| 10. Energy |
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Japan's
Energy Supply
Japan's energy supply for fiscal year 2001, which was equivalent
to about 588 million kiloliters of crude oil, consisted of 49.4%
oil, 19.1% coal, 12.6% nuclear power, 13.1% liquefied natural
gas, 3.5% hydroelectric and geothermal power, and 2.3% other
energy sources. 45.9% of Japan's energy consumption is in the
industrial sector, with the majority of the remainder being
consumed by the residential and commercial sector (24.8%).(*1)
Japan imports virtually all of its oil (99.8% in 2001).(*2)
Japan's dependence on oil for its energy needs, which stood
at 77% before the first oil crisis of 1973, dropped below 50%
for the first time in fiscal year 2001.(*3) This decline reflects
the progress of efforts in the industrial sector to reduce the
amount of oil and energy used, and the use of alternative energy
resources such as nuclear power.
The country's bill for crude oil imports peaked at $53.3 billion
in 1981; by 2002 the figure had dropped to $36.6 billion(*4),
reflecting both lower oil prices and decreased consumption.
Oil accounted for 37.2% of the total value of Japan's imports
in 1981 and 12.0% in 2002.(*5)
Liberalization
On April 1, 1996, the import of gasoline and petroleum products
was liberalized in principle as a part of certain deregulation
measures. The goals were to rectify the difference of Japanese
and foreign prices and to encourage greater efficiency in the
sector by exposing petroleum products to foreign competition.
The petroleum market has entered a new age of competition, with
oil companies and other trading houses handling gasoline imports.
Because Japan's domestic coal is more expensive than coal available
from abroad, dependence on imports is increasing, accounting
for 99.3% of all coal sold in 2001.(*6) There were 622 coal
mines in Japan in 1960, being shut down one after another until
the last one in Kushiro, Hokkaido, was closed in January 2002.
Meanwhile, independent power producers and suppliers (PPS) are
taking advantage of deregulation in the electric power retail
market and expanding their business presence in major urban
areas. The major utilities do not report on business lost to
PPS firms, but the Ministry of Economy, Trade and Industry estimates
that PPS firms held just 1.7% of the liberalized energy market
in the first half of fiscal year 2003, so there is ample room
for PPS firms to grow.
PPS firms such as Nippon Steel Corp. and Ennet Corp. (affiliated
with Nippon Telegraph and Telephone Corp.) are working to quickly
scale up their businesses by building power-generating facilities
and buying surplus power from entities that generate their own
electricity. The PPS firms are winning customers away from the
major utilities by charging 5 - 10% less. But the utilities
are starting to fight back by cutting prices, and the pricing
competition will likely grow more intense.
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Energy Policy
The nation's new basic energy plan (*1), released in October
2003, stresses the twin policies of securing stable supplies
of energy and protecting the environment. Put together by the
Advisory Committee for Natural Resources and Energy, an advisory
body to the minister of economy, trade and industry, the new
energy plan reaffirms the basic policies that the government
has pursued to date, including the promotion of safer nuclear
power and adjustments regarding the extent of Japan's dependence
on oil from the Middle East.
Electric Power
Under Japan's present electric power supply system, 10 private
companies supply power to 10 regions in Japan. The Electric
Power Development Co.(*2) and the Japan Atomic Power Co.(*3)
play complementary roles as suppliers of energy throughout the
nation.
As of fiscal year 2002 thermal power plants generated 557.6
billion kWh, hydroelectric power plants 85.1 billion kWh, nuclear
power plants 294.8 billion kWh, geothermal power plants 3.8
billion kWh, and others 3.8 billion kWh, for a total of 945
kWh (excluding home power-generating). The breakdown of thermal
power generation, which accounted for 59.0% of the national
total, is as follows: 26.6% liquefied natural gas power generation,
10.2%, oil power generation and 22.2% coal power generation.
Nuclear Power
Following several serious accidents, the nuclear energy industry
is heading toward stagnation in Europe and the United States.
With scant energy resources of its own, however, Japan has been
actively promoting nuclear power generation. As of March 2003
there were 52 commercial reactors in operation, with an output
capacity of 45.7 million kilowatts, the third largest behind
the United States and France. Four more reactors are under construction
at the time of this writing.
However, concerns were raised following the outbreak of critical
accidents at a nuclear fuel processing facility in Tokai-Mura,
Ibaraki Prefecture, in September 1999, not only regarding the
location of any new nuclear power generation plants but also
the government's promotion of the nuclear fuel cycle in general,
including the pluthermal plan, which uses plutonium as a fuel
for commercial nuclear power reactors.
The pluthermal project was expected to become the lynchpin of
Japan's nuclear fuel recycling policy. But a plan to build a
reprocessing plant in Rokkasho, Aomori Prefecture, is up in
the air as local residents have turned strongly against the
project following a series of scandals, including the forgery
of data by British Nuclear Fuels Ltd., to which Tokyo Electric
Power Co.(*4) entrusted fuel processing, and the Japanese power
utility's cover-up of defects in nuclear reactors which surfaced
in summer 2002.
In December 2003, Kansai Electric Power Co.(*5) and two other
regional electric power companies decided to scrap their joint
project to build a nuclear power plant in Suzu, Ishikawa Prefecture,
due to excess supply and relatively high construction costs.
Behind the decision is the growing presence of independent power
suppliers that use natural gas and other lower-cost energy sources.
These have moved into the power industry, encouraged by the
government policy for deregulation in the utilities sector.
The government has reduced the number of nuclear power plants
proposed for construction by fiscal year 2010 from a maximum
of thirteen to nine.
Tohoku Electric Power Co. (*6) also decided in the same month
to stop the construction of a nuclear power plant in the town
of Maki, Niigata Prefecture. The decision came in the wake of
the Supreme Court ruling that cast a shadow on the company's
plan to acquire land needed for the nuclear power plant. It
became the first time that a nuclear construction project being
part of the central government's basic power development program
was cancelled.
Alternative Energy
Amid growing consciousness of environmental issues, both the
government and the private sector have been investigating wind,
solar, fuel-cell and other energy sources for generating electricity.
In an effort to combat global warming, in April 2003 the government
enforced the Renewables Portfolio Standard Law, which requires
electrical power companies to insure that by fiscal year 2010,
1.35% (or 12.2 billion kWh) of all power sold come from alternative
sources. The percentage is 3.7 times larger than the figure
in fiscal 2003.(*7)
Due to the fact that major investments in power distribution
systems are needed to make these technologies practical, most
alternative power suppliers depend on the government subsidy
program, which subsidize a certain percentage of the capital
investment in alternative energy facilities.
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