Reality-Based Electric Power Policy

One of the fictions supporting the Japanese utilities was the idea that some of them might restart ALL their nuclear reactors, other than the TEPCO reactors at Fukushima Dai-ichi and Dai-ni complexes.  In fact, the restart effort has dragged on.   Three and a half years after the Fukushima disaster, NONE of the reactors are operating, even though the DPJ begrudgingly promoted plans for a limited restart, and the LDP/Abe Administration has actively promoted the restarts since it regained power almost two years ago.

The two Sendai reactors in Kyushu are essentially cleared to restart by the NRA, but even that has not happened yet, months after initial timelines would have predicted.

Of course, it has been widely known that a large number of reactors can never meet the new NRA safety standards, many because they are just plain old -- old design, old equipment.  Thus, out of 55 reactors operating (sometimes) pre-Fukushima disaster, at best 15-20 are plausible candidates to restart.

But the utilities cannot afford the financial hit they would incur if they were to admit that the assets are impaired.  In response, Japanese accounting rules were changed in 2013  to permit asset impairments from reactor closings to be spread over a number of years (and included in the utility rate-base).  Even so, the economic impact on the utilities will be an ongoing drain they can ill-afford.

It was reported on September 5, 2014 that the government has asked utilities to consider decommissioning plans for reactors that entered service before 1970 -- and thus will reach the end of their 40-year license term within the next 5 years.  It is unlikely that these reactors will ever meet the NRA standards for a license extension.  As seen in the chart published by Nikkei in its version of the story, there are 12 of these pre-1970 reactors (excluding Fukushima Dai-ichi).

It seems that getting the utilities to acknowledge some of the reactors that will never restart is part of the campaign to try to win some degree of public acceptance that others will restart.  Makes sense. Why would the public accept restart of the reactors that might actually clear the NRA's new safety standards, if the utility is taking the view that next year it will apply for restart of all its reactors, if the utility always challenges the NRA conclusion that an earthquake fault under a reactor is "active", that safety equipment is inadequate, etc., or if the utility says it will spend trillions of yen to retrofit an aging reactor.

According to the press reports, the utilities will get to make their own decisions on whether or not to go ahead with decommissioning, but Kansai Electric has already said it will "study" decommissioning its Mihama 1 and 2 plants, which are 42/43 years old.  Kansai Electric, in particular, has 7 of the old reactors.

Japan Atomic Power (Nihon Gen Den) has two reactors on the list, Tokai #2 and Tsuruga #1.  But its Tsuruga #2 plant also is built on an earthquake fault (according to the NRA expert panel).  If these are all decommissioned, the company will have no remaining business and need to be liquidated.  90% of its shares are held by the utilities, and of course any value must be written off, plus additional funds provided over many years to support a decommissioning effort.

TEPCO also had a number of older reactors, but they were located at the Fukushima Dai-ichi plant. Fukushima Dai-ichi's 6 reactors are now the object of a major clean up effort after the 2011 disaster, and Dai-ni's 4 units (all dating to the 1980s) will never be restarted.  TEPCO's other seven nuclear units are in Niigata at Kashiwazaki-Kariwa, which suffered damage in a 2007 earthquake.  While TEPCO has initiated the application process to restart units 6 and 7, and adding filtered vents, building huge, expanded anti-tsunami seawalls and doing other retrofits to try to clear the NRA standards, it is not clear whether these actions will be sufficient, or whether inherent geologic features (earthquake faults) and political opposition will be overcome.  In any event, the prospects for restart of units 1 to 5 seem remote.

So if one assumes that 15 out of TEPCO's 17 units will never restart, adds the 12 units in Nikkei's chart, that already eliminates half of Japan's pre-2011 nuclear reactors.

How much will it cost to decommission these reactors?  How long will it take?  A lot, and a long time.

UPDATE November 17 2014:  It was reported on November 13 that Kansai Electric is considering a filing with the Japan NRC for the "special inspection" required to restart its Takahama 1 & 2 reactors and extend their lives beyond 40 years.  The current ages are 38 and 39 years, respectively.

Another Non-Nuclear Summer ... and Autumn ... and Winter

As previously reported, the Nuclear Regulatory Agency (NRA) is checking whether 19 reactors (out of the 55 reactor pre-Fukushima nationwide reactor fleet) at 12 facilities meet its new safety standards.   Kyushu Electric's Sendai reactors 1 and 2 in Kagoshima Prefecture are the first in line for review.

It has been widely reported that these are "good" reactors which are well-positioned to satisfy the NRA standards -- these are the MOST likely reactors in Japan to satisfy the NRA.  No reports of suspicious earthquake faults under or near them.  They are relatively new -- having started operations in 1984/1985.  No record of major problems in operations.  And they are pressurized water reactors, which have the iconic large concrete containment structures covering the entire reactor building -- different from Fukushima.  Under the NRA new standards, PWRs did not need to do as much retrofitting as the boiling water reactors (BWRs) such as were at Fukushima Dai-ichi.

Yesterday, there was an update from Kyushu Electric (Kyuden) on the review status.  Apparently, the earliest a restart could be expected is this autumn.  According to Kyuden, the NRA has given them comments on their filing and identified a number of "misses".  (In this case a "miss" could be a serious issue, a simple typo, or a location where the NRA wants something to be rephrased or further developed.  Pesky paperwork!) 

Kyuden had hoped to get comments and respond by the end of May, but it has now just resubmitted one of three required documents and does not expect to have them all filed until mid July.  The total length of the filings will expand from 7200 pages to 8600 pages, according to Kyuden.

