Overview of the 14th “Asia Pacific Forum, Awaji Conference Japan”
International Symposium

Following an opening address from Representative Director Satoshi Iue, a welcoming tribute from Governor of Hyogo Prefecture Toshizo Ido, and the Asia Pacific Research Prize giving ceremony, an explanation for the purport of holding Awaji Conference was provided by Shigeyuki Abe, Professor, Faculty of Policy Studies, Doshisha University. After three speakers gave some commemoration lectures, Koji Murata, President, Doshisha University, took the role of the coordinator.

Abstract of the Commemoration Lecture: “World Trends and Issues in Japan Concerning Energy”

Speaker: Tsutomu Toichi (Research Adviser, The Institute of Energy Economics, Japan)

1. Forming a unified world view and civilization

   In the Middle East, the world’s supply base for oil and natural gas, there is an increasing geopolitical risk due to the movement for democratization. Japan depends on imports from the Middle East via the Strait of Hormuz for nearly 90% of the country’s oil consumption and 25% of its LNG consumption. This means that the situation in the Middle East considerably affects Japan.

   Meanwhile, the U.S. shale revolution is generating a dramatic change in the world’s energy market. While some people believe that the decline in the U.S. dependence on the Middle East for oil will lead to the decline in the country’s political commitments to the Middle East, oil is not the sole aspect that the U.S. emphasizes in its policies concerning that region. However, in the U.S., voices are being raised that the U.S. should be replaced by Japan, China, and Korea, which import a large amount of resources from the Middle East, in bearing security costs necessary for the stabilization of the region.

2. Nuclear Power Generation – World Trends and Japanese Challenges

   After the accident in Fukushima, countries around the world are now roughly divided into two groups: those striving to continue the development of nuclear power generation and those aiming to achieve a nuclear power phase-out. The countries that will directly affect the consideration of Japanese energy policies are Germany and China. German policy of nuclear power phase-out is now facing major problems, such as the negative impact generated by the feed-in tariff cost and other necessary costs upon the country’s industrial competitiveness, and residents’ opposition to the construction of new high-voltage power lines. At the same time, when the EU is seen as a whole, it can be said that the region has a well-balanced composition of power generation. It is necessary to consider the energy policy not of Germany alone but of the entire EU. Meanwhile, it is expected that by 2020 China will become the second largest nuclear power nation next to the U.S. Should any serious nuclear power plant accident occur, such as the one in Fukushima, there is no doubt that the accident will affect Japan. In this regard, when considering the safe use of nuclear power generation, it is vital to consider the issue on a global scale, including the situation of surrounding countries.

   The Great East Japan Earthquake and the Nuclear Power Plant accident in Fukushima have mainly presented four lessons in terms of energy policies. First, the fragility of large-scale and centralized systems has been revealed; and the necessity of utilizing distributed systems resistant to natural disasters. Second, it is necessary to employ IT-based energy saving equipment, promote the diversification of electricity bill menus, and strive for more efficient power usage. Third, in order to spread the use of renewable energy more extensively, it is necessary to administer power systems on a wider-regional base and to increase the use of smart grids. Finally, in order to restore people’s trust in nuclear power generation, it is imperative to reinforce both national and electric power companies’ governance concerning nuclear power generation, and to promote a fundamental review of safety regulations and risk management both in terms of tangible and intangible aspects.

   The accident in Fukushima has been followed by the nationwide halting of nuclear power plants, which has led to the increased use of thermal power. This is significantly affecting not only the economy but also the environment. Japan has internationally pledged that by 2020, the country will reduce its CO2 emissions by 25% compared with 1990 levels. While it is estimated that Japan cannot fulfill the pledge, it is becoming a real possibility for the EU and the U.S. to achieve their reduction targets. How Japan will handle this problem may become a major concern.

   It is very difficult to decide how Japan should face the issue of nuclear power generation. Considering that it is a technology created by human beings, it is impossible to totally eliminate all risks. What is required here is the perspective of risk trade-off. In addition, nuclear power generation entails other risks, such as an increase in power bills, economic damage to the areas with nuclear power plants, and global warming. In this regard, it is necessary to discuss to what extent society will accept the risks posed by nuclear power generation, and to form a consensus among citizens.

