This is Kamala Shelling and you're

listening to Switched on the Bloomberg

NEF podcast. It's been 15 years since

the Fukushima disaster led Japan to shut

down all of its nuclear power generation

essentially overnight. That left the

country heavily reliant on imported

fossil fuels for electricity and changed

much of the world's relationship with

the nuclear power. Japan's shuttered

reactors have been slowly coming back

online for years now. But the recent

restart of the Kashiwazaki Kariwa unit 6

in eastern Japan holds particular

significance for the country's nuclear

rebirth. With us today is Mara O'Neal,

BNF's head of Asia-Pacific Power

Research for a short analyst reaction

episode about what it means that the KK6

reactor, as she calls it, is back in

action. Our conversation is largely

based on Marico's story, nuclear

comeback to ease Tokyo Power Price War

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bloomberg.net. But for now, let's speak

with Marico.

Welcome to the podcast, Marico.

>> Thank you for having me.

>> So, we're here today to talk about the

restart of one nuclear reactor in one

corner of Japan. But I think to really

understand why this moment is so

important, we need to have a broader

view of the Japanese power market and

actually why it's a relatively

idiosyncratic power market among the

ones that BF covers. So you as our Japan

power market maven, can you zoom out and

start by giving us that broader view?

>> Yeah, sure. So I think we have to start

by addressing the accident that happened

in Fukushima following the tsunami in

2011. Um, before 2011, Japan had more

than 50 operational nuclear reactors

that generated 26% of its electricity.

However, in response to the accident in

2011, the government shut down all of

its nuclear power plants and required

them to be reassessed according to new,

stricter safety standards before they

were able to turn back on. It's also

worth noting that the 2011 accident had

repercussions outside of Japan with

other countries such as Germany pursuing

nuclear phase out policies. But coming

back to your question about what we need

to know about power generation in Japan

in order to understand the importance of

this restart. Think about the world's

fifth largest consumer of electricity

having to substitute a quarter of its

power generation almost overnight. And

in a way it's incredible that they

managed to do so without widespread

blackouts. In terms of how they did it,

unsurprisingly given that you can't

bring renewables online that quickly,

most of the nuclear power was

substituted by fossil fuels. increased

coal generation, but mostly much more

gas fired power generation. And this

actually brings me on to the other story

that comes up in all power conversations

these days, and that's the war in the

Middle East. One of the problems with

Japan increasing gas generation, so that

it makes up 30 to 40% of its power, is

that it not only doesn't have domestic

natural gas resources, but it's of

course an island, so it can't import gas

via pipelines, which means that it has

to rely on imported liqufied natural gas

or LNG. So when war breaks out in the

Middle East and damages Qatari LNG

infrastructure or blocks the straight of

Hormuz which is a corridor for a fifth

of the world's LG LG prices go

skyrocketing and generating electricity

in Japan suddenly becomes rather

expensive even if Japan only imports

around 10% of its LG from the Middle

East. So day ahead power prices in Tokyo

reach 64 yen per kowatt hour on April 28

which for context is around $400 per

megawatt hour. So those are some huge

numbers there. You said they basically

lost a quarter of their power generation

overnight, 30 to 40% of generation from

gas, $400 a megawatt hour for power. So

against all of these massive, massive

stories, why is the restart of just one

reactor such a big deal? Yeah, that's a

good question. I'd say three main

reasons why the restart of this reactor,

which it's unit 6 of Kashiakar nuclear

power plant, and I'm going to call it

KK6 because it's a rather long name. But

the first reason that is a bit more of

symbolic or political significance.

Although Japan's nuclear reactors have

been restarting slowly and one by one

since 2015, KK6 is the 15th reactor to

do so. It's the first reactor operated

by TCO or the Tokyo Electric Power

Company. And that's the utility that

operated the Fukushima Daichi plant

which was the site of the accident in

2011. So as a result, it can be seen as

a big mark in the shift in Japanese

energy policy back towards nuclear

power. The second reason that this

restart is significant is that it's the

first restart in the Tokyo utility

region. It's the country's largest power

region in terms of electricity

consumption. And in fact, all but one of

the other reactors that have restarted

since 2015 have been in West Japan. So

as a result, power prices in East Japan

have consistently been higher than the

west side of the grid. Third and

finally, this restart comes at a

particularly crucial time. As I

mentioned, there's war going on in the

Middle East, and we expect this reactor

to displace around 61,000 metric tons of

LG demand in the Tokyo region, which is

close to one full LG cargo for each

month of its operation. So, if this is

the first reactor to restart in the

Tokyo region, can it have a really big

effect on Tokyo power prices? So, yes,

but only to some extent. So, a few

reasons why it will have an impact on

Tokyo power prices is that the Tokyo

utility region is one of the country's

most gas-heavy uh electricity regions.

