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Saturday, March 10, 2012
QUEST FOR RECOVERY
Summer power crunch looms large
By KAZUAKI NAGATA and HIROKO NAKATA
Fourth in a series
As the closure of the nation's 54th and final reactor approaches, businesses and think tanks are starting to wonder whether Japan can survive next summer without atomic energy and a mandatory power-saving order.
Japan has survived a winter and a summer without its full complement of nuclear plants, but utilities and experts think it will be tough to get by without restarting some of them.
However, as revelations of poor government disclosure and gross incompetence continue to emerge from the Fukushima disaster, the prospects for nuclear energy are dim. Only two reactors are online and both will be offline by May.
"The situation will be more difficult than last summer," said Shigeru Suehiro, manager of the energy demand, supply and forecast analysis group at the Institute of Energy Economics, Japan.
Suehiro said it will be difficult to avoid power shortages this summer without firing up reactors. And with outages a risk — and the yen still high — manufacturers might accelerate their exodus overseas while utilities struggle to pay for the drastic jump in fossil fuels needed for thermal power plants.
In the past year, Japan has weathered rolling blackouts and the first mandatory power conservation order issued in 37 years, but the drawdown from nuclear power appears to be proceeding in an orderly manner.
According to a government estimate, however, six regional utilities — the Hokkaido, Tokyo, Kansai, Hokuriku, Shikoku and Kyushu electric power companies — will not have enough juice to cover peak demand without their reactors.
Kansai Electric could come up 25 percent short of peak demand this summer with just 23.53 million kw, against 31.38 million kw needed.
Last summer, the government issued a 15 percent mandatory power-saving order to big clients of Tokyo and Tohoku Electric. Suehiro said it was quite a burden, especially for manufacturers.
Last fall, business lobby Keidanren surveyed 87 companies on how power conservation impacted their businesses. Some decided to shift working hours from weekdays to weekends or day to night to reduce peak demand. Others were in a position to simply generate more of their own electricity. But in-house power generation jacked up operating costs, and shifting work schedules interfered with communications, the survey found.
Considering last year's ordeals, Suehiro said it would be unreasonable to expect more corporate contributions to energy relief this summer. Supplies last summer were tight, and some utilities had to resort to borrowing electricity from private companies that had their own generators.
For example, the Nippon Paper Group decided in June to crank up the thermal power generators at Nippon Paper Industries Co. and Nippon Daishowa Paperboard Co. to provide Tepco and Tohoku Electric with 95,000 kw of emergency power — power the paper makers would normally use themselves.
But to some experts, observations like this are reason to be more optimistic about the situation because it shows there's still more room in the both the public and private sectors to save power and pare total demand.
Hideaki Matsui, a senior energy expert at The Japan Research Institute, said utilities could probably do without reactors and power-saving orders if they pursued more strategic and efficient conservation measures.
Matsui said the most important thing to do is reduce peak demand. Although Kanto and Tohoku residents made constant efforts to save power, including at night when demand usually ebbs, their Kansai counterparts didn't have to, he noted.
"The Kansai region has more room for power-saving because a mandatory order was not issued in that area last year," he said.
Matsui said whether to restart reactors is a tough topic. Although curbed use of nuclear power will have a big impact on the economy with the increased import of liquefied natural gas, a rush to restart reactors could open the door to another major nuclear crisis, he said.
He added that the economic impact and reactor safety should be treated as separate issues, as securing the safety of reactors is critical to avoid another disastrous nuclear accident.
It is still unclear whether the nation can get through the summer without nuclear power, but one thing is clear: The utilities are eager to fire up their atomic plants as soon as possible to save the billions of yen they are spending on fossil fuels.
As a result, all of them except Okinawa Electric Power Co., which doesn't have reactors, posted losses for the period from April to December.
"It's not too much to say that we are facing the biggest challenge in the history of this company," Kepco President Makoto Yagi said Feb. 27 as he announced his projection of a record-high ¥253 billion loss for the year ending in March. April-December fuel costs jumped ¥231 billion from the previous year and all its 11 reactors are closed, the utility said.
If the utilities can't restart their reactors and stem their losses, "they will have to raise electricity rates to avoid going bankrupt," Suehiro said.
Tepco, struggling with the crippled Fukushima No. 1 plant, plans to raise power rates for its largest customers by 17 percent in April despite a harsh outcry.
Toshiyuki Shiga, Nissan Motor Co.'s chief operating officer and chairman of the Japan Automobile Manufacturers Association, said the 17 percent hike might increase operating costs by roughly ¥2,000 to ¥3,500 per car.
"We can't just reflect that in the sales price," he said last month.
Concerns about power shortages have prompted some companies, especially in eastern Japan, to transfer operations to western Japan or overseas to diversify their resources and mitigate the risk of crippling business disruptions.
Glass maker Hoya Corp. decided to build a production plant in Shangdong, China, after the quake to avoid power shortages at its Akishima plant in Tokyo, a company official said. The Shangdong plant went online in December.
Kenko.com, an online firm that sells health products, moved some of its head office operations in Tokyo to Fukuoka in May to avoid the risk of power shortages.
Because nuclear power was promoted for decades and has become a big part of the nation's economic structure, the impact of its decline on the economic and business sectors cannot be ignored. But it is also true the direct impact of the Fukushima crisis has been enormous to residents and businesses around the plant, demonstrating the potentially tragic consequences of depending on nuclear power.
According to a 2011 white paper, some 8,000 small and midsize firms were within the Fukushima nuclear evacuation zones. Evacuation advisories have now been lifted except for the 20-km no-go zone around the crippled plant.
"Our engine bulb technology is unique. So stopping most of our plants disrupted the supply chain for automakers," said Mitsuyoshi Naka, who heads auto parts maker Fujikura Rubber Ltd.
For his company, the nuclear crisis happened at the worst time possible. It had just moved its core operations to its Odaka plant in Minamisoma, Fukushima Prefecture — 10 days before March 11.
The Odaka plant, only 10.9 km away from the nuclear plant, had assumed the major operations of Fujikura's nearly 50-year-old plant in Omiya, Saitama Prefecture.
Fujikura had no choice but to abandon the Odaka plant, he said.
The company temporarily moved the Odaka operations to a plant leased from Denso Corp. in the city of Tamura, Fukushima Prefecture, outside the evacuation zones, and later relocated to a site it bought from Advantest Corp. in Kazo, Saitama Prefecture.
Naka said the company also had to briefly suspend operations at two other plants that are located 27 km away and 36 km away from the No. 1 power station
Due to the significant drop in production, the company's operating profit plunged 74.8 percent for the April-December period from the same period a year before to ¥357 million.
"The nuclear accident caused pain and crisis beyond our expectations," Naka said. "The aftereffects are still lingering."
In this series, we examine how the March 11 calamity changed the nation and what needs to be done to revive Japan as the first anniversary of the Great East Japan Earthquake approaches.