BMI View: Our view that reactors will start to go online in 2015 is still very much in play. We expect roughly 20 reactors to come online by the end of our forecast period in 2024, accounting for around 10% of the generation mix. The risks to this view lie largely in the continued strong public opposition to nuclear energy. Additionally, growing renewable fleet will add an upside to Japanese power output .
At the time of writing all 50 of Japan's nuclear reactors are offline, but Shinzo Abe's commitment to nuclear energy will see the first reactors return to the grid in 2015. Japan has faced significant financial implications from switching off nuclear and consequently having to rely more heavily on costly imported diesel and liquefied natural gas (LNG) to fill the nuclear void.
We believe that nuclear restarts will begin by the end of 2015 (specifically the restarting of the Sendai 1&2 reactors), and then continue gradually over the next decade, with between one and three reactors coming back online through to 2024. Overall, we expect roughly 20 reactors to be restarted, representing around 10% of the generation mix in Japan (still a noticeable reduction on the 27% contribution made by nuclear before the disaster). This accounts for just over 46% of the total operable reactors in Japan. Nonetheless, traditional thermal fuels and renewable generation will continue to play an important part in the Japan's power sector.
The plunge in global crude oil prices has lowered the cost of oil-linked LNG supplies and helped to reduce Japan's import bill. The return of nuclear energy will provide further relief to utilities, especially with much of the contracted LNG volumes to Japan still priced at a premium to spot prices. Still, the Japanese Ministry of Economy, Trade and Industry (METI) estimates that power generated from imported fuels will continue to be more expensive than indigenous nuclear generation.
Critical developments in Japan's power sector include:
Draft proposal by the Ministry of Economy, Trade and Industry in April 2015, outlined plans for Japan's power mix targets for 2030 and reiterates the government's commitment towards nuclear energy. According to the proposal, nuclear will account for over 20% of the total electricity mix by 2030, with non-hydro renewables rising to nearly 15%, with a planned reduction across all thermal power sources, notably gas and oil.
On July 7 2015, Japanese electricity supplier Kyushu Electric Power Company commenced the restart of its Sendai nuclear station in the Kagoshima Prefecture. The process includes the loading of uranium fuel cells at the plant's first reactor, which is expected to be operational by mid-August of this year. The start-up of the second reactor is currently anticipated in mid-October. While the return of power capacity from these two reactors may not be significant, it certainly paves the way for more nuclear restarts over the next decade.
Conversely to the development at Sendai, it was announced on April 14 that a court has sided with local residents and ruled to block the planned restart of two reactors at Kansai Electric Power's (Kepco) Takahama nuclear power plant. The reactors had previously been approved for restart by the Nuclear Regulation Authority (NRA). We previously stated in our analysis that judiciary traditionally supported power companies prior to Fukushima disaster; however, the shift in public opinion against nuclear power could mean judges give more weighting to the fears of local residents - this has seemingly been the case with the Takahama nuclear plant.
Japan's government will earmark about JPY130.7bn (USD1.12bn) in its FY2015 budget to promote renewable energy. Of the total, about JPY7.9bn (USD67.7mn) is expected to be set aside for the development of offshore wind power technologies and JPY4.4bn (USD37.7mn) will be invested in research projects that aim at cutting the cost of solar power generation. A further JPY8bn will be spent on promoting geothermal power.
On April 11 2014, the Cabinet of Japan approved the country's fourth Basic Energy Plan - the first long-term energy policy to be approved since the Fukushima disaster in 2011. In the new policy document, the METI states that nuclear energy is 'a quasi-domestic source that gives stable power, operates inexpensively and has a low greenhouse gas profile'.
The Basic Energy Plan did not give any specific details with regard to the composition of the future energy mix, but the government placed a greater emphasis on coal-fired generation and hydropower as an important source of baseload capacity. This is likely due to superior cost competitiveness and ease of access to coal relative to LNG. We acknowledge that these are important factors, especially in light of the deleterious effects that higher LNG imports and the weakening yen have had on Japan's trade balance and the economy as a whole. To meet its coal generation targets, the Japanese government is banking on integrated gasification combined-cycle plants (IGCC) that utilise coal gasification technology.
The new policy said that Japan would aim to surpass renewable energy targets in past plans, but did not set any specific targets. The previous target was for renewable energy to account for 13.5% of total power generation in 2020 and around 20.0% in 2030.
The construction of new natural gas infrastructure, from LNG re-gasification terminals, to transmission pipelines and gas-fired power plants, means that natural gas will become even more entrenched in Japan's electricity mix. Coal has also been championed by the government in its April 2014 Basic Energy Plan as an important source of baseload capacity.
The Japan Power Report features BMI Research's market assessment and independent forecasts covering electricity generation (coal, gas, oil, nuclear, hydro and non-hydro renewables), electricity consumption, trade, transmission and distribution losses and electricity generating capacity.
The Japan Power Report also analyses the impact of regulatory changes, recent developments and the background macroeconomic outlook and features competitive landscapes comparing national and multinational operators by sales, market share, investments, projects, partners and expansion strategies.
- Use BMI's independent industry forecasts for Japan to test other views - a key input for successful budgeting and strategic planning in the power market.
- Target business opportunities and risks Japan's power sector through our reviews of latest power industry trends, regulatory changes, and major deals, projects and investments in Japan.
- Assess the activities, strategy and market position of your competitors, partners and clients via our Competitive Landscape analysis.
BMI Industry View
Summary of BMI’s key industry forecasts, views and trend analysis, covering power markets, regulatory changes, major investments, projects and company developments.
Industry SWOT Analysis
Analysis of the major Strengths, Weaknesses, Opportunities and Threats within the power sector and within the broader political, economic and business environment.
BMI’s Power Forecast Scenario
Forecasts to end-2024 for all key indicators, supported by explicit assumptions, plus analysis of key downside risks to the main forecasts:
- Generation: Electricity generation total, thermal, coal, natural gas, oil, nuclear, hydropower, hydro-electric pumped storage and non-hydropower renewables.
- Transmission and Distribution Losses: Electric power transmission and distribution losses.
- Trade: Total imports and exports.
- Electricity Consumption: Net consumption.
- Electricity Capacity: Capacity net, conventional thermal, nuclear, hydropower and non-hydroelectric renewables.
BMI’s Power Risk Reward Index
BMI’s Risk Reward Indices provide investors (power companies, service companies and equity investors) looking for opportunities in the region with a clear country-comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points to provide indices of highest to lowest appeal to investors,
Structure, size and value of the industry sector; overview of the industry landscape and key players; an assessment of the business operating environment, sustainable energy policies, pricing and the latest regulatory developments.
Key Projects Database
Details and analysis of all current and planned developments (new ventures, capacity expansion and other investments) across the sector broken down by location, sector type, capacity, value, companies and operational status.
Illustration of the power industry that exploits our data-rich, in-depth analysis of the leading players in the sector and examination of operational results, strategic goals, market position and the potential for investment.
Power Outlook long-Term Forecasts
Regional long-term power forecasts covering electricity generation, consumption and capacity for thermal, hydroelectric and nuclear power. These are supported by a country specific overview, alongside an analysis of key downside risks to the main forecasts.
Providing BMI’s near-term economic outlook for the region as a whole, as well as taking a close look at countries of particular interest and the latest trends and developments.
The Power Market Reports draw on an extensive network of primary sources, such as multilateral organisations, government departments, industry associations, chambers and company reports, including Energy Information Administration (EIA), World Bank (WB) and United Nations (UN).