And in the current environment of really

high gas prices, any additional power

supply that can displace gas should

provide some relief to power prices. In

particular, nuclear power has low

marginal generation costs, can run

around the clock, unlike renewables, and

its units tend to be large. KK6 is now

the largest reactor operating in Japan

at a whopping 1,356

megaww. So in terms of a single power

asset that can have the largest impact

on a power system, this is probably it.

What's more, I mentioned that there's

one other reactor only that has been

restarted in East Japan. This is Tohawk

Electrics Onagawa 2, but that reactor

has been undergoing a maintenance outage

until very recently, meaning that for a

while, KK6 was the sole provider of

nuclear power in the whole of the East

Japan side of the grid for a while.

However, I don't want to overstate the

price impact. It's going to be limited

by the fact that even a reactor of this

size can only meet around 3% of power

demand in Tokyo, which consumes about a

third of the country's total

electricity. Are there other nuclear

reactors in the region that you expect

to come online after this one? Yeah, so

we've been tracking the nuclear restarts

here at Bloomberg NEF and we expect

around nine nuclear reactors to restart

between now and 2035. Of these nine,

actually seven are in East Japan. Um, so

that price premium that I mentioned,

East Japan power has over its West Japan

counterpart is expected to continue to

shrink. And within East Japan, there are

different utility regions where the

impact of these restarts will have

different impacts. So for example, in

Hokkaido, which is a very small power

region in terms of power consumption, if

all three units of the Tomari nuclear

power plant do restart, just this one

nuclear power plant could probably meet

between half and 3/4 of the region's

entire power demand. These restarts are

expected to displace fossil fuels in

Japan's power system. But looking at the

list of reactors that have applied to

restart from the regulator, only 11 have

applied to restart so far, meaning that

nuclear generation is still unlikely to

reach levels seen before 2011, at least

between now and 2050. BN forecasts that

uh restarted nuclear capacity will

increase from about 13 gaw today to 18

gaw by 2030 and 26 gaw by 2040. But

Fukushima was 15 years ago. So why did

it take so long to get these restarted

if they're such a critical part of the

Japanese power infrastructure? Yeah,

that's that's a question that I get a

lot. Um, so I think one part of the

answer is probably political. Obviously,

in the immediate aftermath of the

accident, neither the public nor sort of

uh policy makers were particularly pro-

nuclear. The new regulations to restart

a nuclear reactor are extremely

stringent. Um and some reactors have

been waiting more than 12 years uh for

approval from the regulator which is

known as the NRA, the Nuclear Regulation

Authority in Japan. And some of the

safety regulations include having a

contingency plan for what you would do

in the event of a once every 10,000year

earthquake or tsunami. So I guess the

flip side then to that question is given

how disastrous a nuclear meltdown can

be, given how disastrous Fukushima was,

why is nuclear regaining strategic

importance in Japan? Uh I mentioned

before that Japan has no natural gas

resources. It doesn't have really any

fossil fuel domestic resources which

means that it's very import dependent

when it comes to its energy. So whether

that's imported coal or imported

liqufied natural gas, even now there's a

lot of discussions around its dependence

on imported solar panels. So having a

nuclear power supply uh would be a big

boost for its domestic energy security

especially in terms of meeting its

decarbonization targets. I will also add

that globally uh there's a lot more

interest in nuclear power now as an

aroundthe-clock zero emissions power

source that could power data centers

required for AI. Um so bringing all of

these factors together the current

administration run by Sai Taki is very

pro- nuclear. So something we've been

talking about a lot at BF since the Iran

war began was maybe this is an

opportunity for renewables buildout.

Japan is now sort of having this nuclear

renaissance, but is this an opportunity

for them as well to really lean into

their renewables build? I would say yes,

it is an opportunity to lean into its

renewables build, but whether or not

they're actually doing so is probably a

different question. I mentioned before

that the current administration is very

pro- nuclear, but they are not

necessarily pro-renewables to the same

extent. There's been a little bit of

opposition to largescale solar uh as a

result of the opposition of local

communities around these what they call

mega solar plants and some concerns

around reliance on imported solar

panels. So I would say that despite the

heightened importance of energy security

in the current agenda, most of that

focus has been on nuclear rather than

renewables. And finally, despite this

renewed push for nuclear, what are the

challenges that Japan's nuclear sector

is still facing moving forward? Yeah, as

I mentioned, the timelines for these

restarts are incredibly long and this is

also just for restarting existing

nuclear plants. So a lot of these are

quite old and they have just changed the

laws to potentially extend their

operating lifetimes and still a lot of

them will start to brush up against

retirement times between now and 2050 at

which point there probably has to be a

discussion around the building of new uh

nuclear capacity. Last year, Kai

Electric, which is one of the utilities,

announced that it was conducting

geological surveys for a potential new

nuclear reactor at its Miama power

station site, but it hasn't been decided

yet. And this has been the first and

only mention of any new nuclear capacity

since 2011. Marico, this has been

absolutely fascinating. Thank you so

much for being here. Thank you so much

for having me.

Today's episode of Switched On was

produced by Cam Gray with production

assistance from Kamala Shelling.

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