POWER June 2012 - 62

ResouRce planning
(¥3.1), and fuel cycle costs (¥1.4). But it also
includes ¥0.2 for additional post-Fukushima
safety measures, ¥1.1 in policy expenses, and
¥0.5-at minimum-for dealing with future
nuclear risks. Costs would increase by ¥0.1
for each additional ¥1 trillion ($12.5 billion)
of damage, the council estimates.
There is no silver bullet, Arima concluded.
" In the long-term horizon, more penetration
of renewable energy will raise energy selfsufficiency
and save the cost of imported fossil
fuel, " he said. " However, in the short- to
mid-term perspective, the Japanese economy
will have to bear considerably higher electricity
price. "
Restructuring for More
Competition
Japan's electricity supply market currently
imposes rate restrictions on " general electricity
utilities " and obligates them to supply
power, but it allows them to be monopoly
businesses within their respective regions.
After a revision of the Electric Utilities Industry
Law went into effect in 1995 (and two
later revisions), the scope of liberalization
was expanded by allowing newly participating
power producers and suppliers to meet
demand alongside general electricity utilities
and to use those utilities' powerlines.
The effect of the law is much debated:
Some say it has led to efficiency improvements
through competition while ensuring
reliability, but others point out that because
regional monopolies remain, competition
is insufficient.
Among the first things that became apparent
after the quake (besides the country's
dual frequencies) were the risks of
concentrating large-scale power sources in
distant regions of the country and relying
on a system designed to supply electricity
corresponding to demand while knowing
little about consumption. In Japan, as
METI explains, major electricity consumers
have supply contracts that allow them
to use unrestricted electricity based on a
predetermined rate table-which means
that electricity rates are unchanged even
when the supply-demand balance is tight.
To address these challenges, METI has
told the Task Force on the Reform of Electric
Power Systems that the nation must develop
" an electricity system that has the ability
restrict the peak demand, by utilizing consumer
behavior patterns, and [that allows]
fair and transparent entry into the electricity
business. " This should include reform of
the electricity business system and address
current and future possibilities that include
smart grid development.
One option under discussion hinges on deregulation.
It establishes price mechanisms
62
to help reduce demand and increase supply,
where dominant companies do not hold monopoly
power, and in which customers can
make " free choices " about providers.
Separation of the country's power generation
and transmission sectors is also under
consideration to " secure fairness of competitive
conditions, " but this move has been opposed
by FEPC, the 10-utility coalition.
Competing for Natural Resources
Japan's reluctance to rely on thermal sources
for the bulk of its power stems not only from
a commitment to reduce greenhouse gases
but also from the fact that several Asian
countries-China and India in particular-
are stiffly competing for global oil, coal,
and natural gas imports. (See " THE BIG
PICTURE: Coal Demand Surges " in the
May 2012 issue or in the archives at www.
powermag.com.)
In 2011, the country's crude oil imports
fell 2.4% to 209.85 million kiloliters, owing
mostly to heightened prices: The cost of oil
purchases increased 22% to ¥11.9 trillion.
Japan, already the world's biggest LNG
importer, increased imports of the fuel to a
record 83.18 million metric tons last fiscal
year, up 18% from pre-quake levels, and the
highest level since the government started
collecting data in 1980. The cost of fuel imports
also climbed to a record ¥5.4 trillion
($66 billion), compared with ¥3.5 trillion in
fiscal year 2010.
LNG is certain to play a major role in future
energy policy. Analysts say natural gas
will likely fill most of the gap left by nuclear
generation, making up 30% to 35% of the
country's generation by 2030. They anticipate
the building of new gas-fired generation
facilities and the conversion of older capacity
to more efficient technologies.
Here, too, serious hurdles will have be
overcome. One is that Japan's existing infrastructure
limits the amount of natural gas it
can import. In Tokyo Bay, for example, only
24 million tons per year can be imported
by TEPCO. And then there are permitting
delays: In Japan, building a new gas-fired
plant takes from seven to 10 years, owing to
a five-year-long environmental assessment.
Only TEPCO and Tohoku Electric Power
Co., whose gas plants were demolished by
the earthquake and tsunami, have so far
been exempted from environmental assessment
requirements.
To bypass increasing competition in the
Asia-Pacific LNG market-as well as energy
security risks posed by imports from
the Middle East and Russia-Japan's future
energy policy could also push less-expensive
LNG with flexible volumes from the U.S. If
that occurs, Japanese utilities will have to dewww.powermag.com
vise
technical solutions to combust lean gas
(as opposed to rich gas, which is 90% of the
gas imported today).
Japan was the world's biggest coal importer
from 1975 and 2010, but this January,
it lost that title to China. As China's
coal demand soared to 182.4 million metric
tons to fuel its booming economy, Japanese
customs-cleared imports fell 5.1% to 175.2
million metric tons in 2011, as demand
for coking coal slackened as steelmakers
curbed production. Imports of thermal coal
also fell about 0.4%, to 101.2 million metric
tons, in 2011, because the quake damaged
several coal-fired power plants along the
northeast coast. However, if nuclear reactors
do not resume operations, thermal coal
demand could jump by 8.3% over the next
year, IEEJ said.
To secure future coal supplies, Japan must
strengthen relationships with major coal
suppliers such as Australia and Indonesia,
and build relationships with new ones such
as Mongolia and Mozambique, Hisayoshi
Ando, director general of METI's Natural
Resources and Fuel Department Agency, told
attendees at a coal conference in September.
As China and India are already doing, Japan
must also support development of new coal
mines and transportation infrastructure in
emerging supply countries, Sumitomo Corp.
executive Toru Furihata said. The country's
future energy policy should also promote
clean coal technologies.
The bottom line is that Japan's revised
energy policy will have a tremendous
impact on world energy policy, Nobua
Tanaka, former executive director of the
International Energy Agency and now a
IEEJ global associate, told newspapers in
March. " Competition over energy will be
inevitably aggravated in the future, even
though nonconventional oil and natural
gas are now being actively developed, " he
said. " Japan has to formulate its energy
policy based not solely on domestic context,
but on energy security for the whole
of Asia. " Tanaka says that, considering
this, and ensuring that lessons learned
from Fukushima are capitalized upon, " we
should keep a certain amount of nuclear
generation capacity. "
Upheaval in Japanese Politics
Politics will play another important role
in determining the country's future energy
mix. As some academics note, Japan's administrative
bureaucracy determines government
policy in most fields-the result
of single-party dominance by the Liberal
Democratic Party (LDP) that lasted nearly
40 years, beginning in 1955. The Democrat
Party of Japan's taking of majority seats in
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