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Wednesday, Aug. 15, 2012

Output trumps energy-saving mood

Firms willing to conserve in 2011 now fear for economic survival


By CHICO HARLAN
The Washington Post

SAPPORO — In this summer of idled nuclear plants and energy shortages, corporate Japan is under duress.

News photo
Dark sentinel: Lights for ads on Tsutenkaku Tower in Osaka are turned off July 1. Firms have been straining for ways to meet summer energy-reduction targets. BLOOMBERG / WASHINGTON POST

Workers in short-sleeved dress shirts spend their days in 28-degree offices, the new standard. Lights are dimmed and printers are on only when necessary. Firms chart their energy use, and at one bread factory in Hokkaido, an employee jumps on the PA system when electricity usage spikes, ordering air conditioners off and asking select workers to stop what they're doing.

"This is a demand warning," the announcer says, reading from a script. "We ask for your cooperation."

But many companies are tired of cooperating. Asked by the government to use less electricity, businesses say the cutbacks curb their productivity, thin their profits and could eventually stall the economy.

The energy-saving push was seen on a smaller scale last year after the Great East Japan Earthquake and tsunami led to the crisis at the Fukushima No. 1 nuclear plant, an event that started resulting in all reactors going, and staying, offline for routine and extra safety checks.

Power cutbacks were ordered, initially across wide areas of the Kanto and Tohoku regions, and firms were obliged to curtail power use, which they did without complaint. Electricity conservation, or "setsuden," was a way to help the postdisaster cause.

But this year, business leaders say, the energy-saving feels more like a major drain than a good-will duty. Unlike last summer, when severe shortages were confined to the northeast, even regions far removed from the Fukushima plant now face shortages, with all but two of Japan's 50 viable reactors idled amid public opposition.

Utilities are importing record levels of fossil fuels, but even that hasn't covered the gap. That leaves companies — many that were already energy-efficient — straining for unorthodox ways to meet peak-hour summer reduction targets.

Panasonic told employees at its Osaka headquarters to take a nine-day paid vacation in late July. Nippon Tungsten, a manufacturer in Kyushu, bumped work shifts to the weekend to avoid peak hours and, to use less air conditioning, started spraying factory rooftops with cold water.

Nichiryo Baking, based in Hokkaido, leased a 200 kilovolt-ampere diesel generator, which sits like a horse trailer outside its main factory and supplies electricity at four times the cost of Hokkaido Electric Power Co.

"It makes no sense financially to use the generator," said Hidetaka Matsuda, a Nichiryo Baking manager in charge of energy use. "We're doing it just to achieve the reduction target."

Matsuda described the energy restrictions as "severe." A Panasonic spokeswoman said they've had a "major impact" on business. At the Kawai Tekko Iron Works plant in Hokkaido, some employees second-guess the need for conservation and point fingers at the power utility, which they feel should provide the necessary amount.

"Our work shouldn't suffer," said Hiroki Kawai, an employee who is a third-generation member of the family business. Kawai said he was describing others' complaints, not his own.

The economy-sapping energy shortages hint at the stakes of the fierce debate over the future energy mix. At the root is whether Japan, in the wake of the three meltdowns at the Fukushima plant, should renounce nuclear power to build a less disaster-prone country or re-embrace it to fuel a more economically viable one.

At the 11 public hearings the government held to discuss nuclear power, 70 percent of the citizens who spoke said they favored a no-nuclear policy by 2030.

That is one of the three plans being considered, along with options under which nuclear power would make up 15 or 20 to 25 percent of Japan's total energy supply by 2030.

It is the leaders of corporate Japan, along with top government officials, who form the powerful minority in favor of nuclear energy. Persistent power shortages, they say, will wreak havoc on a resource-poor nation whose energy costs — already among the world's highest — will further rise with growing fossil fuel imports.

Japan needs nuclear power for a stable electricity supply, Prime Minister Yoshihiko Noda said in June, and without that, "Japanese society will not be able to function."

A nuclear Japan, according to projections last December from the Tokyo-based Institute of Energy Economics, would have a GDP in 2012 roughly 2 points higher than a nonnuclear one, and experts say the difference could be even greater if oil prices spike.

Nuclear opponents say nuclear power, which once supplied one-third of the nation's electricity, can be replaced with renewable sources. But that would take years of work and billions in investment.

This summer's shortages have convinced some corporations that nuclear power is essential, at least until progress on renewable energy is made.

"It's preferable to reduce our dependency on nuclear power plants in the medium to long term," said Cathy Liu, a Panasonic spokeswoman. "However, there is no other way but to keep using nuclear power plants, with attention to their safety, as we do not have an alternative energy at this point."

The shortages, in theory, can disappear — or at least diminish — with just the flick of a few switches, as seen last month when the central government ordered the reboot of two reactors in the industrial heartland of Kansai. With that restart, the region's energy-saving request was trimmed to 10 percent of 2010 peak levels from 15 percent.

Each region has different energy-saving targets, imposed on companies and households, depending on the severity of shortages faced by utilities in the area.

In Hokkaido, households and companies are being asked to shave 7 percent from their 2010 peak-hour consumption levels. Were Hokkaido Electric Power able to operate even a single reactor, such a request wouldn't be necessary.

The saving is not mandatory, and companies face no punishment for ignoring the request. But by doing so, they risk sudden blackouts that would come if demand by the utility's customers exceeds capacity.

So far this summer, this scenario has been avoided — a sign, Hokkaido officials say, that the voluntary cutbacks are working.

The energy-saving, though, is expected to get harder the longer it goes on. A 2011 report from the International Energy Agency on urgent electricity shortages said "consumers may be more willing to conserve energy if they know the shortfall is short-term."

The people "will become tired and exhausted" over the long haul as the country loses the feeling of postdisaster crisis, said Yu Nagatomi, an economist at the Institute of Energy Economics.

This year, some people are brushing off energy conservation as a low priority — something unheard of last year after the disaster. At a spring meeting with regional farm leaders, Hokkaido's powerful agricultural co-op recommended only a few modest ways for farmers and producers to cut back electricity — and mostly on the office side, not with actual machinery. Save electricity, a document outlining the meeting said, only to the extent that "it does not create any trouble for managing your business."

The energy shortages are particularly vexing for firms as nobody knows how long they will last.

Energy experts say the best way for corporations to reduce consumption is with heavy investment, particularly in energy-efficient lighting and in modern machinery.

Companies, though, are hesitant to spend the money before they know Japan's long-term plan for the nuclear plants.

During a recent tour of his family's iron factory, which employs 40 people, Kawai pointed out the many decades-old appliances he'd love to replace. Wiring. Machinery. The fire-hot mercury lamps that light up his factory "like a baseball stadium."

But Kawai Tekko has lost ¥28 million over the past two years. Major investment in energy-efficient machinery isn't so smart if Hokkaido's three reactors are operating by next summer. In the interim, Kawai Tekko is trying to save electricity only on the office side, by using less lighting and air conditioning.

"It's almost impossible to do energy conservation without (changing) the machines," Kawai said.

He emphasized that saving energy is an admirable goal, and he'd prefer not relying on nuclear power because of the safety risks. But he has come to think that the country has no choice.

"People say, 'Shut down all the plants,' " Kawai said. "But then what do we do for an alternative? We're stuck."



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