3. Power System Reforms: Diversity of Energy Mix and Comprehensive Strategy

   Japan is currently trying to push forward a variety of power system reforms: the country is attempting to establish a wider regional power system administration institution, realize a full liberalization of power retailing, and separate power transmission and distribution divisions. The biggest problem regarding these reforms is the lack of sufficient discussion on nuclear power generation policies. Without discussion on the positioning of nuclear power generation, these reforms can never be accomplished. It is necessary to secure a stable power supply, while achieving a more efficient power generation retailing market and reducing power bills. To do so, the key resides in how to utilize the vigor of the private sector to stimulate the wholesale power market.

   Japanese energy policies require a diversity of energy mix and a comprehensive strategy. First, it is imperative to establish a structure in which residents can participate to secure mutual interests, as well as to carry out energy-saving efforts and increase the use of renewable energy. At the same time, it is also necessary to secure a stable supply of natural gas and reduce procurement costs. Moreover, it is essential to promote research and development concerning renewable energy, smart grids, and storage batteries, to pursue technological innovation for the safety of nuclear power generation and the disposal of waste, and to develop appropriate human resources. Furthermore, it is now required more than ever for the government to employ a system in which energy strategies will be developed from a comprehensive perspective.

Abstract of the Commemoration Lecture: “The Energy Situation and International Cooperation in the Asia-Pacific”

Speaker: Mikkal E. Herberg (Research Director, Energy Security Program, National Bureau of Asian Research [NBR])

1.The Implications of the Shale Revolution on the U.S.

The shale revolution has led to a rise in the tight oil production in the U.S.—an approximately eight fold increase in the space of six years. U.S. tight oil production is now larger than Kuwait’s oil production. It is expected that by 2020, tight oil production in the U.S. will reach 10 million barrels per day. In addition, it is also expected that the further imposition of vehicle efficiency standards will lead to a decrease in domestic oil consumption. In this regard, it is foreseen that by 2030, the U.S. will become a net oil exporting country. However, as there is a law in the U.S. against exporting crude oil to any country other than Canada, discussion is now underway about whether this ban should be lifted or not.

Moreover, the rules in the U.S. require that in order to ship shale gas to a non-free trade agreement country, it is necessary to obtain special permission from the Department of Energy. There is also political pressure from environmentalists and natural-gas-consuming industries in the U.S., both of whom are against exporting the gas. As a result, it is now taking a considerable time to obtain such permission. If all the export projects currently under contemplation are approved, it could mean that 90 or 100 million tons would be exported, which will generate drastic changes in the market.

2. Asia’s Energy Security for the U.S.

The shale revolution has realized cheap energy for U.S. industries and increased their competitiveness. Also, the revolution has lowered U.S. dependence on the Middle East for oil, increasing the country’s independence of the region. On top of this, Asia is also going to benefit from the bulge in U.S. gas production—there will be a more diversified and worldwide LNG supply picture for the region.

On the other hand, it is estimated that there will be a decline in the U.S. commitment to energy security for the world. This is because the main purpose of U.S policy concerning the Persian Gulf is to maintain a stable oil supply from the Middle East to the U.S., and to prevent damage to the world economy due to a strong appreciation in oil prices. European dependence on the Middle East is also declining; the region can be supplied by Russia, Central Asia, and Africa. On the other hand, more than 90% of Middle East oil is flowing to Asia. While the U.S. has so far played a considerable role in the security of the relevant sea lanes, the direct beneficiaries of the supply from the Middle East are currently Asia, in particular, China.

Budget constraints will also reduce future U.S. commitments to the Middle East. However, the U.S. is the only country with the military power to secure the stability of the sea lanes in the Middle East. The prosperity of Asia is also vital to the U.S., and this prosperity cannot be achieved without a secure energy supply from the Middle East. Consequently, while the U.S. wishes to draw back from the Middle East, they cannot. The stability of oil prices will continue to depend upon U.S. commitments.

If there is a decline in U.S. commitments, it will be necessary to consider what alliances should be forged among Japan, Korea, India, and other Asian countries. It is essential for Japan and the U.S. to demonstrate partnership and leadership, and consider a new energy security structure. At the same time, it is crucial to strengthen the LNG supply from North America to Asia and to establish and reinforce energy institutions, such as International Energy Agency (IEA), thereby developing greater regional energy cooperation.