The NRA will take at least a month to respond, and the earliest for restart permission would be September, possibly October.  It seems likely the restart will come until after the three and a half year anniversary of the March 11, 2011 disasters.

So it will be another hot summer in west Japan, with maximum efforts at conservation and supply limited.  We may get a chance to see if the solar PV implemented over the past two years makes a discernable difference.

UPDATE (July 5):  Nikkei reports this morning that the Sendai 1 & 2 reactors are now on track to clear the NRA procedures bySeptember.  The NRA is reported to plan to propose the re-open in late July, with a period for public comment over the month of August, then a final decision.

UPDATE (August 6):  NOT SO FAST!  Nikkei now reprints a Kyodo wire service report that the Sendai nuclear plant will not be open until "winter or later".  Apparently the utility and regulator need more time to prepare and have checked the construction plan (工事計画) for the work that permits reopening, as well as new safety rules (保安規定).   Kyushu Electric initially had hoped to file at end of May, but the filings will not be made until September at best, and could slip more.

UPDATE (November 10):  Things have gone relatively smoothly with the Sendai plant restart process, to the point that last week the governor of Kagoshima Prefecture signed off on the restart, even though a number of communities within the plant's evacuation zone had not given a green light. ... but the plant will still not be up and running for several months, until after the winter electricity usage peak.  Absent surprises, it should be available for the summer 2015 peak.  The utilities and regulator will now push to accelerate the process for the rest of the reactors in the "first wave" of restart applications -- those facing the fewest apparent technical and regulatory issues.

More Strain on the Utilities

TEPCO and a number of the other utilities reported better financial results for the most recent ended fiscal year.  But the pressure is still on, big time.

-Both Kyushu Electric and Hokkaido Electric are in the process of applying for/taking equity from the Development Bank of Japan, in order to avoid risk of technical insolvency as they continue to lose money. The interesting question will be whether this equity comes with significant strings attached, in terms of a commitment to cooperate fully with the government's regulatory/restructuring initiatives.

-Japan is still a zero nuclear country, with many utility applications pending with the Japan NRA for reactor restarts, but none yet approved.  The nation appears headed to a no-nuke summer again.  Supply will be especially tight in western Japan, where Kansai Electric has made it through the last 2 summers with the Oi reactors 3 and 4 operating, and where Kyushu Electric faces an outage at a major J-Power plant in Matsuura, Nagasaki from which it has taken supply in the past.  

-Even worse for the utilities and their business plans, a Fukui-based district court issued an injunction against the restart of Oi Reactors 3 and 4, on May 21.  KEPCO has appealed the decision, but it could take months or years before the upper court hears the appeal and issues a ruling.  The decision gave legal standing to persons without a broad area (250 kms) of a reactor to pursue litigation in court, undercutting government efforts to limit restart consents to communities within the host prefecture.  The nuclear restart is now a critical part of the government's energy policy, and it is far behind schedule.

-There are now something over 200 companies registered to sell electricity to small, retail end-users as the market liberalizes.  We will probably see a slow but continuous chipping away at both the generation and distribution/sales part of the utilities businesses.

A Nikkei opinion piece on June 3, 2014 notes that the historical environment for the electric utilities has collapsed.  No longer can they be assured of recovering costs and earning a profit if they just follow national policy -- which has included the promotion of nuclear power.  The electricity market may become competitive, and in such case the utilities cannot support or promote a risky endeavor such as nuclear power, where reactor closures can push a utility into sustained losses or even insolvency.   In order for the utilities to be reborn as "normal" private sector enterprises, the article suggests a need to transfer the nuclear power assets to a public corporation that can handle the burdens, the risks and rewards.

TEPCO Turn-around Effort

September 25 (Wednesday's) evening NHK newscast had coverage of the President of TEPCO meeting with Governor Izumida of Niigata Prefecture to present paperwork including details about plans to make the TEPCO Kashiwazaki Kariwa ("K-K") reactors safer and apply for a restart of reactors 6 and 7.  The last meeting between these two, a few months ago, featured the Governor on camera screaming, loudly, at the much smaller, weaker looking TEPCO president, angry because TEPCO was taking steps to apply for a restart of Reactors 6 and 7 before obtaining the Prefecture's approval.

This time, TEPCO signalled well in advance that it would NOT apply for a restart of the reactors before "gaining the understanding" of Niigata Prefecture.  Also, a flurry of press stories has reported in recent days on TEPCO's dismal finances, the pressure from its banks and bondholders, and the importance of a reactor restart as part of its financial rehabilitation plan.

Instead of a shouting match, the Governor asked why Niigata should trust TEPCO to do things any differently than in the past.  TEPCO President Hirose mumbled something about TEPCO being "reborn" ("Shinsei TEPCO") and having taken the Government's money, ... then pointed out that TEPCO is now planning to install extremely expensive filtered vents that would allow venting of the reactor buildings without release of significant radioactive materials.  Had these vents been in place at Fukushima Dai-ichi, TEPCO would have vented the buildings and avoided the hydrogen buildup which contributed to the problems there -- at least the most visible sign of catastrophe, with hydrogen explosions sending radioactive material high into the atmosphere.

(The K-K 6 and 7 reactors are relatively new, commissioned in 1996 and 1997, respectively, and are "advanced boiling water reactors."  The other reactors at K-K were commissioned between 1985 and 1994 -- also nowhere near as old as Fukushima Dai-ichi 1 and 2, but there are concerns about potential earthquake faults on site that run directly under or very near reactors 1-5 and their turbine buildings.  The K-K complex suffered various types of damage in a 2007 earthquake and the first of its reactors did not reopen until 2 years later.  Also, estimates of earthquake intensity from nearby faults has been increased significantly in the post-2011 reassessment, so it is not clear that the current designs would be sufficient, even absent the on-site faults.)

