REPORTAGE

Walking the Wall

PAUL SULLIVAN

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OKYO—The concrete and steel tsunami wall at a nuclear plant south of Tokyo is nearly 50 Tfeet high and stretches a mile long. It is only one of a host of other earthquake and tsunami refits— waterproofing some of the most vital areas of the plant, backing up cooling systems, and improving venting for the facility in the event of hydrogen build up. On March 11, 2011, known as 3/11 in Japan, in the after- math of the nuclear disaster at Fukushima Daichi, thou- sands died in the earthquake and resulting tsunamis; countless others lost their lands and livelihoods. There were a number of casualties from stress, dislocation, and more, especially among the elderly. And worse yet, fu- ture health fallouts are still to be seen. It was unques- tionably a social and cultural calamity for a country that has had so many in its past, yet always seems to recover and come back stronger than ever. The tsunami wall represents one attempt by the Japanese to hold back the power of nature lurking be- neath and near its lands. It is but one example of Japan’s attempts to get back some of the energy and economic self-reliance that it lost that day. It is also a $1.5 billion investment by the power company that hopes to lessen the potentially existential threat of a permanent shut down of its nuclear facili- ties—an attempt to prove to the government and to the people of Japan that is indeed safe. Post- Fukushima, this is no easy sell. Nuclear power accounted for some 30 percent of all and 13 percent of all energy pro- duction in Japan in the year prior to 3/11. All nuclear power was shut down after the disaster of 3/11. Some nuclear plants were immediately shut down; others were gradually shut down over the next few months. By January 2012, the nuclear industry was a tiny propor- tion of all energy in Japan. There was even a time in 2012 when they were all shut down. A couple of nuclear generators were reopened later that year, but all nuclear generators were eventually closed by September 2013.

Paul Sullivan is a professor of economics at the Na- tional Defense University and adjunct professor of security studies at Georgetown University.

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The closure of these plants paved the way of 2009. Japan gets about 61 percent of for Japan to become an even bigger player its from . It receives about in the energy commodities market. 31 percent of its coal from . The rest of its coal comes from , , INSECURITY the , , and a few other Japan’s measure of domestic self-reliance smaller suppliers. It gets about 30 percent in energy is now about 4 percent. It was of its LNG from the Middle East—nearly 17 percent prior to 3/11 and the eventual a third from Oman, , and the UAE. shutdown of the entire Japanese nuclear Australia is a source of 18 percent of its industry. That measure of self-reliance LNG. Russia supplies 10 percent, and this is the lowest of any may be growing given Russia’s invest- member of the Or- ments in new LNG facilities in Vladivo- one of the ganization for Eco- stok. supplies about 17 percent. biggest nomic Cooperation Nigeria, a potentially very unstable state, and Development supplies about 5 percent. Indonesia and problems (OECD). It is the supply 7 percent each. And in late confronting world’s second larg- May, the first shipment of LNG from a the japanese est import- $19 billion Exxon Mobil development left er. It is the largest Papua New Guinea destined for Tokyo nuclear importer of liquefied Electric Power—a project that’s expected program is (LNG), to yield more than 9 trillion cubic feet of where to store with 37 percent of gas over 30 years. the market of in- Japan has diversified its sources of fos- spent fuel ternationally traded sil fuels. However, some of these sources that is not LNG. It is also the are potentially unstable or unreliable. world’s second larg- Furthermore, all these energy sources ar- processed. est importer of coal rive in Japan by sea—ports that need to and the third largest be working up to speed, especially after importer of oil. In short, it imports about earthquakes and tsunamis. 99 percent of its fossil fuels. As for nuclear fuel, Japan has no do- For some years after the oil shock of mestic reserves. About a third of 1973, Japan was able to reduce its depen- its uranium imports come from Australia; dency on Middle East oil from its high of the rest comes from Canada, Kazakhstan, 92 percent in 1967 to 66 percent in 1988. and other smaller sources. It can enrich Now it imports over 83 percent of its oil the imported uranium in Japan, but often from the Middle East, and mostly from relies on others, particularly and countries inside the Straits of Hormuz, in- Britain, for enrichment and reprocessing cluding Iran, Saudi Arabia, and the UAE. services even though it has a major, yet Another source of Japanese oil is Russia, sometimes problematic (and now closed) accounting for about 4 percent of im- reprocessing facility at Rakkasho in the ports, which has been supplying increas- north of Honshu Island. Tens of billions of ing amounts from its port at Kozmino dollars have been spent to develop repro- since the East Siberian Pacific Ocean Oil cessing in Japan, only to see the reprocess- Pipeline (ESPO) was completed at the end ing plants shut down.

