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     Dec 15, 2012

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Japan builds a Galapagos of power
By Andrew DeWit

This article assesses the political economy risk of the return of Japan's nuclear village. The campaign for the December 16 general election and its aftermath may see the nuclear village and its allies seize even greater momentum in key central-government agencies.

With a welter of parties and their confusing positions on energy policy, an election seems hardly likely to lead to coherence. The general political and policymaking chaos of the present invites comparison with Japan's early post-war years. The upshot could lead to a gradual return to the concentration on nuclear power that was written into the June 2010 basic energy policy and remains the de jure energy policy, notwithstanding the March 11, 2011, Fukushima shock and all that has happened since.

If this "back to the future" scenario eventuates, I argue that Japan

risks building a "clean" Galapagos in its power economy, one relatively sterile in business potential, at a time when power is becoming perhaps the world's most dynamic sector.

This risk also encompasses Japan's energy policy in general, since the innovative dynamism of the power economy is spreading to efficiency, fuels and other energy sources outside of the electricity sector per se.

If you start me up...
As we know from Jeff Kingston's excellent work, [1] Japan's "nuclear village" is on the comeback trail within the central government's chaotic politics and policymaking. Key decisions on reactor restarts are being moved from the cabinet to the new Nuclear Regulatory Agency, which is clearly dominated by pro-nuclear interests.

The public remains very skeptical about the merits of nuclear power, as are publics just about everywhere. That fact, and its impact on the power policy debate over the past year and a half, is clearly one reason that a host of decisions are being shifted to the new regulatory institution where the nuclear village holds sway. [2]

It is clear, that at the central government level, the nuclear village and much of the establishment's political and business actors insist that the power-policy status quo ante-Fukushima is the proper basis for weathering Japan's daunting total of eight major challenges and moving towards a sustainable recovery.

These challenges include the world's most rapid rate of aging, the weakening global economy, and the continuing nuclear crisis. [3] Looking at the bottom line on power prices, the Japanese establishment sees increased imports of gas and other fossil fuels as costing more than restarting the country's currently idle 48 out of 50 nuclear reactors.

These direct pecuniary costs are not insignificant. Japanese utilities' fuel costs appear likely to double this fiscal year from two years ago. In the fiscal year ending March 2013, the nine monopoly utilities, excluding Okinawa's monopoly, appear likely to pay about 6.8 trillion yen (US$85.2 billion) for liquefied natural gas, coal and crude oil. By comparison, in the year before the Fukushima shock (the fiscal year ending in March 2011), the utilities imported 3.6 trillion yen worth of fuel. And last year, they imported 5.9 trillion yen worth of fuel.

The utilities losses as a result of last year's costs and other factors totaled 1.6 trillion yen in 2012. [4] With Tokyo Electric Power (TEPCO) now asking the Japanese government for more assistance to cope with Fukushima disaster costs of over 10 trillion yen, they are also pressing to have their massive nuclear capacity at Kashiwazaki-Kariwa and elsewhere restarted. [5]

Crass calculations play a significant role here. The peak business association, Keidanren, remains dominated by energy- and resource-intensive industries with significant ties to the nuclear village. [6] For the most part they are either not interested in the revolutionary "green growth" opportunities of our era, not aware of them, or believe they can have their nuclear cake and robust green growth as well. They look at power costs, ignoring the trillions of yen in Fukushima costs that will be passed on to taxpayers, repeat the slogans that Japan is the world's most efficient economy and that renewables are unreliable, and make their decisions accordingly.

They are not simply being cynical: like all other observers of Japanese business, they see the sobering spectacle of such huge firms as Sharp on the edge of bankruptcy and Sony's debt downgraded to a notch above junk. [7] They are also poignantly aware that, in early November, the Japanese economy is entering its fifth recession in 15 years.

They will find no relief in, for example, the 2013 Global Manufacturing Competiveness Index, compiled by Deloitte and the US Council on Competitiveness. Based on a variety of measures, the report places Japanese competitiveness at 10th, just behind Singapore, and sees it slipping to 12th in five years, beneath Indonesia and just above Mexico. [8] In short, Japanese business interests are quite reasonably worried about their capacity to survive in a very competitive and unstable global marketplace. Deeply risk-averse and perceiving risk largely in pecuniary terms, they are trapped in a tunnel vision.

Out of the tunnel
Let's not share their tunnel vision. Rather, let us look instead at the rapidly changing global environment in which Japan has to find a new niche. The major opportunity for Japan is in the energy sector, and infrastructure related to it. This sector is at least 10% of the global economy. [9] Energy is not only the world's largest industry; it is also its most damaging via direct health costs [10] as well as being the source of over 80% of anthropogenic greenhouse gas emissions. [11]

Japan's demographic, economic and other crises are real. But deep, systemic crises are now humanity's common reality. Among the most evident of these systemic crises are long-term trends of population growth, economic development and urbanization that are driving resource constraints. By 2030, roughly five billion people, or two thirds of the global population, are projected to live in cities, with massive and potentially catastrophic increases in energy demand.