NHK followed this theme (based on talking points from the central government and TEPCO?) and indicated that reopening the K-K 6 and 7 reactors could add billions to TEPCO's bottom line annually (the NHK report said 240 to 350 billion yen -- 2.4 to 3.5 billion dollars -- annually), helping to avoid another rate increase, more government bailout money, etc.

A story in this morning (Thursday's) Nikkei reports that TEPCO has a refinancing of some debt approaching this autumn, and the financial institutions are indicating that in order to participate they will significantly increase the interest rate charged unless either (1) TEPCO has applied for a restart of K-K 6&7 reactors, or (2) TEPCO has further increased its electricity rate.  The TEPCO management is bending over backwards to try to avoid another rate increase so quickly after its 2012 increase, and so has everything riding on a restart of the reactors.

To put this in perspective, the K-K reactors 6 and 7 each have maximum power output of 1315MW.   Even if they do restart in the next year or two, after very expensive upgrades, TEPCO is very unlikely to achieve a restart of any of the rest of its reactors over that time-frame.  TEPCO's pre-March 2011 nuclear reactors consisted of:

1.  2812MW -- Reactors 1 to 4 at Fukushima Dai-ichi.  These were catastrophically damaged and will be a burden for many decades and, of course, never restart.

2.  1884MW -- Reactors 5 and 6 at Fukushima Dai-ichi.  These were not damaged, but are on the same site and will be decommissioned.  Prime Minister Abe officially requested earlier this month that TEPCO decommission these.

3.  4400MW -- Fukushima Dai-Ni reactors 1 to 4.  This facility is down the coast 20-25 kms from Fukushima Dai-Ichi.  It is highly likely these will never be restarted.

4.  8212MW -- Kashiwazaki-Kariwa (or Kariba) reactors 1 to 7.  Again, the restart of reactors 6 and 7 remains very uncertain and very expensive, while reactors 1 to 5 have additional problems and earthquake concerns that will make them more difficult, if not impossible, to restart.

So out of the total nameplate capacity of 17.3GW of nuclear generation, TEPCO is working toward a possible restart of 2.63GW -- just 15% of the total.

The TEPCO restructuring problem was the subject of an analysis piece in Nikkei Wednesday morning as well, by Chuo University law professor Junji Annen.   Prof. Annen notes that TEPCO has ultimate compensation obligations from the Fukushima Dai-ichi accident of between 5 and 10 trillion yen, that the nuclear compensation body has provided 4 trillion yen (40 billion dollars) of funding (3 trillion of grants/subsidies and 1 trillion yen of capital); that TEPCO raised rates significantly; and yet TEPCO still had an aggregate loss of 700 billion yen (>$7 billion) for the two years ended March 31, 2013.  The loss was recorded despite TEPCO's ability to book the 3 trillion yen (>$30 billion) of the government subsidies as extraordinary income, so the actual situation is far, far worse.  Prof. Annen notes that both a cap on TEPCO compensation obligations (as opposed to government clean-up efforts) AND a reactor restart at K-K are essential for TEPCO's near-term survival, while the longer-term solution will involve some kind of restructuring that divides TEPCO into a "good" and "bad" company.  The "good" company will be freed of impossible burdens, but would pay a share of its profit to fund the "bad" company and meet a portion of such obligations.

UPDATE:  One day after this post, the Niigata government has given TEPCO its "conditional" support for TEPCO to at least proceed with filing its application with respect to K-K reactors 6 and 7.  The prefecture has apparently taken the view that this is not a "final" approval, which will be subject to satisfaction on various safety issues, but only a nod to allow TEPCO to make its filing.

By Friday, the group of all major (and some minor) Japanese banks that faced an upcoming TEPCO refinancing had indicated that, given the restart application for K-K reactors 6 & 7, they would NOT require TEPCO to file for a rate increase and, at least tentatively, that they plan to participate in the refinancing.

On Saturday, the 28th, TEPCO's President was interviewed by Nikkei Shimbun and stated that, in light of the prospect that these reactors might be operating in 2014, TEPCO plans to announce a restructuring plan later this year that would not include further rate increases, and hopes to avoid a loss for the fiscal year that ends March 31, 2014.

A look at TEPCO's implementation of its current restructuring plan does not offer high hopes.

The current plan had proposed restarting K-K reactors 6 & 7 by April, 2013, six months ago.  It also contemplated decommissioning only Fukushima Dai-ichi Reactors 1 through 4, whereas now 5 and 6 also must be decommissioned.  Now, TEPCO hopes to squeeze out additional 10-year cost reductions of 140 billion yen, following its current plan of 336 billion yen in reductions.  And TEPCO also plans to establish an arm to participate in deregulated portions of the electricity market, as Chubu Electric and Kansai Electric also have announced.  Maybe TEPCO will be able to reduce customer outflow if it "counterattacks" in the home regions of other utilities?

We should know before too long if the hope for a profit in the current TEPCO fiscal year is more "happy talk" to support Abenomics and improve the economic mood--a thank you present for well-orchestrated government support to bring Niigata's governor and the financial institutions into line for the time being--or if it can actually be achieved (and, if so, whether it involves the same kind of accounting magic that limited the last two years' losses to 700 billion yen).