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One of the biggest problems confront- WARINESS OR WANT ing the Japanese nuclear program, faced Japan’s nuclear industry development was also by many other nuclear programs boosted by sending subsidies to the locali- worldwide, is where to store spent fuel ties where the plants would be built. In that is not reprocessed. So far in Japan some places, some of the largest tax sources it has been mostly stored at the domes- are the nuclear plants and their companies. tic nuclear plants in spent fuel pools and There are also significant tax revenues from dry cask storage. These storage areas have nuclear waste storage sites, but other eco- been filling up fast. One insider suggested nomic drivers for some prefectures who were not dealing with the nuclear waste issue sought as sites for nuclear plants included in the industry was like “building a house government subsidies, jobs, and industrial without a toilet.” A considerable amount plants that make use of such massive sourc- of spent nuclear fuel still sits in dry casks es of energy nearby. These economic reasons and spent fuel pools in the damaged Fuku- are also driving some of the public desire to shima plants. Decommissioning nuclear restart the closed plants. plants requires dealing with the spent fuel Though polls show an increasing wari- on the site of the plants. ness towards nuclear power, with most The solution to this nuclear waste Japanese anxious to phase it out, the party problem has taken a back seat to making that is best-known for supporting such sure that the nuclear plants that are being plants, Prime Minister Shinzo Abe’s Lib- stress-tested and evaluated for potential eral Democratic Party (LDP), was re-elect- restarts are fulfilling the regulations for ed, while the opposition parties that were safety and security imposed by the new against the restart of the nuclear plants Nuclear Regulatory Authority (NRA) of lost miserably in many areas. Japan, now under the Ministry of Envi- The nuclear industry, the large elec- ronment, which replaced the Nuclear and tricity generation companies, METI, the Industrial Safety Authority (NISA), once former NISA, the LDP, and some pro- under the Ministry of Economy, Trade, nuclear academics and energy experts were and Industry (METI). This transfer of reg- all part of what some of those opposed to ulatory power is important. call “The Nuclear METI is responsible for the develop- Village.” This is seen as a cozy group that ment of the nuclear industry. It has acted feeds off each other’s studies to develop as a proponent of the industry. Under the the nuclear industry, and now to restart same roof was NISA, which was responsible as many nuclear plants as possible. Others for regulating the nuclear industry. So at the see this group as the economic and energy same time METI was pushing down on the champions of the nation. accelerator for nuclear energy development, All electricity for Japan is made in Ja- it was also putting on the brakes. Soon after pan. There are no interconnections with 3/11, this all too cozy relationship between other countries. It is an island nation geo- the nuclear industry and its regulators came graphically, but also energy-wise. It is amaz- under considerable scrutiny. It was subse- ing that a country with so few indigenous quently decided that the Ministry of Envi- energy resources could become a world eco- ronment—a strong proponent of renewable nomic powerhouse just a few decades after energy—would be the new regulator. the immense destruction of World War II.

