The election of Ryuichi Yoneyama, an anti-nuclear campaigner, as Governor of the Niigata prefecture on October 16, 2016, has cast serious doubts on the nuclear restart agenda advocated by the Abe government. This follows a similar development in the southern Kyushu province of Kagoshima, the location of Sendai’s Units 1 and 2, where the anti-nuclear Governor Satoshi Mitazono was elected in July 2016. Japan’s power utilities, who have been facing intense power price volatility in recent months and are struggling to maintain security of supply, have been pushing to speed-up the restart program. The election result comes as a blunt reminder to the Japanese power industry of the deep divisions in public opinion. The battle for a restart may be fiercer than expected.
Out of the 53 nuclear reactors that shut down in the aftermath of the great East earthquake in March 2011, 42 reactors are operable and potentially able to restart (including Takahama 3 and 4, which were already restarted but put on hold again after a court decision). Today, only two are in commercial operation following a series of very strict inspections and new security measures. Even if a prefecture governor has no legal power to decide over power plant safety and operation matters, the sudden political reverse of the Niigata prefecture will be a source of concern for medium to long-term power network planners. The region hosts the 7.965 GW Kashiwazaki Kariwa plant (operated by TEPCO), which is the world's largest nuclear power plant.
At the same time as these political developments are taking place, stress test measures have begun to bear their first fruits. Several events appear to indicate that Japan potentially stands at the start of a long awaited restart process.
On November 9, 2016, the Nuclear Regulation Authority (NRA) approved a preliminary report confirming that Kyuden’s Genkai No. 3 and 4 reactors (2.3 GW) meet post-Fukushima safety rules, one of the biggest hurdles an operator must clear. A 30-day public consultation period must still be held before final approval.
On November 16, 2016, KEPCO also received the green light from the NRA to restart unit 3 of the Mihama power plant in the Fukui prefecture and was granted the authorization to operate it for an additional 20 years. This approval does not mean that the Mihama No. 3 reactor will be resuming operations any time soon though. Anti-quake measures and the replacement of electric cables that total about 1,000 kilometers in length are expected to take more than three years, meaning that operations will resume by March 2020 at the earliest.
The market is also preparing for further nuclear energy development with two new reactors currently under construction: The Ohma reactor (Aomori prefecture, J POWER, commissioning expected in 2020) and the Shimane 3 reactor (Shimane prefecture, Chugokuden, successful safety tests conducted in 2016, no official commissioning date announced).
These events bring both information and uncertainties about the pace and scale of the nuclear restart in Japan, and the resulting resilience and operating cost of the power network with and without nuclear energy. In this context, capacity planning in Japan faces great uncertainties and there is now a strong need to assess the long-term development of nuclear energy in Japan, particularly the feasibility of METI’s 2015 plan that targeted a return to a 20 percent to 22 percent share of nuclear power generation by 2030.
Taking a closer look at this announced target, METI only specified its nuclear share objective for the year 2030 and not the progression in between. Assuming a progressive restart of nuclear power between 2020 and 2030 of two GW per year is one reasonably realistic path to reach the METI objective. By utilizing the Genscape EPSI Platform’s extensive plant database and implementing this trajectory in installed nuclear capacity into an EPSI scenario of the Japanese power market over the 2017-2030 timeframe, we obtain the generation mix evolution shown in the top-left chart of Figure 2 below. Despite an increase in nuclear and renewable generation, further conventional units are required. With Japan’s strong investment in advanced coal technologies, which is reflected in recent new coal plant development, and a relative lack of environmental regulations, it is likely that the majority of the required new capacity will be coal-fired.
However as pointed out earlier, the nuclear restart process may be a much bumpier road, and the capacity for METI’s objective to be turned into reality may well be challenged.
To explore this, we used the EPSI platform to develop an alternative scenario in which Japanese power utilities struggle to get their reactors back on line. In this alternative configuration, we halve the assumed nuclear generation share in 2030 (but still follow a similar path pro rata). The resulting generation mix evolution is shown in the top-right chart of Figure 2.
With similar assumptions on demand growth, installed renewables capacity evolution, and fuel price development, we can see that power demand is satisfied to a much greater extent by coal and gas. More ups and downs and likely higher power prices can be expected in this scenario as they are driven by more expensive and volatile fuel prices. A predominantly thermal generation basis will require further development of coal and gas installed capacity in the medium term and this may create new opportunities for outsiders to build and operate new plants. Despite a strong rise in solar capacity (also taken from METI projections), the resulting carbon footprint for Japan, without any emission restriction, would certainly look quite poor with coal accounting for much of the installed capacity development. As such, an alternative scenario would instead see much of the slowdown in nuclear restart being replaced by faster growth in renewables capacity, creating a whole new dynamic altogether.
Japan is on the brink of a structural power market transition and is at the same time unsure of how its mid and long-term generation infrastructure will develop. When entering a period of great uncertainty, one cannot afford to navigate blindfolded. The process of exploring different market evolutions in a scenario-based approach enables Japanese power market players to rely on solid insights to make their investment and operating decisions.
Genscape's EPSI Platform uses a combination of market insight, thorough data research, relevant data streams, and rigorous quality control to provide unparalleled depth and quality of data focused on the fundamentals of the Japanese power markets. To learn more, or to request a call, please click here.