Japan Shifting Back to Fossil Fuels (NYT)

From the New York Times, August 19th, 2011

Japan Quake Is Causing Costly Shift to Fossil Fuels

YOKOSUKA, Japan — The half-century-old, oil-fueled power generators here had been idle for more than a year when, a day after the nuclear accident in March, orders came from Tokyo Electric Power headquarters to fire them up.

“They asked me how long it would take,” said Masatake Koseki, head of the Yokosuka plant, which is 40 miles south of Tokyo and run by Tokyo Electric. “The facilities are old, so I told them six months. But they said, ‘No, you must ready them by summer to prepare for an energy shortage.’ ”

Now, at summer’s peak, Yokosuka’s two fuel-oil and two gas turbines are cranking out a total of 900,000 kilowatts of electricity — and an abundance of fumes.

The generators are helping to replace the 400 million kilowatt-hours of daily electricity production lost this summer because of the shutdown of all but 15 of Japan’s 54 nuclear reactors in the wake of the Fukushima Daiichi disaster. Across the country, dozens of other fossil-fuel plants have been fired up, and Japan is importing billions of dollars worth of liquefied natural gas, coal and oil to keep them running.

Japan, the world’s third-largest user of electricity behind China and the United States, had counted on an expansion of nuclear power to contain energy costs and greenhouse gas emissions. Instead, its nuclear program is in retreat, as the public and government officials urge a sharp reduction in the nation’s reliance on nuclear power and perhaps an end to it altogether.

As its nuclear program implodes, Japan is grappling with a jump in fuel costs, making an economic recovery from the March earthquake and tsunami all the more difficult. Annual fuel expenses could rise by more than 3 trillion yen, or about $39 billion, the government says.

The country, until recently a vocal proponent of measures to curb climate change, is also leaving a bigger carbon footprint. According to government calculations, Japan’s greenhouse gas emissions could rise by as much as 210 million metric tons, or 16 percent, by 2013 from 1990 levels if its nuclear reactors were shut permanently. Under the 1997 Kyoto Protocol, a global agreement on greenhouse gas emissions, Japan promised to reduce its emissions by 6 percent over that period.

“Can nuclear be eliminated?” asked Adam Schatzker, an energy analyst at RBC Capital Markets. “It’s possible, but very costly.”

If necessary, Japan could replace the energy capacity lost in the shutdown of its nuclear fleet by increasing the use of natural gas and coal, Mr. Schatzker said. “But even if fossil fuel facilities can make up for the loss of nuclear, it would likely take time, cost a great deal more money and pollute significantly,” he said.

For resource-poor Japan, it is an energy shift of an unprecedented scale and speed. A generation ago, the oil shock of 1973, which exposed the country’s overdependence on Middle Eastern oil, forced Japanese companies to focus on energy efficiency and prompted the government to invest heavily in nuclear power.

But as it doubled down on nuclear power plants, Japan was slow to develop alternative forms of energy, like solar or wind power, which account for just 1 percent of its electricity supply.

Prime Minister Naoto Kan has called for a gradual move away from nuclear energy, and proposed a goal of generating 20 percent of Japan’s electricity from renewable sources, including hydroelectric plants, by the early 2020s. The Parliament is debating legislation to spur that change.

A nuclear-free future could come much sooner, however. Nervous local governments have blocked the restart of reactors idled for routine inspections, which occur every 13 months. If no reactors can restart, Japan’s entire nuclear fleet, which provided 30 percent of its electricity in 2009, could be closed by spring.

The shutdowns are already causing an energy squeeze. At least three utilities have come close to full capacity during peak demand hours this summer. The government has warned that eastern Japan, including Tokyo, could face an electricity shortage of about 10 percent next summer if no nuclear plants are running.

A 10 percent shortage may not be disastrous. This summer, for example, a major energy-saving drive by households and companies drove down peak electricity demand in July by about 20 percent, to 46.3 million kilowatts, averting blackouts despite the energy shortfall, according to Tokyo Electric, the operator of the stricken Fukushima plant.

Still, “we take this situation very seriously,” Toshio Nishizawa, chief executive of Tokyo Electric, said this month. Only three of the company’s 17 nuclear reactors are running.

A protracted increase in fossil fuel costs is possible to make up for the shortfall, traders say.

Japan’s liquefied natural gas imports have jumped for three consecutive months, squeezing global supplies amid strong demand from China and other emerging economies. Imports of coal, which still accounts for 25 percent of Japan’s energy, are also rising.

Analysts at RBC Capital Markets predict that in Japan, the world’s largest importer of coal, coal-fired generation could climb as much as 20 percent, equivalent to 3 percent of global supply.

Last month, Japan’s power utilities said they would raise electricity prices in September to make up for higher fuel costs.

Some businesses worry about the impact of a long-term energy deficit.

“We could see Japanese companies start to move overseas,” Hiromasa Yonekura, chairman of Sumitomo Chemical and head of Japan’s largest business lobby, the Keidanren, told reporters last month. “A prolonged energy shortage could harm business and investment.”

Meanwhile, the sharply higher energy costs are helping to undermine Japan’s formerly rock-solid balance of trade, which swung into the red for three straight months after the earthquake as exporters struggled to restart production. The country’s trade surplus for July was down 90 percent from a year earlier, on a combination of weak exports and rising energy imports.

Elon Musk, the American entrepreneur and founder of the electric car company, Tesla Motors, was in tsunami-stricken Soma late last month to donate $250,000 to build a solar farm there. He said that he saw potential for renewable energy in Japan, but that cumbersome regulations and government foot-dragging were holding the industry back.

“The cost of solar power has dropped in recent years, but government policy hasn’t caught up to that,” Mr. Musk said in a telephone interview.

One roadblock for renewable power in Japan has been the inability of producers to get an adequate price for their electricity on the market, where they must compete with cheaper power from coal, natural gas and nuclear power.

Lawmakers are debating a law that would require utilities to buy electricity from solar, wind, geothermal, hydroelectric and other renewable power sources, even if it means paying a premium. According to Japan’s Trade Ministry, the move would raise average home electricity bills by about 200 yen (more than $2) a month.

“If we, as a society, are willing to pay more, this technology will most certainly spread,” said Norihiro Okumura, an economist with the Tokyo-based Institute of Energy Economics. “And though some in industry say this hurts competitiveness, renewable energy will create new businesses, too.”

Until then, the huge generators at the Yokosuka power plant will continue to pick up the slack, fumes notwithstanding.

“People once called this the No. 1 power plant in the Orient,” Mr. Koseki said. “We are back, doing what we can.”