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Japan had mostly hydropower and coal away from nuclear power, it all was shut to rely on for electricity production in the down. This has been a massive energy and early postwar period. In the late 1950s and financial shock to the country—potentially early 1960s, Japan began to use increas- even worse than the 1973 oil shocks. ing quantities of oil. By the time of the oil As nuclear power was shut down in Ja- shocks of 1973, oil was by far the most im- pan, it needed to import more LNG, coal, portant energy source in Japan, accounting and oil. Japan was already the largest im- for 75 percent of its energy. After the oil porter of LNG in the world so its sharply shocks, Japan started to look more toward increased demand put pressure on LNG natural gas and nuclear power. The coun- prices worldwide. It has been importing try diversified its sources of energy over the the most expensive LNG in the world, next decades. These great energy transi- at about $16-$18 per MMBTU, which is tions happened during some of the fastest about 1,000 cubic feet of natural gas in economic developments in Japan’s history. its gaseous state, not in its liquefied state. Coal, which generated nearly three- In Europe, natural gas has been hovering quarters of all primary energy in Japan in around $10-$12 per MMBTU. Gas prices the 1950s, remained a steady source of ener- in the United States dipped to under $3 gy even as natural gas and nuclear replaced for awhile and have hovered mostly be- oil. Coal is a big part of the energy psyche tween $3 and $4, with some spikes now of Japan. It is seen as a backbone fuel for and then due to weather and pipeline ca- electric power, especially in times of great pacity issues. stress, even if it is now all imported. Japan has had to import a lot more coal At a well-managed, high-tech clean after 3/11. Fortunately, coal prices have coal facility near Yokohama, the managers been in decline during this difficult time. are clear that coal is a cheaper fuel than Japan has had to also increase its imports LNG. However, they are also clear that of oil to run some marginally important coal produces more carbon dioxide than electricity generation plants, but that for- LNG when used in generating plants. eign exchange shock has been less than the While this plant brought down the car- shock of having to sharply increase imports bon output considerably, it was still not of LNG. As a result of the huge increases competitive with LNG in this respect. in energy imports, Japan was thrown into The LNG-coal tradeoffs are important its first series of trade deficits since 1980 for Japan these days as it tries to navigate because of its increasing demand for fossil its way to enhanced energy, security, eco- fuels needed to run electricity generating nomic stability, and national security in plants and replace lost nuclear capacity. difficult times and still hold to their 3E The loss of nuclear power in Japan was principals for energy policy: energy secu- not just an energy shock. It was a foreign rity, environmental sustainability, and en- exchange and economic shock.Japan’s over- ergy efficiency. all economy took a big hit as brownouts and rolling blackouts took hold. Some THE GREAT NUCLEAR SHUTDOWN major companies, including exporters like Japan invested hundreds of billions of dol- Toyota, were forced to cut back on pro- lars in its nuclear industry. Then, as trag- duction. GDP took a hit. This was espe- edies struck, and the public turned further cially evident in the regions of Fukushima,

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ACTION STEPS Japan needs to: • Come to some effective consensus on making its electricity system more resilient and even anti-fragile in the future. - Unbundle the 10 major regional electricity near monopolies - Increase transmission capacity across and within electric regions - Increase transmission capacity across its 50 Hz/60 Hz electricity wall - Develop proper transmission operators, open access transmission networks, futures and spot markets for electricity - Open competition across and within electricity regions • Move beyond its very low energy self-sufficiency level toward the development of more indigenous energy resources: geothermal, solar, wind, tidal, and the potential game changer of methane hydrates found off its shoreline. • Develop innovations like setsuden (energy savings) programs and deal less with entrenched political and economic power groups like “The Nuclear Village.” • Prepare (beyond building tsunami walls and water proof doors) for the next, inevitable, disasters. Political, economic, technological, and other structures need as much refitting and reforming as the doors and walls of nuclear power plants or ports. —Paul Sullivan

Iwate, and Miyagi, where the earthquakes though, 3/11 was a personal, national, and and tsunamis had their biggest impact. international event that could reverberate Though the disaster hit these regions the for many years to come—and not just in hardest, it reverberated across the nation. Japan, but across the entire spectrum of the global energy industry. The Great East Japan Earthquake of 3/11 was a massive 9.0 on the Richter scale. SYSTEMS WITHIN SYSTEMS Some 19,000 people died. Thousands were In order to understand the gravity of physically injured, tens of thousands more earthquakes and tsunamis in Japan, it is were emotionally scarred for life. Direct important to understand that energy sys- measurable economic losses are estimated tems are actually systems nested within in the $300 billion to $400 billion range, other systems. Massive and complex trad- including cleanup costs of the areas dam- ing, transport, and information systems aged by the tsunami and nuclear disaster. are needed to get the coal, gas, oil, and nu- The emotional and cultural losses are im- clear fuel to the generating plants. Major possible to quantify, especially given the earthquakes can damage the ports where relatively private nature of Japanese so- these vital fuels are imported. Fortunately ciety, where outward signs of resilience for Japan, most of its ports remained intact are seen as positive traits. Undoubtedly and workable after 3/11. Some faced dam-

