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Uranium investors will be interested in this political situation in Japan, in addition to how they meet the increasing challenges of simultaneously achieving high degrees of energy security, environmental compatibility and economic efficiency.
Recently Prime Minister Naoto Kan issued commentary challenging Japan’s dependence on nuclear power. The present basic energy plan anticipates reliance on nuclear power for the majority of the country’s electricity demands in 2030, with an objective towards withdrawing dependence on nuclear power while continuing to utilize the energy source with safety enhancements.
On Friday a council agreed to review the current basic energy plan and coordinate a schedule for withdrawing dependence on nuclear power and they expect to reach a consensus through public engagement forums. The council will create a policy guideline for the strategy based on an interim plan by year end, working together with relevant agencies and advisory bodies including a committee for Natural Resources and Energy.
Impending short term electricity challenges
With the administration’s indecisiveness on creating a policy and procedure guideline for safety checks on reactors, Japan is facing significant constraints on electricity supplies as reactors shut down for refueling or annual checks are prevented from restarting.
Looking ahead to 2012 the Ministry of Economy, Trade and Industry (METI) has estimated that power generation expenses would climb by over $37 billion per year, which could be relative to approximately 0.7 percent of gross domestic product (GDP), if utilities had to replace nuclear energy with thermal power generation.
A policy shift from nuclear generated power could make an energy resource deficient Japan more reliant on obtaining sources from fossil fuel providers, risking further commodity price volatility. This also puts the country increasingly in competition with rapidly growing Asian nations like India, South Korea and China, which have begun to invest heavily in order to secure global supplies of natural gas, coal and oil.
Last year’s electricity supply plan indicated nuclear capacity growing by 13 gigawatts per year by 2019, and the mix of supply growing from 25.4 percent in 2007 to about 41 percent in 2019. This will now become a source of speculation following the recent government equivocation and public fears.
Internal domestic debate
Kan’s proposed reversal on nuclear policy was a surprise, contrasted with decisions against nuclear energy in Germany and Italy, which were reached following extensive government discussions or referendums. The German policy shift will be interesting to observe as the country is aiming to replace almost 28 percent of its energy supply without importing capacity from France, which should be a challenge.
The Japanese turnabout faces substantial opposition within Kan’s own administration and from the public. According to Bloomberg, the prime minister’s approval rating in June declined from 23.2 to 17.1 percent in June, which further indicates an increase in the disapproval rating to 70.6 percent. A poll by the national daily Mainichi newspaper published July 4 found that as much as 30 percent of respondents believe the country’s dependence on nuclear power “couldn’t be helped” and additionally 37 percent of the population favor restarting the nuclear reactors that are currently being kept offline following shut down for regular maintenance.
Kan has dismissed any speculation that he might suspend parliament and call a sudden election over the energy issue, although he acknowledges that citizens have a right to participate in energy policy decisions. He also said it was possible the reactors now shut for maintenance would go back online, but that current conservation efforts should be enough to get the country through the summer and winter on the existing electricity supply. The 46th general election for Japan since 1890 is regulated to take place on or before the end of August 2013, as a tenet of the Constitution of Japan.
Uranium investors will be interested in this political situation in Japan, in addition to how they meet the increasing challenges of simultaneously achieving high degrees of energy security, environmental compatibility and economic efficiency.
Uranium spot market price increase
On Friday, TradeTech consultants reported a slightly higher spot uranium price last week, increasing $0.25 to $52.00 per pound of uranium. The market activity continues to be moderately stable with limited quantities of sellers and buyers actively participating. A total of seven transactions were concluded with prices marginally increasing by the end of the week.