Japan will increase public funding for nuclear power renewal
Japan has announced plans to increase public funding for its crippled nucleopower sector. This is essential, say experts, to kick-start an industry that was previously financed by utilities owned by shareholders.
Japan closed all 54 reactors in the wake of the 2011 Fukushima nuclear disaster. The public was concerned about safety standards and shut them down. Only 14 out of 33 reactors that were available to restart are operational due to stricter rules and in some cases opposition from locals.
The recovery of the nuclear sector will be marked by a major milestone next week when the Niigata Prefecture's lawmakers vote to restart two of the seven reactors of the Kashiwazaki Kariwa plant, which is the largest in the world.
The Japanese trade and industry minister proposed last month a loan program for nuclear power investments that could assist utilities who are looking to upgrade reactor safety or build new ones.
Prior to this, the public's financial support consisted of allowing a certain amount of investment recovery via the long-term decarbonization scheme.
The ministry stated that it will be using the loan system under consideration for long-term, large-scale investment projects which are difficult to fund.
A ministry working group proposed in?November that public financing for nuclear projects could be as high as 30% of the total loan amount and even more for large projects.
Potentially Strong Demand
Demand may be strong. Japan wants to double its nuclear energy share in the electricity mix by 2040, to 20%, to improve energy security and contain costs. It also wants to meet the growing demand for power, which is expected to increase by 6% by the end of the decade, driven by AI data centers, thus reversing decades of decline.
Sanae Takaichi, the new?Prime minister of Japan, is a staunch supporter of nuclear energy. She wants to reduce the cost of imported fuels which power 60-70% or Japan's electricity generation. The industry is also benefiting from other factors.
Go Katayama, analyst at Kpler, said that "Nuclear restarts?are clearly gaining in momentum. This is driven by not only the rising demand for power from data centres, but also energy security concerns, decarbonisation pledges, and slower than planned offshore wind deployment."
Japan's operating reactors can produce around 13 gigawatts of power. Analysts say that to achieve the 2040 goal, Japan will need at least 15-16 more idle reactors brought online.
NEW BUILDINGS AND RESTARTS
World Nuclear Association estimates that restarts requiring safety improvements cost between $700 and $1 billion per unit.
Katayama, from Kpler, said that Japan's stricter regulations due to earthquake risks are likely to push costs to the higher end. He believes that restarts would need public funding of 30%-50% to be viable for operators.
But Japan cannot rely on just restarts.
A report from the June Trade and Industry Ministry states that 14 GW nuclear reactors are expected to reach their 60-year operational limit by 2050. This highlights the need for next-generation reactors.
Kansai has been the only company to announce plans for a nuclear reactor since Fukushima. The utility has not yet provided a cost estimate for the construction. It plans to raise money through bonds, loans and other vehicles.
Joshua Ngu is vice chairman of Wood Mackenzie's Asia Pacific region. He said that a new 1 GW reactor in Japan costs around $7 billion. New-build large scale projects are typically funded by debt to the tune of 50% to 80%.
Hideki Masui of the Japan Atomic Industrial Forum noted that it takes about 20 years to construct a nuclear plant.
"During the 20 years, there was essentially no income coming in." "Frankly, this is extremely difficult," he said.
The Kashiwazaki and Kariwa restarts will bring a 1,36 GW power unit online in 2019, followed by another 1,36 GW power unit sometime around 2030. Hokkaido's governor recently approved restarting Hokkaido Electric Power Co.'s Tomari-3 nuclear reactor.
The industry regulator has given Japan Atomic Power Co. the green light to resume service with its 1.1 GW Tokai-2 nuclear reactor. They plan to finish safety improvements by the end 2026. The local government still has to approve it.
Six other reactors owned by Hokkaido Electric and Chubu Electric Power Co as well as Tohoku Electric Power Co., Hokuriku Electric Power Co., and Tohoku Electric Power Co. are waiting for regulatory decisions regarding their possible restarts.
(source: Reuters)