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age. Most were rapidly repaired. A serious is also encouraging the further develop- issue here is what happens when the ex- ment of clean coal technologies. Coal is a pected big earthquakes hit Tokyo, Yoko- lot cheaper than LNG for each megawatt hama, Isogo, and many other areas along hour produced in Japan, but it produces Japan’s coastline where large amounts of a lot more carbon dioxide for each mega- these fuels are imported. watt hour. It is very curious indeed, and LNG vessels, coal barges, and oil an interesting hedging strategy, that many tankers sit at and near each port. A giant of the very companies investing billions in earthquake could be devastating to some greater nuclear safety and security are also of the most important LNG, coal, and oil the companies investing in fossil fuel elec- import facilities. Many ports in the most tricity plants that can replace them. potentially seismic areas must urgently be made more resilient to the future shocks TRADING POWER that scientists are convinced will come. Electricity involves generation, transmis- It is best to plan and invest now, rather sion, and distribution. Along with several than wait for the inevitable. If Japan had generating plants, multiple transmission performed the resiliency drills, built high lines were damaged. These are generally tsunami walls, and set up the many other more easily repaired than generating sta- security, safety, and fail safe devices prior tions, particularly of the nuclear generat- to 3/11, then instead of a nuclear catastro- ing variety. Some transformer stations, phe, the tsunami waves might just have substations, and other parts of the system bounced off, shutting down the plants were badly damaged in the areas hardest temporarily—rather than indefinitely. The hit. It took considerable time to get many deaths, injuries, and loss of livelihood and of these repaired and in working order. property from the earthquakes and tsuna- Others were not repaired given that they mis would have happened, but the energy were in the no-go nuclear radiation zone shock would have not. near Fukushima Daiichi. Many fossil fuel generating stations The country is split into two electricity near the earthquake area were damaged. zones, 50 Hz and 60 Hz, each having a dif- Some were repaired in astonishingly quick ferent frequency for its alternating current. order. Others, such as some coal plants in This is an historical quirk going back to the and near Fukushima took much longer, 19th century when the then Tokyo Electric such as the Haramachi plant. Many of the Light Company chose German generators large electricity generating companies had with 50 Hz electrical frequency, and Osaka fossil fuel plants in mothballs. These were Electric Lamp Company chose American restarted quickly to make up for some of generators with 60 Hz frequency. These two the losses due to the nuclear shutdowns. systems coexisted, side by side through two Large investments are in the works to world wars and the transformation of Japan increase fossil fuel generating capacity in into a world economic powerhouse. the event most, if not all, nuclear plants Electricity cannot move from one fre- stay offline permanently. The Japanese quency zone to another without going government has relaxed some environ- through giant frequency converters to mental regulations to give incentives for change the alternating current (AC) of one more coal plant capacity to be built. It frequency to the AC of another frequency.

