Nuclear versus Natural Gas: An Assessment on the Drivers Influencing Japan's Energy Future

Abstract

After decades of strong commitment to nuclear power by the Japanese government, rising anti-nuclear sentiment among the public following the 2011 Fukushima Daiichi nuclear incident has forced the government to re-evaluate the country's reliance on nuclear power. Japan's subsequent switch to Liquefied Natural Gas (LNG) demonstrated the utilities’ preference for LNG as the large scale alternative option to nuclear power. The reliance on natural gas looks set to grow in the years ahead as the utilities are constructing 12 new gas-fired power generation units in 2014 alone, as replacement for nuclear power and to scale back on the use of expensive oil for power generation. This growing reliance on LNG imports came at a time the IEA said that the world is entering into a “golden age of gas” due to progress in exploration and extraction technology resulting in the North American shale gas boom and the expansion of LNG trade. Although natural gas is much less polluting than all the other fossil-fuel alternatives, it is still a carbon intensive energy source. Japan's growing reliance on natural gas implies that it would be increasingly difficult for Tokyo to meet its Kyoto Protocol pledge in reducing carbon emissions. Moreover, the Levelized Cost of Electricity (LCOE) approach used by the International Energy Agency has demonstrated that the cost of electricity generation from natural gas is higher than nuclear. Already, Japan's growing reliance on LNG has contributed significantly to its first trade deficit since the second oil shock (1979-1980). In this paper, we examine, in economic and political terms, how energy security, international relations, and climate change policy considerations are shaping the Japanese policy-makers’ debate on the country's future energy mix. We argue that in addition to domestic concerns over cost and social acceptance, Japan's decision on its future energy mix will also be shaped by: first, global energy security trends; second, the priority the government attaches to addressing global climate change; and third, Tokyo's international relations strategy to elevate Japan's diplomatic and strategic clout.