Japan Snaps Back With Less Power

Economy Survives Reactor Shutdowns, and Tokyo Rethinks Nuclear Policy

By PETER LANDERS

Bloomberg News

A
man walks down the stairs of a subway station in a darkened Tokyo.
Japan has been slashing power use since a March 11 earthquake and
tsunami knocked out nuclear power plants.

TOKYO—When
the March 11 tsunami knocked out more than half of the nuclear power
plants serving the Tokyo area, it set off one of the biggest unplanned
experiments in a modern society: Could a metropolis of 30 million people
get by after losing about a fifth of its power supply?

After
a steaming July in Japan filled with 90-degree-plus days, the
preliminary answer is in, and it is yes. Not only has Tokyo Electric
Power Co. kept the lights on all summer, it has so much extra capacity
on most days that it could power New York City, too.

The
economic hit from power shortages that many feared has failed to
materialize. Japanese stock prices have risen almost to their prequake
levels, the economy is growing again and some companies have actually
been invigorated by the demand for electricity-saving goods.

Saving
electricity has become a sort of national religion. With many air
conditioners set at 82 degrees, businessmen have shed their usual suits
in favor of "super cool biz" short-sleeve shirts. Car makers have been
forced to operate on weekends to avoid sucking up electricity during
peak weekday hours.

Peak electricity usage for the Tokyo area so far this summer was nearly 23% below the peak last summer.

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The
drop in electrical consumption is shaking Japan's decades-old
commitment to nuclear power, which until this year supplied nearly 30%
of its electricity. If the country successfully navigates the remaining
weeks of the summer with a reduced power supply, the Fukushima Daiichi
accident is likely to transform Japan's energy policy. That will have
global implications as nations review nuclear power in light of the
worst radiation release since Chernobyl.

There's
a growing sense that Japan will rely less and less on nuclear plants
and may phase them out entirely some day, politicians and many business
executives say. Germany and Switzerland have announced their own
phase-out plans, while leaders of the U.S. and France, the two biggest
nuclear-power users, say they plan to keep their reactors running.

"Over
the mid- to long-term, it is desirable to move toward shrinking
nuclear power by phasing out aging reactors and promoting renewable
energy," said a statement by the Japan Association of Corporate
Executives after its summer meeting in July.

Others go even further. "I think it's better without nuclear energy" in principle, said Hiroshi Mikitani,
the 46-year-old billionaire head of Internet shopping company Rakuten
Inc., and one of the most prominent leaders of a rising generation of
Japanese business executives. Mr. Mikitani cautioned that he doesn't
favor shutting down all nuclear plants at once. But he said the summer
has shattered the trust that Japanese once held in the nuclear
establishment.

Japan's success in
avoiding a power crunch owes both to greater supply and less demand.
Tokyo Electric Power, known as Tepco, raced to revive older gas- and
coal-fired plants, putting a quick stop to rolling blackouts that Tokyo
suffered a few days after the earthquake. Meanwhile, the conservation
drive has reduced peak demand in the Tokyo area by 10,000 megawatts or
more on many days.

These steps
have drawbacks. The traditional power plants emit more greenhouse
gases, and Japan must import the fuel. That increases energy costs,
although the strong yen eases the burden.

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And
some elderly people are taking the conservation effort too far, risking
heat stroke. At the Imperial Palace, the emperor and empress, both in
their late 70s, at one point were getting by with candles and
flashlights at night, according to a palace spokesman. Emergency
responders have brought 22,418 people with heat stroke to medical
facilities this summer through July 24, according to Japan's Fire and
Disaster Management Agency. Nearly half were elderly, and 43 people
died. The number of people with heat stroke is running more than 50%
ahead of last year, but the number of deaths is one-third lower.

Power
company officials and some business leaders say the conservation
efforts, which are mandatory for larger companies in the Tokyo region,
disrupt production and add to uncertainty. "It's an overly hasty
conclusion to say that we don't need nuclear plants because we have
enough power," said Zengo Aizawa, Tepco's executive vice president and
top nuclear official, in a brief interview. "Japan is a country that
lives on making things, and production is suffering a pretty big
effect."

Still, for such a tremendous cut in energy usage—the savings are roughly equal to the entire power demand of Consolidated Edison Inc.'s unit serving New York City and Westchester County—the economic damage seems relatively small.

The
vice governor of the Bank of Japan, Hirohide Yamaguchi, said July 20
that power issues are "not likely to constrain economic activity to the
extent expected earlier," and the central bank is predicting a
moderate recovery this fall and 2.9% growth next year. The capital is
mostly humming as usual, with lines at electronics stores and packed
trains to resort areas.

By
themselves, the earthquake and tsunami brought significant damage only
to Tepco's Fukushima Daiichi nuclear plant, which has six reactors. The
company also shut down the nearby Fukushima Daini plant with four
reactors.

The vast majority of
Japan's 54 nuclear reactors suffered no damage in the quake. But to the
surprise of power companies, communities started balking at restarting
reactors that were idled for routine inspections. Then Prime Minister
Naoto Kan announced a series of stress tests to check reactors'
vulnerability to accidents, further delaying the restarts.

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Bloomberg News

Pedestrians stand in the dark as they wait to cross a Tokyo intersection -- part of a power-saving drive.

