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Japan Fukushima update: rethink of national energy policy

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from Casey Research
Posted originally May 12, 2011

Fukushima Daiichi disaster prompts closure of another plant, rethink of national energy policy

As workers continue to battle with the crippled Fukushima Daiichi Nuclear Plant, more impacts from the worst nuclear disaster since Chernobyl are starting to arise. The latest impact will hit car manufacturers, with plants in central Japan hit the hardest: power firm Chubu Electric has agreed to shut its Hamaoka Nuclear Plant until it can build better defenses against the kind of massive earthquake and tsunami that hit on March 11, and Hamaoka provides power to at least 15 auto plants.

Now analysts are wondering if the power disruptions – and more generally the lack of clarity around Japan’s future energy policy – might be the final pressure that drives Japan’s famous car makers towards more overseas manufacturing.

Japanese Prime Minister Naoto Kan asked Chubu to shut down all of the reactors at Hamaoka, citing studies that say there is a 87% chance the area will be hit by a earthquake of magnitude 8.0 or greater in the next 30 years. That information raised questions about why the plant was built near a major fault line in the first place. Chubu complied with the request within days. The utility said it will look to buy more liquefied natural gas and oil to make up for lost capacity. The company also said it will make efforts to procure energy from another utility in western Japan to try to avoid disruptions in its power supply.

That supply powers half of the 18 Toyota plants in central Japan and all four of Suzuki Motor’s domestic car and motorcycle facilities. The coverage area also includes plants owned by Honda Motor and Mitsubishi Motors, as well as Sharp’s LCD factory and Toshiba’s semiconductor plant.

Japan’s car makers are already hurting from the March 11 disaster. Toyota and Honda have been forced to operate at about half of their planned levels because of a shortage of components. They had forecast a return to normal levels by the end of the year, but now power shortages will make it even harder to recover. More generally, the power issue could give car companies another reason – in addition to a strong yen and cheaper labor abroad – to shrink production volumes in Japan.

The government stressed that Hamaoka was a special case because of its location, and reiterated that other plants would not be singled out for closure. Analysts were less than convinced, however; many pointed out that the request to Chubu came from a government that still had not clarified its energy policy in the wake of the nuclear disaster. Chubu can switch to LNG- and oil-derived power in the short term, but those power sources cost more and increase emissions. In the longer term, no one knows what the government wants to do. And the longer that uncertainty about power supplies continues, the more companies will start thinking about manufacturing overseas.

As if in response to these growing calls for energy policy certainty, on Tuesday the prime minister said Japan will scrap a plan calling for increasing use of nuclear power. Prior to the disaster, Kan’s government planned to increase the country’s reliance on nuclear power from 30% to 50%. Kan said the country needs to “start from scratch” on its long-term energy policy.

Over at Fukushima Daiichi, workers opened the doors of the damaged building around Reactor No.1 on Sunday and, after letting the building air out for eight hours, entered the building for the first time. TEPCO said the airing out released little radiation because an air filtration system installed last week had already removed most of the dangerous particles. The next step is to start replacing the reactor’s cooling systems.

A few days ago, about 100 evacuees were allowed to visit their homes in the exclusion zone around the plant for the first time since the earthquake. Nine towns and villages, usually home to tens of thousands, are subject to the no-go zone order and TEPCO says that, even in a best-case scenario, residents will be not able to return for another six to nine months.

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