Comment on “Japan's Post‐Fukushima Energy Policy Challenges”

Abstract

Ken Koyama (2013) has done a great job in analyzing the current energy situation in Japan. I would like to add five points to his analysis mainly from an Asian and global context. First, the short-term risk of a possible Iranian crisis should be stressed. The Strait of Hormuz may be practically blocked when Israel decides to attack Iranian nuclear facilities. The probability of attack will increase from the summer of 2013 to the winter of 2013. If this happens when almost no nuclear reactors are running in Japan, the oil and gas price hikes may trigger an economic crisis by pushing Japan's current account surplus into a huge deficit. Capital flight will dampen the value of Japanese government bonds as well as the yen. Liquefied natural gas (LNG) supply shortages in the Chubu Electric Area which relies on Qatar for 40% of its total power supply will trigger planned blackouts in the region. The Japanese government should prepare a contingency plan, including a quick re-start of nuclear power plants. I am concerned that the re-starting of nuclear power plants may be further delayed even after the completion of new safety standards by the newly created Nuclear Regulatory Commission in July 2013 because more detailed criteria and/or the rules for implementing these new standards may not necessarily be in place at the same time. Second, natural gas will be a very important bridge energy source for Japan. Imports of LNG from US shale gas as well as from Alaska have strategic importance for diversification at competitive prices. Russia may also play a very important role for Japan and Asia. A gas pipeline connecting Japan with Russia would help diversify gas supply away from Japan's current total full dependency on LNG. These diversifications will help Japan to change the current price formula for LNG that is indexed to the oil price to a more rational one. Third, high feed-in-tariffs are not enough to expand the use of renewables. Power market reform such as the unbundling of utilities and the unification of the 50–60 Hz frequency zones in Japan are keys for introducing a decentralized power system by renewables. This may open the way up to an interconnection with the power grids in Russia and Korea. Russia wants to export hydro-generated electricity form East Siberia, and South Korea benefits from a reduction in the risk of blackouts. Fourth, technological solutions must be considered to strengthen Japan's energy security. Examples of these solutions are generation 4 reactors such as Integral Fast Reactor and Pyroprocessing, hydrogen transportation and storage using Methyl-Cyclo-Hexane, Methane hydrate, and super conductivity grid. Fifth, energy security for the 21st century is collective energy security. Countries in the European Union are connected with each other by power grids and gas pipelines, which enables Germany to phase out nuclear power, while increasing the use of renewables and reducing security risks. This collective security system provides an interesting model for Asia. While Asia needs more energy than anybody else, we urgently need a governance framework. We should not waste our time by unnecessary disputes or conflicts. Japan, after the Tohoku Earthquake and Tsunami, is in the best position to lead the dialogue on collective energy security.