UPDATE:  Reuters had a good article today (October 7, 2013) on the TEPCO turnaround effort -- the public relations and the reality.  As one analyst indicates, "it's all kabuki ... It's very much an orchestrated presentation".  I hope my blog post gives some sense of the way these things are done in Japan, at least at the public level.

Also the Yomiuri mentions that the LDP is now seriously considering a "good bank bad bank" approach to TEPCO, hiving off the legacy problem of decommissioning its reactors and dealing with the Fukushima mess.  Since TEPCO does not have the resources to deal with its legacy issues, this is perhaps inevitable.  But if and only if it is done in a manner that ensures the "good TEPCO" will move forward faithfully to implement a competitive market in electricity, including separation of generation, transmission and distribution. 

Fukushima Dai-Ichi -- Is it Still News?

I have heard two ACCJ (American Chamber of Commerce in Japan) guest speaker presentations in the past year where a foreign expert on the nuclear industry -- one primarily a regulator, the other a consultant/academic -- has complained about the approach the Japanese press has taken to reporting on the Fukushima nuclear accident.  Both speakers grumbled that as long as the press keeps dramatising events related to Fukushima, it will be difficult for the nuclear industry to regain trust of the Japanese people and for nuclear reactors to play a role in Japan's energy future.

Indeed, a recent public opinion poll suggests that 94% believe the Fukushima accident is not "under control", and yes, the press does report on some continued, very real, issues at the plant.

But my view is that the press coverage of Fukushima is not one-sided or anti-nuclear.  Instead, it largely reflects the editorial views of the particular media conglomerate.

Thus, the "progressive" Asahi Shimbun and Asahi TV are predictably happy to report about ugly goings on regarding Fukushima.

Meanwhile, the "conservative" Yomiuri seems to want to say the bare minimum about Fukushima. Stories about Fukushima get in the way of its effort to "accentuate the positive" and support the LDP government.  The Yomiuri seems to be completely aligned with the government program to restart the reactors.  Its editorials claim nuclear power is essential, and safe, and its news reporters seem to fall in line to the maximum extent possible.

The Nihon Keizai Shimbun, meanwhile, seems to be aligned with the leaders of the business community and the Keidanren (Japan Federation of Economic Organizations), who believe nuclear power is essential to the survival of the Japanese economy, at least over the near and medium-term.

Mainich Shimbun, Fuji-Sankei Group (conservative) -- I do not really know since I do not read or watch their news outlets regularly.

Just one example -- during last week's lead up to the House of Councillors election -- a very politically sensitive period -- a story comes out that up to 2000 workers for TEPCO and its subcontractors received high radiation doses (over 100 millisieverts) in their activities at the Fukushima Dai-ichi plant, and are thus at heightened risk of thyroid cancer.  This was ten times the number of workers who had previously been said to have received such doses.

According to Asahi Shimbun, TEPCO only released the news once it became clear that the World Health Organization questioned the company's method of calculating doses, and planned to release the information -- so that workers would be aware of the situation.  Also, TEPCO does not really know how large the doses were, since most of the workers did not have timely tests of their thyroid. Now, 28 months after the accident and much of the exposures, TEPCO has agreed to pay for regularly testing of workers exposed to 100 millisieverts or more.

This story got major coverage in the Asahi Shimbun.  It also got major coverage in the English language Japan Times.

In the Yomiuri?  Not so much, and only several days later via a wire service report, buried on a lower inside page, next to a much larger story about TEPCO's plans to file an application to restart the Kashiwazaki Kariba plant, reactors 6 and 7.  Here is a comparison of the degree of coverage in the Asahi and Yomiuri English language papers web sites (which reflects the offline English and original Japanese versions, in this case).

Asahi (July 19, 2013) online edition:

TEPCO now says 2,000 Fukushima workers exposed to high radiation doses

Estimated radiation doses in thyroid glands exceeded safe levels in nearly 2,000 people who worked at the stricken Fukushima nuclear plant, more than 10 times the number previously announced, The Asahi Shimbun has learned.
The larger figure was deduced after doubts were raised both at home and abroad over the results of Tokyo Electric Power Co.’s belated first study on the workers’ health.
TEPCO, the nuclear plant’s operator, said in December that radiation doses topped 100 millisieverts--the widely accepted threshold for an increase in the risk of cancer--in 178 people, with a maximum reading of 11,800 millisieverts.
But that figure covered only a fraction of those who have braved the high radiation levels to try to bring the nuclear crisis under control.
The workers themselves say TEPCO has provided little or no information about radiation doses in their thyroid glands. Some have stopped working at the crippled Fukushima No. 1 plant.
The new figure is based on a review of an expanded number of study subjects.
TEPCO and its partner companies not only re-evaluated the readings from thyroid gland dose tests, but they also estimated doses when the amount of radioactive iodine that entered the body was unavailable. These estimates were based on cesium intake amounts, the airborne iodine-to-cesium ratio on the days they worked, and other data.
The latest study showed that doses topped the 100-millisievert mark in 1,973 workers. In one worker, the estimated thyroid gland dose increased by more than 1,000 millisieverts during the review.
A thyroid gland dose reflects the amount of internal exposure to radioactive iodine that has entered the body through inhalation and other processes. The thyroid gland doses received during the early stages of the nuclear disaster, which started in March 2011, account for most of the potential internal damage to the Fukushima plant workers.
Early on in the crisis, health experts warned about the risks of high radiation doses received by the workers. But TEPCO was late in opening a full-scale investigation into the thyroid gland doses.
The utility submitted data about the doses to the World Health Organization. However, TEPCO only released available data for some of the workers in December after it learned that the WHO was planning to disclose the information.
The data concerned 522 workers for whom thyroid gland dose test results were available.
It took TEPCO 28 months since the earthquake and tsunami on March 11, 2011, caused the nuclear disaster to learn that so many workers have been exposed to cancer-inducing levels of radiation doses in their thyroid glands.

