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What future for Japanese nukes?

February 5, 2019



Which way next for Japan's nuclear power industry?





By Yuichiro Okawa


After the 2011 meltdown at Tokyo Electric Company's Fukushima Daiichi nuclear power plant, the Japanese government established exports of nuclear power technology as one of the key pillars of its growth strategy.

But that strategy appears to be at an impasse. A series of projects to build nuclear power plants abroad has stalled. For instance, Hitachi has decided to freeze a project in the UK. Japan may now be forced to review its policy of promoting nuclear exports.


Hitachi announced its decision to suspend a project to build a nuclear power plant on the island of Anglesey in Wales on January 17th. Company officials cite ballooning costs, including those related to safety measures, as a factor.


Hitachi's negotiations with the British government, mainly over its request for financial support for the project, were prolonged. Hitachi officials say their decision to freeze the project was based on doubts about its profitability. As a result, the company expects to book a loss of about 300 billion yen, or roughly 2.7 billion dollars.


Hitachi President and CEO Toshiaki Higashihara said the firm made the decision to ensure that risks will not be carried over into the future.


Infrastructure exports are virtually zero.


While nuclear power is designated an important energy source in the government's policy, the construction of new plants has become difficult in Japan because of Fukushima. Therefore, the government has shifted its focus to overseas demand. It aims to help expand the operations of Japanese firms in the field.


Nuclear power projects have been planned not only in the UK, but also in Lithuania, Turkey and Vietnam as part of efforts to reduce greenhouse gas emissions. That led Japanese companies to prepare to do business in those countries.


Trade and Industry Minister Hiroshige Seko said: "There are many countries willing to use nuclear power. Since Japan has experienced the nuclear accident in Fukushima, we can contribute globally through technical know-how related to safety at nuclear power plants."


However, the companies have all decided to call off their plans for the UK, Lithuania and Vietnam. As for Turkey, the cost of a planned project has doubled, which makes it difficult for Japanese companies to take part. On top of that, Toshiba has pulled out of the nuclear power business in the US after incurring massive losses through a former nuclear power subsidiary there.


As a consequence, there's basically no Japanese company undertaking nuclear power projects abroad.


A changing environment


The environment surrounding the nuclear power sector has been transformed. After the accident at Fukushima Daiichi, safety requirements have been tightened, causing construction costs to increase. The amount per nuclear reactor used to be a few billion dollars, but that's risen to roughly 9-billion dollars. Critics point out that the private sector alone can be no longer handle safety on its own.


On the other hand, renewable energy sources, such as solar and wind power, have been winning favor worldwide as costs drop. Offshore wind power generation in the UK costs around the same as nuclear power. That led Hitachi to realize nuclear power was losing its economic advantage there and played a part in the decision to freeze the Anglesey project.


Chinese and Russian success


In contrast to Japan's tricky situation, Chinese and Russian state-run companies are increasing their influence. The construction of nuclear power plants is booming in China to meet soaring domestic demand for electricity. This boom, in turn, drives the development of home-grown technologies, which helps Chinese firms make inroads overseas.

Russia's State Nuclear Energy Corporation Rosatom is currently involved in projects to build 36 nuclear reactors abroad -- thought to be the world's largest portfolio of overseas nuclear development. The corporation not only handles construction, but also disposes of spent nuclear fuel and related operations.


Tomoko Murakami, an expert on global trends in the nuclear power business at IEE Japan, says: "China has just begun to rise. However, Russia has already succeeded in terms of acquiring new project orders worldwide."


Japan's nuclear industry at a crossroads


Several companies in Japan are looking at realigning their businesses. It has been revealed that negotiations for a possible tie-up are ongoing between several firms: Tokyo Electric Power Company, Chubu Electric Power Company, Hitachi and Toshiba.


Japan's nuclear-related companies face difficulties in keeping their technologies up to date at the same time as seeking to streamline operations further.


The number of people working in Japan's nuclear business and its affiliated industries has decreased by over 20 percent since the accident at Fukushima Daiichi.


Taking everything into consideration, it is clearly time for Japan to think about the future of its basic energy policy.


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