Deregulation threat to nuclear industry

30 March 2001

Japan Japan’s nuclear industry is facing competitive threats from rival power suppliers that could slow down construction of new nuclear plants, a spinoff of deregulation aimed at slashing Japan’s high energy prices.

As a result, nuclear companies are grappling with deep questions about how to grow as the economy stagnates, and as a new wave of cost-conscious power companies eye cheaper fuels.

“They must think very carefully about costs,” said Takahiro Morita, senior vice-president at Moody’s Japan KK. “I think that will lead to a slowdown in the development of nuclear power plants.” This, combined with public anxiety over the safety record of the nuclear industry after recent incidents, is making privately-run utilities that operate all of Japan’s 53 commercial reactors hesitant to commit to major new development plans.

Long-term investment plans announced by Japan’s major utilities showed that only 13 reactors are due to begin operating over the next 10 years, compared to the government’s target of 16-20.

Japan’s 10 leading utilities held regional monopolies on electricity supplies until March 2000, when the government allowed non-power firms to sell electricity to major consumers. This change, aimed at reviving Japan’s economy by reducing energy prices, led to seven new companies to enter Japan’s power supply industry. These companies are likely to turn to cheaper fuels like coal, forcing down prices and preventing nuclear companies from passing on extra costs needed to build new reactors through to electricity rates.

Nuclear power plants enjoy a competitive advantage, using relatively cheap fuel and running costs are comparitively low once the initial construction costs have been met. However, predicting what Japan’s energy market will look like in 10-20 years when the full benefits of any reactor built now would materialise is harder than ever.

TEPCO annnounced that it will freeze construction of new power plants, including nuclear plants, for three to five years.

A day after it made this announcement, TEPCO revised its position, saying that it would continue its construction of nuclear plants. Experts are, however, uncertain that TEPCO will actually construct these plants, given the slowdown in power demand growth in Japan.

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