Its re-evaluation also came after the U.N. Scientific Committee on the Effects of Atomic Radiation, which received data from TEPCO, questioned the reliability of the company’s thyroid gland dose readings. Japan’s health ministry also ordered TEPCO and its partner companies to review the internal dose readings for the workers.
“We will provide and pay for annual, ultrasound thyroid gland tests to all workers with thyroid gland doses in excess of 100 millisieverts over their lifetimes,” a TEPCO public relations official said. “We have already notified those who are eligible for the checkups.”
But TEPCO said it does not know how many of those eligible workers have actually taken the tests. Sources said only about half of them have received the thyroid gland checkups.
In addition, the utility has not announced a schedule for the thyroid gland checkups for the workers and has yet to explain what it will do when it spots abnormalities during the tests.
Most of the study subjects with thyroid gland doses exceeding 100 millisieverts entered the Fukushima plant site early in the disaster and inhaled radioactive substances. TEPCO employees account for 976 of them, with the remainder employed by the utility’s main contractors and their subcontractors.
Several workers told The Asahi Shimbun that TEPCO has never provided a careful explanation about the risks of radiation exposure in thyroid glands. Some subcontractor workers have already quit their jobs, complaining that they were never told about the radiation doses or received any notification of thyroid gland tests.
The delay in the testing can be partly blamed on a health ministry policy, which says health control for nuclear plant workers should be based solely on whole-body doses.
The ministry has never taken the initiative to investigate thyroid gland doses in the Fukushima workers. It has left the task to TEPCO on a “voluntary” basis.
Some experts have emphasized that enhanced thyroid gland doses do raise the risk of cancer even if the whole-body doses remain modest. But the health ministry has maintained that whole-body dose control is sufficient.
The international consensus for the 100-millisievert threshold for an increased risk of cancer is based partly on studies following the 1986 Chernobyl nuclear disaster.
The international standard for taking iodine tablets to block radiation exposure in thyroid glands, however, is 50 millisieverts.
Some health experts have said the cancer rate began increasing at the 50-millisievert level after the Chernobyl disaster.
Children are believed to be the highest at risk to thyroid gland doses. But a recent study showed the risk of cancer from thyroid gland doses rises even in people over 40, countering the previous belief that older people were far less susceptible to the cancer- inducing effects of radiation.

(This article was compiled from reports by Yuri Oiwa and Toshio Tada.) 
THE ASAHI SHIMBUN 

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Yomiuri (July 21, 2013) online edition:

Higher cancer risk at Fukushima plant

July 21, 2013
Jiji Press
Nearly 2,000 workers at Tokyo Electric Power Co.’s Fukushima No. 1 nuclear power plant face higher risks of thyroid cancer as their radiation exposure from the crisis that began at the plant in March 2011 exceeded a key threshold of 100 millisieverts, TEPCO officials have said.
Of all workers engaged in operations to contain the nuclear crisis triggered by the magnitude­9.0 earthquake and subsequent tsunami, 1,973 are estimated to have received radiation doses of over 100 millisieverts in their thyroid glands, according to the officials. 

So to any nuclear industry proponent who thinks the Japanese press is hindering the comeback of the nuclear industry, I say -- just read the Yomiuri.  You will need to look very carefully to find any negative news.

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UPDATE:  Within a week after this post, continued and new water leakage at Fukushima, including leakage of highly radioactive water into the ocean, brought it back into the "mainstream" of Japanese news, with at least some coverage by ALL the major Japanese press.  Everyone seemed to acknowledge that this -- and the central government stepping in to assume control of some remediation operations from TEPCO -- constituted news worth reporting.

Disguised Bailouts – Evidence that Electricity Deregulation (and Re-regulation) is Going to Happen

As recently as March, there were growing concerns about whether the LDP government, heavily influenced by the business community in general and the electric utilities specifically, would follow through on plans to introduce retail electricity competition and, eventually, a degree of separation among electricity generation, transmission and distribution functions needed for an environment that will support the existence of competitive supply and distribution companies.  In other words, would the current system of dominant regional electric utilities fight off attempts at reform, as they did in the late 1990s when similar reforms went forward in Europe, North America, Australia and many other places?

Several announcements last week lead me to conclude that, this time, the system will end up being reformed.  These announcements represent massive potential transfers to the utilities, to help them solve the problems they will face if systemic reform goes ahead.  Thus, in Japan, reform of a powerful industry involves placing the costs of past mistakes upon the ratepayers and the taxpayers, rather than driving the utilities into insolvency, creating distress among their lenders (all major Japanese financial institutions), etc., etc.

First, and perhaps most important, METI has floated plans to revise the utility rate base accounting in order to allow utilities to avoid massive write-downs and instead recover, spread over a number of years (approximately 10 years) in their electricity charges, the cost of decommissioning reactors prior to conclusion of their 40-year planned operating life.  This sets the stage for the utilities to end the “kabuki” play of spending money trying to reopen reactors that, in fact, are very unlikely to meet the new regulatory standards.  Of course, in Japan, these things take time--too much time.  And this is a massive disguised bailout by the ratepayers, and one that does not require any direct pound of flesh, such as a change of utility management.  

