Japan strives to go nuclear-free

This story by Hiroho Tabuchi appeared Aug. 29 in the New York Times.

As Japan moves to cut back on nuclear power after last year’s disaster in Fukushima, it is running into a harsh economic reality: the cost of immediately abandoning its nuclear reactors may be too high for some big utilities to shoulder.

If the country’s 50 nuclear reactors were permanently closed this year, power companies would be hit with losses totaling 4.4 trillion yen ($55.9 billion), rendering at least four of them insolvent, according to calculations this summer by the government’s Agency for Natural Resources and Energy.

The extraordinary costs of an immediate shutdown have emerged as a major concern for the Japanese government, which has struggled to balance the desire for improved nuclear safety with the bottom-line realities of the big utilities. Nuclear plants generated about one-third of Japan’s electricity before the Fukushima accident, but most remain at least temporarily offline.

“People talk easily about shutting down Japan’s nuclear power plants, but the economic and financial consequences are severe,” said Reiji Takeishi, professor in environmental economics at Tokyo International University.

The government is now considering at least three options to reduce the country’s dependence on nuclear power — and all of them would give the power companies until 2030 to shut their reactors permanently, allowing them to largely recoup their plant investments. By 2030 the majority of reactors would be older than 40 years and would face decommissioning anyway under Japanese guidelines.

But a series of fresh safety concerns, including possibly active fault lines beneath nuclear sites, have raised doubts about whether the nuclear reactors should be restarted at all. And the proposed 18-year timetable has angered the country’s growing antinuclear movement, which complained that the government had its priorities wrong.

“How can you put the economy above safety, above human life?” Masanori Oda, a contemporary artist and a representative of the movement, said after a meeting with Prime Minister Yoshihiko Noda last week.

One option being considered by the government would reduce the country’s dependence on nuclear power to 20 to 25 percent of electrical needs by 2030. A second option would cut the segment to 15 percent, and a third would eliminate nuclear power entirely.

Though the 15 percent proposal initially gained traction, public hearings and opinion polls have shown overwhelming support for a complete phaseout. All of the proposals could involve progressively restarting the country’s reactors.

In recent days, a string of governing party lawmakers and government ministers have also expressed support for the so-called zero option, with an eye on nationwide elections that could be called within months. The fate of the nuclear reactors is part of a larger and highly charged discussion over the costs and benefits of nuclear energy and its alternatives.

Much of the argument has tended to focus on the wider economic costs of turning away from nuclear power.

Japan’s biggest and most influential business lobby, the Keidanren, warns of disaster. Hundreds of thousands of jobs would be lost, the group says, and energy alternatives would be hampered by problems.

Already Japan’s fuel imports have surged since the Fukushima disaster, driving the country’s trade deficit to record highs. Though Japan has so far avoided blackouts this summer, power shortages are weighing on businesses. Japan’s greenhouse gas emissions are also surging, and renewable energies such as wind and solar power remain small-scale, expensive and unreliable, the lobbying group says.

“If we do not have a stable supply of energy at economically viable prices, Japan’s economy cannot grow,” the group said earlier this month.

The economic stakes for the utilities could be even higher in the shorter term.

A government-appointed panel of experts warned this year that there is a possibly active fault line under the Yoshihiko Noda, 170 miles north of Kyoto, raising the possibility that the location could be declared unfit for a nuclear facility. The plant’s operator, the Hokuriku Electric Power Company, would be pushed to near-insolvency with losses of at least 313 billion yen ($3.97 billion) if it were forced to shut the two reactors, the government calculations show.

The losses would stem from extra costs of early decommissioning, write-downs on other nuclear assets, as well as the costs of offloading the plant’s nuclear waste and fuel, according to those calculations.

Another troubled utility is Chubu Electric, which is desperate to save the No. 5 reactor at its Hamaoka Nuclear Power Plant, the newest unit at the site and the country’s largest. The unit opened in 2005 but has been offline since last May, when Naoto Kan, then prime minister, effectively ordered it closed on fears that it lies on a particularly tsunami-prone coastline.

During the shutdown, however, about 1,300 gallons of seawater entered the reactor because of a burst pipe, and it is thought to be corroding the reactor core.

Two smaller utilities, Hokkaido Electric and Tohoku Electric, would fare even worse: the cost of writing off their reactors would drive them into insolvency, the government estimates. Both utilities face concerns that their reactors also face bigger quake risks than previously thought.

And Tokyo Electric — Japan’s largest utility, and the operator of the ravaged Fukushima Daiichi plant — would be forced to take additional write-downs of 1.15 trillion yen ($14.6 billion) if it were unable to reopen its 13 remaining reactors, including two at the tsunami-ravaged Fukushima Daiichi site, and four more at a sister site just 10 miles away.

The local Fukushima government is calling for all of the utility’s reactors to remain permanently closed. But that would be disastrous for a company effectively nationalized last month because of the exorbitant costs of the accident and compensation payments.

“I really don’t see a scenario that the power companies will be made to go to zero in the near term,” said Penn Bowers, a research analyst who covers Japan’s power companies at CLSA Japanese Equities. “You would go into negative equity for some of those companies,” he said. “I don’t think that’s a choice, because there are not alternative suppliers. You need these companies to remain going concerns.”

Those who favor phasing out nuclear power argue that the costs of another disaster would easily outweigh other considerations. They are optimistic about developing renewable energy, especially with heavy public investment, and say new technologies in that field could cut down on emissions and create new jobs.

“The assumptions underlying the economics of nuclear power no longer hold up,” said Terumitsu Honma, a professor in economics and insurance at Aoyama Gakuin University in Tokyo. “The biggest assumption was that accidents don’t happen.”

The utility companies have a strong incentive to push the government for permission to restart their reactors, even with the risks. Because the cost of another disaster would most likely be greater than the value of the companies, private insurers have been unwilling to insure the utilities — putting the government on the hook for any damages.

As such, the risks of restarting Japan’s reactors, both financially and in terms of safety, would be borne by the Japanese taxpayers, while any benefits would go to the utilities and their shareholders, said J. Mark Ramseyer, a professor at Harvard Law School who wrote an article about the Japanese nuclear industry this month in an academic journal, Theoretical Inquiries in Law.

“They capture all the returns, but bear less than all of the costs,” he said in an e-mail.