Japan Pulls Together: For Now

Japan has 19 of its nuclear reactors off-line on March 10th, according to the Wall Street Journal. Today that number has doubled, which I believe is higher than any observers initially estimated. Electricity to Tokyo is down 20%.

If anyone owns an international mutual fund with Japanese holdings, most of them have behaved as if the holdings were marked down to zero. Brokerage companies in Tokyo would not be able to do business without power, the thinking went. Instead, peak consumption in Tokyo is 23% below last year, according to the Journal, in a hotter summer. Japanese stocks are broadly back to their pre-crisis levels, according to the Journal story. All of this comes from the same kind of social pulling together that occurred in New York, post 9/11, and which is also characteristic of the Japanese social contract. If you've read this blog on these issues, it's no surprise.

While this is encouraging, some of the ongoing debate is not as uplifting. Like Germany, there is a growing sentiment in Japan to completely and immediately wean itself from nuclear power. The blame for much of this sentiment can be laid at the doorstep of the industry itself, because of its poor communications, stakeholder relations, and too cozy association with business lobby groups. That can be fixed, but will it?

In the short run, Japan is said to be firing up decommissioned coal and natural gas capacity. Japans is already the largest importer of thermal coal, which is the worst fuel from a greenhouse gas emissions standpoint. Japan is also a very large importer of LNG, and this fuel is environmentally preferable to coal. Both of these measures are short term, however.

Completely shutting down the nuclear sector, and increasing renewables, particularly solar, will have significant costs. Hopefully, these issues will be more reasonably and rationally debated in Japan, as opposed to our "get out the machetes" politics. This is where the Japanese political leadership will be challenged, now that the people of Tokyo have done their part individually and collectively to meet the challenge of reduced power supplies.

LNG is relatively cheap now, and the yen is relatively strong, so perhaps there is a way to increase imports and stockpiles of LNG in preference to coal. Both GE and Siemens have dual fuel, high efficiency power plant turbines with modular designs which might have decent economics when compared to the hybrid alternative of shutting down nuclear and substituting thermal coal. Chinese solar panels are in plentiful supply, if analyst reports are correct.

Shigeru Ban has advised Japan to start rebuilding housing quickly,with cost and energy-efficient structures that respect the landscape. On the energy front, our advice would be similar: a little bit of thought about long-term implications, but pull together and fix the problems with solutions that work economically and environmentally.