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To do this, the AC has to first be converted gigawatts, or about 35 percent of the total to a high voltage direct current (DC), then electricity capacity of the nuclear indus- back to the higher or lower AC frequency try. By the beginning of 2012, very little depending on which direction the electric- capacity was left in the nuclear system at ity is flowing. all. When the nuclear plants were shut The total generating capacity of the down completely, 43 gigawatts of electric- 50 Hz zone, where Tokyo Electric Power ity disappeared. This was 30 percent of all (TEPCO), Tohoku Power and Hokkai- of the potential electricity supply in the do power are found, has the potential of country. Electricity also could not move around 74 gigawatts, a gigawatt being the freely between the 50 Hz and 60 Hz sides equivalent of 10,000,000 hundred watt of Japan as these extreme energy events light bulbs all glowing at once. The 60 Hz were happening. side of the country, where Chubu, Hokuri- Not only was it impossible to send ku, Kansai, Shikoku, Chugoku, and Ky- enough of the electric ushu power companies can be found, has power that was pro- the potential of about 88 gigawatts of duced in the 60 Hz a need for electrical capacity. If there were no lim- zone into the 50 Hz a fully its to moving electricity from the 60 Hz area, but there were to the 50 Hz sides of the island, then the also severe limita- functioning economic effects of 3/11 would have been tions on the trans- and competitive significantly less. mission of electricity national grid However, the frequency converter sta- from one company’s tions that allow electricity to go from the areas of service to was never 50 Hz part of the island to the 60 Hz part another company’s envisioned or of the island and vice-versa can only move zone. For example, about 1.2 gigawatts in potential capacity. on the 50 Hz side of established. In other words, with the massive losses in the island, as the fos- electricity generating capacity after 3/11, sil fuel stations run by Hokaido Power and the 60 Hz side of Japan could not trans- Tohuko Power were restarted, there were mit enough electricity to help out the 50 limits to what they could send into the Hz side of the country, where Tokyo and TEPCO areas that were hit the hardest by other industrial cities are found. TEPCO, 3/11. Hokaido had 5.8 gigawatts of gen- the biggest electricity company in Japan, erating capacity, but its transmission lines lost the most generating capacity. All of its could carry only 0.6 gigawatts to Tohoku or nuclear plants were shut down rather rap- on to TEPCO. Tohoku transmissions lines idly. Fukushima units 1 and 4 were written could send only 2.4 gigawatts of capacity at off completely, mothballed for eternity, as most to TEPCO and vice-versa. they were the infamous sites of the explo- Interconnections among the five elec- sions and meltdowns. The company faced tric companies in the 60 Hz zone are also a 2.7 gigawatt capacity loss from these two much smaller than their capacities for plants alone—and very rapidly. generation. If there were any major emer- By May 2011, only 17 nuclear units gencies in the 60 Hz area, only limited were still operating in Japan, but en route amounts of electricity could be moved be- to shutting down. These produced 15.5 tween these companies.

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So we have the combination of the to control transmission across companies country splitting into two electricity fre- and areas when there might be surpluses quency zones, added to the lack of trans- or shortages among them. In short, a need mission capacity between the electricity for a fully functioning and competitive producing regions of the major electric national grid was never envisioned or es- companies, restricting the vital transmis- tablished. Essential to understanding this sion of electricity between them. is the reality, then and now, that there is A single market with free flowing no real option for the storage of electric- electricity set up properly to respond to ity. Network demand for electricity must economic, energy, and other shocks would equal network supply for electricity at all have been best. However, there are 10 ma- times. Otherwise there will be brownouts, jor electricity companies in Japan—six blackouts, or overloads to the system. in the 60 Hz zone, One way to help balance an electric- three in the 50 Hz ity system is to have functioning electric- part of zone, and Okinawa ity trading systems. The Japanese Electric the reason separated from the Power Exchange (JEPX) only moves about behind japan’s rest. There is little 3 percent of electricity in forward and spot electricity traded markets. In most OECD countries, this economic among them, which would be about 20 to 40 percent or more. stagnation is quite odd for an These 10 giant electric companies control advanced, industri- 75 percent of the nation’s capacity and 90 and declining al country. Each of percent of the retail . competitiveness these companies is a Furthermore, for Japan, those few electric- in trade is its vertically integrated ity producers who are not part of the big near-monopoly for 10 companies have had to pay exorbitant energy costs. its region. fees to put their electricity on the compa- These compa- nies’ transmission lines. Electricity cannot nies were set up during the time of the move from one area to the other over long post-World War II American occupation distances without being put into the trans- of Japan under the leadership of General mission network of a specific company, and Douglas McArthur. They were founded on across their high-voltage AC lines. the then widely accepted premise in the Above all, Japan needs freer flows of United States and Western Europe that cheaper electricity—a need that has been electric utilities were natural monopolies clarified by the sudden and catastrophic that needed to be regulated. Their growth developments post 3/11. This includes the over the years was based on the simple development of a proper pricing system understanding that there must be enough and an open-access transmission network. electricity for each of the regions they Such a network will be important in the serve, not for all of Japan. There was not development of competition, which would much thought put into the importance allow a reduction in the price of electric- of full networked interconnections across ity. Japan has the second highest electric- their territories, electricity power pooling, ity rates for households in the OECD. It and the establishment of a fully function- also has extremely high electricity rates for ing national electrical system operator industry and commercial enterprises—on

