Japan - what's next for the nuclear industry, how can we benefit?
Published 19 December 2014
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This publication was archived on 4 July 2016
This article is no longer current. Please refer to Overseas Business Risk – Japan
Summary
2014 ends as it began: with all Japan’s 48 nuclear reactors switched off. But safety clearances are starting to come through, and several will get back to work next year. What can we expect from Japan’s nuclear industry in 2015 and beyond, and what does it mean for the UK?
Detail
Restarts
The continued closure of Japan’s nuclear reactors has forced it to import more oil and gas, weighing on its trade deficit and acting as a drag on the wider economy. Restarts would:
a. enable Japan to be more ambitious on climate change;
b. reduce demand for oil and LNG, which should impact on price and availability in the UK;
c. encourage Japan to diversify LNG supply; and
d. provide commercial opportunities for UK companies.
The number of restarts in 2014 has fallen dramatically shy of our and others’ predictions. Four reactors out of the 21 that have applied for safety inspection are now in the running to restart. Two at Sendai have cleared initial regulatory stages, received public and local government approval, and should restart between February and May 2015. This week saw a further two at Takahama pass the initial regulatory approval with their technical report on regulatory upgrades now open for one month for public comment; current estimates are for a Spring/Summer 2015 restart.
The process has been lengthy: the first restart applications were submitted to the regulator in July 2013 meaning the first restarts will have gone through an almost two year process. A similar pace would see decades before a substantial amount of nuclear comes back online. In 2015, if initial restarts at Sendai go smoothly, there may be a push for the regulator to speed up the process.
Future prospects
A number of Japan’s reactors are approaching end of life (40 years without regulatory approval to extend). A key regulatory criteria—seismicity—has already seen one operator (Japan Atomic Power Company; JAPC) have the plug pulled on the restart of one of its reactors leading them to reconsider their business plan.
Local analysts see around 20-24 total reactors restarts with the remaining 24-28 being decommissioned. This presents a significant opportunity for UK decommissioning companies.
Industry restructure
With electricity market reform and deregulation, the shape of the Japanese nuclear industry could look quite different going forward. Collaborations between utilities have already begun on non nuclear—TEPCO and Chubu earlier this year formed an alliance making them the world’s largest procurer of LNG. A large proportion of nuclear infrastructure could be taken on by one or two utilities with the others focusing on different areas of electricity generation and JAPC going into decommissioning.
Such industry changes are rare in Japan, especially among the utilities which have held regional monopoly positions for a long time. This reform could enable opportunities for UK companies to enter the previously firmly closed market.
UK new build
The Fukushima accident impacted on all sectors of the Japanese nuclear industry. Having Japanese companies invest in nuclear in the UK has given hope to a struggling industry.
Comment
The Japanese nuclear industry is still struggling to recover from Fukushima. But regulatory and industry reforms, as well as government support led by economic sense, should help see more action in 2015. The UK has an opportunity to benefit.
Disclaimer
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