Fossil Fuels Bolstered by Japan's Nuclear Cuts
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Fossil Fuels Bolstered by Japan's Nuclear Cuts

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Reports that Japan plans to shut down its nuclear power industry within 20 years are set to give a jolt to energy markets. Currently the biggest importer of liquefied natural gas (LNG), Japan will be required to import more gas and coal, further worsening trade deficits, while the uranium market may suffer the fallout.

After planning in 2010 to make nuclear power the centerpiece of the resource-poor nation’s energy strategy, the March 2011 meltdowns at the Fukushima Daiichi nuclear plant caused anti-nuclear sentiment to spike and the government shelved its plans.

Just two of Japan’s 50 reactors are currently in operation. Prime Minister Yoshihiko Noda has apparently accepted demands from the powerful business lobby, Keidanren, that nuclear energy continue in a limited form to alleviate potential energy shortages.

However, according to reports by Japanese media, a new draft energy policy would commit policymakers to “achieving zero nuclear power generation in the 2030s.”.

According to the financial daily Nikkei, the new policy’s basic principles are for a 40-year limit on nuclear operation, with no new reactors to be built and only those deemed safe to be allowed to restart. This would mean that the proportion of energy provided by nuclear would drop to as low as 15 percent by the start of 2030.

Ahead of the nuclear phase-out, Japan would use a combination of renewable and conventional power sources, including carbon-intensive coal. Output from renewable sources is aimed at tripling by 2030 from the 2010 level, but the nation would be forced to abandon its target on curbing greenhouse gas emissions 25 percent by 2020 compared with the 1990 level.

A final version of the strategy will be approved as early as next Wednesday, the Nikkei said.

The new strategy may hit uranium markets, which literally fell off a cliff after the Fukushima disaster. More than $1.5 billion Australian dollars was wiped off the value of uranium companies listed on the Australian stock exchange (ASX) on the first day of trading after the disaster, according to the Sydney Morning Herald.

While uranium producers such as those in Australia can look to increased demand from countries such as China and India, the withdrawal of both Germany and Japan from the market would be a blow to their growth ambitions.

But while the uranium market may suffer, exporters of LNG and coal are already benefitting from increased imports by Japan. Qatar-based Qatargas has increased supplies to more than 20 million tons in the short term to make up the energy deficit, while both Russia and Japan recently signed an agreement for a new $7 billion LNG plant on Russia’s Pacific Coast.

Australia also will be aiming to increase exports, already supplying Japan with 20 percent of its natural gas, two-thirds of its thermal coal and more than a quarter of its uranium.

Yet rising LNG imports have caused Japan’s first trade deficit in 31 years, with a further decline in nuclear power set to increase the bill even further.

According to the Japanese government, eliminating nuclear power would cut an already low GDP growth rate by another 1.4 to 7.6 percent over 20 years, while Keidanren estimates the unemployment rate would rise to 7.3 percent.

While a change of government may alter the picture, the prospects for fossil fuels suddenly look a lot more promising in the land that produced a treaty designed to curb them.

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Anthony Fensom
September 19, 2012 at 08:45

Postscript: Japan's cabinet subsequently approved the new energy policy, but removed the reference to a nuclear-free target by the 2030s, apparently due to industry opposition and concern over the potential cost.
"Whether we can become nuclear free by the 2030s is not something to be achieved only with a decision by policy makers. It also depends on the will of (electricity) users, technological innovation and the environment for energy internationally in the next decade or two," Trade Minister Yukio Edano was quoted saying by Reuters.
Uranium prices dipped following the initial Japanese announcement, but uranium demand is still forecast to nearly double by 2030 due to Chinese and other expansion of nuclear power. 

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