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par with . Japan is working on country. Cheap nuclear energy and the the reform of its electricity system. The power of the big 10 producers helped 3/11 shocks and subsequent economic jolts block in the past. Japan’s may push it to a more rationalized electric- electric feed-in tariff system (FIT) provides ity system that can respond to crises, both a guaranteed price to the producer of the very large and even minute to minute, renewable energy, be it a household or a with a more flexible, single market, as well company, which makes it quite profitable as a more competitive and interconnected to produce renewable energy over the next electricity system. 20 years or so. However, incorporating so- Part of the reason behind Japan’s eco- lar, wind, and other intermittent power nomic stagnation and declining competi- systems into the overall electricity system tiveness in trade is its energy costs. Oil, needs cheaper transmission costs, a more LNG, and coal prices are determined by connected energy system with greater ca- forces outside of Japan. However, Japan has pacity across prefectures and other regions. considerable control over where its electric- It will also require cross-frequency inter- ity network could be going—a control that connections with higher capacities. until now it has failed to exercise, but may The base load, the old reliable of elec- not be in a position to delay much longer. tricity, could be nuclear, coal, and LNG, but the intermittent sources may be used RENEWABLE ENERGY? for peak periods of the day or whenever Even with all the talk about how quickly there are shortages in the overall or re- Japan is developing solar and , gional system. For that to happen, there the nation has one of the smallest percent- needs to be a rational and efficient energy ages of renewable energy of any OECD trading system at the wholesale and even RANEKO

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retail levels, and there needs to be a coun- happen. Still, Japan may not have much trywide transmission operator (or a small choice here, nor much longer to wait before number of coordinated regional transmis- moving forward on the project. sion operators) to run that auction. These changes would help keep the transmission EFFICIENCY VS. CRISES network working properly for all provid- Japan achieved enormous efficiencies in ers and suppliers. Without these changes, terms of transportation, heating, cooling, renewable energy could end up being only and industrial production over the past for local and sub-regional use, or even for few decades. In Japanese, saving energy use by companies and households as back- even has its own word—setsuden, which up power. This is not a way to create en- made a huge difference during the energy ergy change in a country. crises after 3/11. The government mandat- Also essential is a role for the massive ed a 15 percent drop in energy demand for potential of that needs many larger energy users. Households had to be unleashed by opening up Japan’s na- their own, mostly voluntary targets, even tional parks to these developments. Most in zones that were not in crisis. The entire geothermal resources are in the national nation seemed to get on board. Lights were parks. Geothermal is a great source of turned off in buildings and houses. More energy for Japan, and is surely more en- efficient lighting, cooling, and heating vironmentally friendly than LNG, coal, systems were installed by industries, store- and nuclear power. Developing geother- owners, and homeowners. Air conditioners mal energy would also increase the energy were either shut off or operated at a much self-sufficiency of Japan from its anemic 4 higher temperature in homes and offices. percent without nuclear to a much higher Short sleeve shirts with loose collars be- number, possibly 8 or 10 percent. These came more acceptable in a business culture small percentage changes could make a where button-down shirts and three-piece big difference for the country’s energy se- suits are the norm. The mild summer of curity. Of course, the Japanese would have 2011 also helped a bit. Elevators were used to work out the many emotionally and po- less often than before. Laundry was done litically charged issues related to building less frequently. Some companies launched power stations in national parks. in-house electricity production and devel- Development of renewable energy oped more backup power. Other compa- could also open Japan to the potential of nies exported electricity into the grid to not just one-way electricity systems, from help out, while also making some money. the generator to homes and businesses, but Setsuden was a success. Electricity de- two-way electric systems, with homes and mand did fall—actually more than many businesses (even transport vehicles) export- expected. The blackouts and brownouts ing their electricity production into the became less frequent, ending a lot faster system while generating companies do the than anticipated. But with a proper pric- same. However, this takes a lot of economic ing system and a more rational and in- and technical coordination and agreement terconnected electricity network for the across these groups, freeing entrenched whole country, setsuden might never have markets and long-standing concepts, as been needed. There is always some excess well as proper regulations to make it all capacity in a well-developed system that

