Is there a future for nuclear power in Japan?
2019/08/15

Sumiko Takeuchi
Senior fellow and member of the board of directors at the IEEI※

Reprinted by courtesy of The Japan Times（JUL 16, 2019）

This is the third in a series of reports on Japan’s energy policy.
Nuclear power has been considered quite beneficial in every aspect of the so-called
3E’s (energy security, economy and environment) of energy policy.
But the damage from nuclear accidents can be catastrophic, in addition to thechallenges posed by nuclear waste disposal. The Fukushima disaster has led to strong
opinions that Japan should denuclearize, and this is still the case. I’d like now to focus
on the future of Japan’s nuclear power technology.
Nuclear power is, along with renewable energy, an important low-carbon powersource.
The International Energy Agency and the Union of Concerned Scientists, which has
been deeply worried about the risks posed by nuclear power, have reported that
extending the operation of the industry’s existing power plants would be the cheapest
countermeasure to climate change, and the undeniable fact is that nuclear power is an
important element in achieving substantial progress in decarbonization.
For Japan, which lacks fossil fuel reserves, nuclear is also highly advantageous in termsof energy security and supply stability. Japan relies on imports of uranium just likefossil fuels, but only a minuscule amount of fuel can generate a large amount ofelectricity. A recent attack on two tankers near the Strait of Hormuz caused a spike inoil prices. The two oil shocks in the 1970s caused pandemonium in the lives of theJapanese people, with power prices jumping 50 percent, but no one could guarantee asimilar crisis would never strike again.

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The fact is that the economic benefits of nuclear power have been losing their shine.
Because of the sharp hike in safety standards imposed by the Nuclear Regulation
Authority after the Fukushima disaster, exorbitant safety upgrades nearly equal in costto building a new reactor are being installed at each site. To get a return on investment,
this intensive capital spending will require long-term operation and high utilization
rates, but the need to get local consent to operate and to respond to dozens of lawsuits
from anti-nuclear residents is making stable operations difficult. Reactor operations
are also capped at 60 years. Nuclear power could potentially be a source of cheap
electricity, depending on the utilization rate and other conditions, but there’s also apossibility it won’t.
In addition, the supply chain that manufactures the delicate facilities required fornuclear plants is contributing to the technical strength of diverse industries in Japan.
Though nuclear power is facing an uphill battle in terms of cost competitiveness, thisdoes not mean Japan no longer needs its other advantages. The impact of theFukushima disaster, however, was enough to completely overshadow the benefits. The
majority of the public is still against nuclear power. In light of persistent public opinion,
Japan’s nuclear power business has been surrounded by three big uncertainties.
The first is political uncertainty. The administration of Prime Minister Shinzo Abe,despite its long-term stability, has not provided enough support to the nuclear powerbusiness. In addition, the government has entrusted the utilities with the job of gaining
local consent.
The safety agreements that stipulate the rules of the industry, such as disclosure of
information to the host governments, are not legally binding. But running reactors
would be next to impossible without local consent based on such agreements.
Whenever there’s an election, the utilities are thrown into confusion, and if a newleader is elected, they will initiate communication from scratch.
The second is policy uncertainty. Japan has fully liberalized the retail power sector. In aliberalized market, reactors for which returns on investment have fully recovered could
have high cost competitiveness, but there will likely be no companies that will take up
the challenge of building new ones.
Since nuclear plants require huge capital, curbing fundraising costs to a low level
would have a big impact on competitiveness, but cheap fundraising is something thatcannot be expected in a liberalized market. The United States has introduced
Copyright © 2019 International Environment and Economy Institute. All rights reserved.

government guarantees for reactor construction costs, while some states award
zero-emissions certificate programs to nuclear plants. Britain also streamlines thebusiness environment by guaranteeing a fixed price for power produced at such plants,
but those systems have not been introduced yet in Japan.
Another thing spoiling operators’ business outlooks is the nuclear fuel cycle policy.
Uranium prices now are totally different from the time when Japan adopted a closed
nuclear fuel cycle policy of recycling spent nuclear fuel, and it is difficult to maintain thispolicy now only from the viewpoint of economic efficiency. The direction of nuclear fuelcycle will have a major impact on the nuclear power business.
The third is regulatory uncertainty. It has become quite common for reactor safety
reviews to take multiple years because of inadequate communication between utilities
and regulators. The U.S. has a presidential executive order that stipulates regulation
shall not be undertaken unless the potential benefits to society from regulation
outweigh the potential costs of dealing with the regulation.
Though Japan has no such principles, appropriate oversight on regulatory activities isbeing called for to check whether the public is suffering from any disadvantages fromunforeseeable regulatory activities. In the meantime, the finishing blow is the plethoraof lawsuits that have been filed demanding the halt of nuclear power plants. Though
the public right to access the courts is an important one, it looks rather peculiar that it
is mostly the same plaintiffs and the same defense counsels who are lodging petitions
at multiple district courts to seek the halt of one nuclear power plant.
When utilities are placed in such an uncertain environment, it is a foregone conclusionthat the nuclear power business will become unsustainable and there will be no future
for it in Japan. If Japan needs nuclear technology over the next few decades, we musturgently discuss how to streamline the business environment.

Copyright © 2019 International Environment and Economy Institute. All rights reserved.