After a long break, it is time to return to Japanese energy policy.
September and early/mid October saw the confused conclusion of the government's attempt to formulate a new long-term energy policy based upon the "national conversation" that took place over the summer months.
Public sentiment is very much against nuclear power, with a strong majority supporting a phase-out of nuclear plants as quickly as practicable (and a very large number of people opposing the restart of ANY nuclear plants, regardless of economic consequences). One can regularly see stories in the Japanese media about the ongoing problems in Fukushima, delays in the clean-up process, complaints about compensation, and communities that oppose the location of dumping grounds for radioactive material. (I was in North Tochigi Prefecture last month and was impressed by the long lines of flags along many country roads announcing opposition to a proposed dump location in the hills nearby.)
Not surprisingly, the public prefers a zero nuclear option, and none of the arguments presented during the national conversation, in town halls, position papers, on television discussion programs or elsewhere seem to have swayed anyone. Some would say that they were shouted out by a biased media.
However, the Japanese business community and many others -- including U.S. strategic planners who worry about Japanese demand pushing up fossil fuel prices and exacerbating issues around the Middle East, the status of various US-Japan nuclear cooperation initiatives, and increased CO2 emissions -- continue to think that a quick phase-out of nuclear power in Japan is impractical.
As a result, and after one noticeable flip-flop, the government seems to have announced a policy that nuclear policy is to be phased out, as and when possible, sometime between 2030 and 2040, subject to availability of alternatives and to ongoing review of the policy in a "flexible" manner. These adjectives were seen as a significant victory for the pro-nuclear forces.
Also, the government has bowed to pressure from Aomori Prefecture, which is pretty much a nuclear dependent economy based on the vast plans for the Rokkasho fuel reprocessing facility. Nuclear fuel reprocessing is still officially part of the "fuel cycle" plan for Japan, even if it takes trillions of yen ($28 billion so far, and counting) and many more years to get the facilities in place, and despite the contradiction that there should be eventually no Japanese spent fuel that needs reprocessing. Work on the final reprocessing facility is now only 3% complete, and has been delayed repeatedly.
Also, TEPCO's new management (selected by the government, now its majority shareholder), announced last week that it is doubling its estimate of the cost of the Fukushima clean-up, from $60 billion to $125 billion. Also decommissioning the reactors is likely to exceed the earlier estimated cost of 1.15 trillion yen ($14 billion). No surprise there, but $125 billion is real money.
Next into this mix is an upcoming election, most likely sometime early in 2013. The leadership of the main opposition party, the LDP, is of the same view as the business community and supports restarting nuclear plants and continuing to use nuclear power. They are seen as the favorites to lead the next government. On the other hand, an election might force them to revisit their positions, if the DPJ (and other smaller opposition groups) try to take advantage of the unpopularity of the LDP's view. The DPJ is poorly positioned to push the issue, based upon its "flexible" policy.
As these debates play out in the background, we will focus future discussion on other areas -- plans for reform of Japan's electricity grid and distribution system, renewables under the feed-in-tariff and otherwise, the need for cheaper natural gas imports, conservation initiatives, and the like. These are areas where we can still hope to see real progress made over the next few years.