That said, it is a necessary and welcome step.  And as between the ratepayers and the taxpayers, it is better that the ratepayers bear the burden, since high and increasing charges by incumbent utilities will actually make it easier for new entrants, for investment in conservation and renewables, etc.

Second, the Nikkei reported that METI is proposing legislation to make it easier to provide governmental aid to a retail electricity provider that faces financial difficulties, adding some “catch all” circumstances to what had been narrowly permitted aid.  This is reported as an effort to help assure continued retail service to customers in the event that retail distribution companies suffer financial difficulties after introduction of competition.  Again, a disguised bailout, on stand-by, which seems intended to assure the incumbent utilities and retail customers.

Third, Chubu Electric and TEPCO have announced plans for a large new thermal plant in the TEPCO service area.  Chubu Electric plans to use its share of the generated power to serve customers in Kanto – TEPCO’s service area.  This is the first sign of mutual competition at the wholesale level.  Of course, the regional utility structure in Japan is akin to the regional "baby bells" in the United States after AT&T was split up, so it is quite unlikely these companies will be the source of real competition in each other's service areas, except for limited large customers with whom they have existing relationships.

Fourth, the latest “Abenomics” announcements of government growth plans clearly mention the introduction of competition in the electricity area as part of Prime Minister Abe’s growth strategy.  This seems a stronger endorsement than anything I have seen in the past.

Lastly, I went to a seminar last month on the future of Japan’s electricity industry.  One of the speakers is an ex-utility executive who now leads a research center at Tokyo University on smart grid implementation in Japan.  He was very clear that while he had once thought the concept unrealistic, he now believes the smart grid is coming, along with distributed generation and separated generation, transmission and distribution functions.  There is no alternative.

  

The Empire Strikes Back

What does the LDP's election victory in December 2012 mean for Japanese energy policy?

The LDP platform made a bow toward phasing out nuclear power (Japan should “strive to build an economy and society that does not rely on nuclear power”), but stated that any decision about future energy mix is only to be made “within the next ten years”.  Meanwhile, post-election, Prime Minister Abe made a number of statements that sound like a nuclear power booster, indicating that Japan should build new reactors, and the government should strive to obtain “public understanding” to do so.

How much of a change is this?  The official policy change is very subtle.  But Abe’s tone is far less reluctant.  He notes, rightly, that any new reactors to be built use an advanced design, and should be safer, more reliable, longer-lived and cheaper than old ones such as Fukushima Daiichi, and sounds almost eager to push ahead with nuclear power.

Then again, will the Japanese people really trust statements about nuclear safety … statements remarkably similar to what they were told in the past, but which were disproved by the Fukushima accident?  Prime Minister Abe seems to think that an election victory gives him a mandate to promote nuclear power.  But a pro- (or at least slightly less anti-) nuclear position was not why he won the election.  Indeed, the LDP’s platform on the issue was almost indistinguishable from the DPJ.  And the LDP’s coalition partner, Komeito, has a clear anti-nuclear stance.  Asahi Shimbun exit polls indicate that 78 percent of voters favor either an immediate or gradual move AWAY from nuclear power.  Only 15 percent oppose such a move.  And cabinet representatives have gotten some rough treatment on television and in other public venues when the discussion turns to nuclear's future.

My prediction is that Mr. Abe will have as much success in promoting nuclear power as George W. Bush did in privatizing social security using the “political capital” he felt he had accrued in defeating John Kerry in 2004.

And the government must work with the new, more independent Nuclear Regulatory Authority, which has recently discovered likely “active” seismic faults under two groups of reactors that otherwise would be top of the list for potential restart.

Fortunately, regardless of how the nuclear discussion plays out, everyone, including the LDP, supports a continued investment in renewable energy, and diversification of sources (and reduced cost) for fossil fuels.

As for other reforms of the electricity system -- we shall see.  There is some good news in that METI advisory committees are moving ahead with plans to split generation, transmission and distribution.  Apparently they are adopting a proposal to operate these functions in separate subsidiaries of the large utilities.

Nuclear Regulatory Authority (NRA) draft rules make restarts look very expensive

On January 30 the NRA, Japan's new nuclear regulator (not to be confused with the U.S. pro gun lobby, the National Rifle Association), released an initial draft outline safety rules for Japan's existing, largely shut down fleet of nuclear reactors.  The detailed rule draft is expected in April, with final rules to be adopted by July 18, 2013.

According to press reports, the new rules will make it extremely time-consuming and expensive to restart reactors.  The rules are to consider not only natural disasters, but also potential terrorist attacks.

Some highlights:

1.  New cabling requirements.  Apparently Japanese reactors approved before 1975 have cabling that would not meet the NRA's proposed requirements for flame-resistant coating.  A complete recabling of these reactors is said to be prohibitively expensive, and if this rule becomes final, it might shut the door on any further efforts to restart older reactors.

2.  Radiation filters.  A new requirement that all have filtering vents that make it possible to discharge steam without releasing radioactive substances, to avoid the hydrogen explosions seen at Fukushima without releasing massive amounts of radiation into the surrounding area.  Apparently this is less of an issue for pressurized water reactors (PWRs), which have much more substantial concrete containment domes, than for boiling water reactors (BWRs) such as those at Fukushima Daiichi.  The Yomiuri reports that only two BWRs, at the TEPCO Kashiwazaki-Kariwa facility in Niigata, are expected to start work on installing these expensive filters in time for summer.  The PWR reactors are said likely to be given a grace period for this requirement.

