Japan In A Post-Post-Nuclear World -- Back To The Future -- April 6, 2015

It may take awhile, but I eventually get around to most things. One of the "Big Stories" (linked at the sidebar at the right), I follow "natural gas and coal in the post-nuclear world." That was the big story that came out after the Fukushima debacle in Japan (tsunami / nuclear reactor).  Everyone thought nuclear was dead. Not so fast.

Today OilPrice has a story suggesting Japan may get back into nuclear. Whether or not that happens any time soon, the story has a lot of data points, worth keeping for the archives.

1. Japan is massively dependent on imported energy. Japan is the world’s largest LNG importer, second largest importer of coal, and third largest importer of crude oil. If Japan managed to ramp up nuclear power to 20 percent of its electricity, it would be able to slash its purchases of fossil fuels dramatically.

2. Weaker economics for energy exporters. Japan’s sharp increase of fossil fuel consumption for power generation after Fukushima raised international prices, particularly for LNG. Spot LNG cargoes in Asia – the so-called JKM marker – spiked, selling for more than three times the price of natural gas found in the United States. The JKM marker has since come down both because more LNG supplies have come online and due to the collapse in oil prices. A return to nuclear power will obviate the need for elevated imports of LNG, keeping JKM prices from returning to their highs of 2011-2013. That will cap the market for LNG exporters around the world, pushing many LNG export projects into the red – from Western Canada, to the U.S. Gulf Coast, to Australia. LNG will be a major loser of Japan’s nuclear restart.

3. Trade deficit and electricity rates down. In the three years following Fukushima, Japan spent $270 billion on coal, oil, and LNG imports, a 58 percent increase over what it otherwise would have spent had its nuclear fleet remained online. That forced Japan to run a trade deficit for the first time in 30 years. Japan’s trade balance went from a $65 billion surplus in 2010 to a $112 billion deficit three years later, owing mostly to higher fossil fuel imports. That also translated into higher electricity prices. Japan’s electricity rates increased by 30 percent for industry and 20 percent for residential homes, respectively. Nuclear power can help reverse the ballooning trade deficit and rising electricity costs.

4. Greenhouse Gases. The loss of nuclear power has taken a toll on Japan’s climate posture, as Japan’s greenhouse gases hit a record in 2013. In the absence of nuclear power, Japan is planning on building a lot more coal plants. It has backtracked on its commitment to reduce greenhouse gas emissions. That could change if nuclear power plays a larger role in the future.

The "greenhouse gas" issue will be the banner to sell this to the Japanese, but at the end of the day, it's all about money.