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Downloaded from wpj.sagepub.com at COLUMBIA UNIV on December 19, 2014 JAPAN can be used for peak and over-peak de- power’s role in its energy systems and in mand in a region. Future developments of its society. Japan’s considerable domestic two-way base-load-renewable energy sys- energy sources of solar, wind, geothermal, tems could also make setsuden less austere, and tidal sources could increase its energy even during the most difficult times. Then self-sufficiency considerably. Thesogo- there is the concept of sho-ene, or long-term shosha, the big trading companies, such energy efficiency. Japan could eke out even as Mitsubishi, Mitsui, Marubeni, Itochu, more efficiencies, which could help the na- Shojitz, and others will continue to play tion whether future energy crises. large roles in the import of LNG, coal, oil, and uranium, as well as being big inves- DECISION TIME tors in energy facilities and fields globally. Without nuclear power, Japan is the most Public, industry, and other buy-ins are energy insecure country in the OECD, needed if Japan is to move toward rationaliz- even with its diversified sources of LNG, ing its electricity sys- coal, oil, and uranium. It needs to make tem, creating a fully some decisions rather quickly about either functioning spot and the future may restarting or mothballing and decommis- forward market for appear a bit sioning some of its nuclear power plants. electricity, better in- It is costing billions just to keep these terconnections across complex and plants in operable condition. It is costing electric company re- bleak right billions more to develop safety and secu- gions and across the now, but do not rity upgrades that could return them to different frequency service. Japan is also investing massively regions, and an open- underestimate in the development of more fossil fuel access transmission the japanese. generation capacity. network. It would Japan needs to come to some consen- make a lot of sense sus on what to do about spent nuclear to put substantial investments into greater fuel, nuclear fuel reprocessing, and its linkages between the 50 Hz and 60 Hz ar- plutonium reserves, and whether it wants eas of the country. It would also make sense to go forward with further development to build greater interconnection capacity of new nuclear power plants. Changes in across the many large electricity company the balances of power directed at energy zones. Also essential is an unbundling of the systems at the federal and prefect levels vertical virtual monopolies in the country. seem to be in order. Prior to 3/11, there Generation would need to be unbundled was serious discussion of moving toward from transmission, which would need to 50 percent nuclear energy in the coming be unbundled from distribution. Giving decades, but that seems moot at the mo- regional monopoly power to vertically in- ment. “The Nuclear Village” has lost a lot tegrated companies gives them huge lever- of credibility and clout. age on pricing and control of the electricity Meanwhile, Japan faces growing trade flows. Unbundling and breaking up these deficits and further economic stagnation. companies, as has been done in many other Energy, or the lack thereof, has much to do countries, may be needed. Japanese leader- with both. Above all, the Japanese people ship and the Japanese people will need to need to find some consensus on nuclear come to some consensus on what structure

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and performance they want from their elec- Japan could develop greater energy co- trical industry. alitions with other major energy importers. It is not enough to create a single Japa- It could work with the United States to im- nese system operator, if it cannot function port shale gas in the form of LNG—pro- properly in the face of vertically integrated vided Western Europe doesn’t get first call virtual monopolies in each region. Improv- on these reserves to ease politico-economic ing the overall interconnectedness of gen- pressure from Russia. However, LNG ex- eration, transmission, and distribution can ports from the United States will be devel- be of great benefit to Japan. Lower elec- oped by private companies so it may just tricity prices can make a huge difference in go to the highest bidder, which would be the overall competitiveness of the country. Japan. The sogo-shosha have also invested in There will be another major earthquake. American LNG export facilities and shale There will be dangerous tsunamis. There gas fields. Japan could work with the Unit- need not be another nuclear catastrophe or ed States to import its shale oil or shale oil even similarly serious energy shocks from refined products. Japan can further diversify any such natural disasters if proper invest- its fossil fuel sources into East Africa and ments are made and if more diversified Latin America (especially Brazil), but it will domestic and international energy sources still be at the whim of world markets—and are developed. especially its neighbor China. Japan is energy insecure. It relies The future may appear a bit complex mostly on the outside world for its energy and bleak right now, but do not underes- and exists in a volatile seismic zone. It also timate the Japanese. These are a resilient, has great potential for renewable energy even an anti-fragile people, who have come that can be domestically produced, as well back from disasters many times before. as the looming potential for frozen natural The greatest source of and reason for hope gas off its shores, but so far this seems like for Japan has been its people. The same a far off dream cure for energy insecurity. could be said for its future. l

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