3.  Higher seawalls.  Seawalls must be high enough for the largest "hypothetically possible" tsunami.  At the Hamaoka plant in Shizuoka -- number one suspect for tsunami damage, a new seawall has been under construction since 2011.  Initial reports mentioned an 18 meter height.  Now it is being built to 22 meters (72 feet) high, at a total cost of at least 150 billion yen (almost $2 billion).

4.  Duplicate control rooms.  The new rule outline requires construction of quake-proof crisis response building, including a second control room, that can take over plant operations in the event the main control room cannot be used because of quake damage, radiation release, terrorism, etc.

5.  Additional earthquake fault data analysis.  Finally, all plants are being required to undergo an additional, detailed survey to verify lack of any earthquake faults.  As seen at Tsuruga and Higashidori recently, if the burden of proof shifts onto the utility to prove lack of earthquake faults, it becomes very hard to satisfy the requirement in Japan.

The lead story in Friday morning's Nikkei Shimbun suggested that the cost for satisfying these requirements is likely to be well over a trillion yen ($11 billion), and perhaps much more.  A short English language summary of the Nikkei story is here.

Of course, both Hamaoka and Kashiwazaki-Kariwa are huge question marks in terms of seismic risk, so we could see hundreds of billions of yen spent at each location ... but neither ever restart.  According to Nikkei, the most likely reactor restarts, in fall of 2013, are Kyushu Electric's Kawauchi reactor in Kagoshima, and Shikoku Electric's Ikata reactor in Ehime.

One English report from the Asahi Shimbun is online here.

Trouble on the Nuclear Ginza

The only nuclear plants to reopen in Japan since the March 11, 2011 disasters are Kansai Electric's Oi #3 and #4 plants in Fukui Prefecture, two of the more modern, larger plants in Japan.

Various other plants are now under inspection as one step to reopening.  One of the next in line is the Tsuruga #2 plant, only a short distance to the east in Fukui Prefecture from Oi, on a peninsula along the Japan Sea Coast.  The Tsuruga #1 and #2 plants are located near the older and smaller, somewhat accident prone, Mihama plants, which I suspect will never reopen.  The Tsuruga operator, Japan Atomic Energy, had planned to build Tsuruga #3 and #4 reactors as well over the next 5-7 years.  This area also hosts the accident-prone Monju experimental fast breeder reactor, and is known in Japan as the "nuclear Ginza", because of the crowded real estate and the massive subsidies that Fukui Prefecture has gotten over the years.

Sunset over the Tsuruga Peninsula.  The nuclear facilities are on the far side, out of sight.

The new regulatory agency in charge of nuclear safety, the Nuclear Regulation Authority ("NRA") has been examining claims from some seismologists that a "crush zone" of rock under the Tsuruga #2 Plant (the "D-1 Fault" which is said to branch off of the nearby, active "Urasoko Fault") is an active earthquake fault.  Under pre-existing Japanese rules, "active" means something like "has moved in the past 120,000-130,000 years".  (It would not be surprising to me if any place in Japan is not considered on or near an "active" fault, under that definition, which really gets to the heart of the unique problems with siting reactors in this country).  Based on inspections to date, it seems all members of the relevant commission believe the D-1 Fault is likely an "active" fault, and the commission is considering next steps.  Most likely, they will conclude that the plant should never have been sited at its location ... and will not be permitted to reopen.  This is the lead story in the Japanese press today, and English reports can be found on AP and NHK websites.

Tsuruga Plant #1 was completed in 1970, shut down in March 2011, and was never a likely prospect to reopen, being over 40 years old and relatively small.  Tsuruga Plant #2, however, was completed in 1987 and, when operating, provides baseload power of over 1100MW to the Kansai area.

There is also a pending investigation of "crush zones" beneath the Oi #3 and #4 reactors, and a divided opinion over whether or not they represent an "active" fault.

UPDATE May 2013:  The NRA has completed its process and formally concluded that the "cursh zone" under the Tsuruga #2 reactor is an active fault ... making it virtually impossible that this reactor will reopen.

Meanwhile, efforts to restart the experimental Monju fast breeder reactor (nearby Tsuruga) have been dealt a severe blow, as the operator has been found to have failed to conduct regular equipment inspections over the lengthy period it has been inoperable.

Limited Reactor Restart Looks Likely for Summer 2012

It has been about a month since the last functioning Japanese commercial nuclear reactor, in Hokkaido, shut down for their "regular maintenance."

Each reactor is shut down after 18 months of operation, on a regular schedule. And by custom/policy it is  not restarted by the operator until the prefecture and locality in which it sits have signed off.  This need for local sign-off, plus government-mandated "stress tests" and a review of tsunami and earthquake resistance standards, has meant that no reactors have restarted since the March, 2011 Fukushima disaster.

(As an aside, the requirement for shutdowns at 18-month intervals, and numerous sign-offs before restart, are one reason that even pre-March 2011, Japan had VERY low capacity utilization for its nuclear reactors, compared with the United States, France or other major developed economies -- I think something close to 60% in Japan vs 90% in the U.S. in recent years.  Ironically, low capacity utilization made it was necessary to build many more of reactors, dramatically increasing the cost of generation, and the risk of accidents such as Fukushima.)

In some parts of Japan where nuclear is a small part of the electric energy mix (Chubu region, for example), it has been relatively easy to replace nuclear generation by firing up dormant fossil fuel plants.  Even TEPCO (Tokyo Electric) expects to meet summer demand this year without mandatory conservation requirements, by using fossil fuel generation.  The result has been a huge increase in Japan's import of hydrocarbons, and a national swing from current account surplus to deficit.