Now
only 16 reactors are still running, and all of them are scheduled to be
idled for routine inspections by next spring. If it fails to restart
halted reactors, Japan will be without nuclear power in less than nine
months.

That would create another
power crunch when demand rises again in the summer of 2012, and Japanese
are debating whether going cold-turkey on nuclear power is possible.
If people continue their conservation and power companies crank up
their aging fossil fuel-fired plants for another summer, Japan could
probably make it without power outages. But backers of nuclear power
say it would be foolhardy to try.

The
quickly dwindling supply of nuclear power has forced other regions to
conserve. Only four of 11 reactors serving Japan's second-biggest
economic center, the Kansai region around Osaka, remain online. At a
restroom in Kansai Electric Power Co.'s headquarters, the electric hand
dryer is turned off and a sign asks people to dry their hands with a
towel purchased from a 100-yen ($1.25) store.

Osaka's
results so far are similar to Tokyo's: Thanks to conservation, power
supply easily exceeds demand. "I'm not buying this claim that we have
to have nuclear power because there isn't enough electricity," Osaka
Gov. Toru Hashimoto told reporters outside his office in late July.
"There's generally more than enough. That's the reality."

Power companies and some business leaders argue that this summer's success is an anomaly that can't or shouldn't be repeated.

Yoshihito Iwama, who heads environmental policy at the
big-business lobby Keidanren, said companies are paying extra to
generate power at in-house facilities and hesitant to invest because of
uncertainty.

"How long can
companies hold on with the all-out efforts they're making now? I think
it's going to be tough," Mr. Iwama said in an interview. The strong yen
is already causing the "hollowing out" of Japan as companies move
production overseas, he said, "and I worry it will accelerate."

Such
views have led business figures to call for an urgent restoration of
the shut-down nuclear plants. Sumitomo Chemical Co. Chairman Hiromasa
Yonekura, who heads Keidanren, said at a news conference that the
government must affirm the safety of the plants and reassure the
public, which he said is getting too "emotional."

But
skepticism has grown about the alliance of power companies, the
industry ministry and big businesses promoting nuclear power.

Public
opinion is running 2-to-1 in favor of reducing or eliminating nuclear
power plants, according to a July poll by public broadcaster NHK. Even
the opposition Liberal Democratic Party, a stalwart supporter of
nuclear power during the decades it ran Japan, is reassessing its view
to ensure its candidates don't get attacked over the issue.

Self-inflicted
lapses have weakened the pro-nuclear power camp. A power company in
southern Japan asked employees to impersonate average citizens and send
in emails supporting nuclear power to a televised debate. The
company's president has said he will resign to take responsibility for
the ploy. The industry ministry's chief nuclear spokesman was replaced
suddenly after it was revealed he was having an affair amid the crisis
with another ministry official.

Mr.
Mikitani, the Internet-shopping tycoon, pulled his company out of
Keidanren in July. "They are protecting the interests of specific
industries, which is not good for…the Japanese economy," he said.

Rakuten
said it reduced its power usage by 35% with steps such as turning off
office lights and controlling the heat emitted by computer servers. It
was "not that difficult," Mr. Mikitani said. Tepco's dire forecasts of
power shortages, followed by the news that power was actually in
plentiful supply, increased his suspicions.

"We don't know if Tepco is telling the truth or not," he said. "We don't even really know if there's an electricity shortage."

Tepco
says its figures are accurate and it is trying its utmost to raise
supply, but it believes power could fall short if people don't conserve.
"We're still not in a situation where we can be optimistic," a
spokeswoman said.

Discussion has
begun in Japan over what is termed "datsu-genpatsu" or "shedding
nuclear power." The nation's most influential newspaper, the Asahi
Shimbun, published an editorial of some 5,000 words laying out its
datsu-genpatsu plan.

The Asahi
said Japan should rely more heavily in the short term on liquefied
natural gas, including imports from the U.S., while developing
renewable sources such as solar and geothermal power for the longer
term. A law pending in parliament, pushed by Prime Minister Kan, would
guarantee producers of renewable power that they could sell their
electricity at a profitable price.

Many
companies are already acting as if the summer of 2011's experiment
with dropping reliance on nuclear power will continue in future
summers. In July, companies such as Panasonic
Corp. and Sharp Corp. said they will team up to develop standards for
solar-powered homes that store their own energy and don't need help from
the grid.

A Japanese alliance led by trading company Mitsubishi
Corp. is investing billions to develop infrastructure in Canada that
could deliver liquefied natural gas across the Pacific later this
decade. And three-quarters of Japan's governors have joined
telecommunications billionaire Masayoshi Son, chief executive of Softbank Corp., in a plan for giant solar-power plants on unused farms and industrial land.

The
moves toward shedding nuclear power will carry significant costs.
Japan's electricity bills are sure to rise in the short term if nuclear
power is replaced by imported fuels and more-expensive renewable
sources. Rural areas that play host to nuclear plants would lose their
main source of jobs and tax revenue, and power companies would have to
write off the billions of dollars invested in the plants.

And,
as the Asahi acknowledged, the shift will place demands on consumers.
"We will have to overhaul the long-established attitude that we can use
as much electricity as we like and view the supply as someone else's
problem," the newspaper said.

Source

http://online.wsj.com/article/SB10001424053111903635604576471803885988900.html

Write to Peter Landers at peter.landers@wsj.com