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Even as May 6 marked the first day in 40 years that Japan has been without nuclear power, the inevitable steps to incrementally restarting the nuclear facilities appear evident.
By Dave Brown — Exclusive to Uranium Investing News
A new World Economic Forum report titled “New Energy Architecture: Enabling an Effective Transition,” assesses how ready 124 countries are to transition to the sustainable and secure energy architecture required to harness economic growth. It provides a case for why Japan will continue to need nuclear power despite a current crisis in public confidence.
The report depicts the Fukushima Daiichi incident as revealing a number of weaknesses in Japan’s capabilities in the nuclear value chain. These shortfalls include treatment of spent uranium fuel storage, managing cooling shut down, and decommissioning. In addition, the report stresses the need for Japan to further invest in research and regulation to overcome these challenges by bringing in international expertise to assist based on a combined government and industry effort. Japan’s challenge and focus for the coming years will clearly be on restoring supply and ensuring energy security. Ultimately this goal requires a multi-stakeholder approach and the government, industry, and public will all be required to play a role in the collaborative solution-based outcome.
Political hot button
In an interview with Uranium Investing News, Dr. Akira Tokuhiro, Professor of Mechanical and Nuclear Engineering at the University of Idaho, explained the challenge for the Japanese government. “Japanese power plants shut down every year for maintenance. The prefecture governor has the right to approve a restart. Politically there is a vulnerability because no governor wants to risk his political career to support a restart. The Japanese have a famous saying that the nail that sticks out gets hammered.”
Speaking with Uranium Investing News, George Borovas, head of the international nuclear projects team at global law firm Pillsbury, recounted the political challenge, commenting, “there is no specific timeline for the restart of the reactors in Japan. The reactors are each undergoing safety checks and stress tests. Changes following these simulations will require approvals from both central and local governments before restarting.”
Additional costs for power on the increase
Prior to Fukushima Daiichi, Japan had planned to generate up to 60 percent of its electricity from nuclear power by 2050. Decommissioning existing nuclear power plants is expensive and any immediate shift will jeopardize Japan’s economic recovery and energy security as well as increase its dependence on fossil fuel imports. The use of fossil fuels would ultimately move Japan further away from its targets set out at the Kyoto Protocol. A major policy change towards renewables could not completely replace industrial base load demand, would require a transition on a scale never seen before, and necessitates vast financial investment.
Borovas recently told CNBC, “Japan gets over 30 percent of its electricity from nuclear power plants, and we saw the previous report that without nuclear power you are going to face shortages of electricity that is going to affect industry and the economy in general, so that is going to have long-term effects in Japan if that should be the case.” Japan’s challenge and focus for the coming years will clearly be on restoring supply and ensuring energy security.
Japan will eventually need to restart the reactors because there is no alternative to replace base load power for industrial support. Facing the prospect of a hot, humid summer without air conditioning may be the catalyst that the country will need to expedite the incremental consent to restart individual nuclear power plants. Dr. Tokuhiro indicated a positive outlook for uranium investors, stating that if “you have a manufacturing economy that is based on a cheap and abundant energy and you trace that back with nuclear fuel or mined uranium prices it is really going to shift the balance of power towards China.”
Implications for uranium mining and exploration companies
The report underscores the critical role that nuclear power must play in the third-largest economy in the world, and should increase global confidence that the overall nuclear industry will gradually reflect a more efficient market. For investors, an efficient market should reveal supply and demand dynamics and recognize a more realistic value for uranium assets over the long term.
Securities Disclosure: I, Dave Brown, hold no direct investment interest in any company mentioned in this article.