But in Kansai (Osaka, Kyoto, Kobe and surrounding areas) and Kyushu, nuclear power is a huge part of the electric generation capacity mix, and is difficult ("difficult" in Japanese actually means "impossible") to replace on a short-term basis.  For peak usage in July and August 2012, Kansai predicts at least a 15% shortfall.  Kansai and Kyushu are implementing mandatory conservation measures for large users, requesting all users to cut consumption significantly, and arranging to purchase power from nearby regions.

This lack of supply, coupled with pre-existing high electricity prices that will only get higher, make the situation dire enough to influence factory relocation decisions and drive away employers.

Also, there is a hint of panic in the debate among establishment players -- the utilities, major suppliers, business groups, more conservative politicians, et al., over whether or not to restart reactors to deal with the 2012 summer peak demand.  Lurking in the background is a realization that, if no reactors restart for the 2012 summer peak, and somehow creative conservation measures manage to deal with the situation as they did in 2011, the argument will have been lost that reactor restarts are somehow essential, that the existing nuclear reactor base MUST be utilized, or that Japan will sink into chaos without nuclear power.

Unlike Prime Minister Kan, who favored getting rid of nuclear power in its entirety, as quickly as possible, Prime Minister Noda takes a much more nuanced approach, trying to navigate between public anti-nuclear sentiment, on the one hand, and demands of the business community and bureaucracy, on the other.

So no target has been set as of yet for Japan's target future electric generation mix of sources.  Nuclear could be 0%, or 30% of the mix, or somewhere in between.  At least the 45% option is off the table!  And Mr. Noda has followed through based on the results of the government "stress tests" clean bills of health, and has made every indication that the government will push ahead to restart two of the Kansai Electric reactors (Omi Nos 3 and 4) for this summer, as soon as the necessary arm-twisting is done at the local level.

It seemed likely from the start that Fukui Prefecture and the actual town where the Omi reactors sit would sign off.  Both are heavily dependent financially on the nuclear industry (a topic for another post) and have little option, unless it is to somehow use their current leverage to extract further benefits.  The sticking point has been the surrounding prefectures -- Kyoto, Shiga, and Osaka, whose governors have pushed hard for their own veto rights, since they are major population centers well within the danger zone should a Fukushima-like event occur again.  The Osaka Governor, Toru Hashimoto, is worth special focus, since he is a young, charismatic politician who leads an populist, insurgent group that may run a large number of candidates and try to gain significant national power in the next general election.

But even Kyoto, Shiga and Osaka governors must be alarmed at potential implications of summer shortages.  The latest news, reported in Friday's major Japanese newspapers, was that the Kyoto, Shiga and Osaka governors are likely to acquiesce in restart of the Omi reactors, but want it to be on a temporary basis, only to address this summer's demand.  So it seems very likely, as of today, that we will see a limited restart by July, in time to ease the summer peak demand in Kansai.

Of course, the legal framework does not provide any backing for a "temporary restart", and to allow it is to lose the battle for anyone who believes that Japan must eliminate nuclear power as soon as possible.  If the reactors really are not "safe", they should not restart, regardless of demand.  If they are "safe", then why shut them down in mid-September?  And if the Omi reactors are "safe" to restart, then why not others?  If the stress test results are sufficient for the Omi reactors, then why should we not consider and abide by the results for others as well?

So it seems likely that the debate of the future of nuclear power in Japan is not over.  It is just starting.

All that said, I think there are some boundaries we need to recognize as a practical matter.

The fallout (literal and figurative) of the Fukushima disaster will be with us for our lifetimes and beyond.  Just when you think life has returned to normal, you read that bamboo shoots from Chiba, just across the bay from Tokyo, were not allowed onto the market due to high cesium levels, or that cesium levels have continued to increase monthly in Tokyo Bay's silt at the month of the Arakawa river.  And the "clean up" effort to reduce radioactivity in towns nearer Fukushima ... will inevitably have mixed results, at very high cost.

So I think it is very safe to predict that the Japanese public will not accept construction of any new nuclear plants in the next 20 years, or perhaps much longer.

And the public will not accept the restart of any existing plants that have any identified special risk factors -- a newly discovered earthquake fault nearby, or aging components.

I predict that none of the 40+ year old reactors will restart or have their licenses extended/renewed.  The utilities should simply save their money and start focusing on decommissioning these (but they will not).

I predict that the Hamaoka reactor in Shizuoka will not likely restart anytime in the next 10 years -- despite all the ongoing expense to build a higher seawall against a future tsunami.  Again, money better spent elsewhere.

And, whatever the decision about future nuclear mix, it is clear that Japan needs huge efforts at each of

1. energy conservation (not just turning the thermostat up in summer and down in winter, but efforts that do not cause direct discomfort, please!);

2. new renewable generation -- solar, wind, geothermal, biomass, small hydro, etc.; and

3. new, efficient natural gas generation.

And these need to occur at the same time as a fundamental reform of its electric supply and distribution system -- deregulated markets, access to transmission and distribution for competitive suppliers, peak pricing regimes to shift demand, on-grid storage technologies using electric vehicles and other new battery technologies, smart meters, and much much more.

So if nuclear policy is still unclear, what needs to be done on other fronts is gradually coming into focus.

WSJ blog report here and article (subscription required) here.  Japan Times here.   Bloomberg report of up to a thousand anti-nuclear protesters at the prime minister's office in Tokyo Friday here.