The Price Point in Japan

Japan has given final approval for the restart of two nuclear reactors, a move that will end a total shutdown of the atomic power sector caused by safety fears raised by last year’s crisis at the Fukushima Daiichi plant.

Inevitable because the Prime Minister Yoshihiko Noda worked hard to get the approval of the prefecture (state) officials because all signs were that Japan would suffer brownouts and blackouts without the Oi (I’ve also seen it as Ohi) reactors in Fukui Prefecture. In any event, though the announcement is notable, it will still take awhile to get the reactors back online.

Kansai Electric said that further tests and checks were required for the two Oi reactors, but it expected to be able to start generating electricity with the No 3 unit in early July, with No 4 following later in the month. It would take each reactor a few days after being restarted to reach full output, the company said.

Which sounds like good timing. The Japanese, much like Americans, appreciate air conditioning. More seriously, Japan’s industrial sector stands to be seriously hemmed in, though the story says this particular restart is more about the air conditioning, allowing Kansai Electric to just about meet its forecast of need output for the summer.

But it’s just the beginning.

Japanese media said leading candidates [to be brought back online] would be a reactor at Shikoku Electric Power’s Ikata plant in Ehime prefecture and two units at Hokkaido Electric Power’s Tomari plant on the northern island of Hokkaido.

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Japan has not yet released in energy roadmap, expected sometime this summer. But it has already taken a larger interest in renewable energy sources.

Industry Minister Yukio Edano approved the introduction of feed-in tariffs (FIT), which means higher rates will be paid for renewable energy. The move could expand revenue from renewable generation and related equipment to more than $30 billion by 2016, brokerage CLSA estimates.

Whatever happens to the nuclear reactors, it certainly isn’t a bad idea to use what resource-poor Japan has on hand. The problem is that nuclear energy is relatively (a lot) less expensive.

The scheme requires Japanese utilities to buy electricity from renewable sources such as solar, wind and geothermal at pre-set premiums for up to 20 years. Costs will be passed on to consumers through higher bills.

We can’t guess what Japan will do with its energy mix. Using nuclear, wind and solar energy in tandem and shutting down fossil fuel plants will allow Japan to lower its carbon emissions. Other combinations will not.

Odd detail:

Wind power will be subsidized at least 23.1 yen per kwh, compared with as low as 4.87 euro cents (6 U.S. cents) in Germany.

That doesn’t tell you anything, does it? In fact, 23.1 yen is 29 cents – not good at all. This story from World Nuclear News provides some sense of relative cost within Japan:

Cost estimates made in 2004 by a Japanese government sub-committee put the cost of nuclear generation at ¥5.30 ($0.07) per kWh, by far the cheapest means of generating electricity, with oil at ¥10.70 ($0.14), coal at ¥5.70 ($0.07), gas at ¥6.20 ($0.08) and hydro at ¥11.90 ($0.16).

According to the story, the accident at Fukushima Daiichi raises that cost by, at most, another two cents per kWh. That makes coal and natural gas more competitive, but not renewable energy sources – wind energy not at all – certainly not with those subsides in place.

The O(h)I facility.

Fluor Invests in NuScale

You know, it’s kind of sad that no one is willing to invest in nuclear energy anymore. Wait, what? NuScale Power celebrated the news of its company-saving $30 million investment from Fluor Corp. Thursday morning with a press conference in Washington, D.C. Fluor is a design, engineering and construction company involved with some 20 plants in the 70s and 80s, but it has not held interest in a nuclear energy company until now. Fluor, which has deep roots in the nuclear industry, is betting big on small-scale nuclear energy with its NuScale investment. "It's become a serious contender in the last decade or so," John Hopkins, [Fluor’s group president in charge of new ventures], said. And that brings us to NuScale, which had run into some dark days – maybe not as dark as, say, Solyndra, but dire enough : Earlier this year, the Securities Exchange Commission filed an action against NuScale's lead investor, The Michael Kenwood Group. The firm "misap...

Wednesday Update

From NEI’s Japan micro-site: NRC, Industry Concur on Many Post-Fukushima Actions Industry/Regulatory/Political Issues • There is a “great deal of alignment” between the U.S. Nuclear Regulatory Commission and the industry on initial steps to take at America’s nuclear energy facilities in response to the nuclear accident in Japan, Charles Pardee, the chief operating officer of Exelon Generation Co., said at an agency briefing today. The briefing gave stakeholders an opportunity to discuss staff recommendations for near-term actions the agency may take at U.S. facilities. PowerPoint slides from the meeting are on the NRC website. • The International Atomic Energy Agency board has approved a plan that calls for inspectors to evaluate reactor safety at nuclear energy facilities every three years. Governments may opt out of having their country’s facilities inspected. Also approved were plans to maintain a rapid response team of experts ready to assist facility operators recoverin...

Nuclear Utility Moves Up in Credit Ratings, Bank is "Comfortable with Nuclear Strategy"

Some positive signs that nuclear utilities can continue to receive positive ratings even while they finance new nuclear plants for the first time in decades: Wells Fargo upgrades SCANA to Outperform from Market Perform Wells analyst says, "YTD, SCG shares have underperformed the Regulated Electrics (total return +2% vs. +9%). Shares trade at 11.3X our 10E EPS, a modest discount to the peer group median of 11.8X. We view the valuation as attractive given a comparatively constructive regulatory environment and potential for above-average long-term EPS growth prospects ... Comfortable with Nuclear Strategy. SCG plans to participate in the development of two regulated nuclear units at a cost of $6.3B, raising legitimate concerns regarding financing and construction. We have carefully considered the risks and are comfortable with SCG’s strategy based on a highly constructive political & regulatory environment, manageable financing needs stretched out over 10 years, strong partners...

NEI Nuclear Notes

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