Monday, 1 April 2013

Japan's nuclear power conundrum

Two years following the gigantically devastating earthquakes near the islands of Japan and the resulting tsunami, Japan has turned off all but two nuclear reactors as modest public opinion against nuclear power remains consistent. However, without domestic nuclear power generation Japan will need to secure alternative energy sources if it is to reinvigorate its economy. A continued lack of nuclear power generation will have geopolitical implications for the island nation.

Shutting down all reactors across Japan after the partial meltdown at the Fukushima Daiichi Nuclear Power Plant was more than simply a knee-jerk reaction by Tokyo. The island nation is extremely prone to seismic activity and the imposition of nuclear power plants has always been a risky method for energy generation. But Japan has embraced nuclear power precisely because of its isolated and unstable geographic position.

The Shika nuclear power plant in Ishikawa Prefecture - Asahi Shimbun file photo
Powering vehicle and electronics factories is energy intensive and Japan lacks substantial deposits of conventional fossil fuels to power these domestically. To maintain a population of its size, Japan must look abroad to import almost all of the energy it consumes, including nuclear fuel.

In the past Japan has used its military power to secure trade routes and offshore energy fields. As an example showing just how important these are for Japan, the United States’ threat to cut off Japan’s sea lanes essentially forced Japan’s entry into World War II.

Being able to control their energy generation, ideally domestically, is a national imperative for Japan. But because public opinion does not always necessarily coincide appreciably with nation interests, Tokyo must to listen to a modest, but vocal, segment of its population who are stridently anti-nuclear. Such public opinion is making current Japanese Prime Minister Shinzo Abe’s attempts to reinvigorate Japan’s economy particularly difficult.

As a result, Japan is relying more heavily on alternative energy sources such as oil and gas, which the United States, as Japan’s security guarantor, will continue to supply for as long as Tokyo needs. And as long as the two Pacific behemoths maintain cordial relations, Japan does not have to secure those energy imports itself.

That is just as well, because tensions around a smattering of supposedly “national” bare rocks in the East China Sea offer a disturbing example of how this part of the world might look if regional powers suddenly found it necessary to secure their own trade routes. Japan can afford to turn off domestic nuclear power reactors and switch back to fossil fuels, even though the price is very high, because it does not have to personally pay for a navy if the U.S. Navy is guaranteeing imports.

However, importing fossil fuels is a stop-gap measure until Japan can secure cheaper and reliable energy sources once again. Major Japanese utility companies are already struggling to make a profit at current energy prices, and recommend restarting more reactors. The unpopular alternative is raising energy prices to offset the high cost of importing expensive fossil fuels. Of course, higher energy prices will impact Mr Abe’s efforts to stimulate Japan’s economy.

Ultimately the Japanese population will need to decide, using simple cost-benefit calculations, which risk they most wish to live with. The danger of nuclear reactors might be exaggerated in seismically stable countries such as Germany, where they will abolish their reactors by 2023 as a reaction to the Fukushima disaster, but is very possible in Japan. Public scepticism around reactor safety is understandably high.

Yellowcake uranium
On the other side, an ailing economy in desperate need of low energy prices to stimulate growth could directly affect Japanese standards of living in the near future. The earthquake has cost close to US$235 billion, making it the costliest disaster in human history. Mr Abe understands these costs and knows where to focus on the Japanese economy. So although public opinion remains against nuclear power, a handful of reactors will potentially restart later this year.

Economic success in Japan requires cheap energy. And far from cooling the nuclear energy sector, more plants will be built following the Japan’s disaster than ever before. Presently 435 nuclear reactors are quietly boiling water around the world with a further 65 under construction.

China is expected to increase its nuclear generation by up to half of current U.S. output, an enormous increase. The World Nuclear Association predicts a further 487 nuclear reactors will be in operation by 2030, indicating that the world is moving towards nuclear power instead of away. Nuclear power is clearly here to stay.

Because many of these reactors will be third generation models, characterised by extremely safe operation with low nuclear waste by-product, uranium will still be the crucial nuclear fuel for many years. The current expectation is that today’s surplus production of uranium will vanish in the next two years, leading to a marked price appreciation in the uranium market. Japan already has existing reactors; Mr Abe just needs to flick the operation switch.

Japan would much prefer to spend the money it is using on normalising its military (centred around protection of Japan’s trade routes) on reinvigorating their economy instead. But in order to achieve this, it will need to decide whether the risk of restarting its nuclear reactors outweighs the increasing costs of energy based on importing expensive fossil fuels. 

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