The Changing Energy Landscape of Post-Fukushima Japan

July 2011--The ongoing crisis at the Fukushima Dai-ichi nuclear power plant has radically altered the energy outlook for Japan. The immediate impact has been a shortfall in energy supplies that is being managed through raised thermostats, weekend work shifts, and other power-saving tactics. For the longer term, the expanded role foreseen for nuclear power in meeting Japan's energy needs is now under question. Underpinning the shifting prospects for both the supply and demand sides of the energy equation in Japan is the changing mindset of her people toward energy resources. As the potential dangers and costs of nuclear energy become greater concerns, renewable resources such as solar and wind move clearly into view as key factors in Japan's energy future.

Fukushima Accident Causes Shutdowns of Other Japanese Nuclear Plants
An important side-effect of the Fukushima crisis has been the suspension of operations at other Japanese nuclear facilities whose potential dangers are now viewed much more critically. Nuclear plants must undergo inspection every 13 months, and many facilities that were examined post-Fukushima did not restart operations in the face of local concerns about their safety. Under pressure by the national government, Chubu Electric Power temporarily halted operations at its Hamaoka nuclear plant in May because of fears it would be unable to withstand a major earthquake and tsunami. And one of the country's largest utility companies, Kansai Electric, anticipates that as of July six of their 11 nuclear plants will be temporarily shut down, creating a significant shortfall in peak power demand this summer. One analysis raises the possibility that, at the current rate of stoppages, by next spring all 54 of Japan's nuclear reactors might not be operating--a loss of about 49 gigawatts in capacity, or 20% of the country's electric power supply.

Accordingly, the Japanese government has been forced to revise dramatically its long-term national energy policy. The government had planned to increase the ratio of nuclear energy in Japan's electricity supply from under 30% in 2009 to 50% in 2030. At this point, that seems impossible. Complicating the government's efforts to realign Japan's energy framework is the country's strong commitment to reducing greenhouse gas emissions (GHG) that cause global warming. Compared with energy resources like oil and coal, nuclear power emits few GHG; but in the short term at least some of the lost nuclear energy will be replaced by traditional fossil fuels.

My discussions with those familiar with the way the Japanese view global warming lead me to believe that there has been a notable shift in attitudes. Prior to Fukushima, the majority saw clean energy as a social good; as one Japanese put it, "we have to do good things for the earth." Companies recognize this sentiment and promote "green" as a part of their corporate social responsibility programs. But the Japanese view was not necessarily shaped by forecasts of "peak oil" and looming fossil fuel shortages. Rather, there has been a vague sense that, regarding energy shortfalls, "things will work out," or the "government will take care of things." Post-Fukushima, the scarcity of energy resources figures much more prominently in Japanese attitudes. Now the focus of individuals and corporations is both on how to save energy and expand supply options through renewable energy resources.

Boosting energy savings and efficiency
Energy conservation is finding full expression in the wide-ranging and strenuous efforts the Japanese are making to limit power usage. The dimly-lit streets, office buildings, and stores that I saw in my recent visit to Japan are only the most visible manifestations of the new setsuden culture. While it is impossible to list all of the energy-saving measures being taken in Japan, I have enumerated below a few of the power-reducing tactics being employed. We encourage readers to develop their own energy-savings ideas which, in some fortuitous instances, may develop into new business opportunities. (Some readers may feel uncomfortable about this possibility; but my own view--and I think that of most fair-minded people--is that such efforts are not exploitative but rather helpful measures to aid Japan.)

• Utility companies such as Chubu Electric have started posting on their websites next-day supply/demand forecasts in the hope that consumers will adjust their energy consumption accordingly.
   
• Manufacturers such as Suzuki and Yamaha Motors are reducing peak power consumption by shutting down production lines on weekdays and operating on weekends. Many other companies are beginning work early in the mornings, when it's still cool and air conditioning isn't needed.
   
• Energy-efficient double-pane and "Low-E" high insulation window glasses have become a staple for new homes in Japan, accounting for more than 90% of window glasses for new single family homes. The Fukushima incident and potential energy shortages are accelerating this trend, with more retrofit and apartments using energy-saving windows.


• Super-premium fans, such as "Sient" by Toshiba Home Techno and "GreenFan2" by Balmuda (a home appliance start-up company) have recently been introduced. While traditional high-end fans sell for mostly under &yen10,000, these new, super high-end fans are priced at &yen20,000 and up; nevertheless, they are selling fast, with volumes up 50% to 60% from the year before. These models are more expensive because they use DC motors, which cost 10 to 30 times as much as the AC motors used in traditional fans. However, fans with DC motors consume much less energy.

Japan faces a substantial shortage of power not only this year but perhaps for the medium- to long-term as well. More than ever before, the country must examine all forms of clean-energy generation and embrace those that best accomplish Japan's energy objectives. In the coming months, we will focus on the specifics of clean technology solutions for Japan.



Note: The above article was written by Cando Advisors, a consulting firm supporting clients on international business development, strategic alliance and investment, focusing on the Japanese market.