ANALYSIS - Reactor restarts first energy hurdle for Japan's Noda
TOKYO/PERTH (Reuters) - Japan's new prime minister has made clear he sees nuclear power playing a part in energy supply for decades -- so one of his first challenges is to convince a sceptical public to allow shut reactors to restart.
Yoshihiko Noda inherits a country with no cohesive energy policy after the March earthquake and tsunami triggered the world's worst nuclear accident in 25 years and shattered the public's confidence in the safety of its reactors.
Noda, approved by parliament on Tuesday as the sixth prime minister in five years, will need to overhaul a plan that before the disaster sought to boost the role of nuclear to meet 50 percent of power supply by 2030 from what was 30 percent.
In the short term, the new prime minister needs to convince the public that it is safe to restart reactors that have shut down for routine maintenance. Reactors far from the disaster zone have been kept shut by local officials mindful of growing public concern.
"Looking at the harsh reality, the best option now is to restart idled nuclear power plants upon confirming their safety," Noda wrote in an essay published this month in the Japanese current affairs magazine Bungei Shunju.
Those that failed stress tests examining their ability to withstand future disasters should be closed, he said, but nuclear must remain part of the energy mix for several decades.
Noda has acknowledged that building new plants is unlikely given public worries after the nuclear crisis at Fukushima.
While he has said he wants a new dialogue with voters on nuclear power, he will have to tread carefully. Nuclear utilities and regulators have been embarrassed by revelations they tried to sway public opinion by rigging public hearings.
But allowing reactors deemed safe to supply for the remainder of their envisaged lifespan would allow Japan an orderly transition into a nuclear-free future.
Without those reactors, the world's third-largest economy would beat a disorderly retreat from nuclear. The risk of unplanned power outages would rise, and utilities would have to burn more fossil fuel to compensate for the loss of nuclear generation. A total nuclear shutdown would add nearly $40 billion a year in additional fuel costs if all nuclear plants shut down, according to trade ministry calculations.
Former finance minister Noda will be keen to avoid adding crippling power shortages and even higher energy costs to a myriad of economic ills the country faces. As he seeks to fund reconstruction, Noda needs to deal with huge public debt, the impact of a strong yen on exports and sluggish economic growth.
"Noda is more seriously worried about the risk of power shortages on the manufacturing sector," said Tsutomu Toichi, chief executive researcher at Institute of Energy Economics for Japan. "He as former finance minister is well aware of the impact of that risk and the likelihood of a rise in electricity bills on the economy."
To avoid a full nuclear shutdown he must act quickly. All of Japan's 54 reactors could be offline by April-May 2012 as those still producing power shut down for maintenance one by one.
As of Thursday, only 12 reactors remain online, with capacity of 10,430 megawatts (MW) or 21.3 percent of the nation's total nuclear power capacity, and that percentage is falling by the month.
Noda's stance on nuclear is a little softer than his predecessor Naoto Kan, who was looking to kick-start a speedy transition into renewables.
"Noda's opinion on nuclear policy is more balanced than Kan's although he is expected to maintain the vision of Japan weaning itself from reliance on nuclear," Toichi said.
Kan introduced the stress tests for nuclear power stations to see how they would withstand disasters. But he gave no firm timetable for the tests, nor what might follow them.
"(Kan's) departure allows them to rethink and perhaps climb down from the rather extreme position that he's put them in because he introduced the stress test, but then made no provisions for saying that's concluded and some of the plants could come back onstream," Tony Regan, analyst at Tri-Zen International, said.
While the tests were meant to rebuild national confidence in the reactors, their announcement delayed the restart of some reactors as local officials preferred to wait for the tests to take place rather than grant permission to restart and risking public opprobrium in the interim.
Noda's administration needs to clarify the nature of the tests and ensure their completion wins regulatory and local government approval for restarts.
The tests could be completed by the end of this year. After that, local government approval would be the final step.
There were unlikely to be any other significant shifts in the government's policy, analysts and industry sources said.
Liquefied natural gas imports will continue to grow as the country looks for clean energy sources to substitute nuclear. Gas imports have already risen in the aftermath of the disaster.
"My guess is LNG and coal stay stronger than they otherwise would have been, but nuclear persists... until somebody actually flicks the switch, the thing stays on," says Ben Wedmore, an analyst with MF Global in Tokyo.
LNG is likely to replace 86 percent of the nuclear power taken offline in 2011 and 65 percent in 2012, according to Societe Generale estimates. Analysts estimate that LNG will replace about two thirds of lost nuclear power.
A Reuters poll earlier this month found that Japan's 2011 LNG demand was expected to rise 12.2 percent to 78.6 million tonnes in 2011 and 81.6 million tonnes in 2012, versus 70 million last year.
Noda has echoed Kan's position that Japan should ramp up investment in renewables such as wind and solar.
Parliament last week passed a scheme that subsidizes the electricity produced from five types of green energy. But investors will have to wait several months before a yet-to-be appointed panel announces the details of the tariffs for solar, wind, small hydro and other sources.
If Noda could accelerate this process, investment in renewable capacity could come more quickly.
Wind and solar have installed capacity of about 6,000 MW, a fraction of the pre-crisis total power generation of about 240,000 MW. The government hopes the scheme will lead to 30,000 MW of new capacity in a decade.
Other new capacity will come from 1,690 MW of new-build gas plants from two utilities including TEPCO by January 2013 and 475 MW from new hydro power units by the end of next year.
Kansai Electric Power Co (9503.T) has been considering restarting five mothballed oil-fired power units with total capacity of 2,400 megawatts. Kansai has said it usually takes two to three years to restart mothballed units.
(Additional reporting by Risa Maeda and Yuko Inoue in Tokyo; Writing by David Fogarty; Simon Webb)
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