Abstract of the Commemoration Lecture: “The Development of the Nuclear Power Policy as an Instrument for Revitalizing the Japanese Economy”

Speaker: Makoto Saito (Professor, Faculty of Economics, Hitotsubashi University)

The world’s energy situation is now undergoing drastic changes. Now that a response to these changes is required, nuclear power generation facilities are becoming, in a sense, negative legacies.

As for the disposal of spent nuclear fuel and nuclear waste and the decommissioning of the Fukushima Daiichi Nuclear Power Plant, it is imperative to consider how to respond to the change in the world’s attitude toward the environment, while securing maximum safety regarding such negative legacies at the minimum cost.

Since it is difficult to implement the best policy in the current situation, it is necessary to develop the second or third best, or in the worst case, the fifth or sixth best policy. It is important to secure the agreement of people in local communities and form a consensus about relevant policies, rather than try to carry out the best policy.

1. What Has Made the Situation of the Fukushima Daiichi Nuclear Power Plant So Severe?

The biggest reason for the leakage of radioactive materials from the containments and the deterioration of the situation resides in the fact that the nuclear power generation facilities were old models. Reactor units No. 1 to No. 5 in the Fukushima Daiichi Nuclear Power Plant are Mark I type; the operation of these units was launched in the 1970s. No accident has occurred in the new type Mark II reactors in the Fukushima Daini Nuclear Power Plant; their operation commenced in the 1980s.

2. How Should the Operation Be Resumed?

Currently, the nuclear power generation facilities at Tomari, Oi, Takahama, Ikata, Sendai, and Genkai are applying for a safety review. These facilities are relatively new among those in Japan and feature high performance. I think that in addition to the one in Kashiwazaki-Kariwa, these facilities may go forward to resuming operations under a warranty of good safety. At the same time, I feel that electric power companies should promote efforts to decommission those nuclear power plants that have been operating since the 1970s; the power generation capacity of such facilities is low, the depreciation of the facilities has almost been completed, and the accounting procedure of booking as a loss any shortfall of decommissioning expenses has been also almost completed.

3.How Should Spent Nuclear Fuel Be Disposed?

In Japan, there is already approximately 17,000 tons of spent nuclear fuel. In addition, it is necessary to dispose of high-level radioactive waste (vitrified radioactive waste) when the reprocessing is undertaken in the U.K. and France. Moreover, the reprocessing generates 1% plutonium. Although Japan is trying to utilize such material for fast-breeder reactors and light-water reactors, this effort is not proceeding well, partly due to technological problems. If a country possesses unused plutonium, the country will be criticized internationally. Amidst this situation, it is crucial to feature a more flexible perspective when considering the disposal of such waste on the assumption that the reprocessing is conducted. I think that some spent nuclear fuel should be reprocessed as has been done so far, while other should be directly disposed of through a common use or a parallel establishment of a final disposal site.

4.How Should Nuclear Power Generation Compensation Risks Be Allocated?

Considering that the scale of the compensation for the damage generated by the accident in Fukushima is very large compared with the electric company’s solvency, it can be said that public involvement in some way will be necessary.

5.How Should the Decommissioning of the Fukushima Daiichi Nuclear Power Plant Proceed?

As for the accident in Fukushima, TEPCO virtually does not bear unlimited liability. The country has established the Nuclear Damage Liability Facilitation Fund, and is planning to provide a grant of 5 trillion yen.

On the other hand, the reserve for decommissioning the nuclear power plants is 700 billion yen, which is far from sufficient. The necessary costs, the amount of which is uncertain, should be taken care of somehow.

6.Conclusion

What agreement should be formed concerning the restarting of operations at existing facilities? How should the existing nuclear waste be disposed of? How should the responsibilities for the follow-up of the accident at the Fukushima Daiichi Nuclear Power Plant be allocated, and what system should be employed to take care of the issue? If everyone becomes aware of the importance of moving forward while managing to secure agreement, and recognizes the reality correctly, I believe that an opportunity for the Japanese economy to move forward will be generated.