For example, the US Energy Information Agency's 2011 International Energy Outlook projects world power generation as increasing from 19.1 trillion kWh in 2008 to 25.5 trillion kWh in 2020 and 35.2 kWh by 2035. It also sees the bulk of power generation coming from conventional fuels, such as coal, natural gas and nuclear. [12] If this "business as usual" scenario on power generation eventuates, then the already escalating costs of fossil fuels will continue. [13]

In addition, the October 29 shock of Hurricane Sandy's US$50 billion destruction in New York and New Jersey will almost certainly become a mere foretaste of abrupt and truly devastating climate change. [14]

An additional and deeply troubling matter is the knock-on effects of these price increases on food supply. Post Carbon Institute senior fellow Richard Heinberg has for example shown that the intense role of oil (as fuel, input source for fertilizers, etc) in food production has led to a correspondence between rising oil prices and rising food prices. [15] Lester Brown includes other factors - such as population growth, changes in climatic patterns, the use of corn and other food crops in biofuels - and starkly details the risks in his new work Full Planet, Empty Plates. [16] He warns that food prices have climbed, roughly doubling, between 1990 and 2012 with devastating effects for the world's urban poor.

Rising resource and food costs add to the increasingly constraining effect the water-energy-food nexus exerts on our energy and other choices. Among other things, the water demands of conventional energy - including nuclear - threaten to overwhelm our capacity to cope with global population increases and urbanization. This risk is evident in so-called "water footprints", illustrated in the chart below, which displays the amount of water used, and then discharged, or consumed (and then evaporated) for the various power generation sources, per unit of power produced.

In the United States, roughly half of freshwater withdrawals are used in energy production, with varying amounts of the water released as heated water, as polluted water, and as vapour. [17] The reliance of conventional energy on water, whether in the exploitation stage or final cooling stages, is another salient problem that is overlooked by conventional projections of demand. That downplaying of risk is bizarre, because there is no substitute for water in these processes and there is now a significant body of research on the water-energy-food nexus.

There is also a rapidly emerging investor risk, particularly in areas where climate change has altered historic rainfall patterns. Utilities, fuel producers, and other interests ignore the increasingly stark evidence of change. They tend to assume that water supplies will not be a problem, certainly not their problem, as has been the case in the past. But particularly in India and China, water stress is already becoming so significant that even the world's largest power-unit maker, General Electric, warns observers that projections of coal-fired power-generation are to a significant extent fanciful. [18]

But again, water stress is not only a problem for fossil-fuel generation. Nuclear power is also a very thirsty form of generation, as we see from the water footprint chart, and is increasingly running into unanticipated problems. The 2003 European heat wave that resulted in 35,000 deaths also had a deleterious impact on nuclear-power production, especially in France. In total, 17 French reactors had to reduce output or shut down altogether, due to reliance on river water for cooling. In the United States in mid-August 2012, a Waterford Connecticut Millstone reactor had to be shut down for 12 days, due to sea water being too warm for cooling, a fact that sent a shiver through the global nuclear village. [19]

What seems clear from observation, rather than fanciful projections, is that the more we grow conventional power, including nuclear, the more severe become our environmental, economic and even political costs. Researches indicate that we have evolved a resource-dependent and inequitable conventional growth model that is unsustainable. We have seen that it is unsustainable in terms of the toll it exacts on nature, particularly the knock-on effects through the water-energy-food nexus.

In other words, markets and nature seem to be driving development in a very different, direction with respect to sustainability. The best recent work on where we are and where we are being driven, if we want sustainability, is the 2012 Global Energy Assessment (GEA).

The GEA is an initiative that included 300 specialist authors over five continents, and weighs in at 1865 pages. It is by far the most comprehensive study of energy options available, as it couches its analyses in terms of such interactive issues as water. It argues that, with aggressive efficiency, the global community can derive up to 75% of primary energy (meaning not just electricity) from renewables by 2050. It sees nuclear power as at best an option, and not a must, like renewables and efficiency.

Is radical efficiency possible?
One question that immediately arises in this context is whether aggressive efficiency is possible, especially in the Japanese case. In spite of the rhetoric, Japanese energy policymaking has long soft-pedaled the role of efficiency. The country has, however, significant scope for efficiency gains.

Japan is far ahead of the United States, of course, which many commentators tend to use as the benchmark for just about anything concerning Japan. But as we saw in the July 2012 release of the authoritative study by the American Council for an Energy Efficient Economy (ACEEE), Japan is ranked fourth in efficiency, behind the UK, Germany, and Italy. The Americans lag at 11th, but simply being ahead of them is not in and of itself an achievement. [20]

And as to specific areas of efficiency that are not limited to Japan, note the gains we can expect from lighting. Lighting consumes about 20% of global electrical power production, and is responsible for about 20% of Japanese household power consumption. [21] The McKinsey consulting group's September 2012 second edition of their comprehensive analysis of the lighting industry, the "first to provide a comprehensive and holistic view" of this fragmented and very complex market, highlighted its dynamism and efficiency potential.

As we see in the chart below, taken from the report, 100% diffusion of LEDs in Japan by 2020 has the potential to displace seven nuclear reactors' worth of power demand (that is equivalent to about 7 gigawatts of power). [22] 

The McKinsey study also projects savings of roughly 19 nuclear reactors' worth of power in the United States by 2020 through the use of LED lighting. LED lighting is also in a very disruptive phase, according to the report, with the evolution of new services, IT applications, and even organics.

LED is one area where we clearly see that the global energy industry and energy applications are in the midst of an industrial revolution that melds energy, IT and biotechnology, well over 20% of GDP for an industrial economy like Japan's.

Continued 1 2 

Japan struggles to store nuclear plant waste water
(Oct 26, '12)



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