Analysis of Japan's New Energy Strategy 2/4: Feasibility

The previous post discussed the inconsistency between the goal and measures adopted in the Innovative Strategy for Energy and the Environment - Japan's new energy plan in response to the nuclear accident in Fukushima. This blog post examines the feasibility of the goal to phase out all nuclear power plants by the 2030s from economic and technical perspectives.

Current and Planned Electricity Demand and Fuel Mix
(Source: National Policy Unit)

Economic Feasibility

The economic problem of the plan's goal to phase out nuclear power is relatively well-known. Nuclear power is arguably less expensive than other fuel sources, even when accounting for the cost of discommissioning of reactors and cleanup of Fukushima Daiichi power plant. The below figure compares the cost of electricity generation from various sources, based on the official estimate by the National Policy Unit. 

(Source: National Policy Unit)

It shows that nuclear power will continue to be less expensive than other fuel sources, and shifting from nuclear to renewable energy is likely to adversely impact electricity costs, even with the declining costs of renewable energy. This cost estimate is highly sensitive to various assumptions ranging from a discount rate to crude oil price forecast, and it will remain a subject of debate no matter what assumptions are chosen. I do however find the cost estimate fair and reasonable after examining various assumptions used in the study, and it is possible that higher-than-expected crude oil prices may drive up the generation costs from fossil fuel higher.

The cost difference in the above figure may not be so large to most people, but the actual cost differences are much larger from now on. Since the majority of the costs of nuclear power already incurred at the time of construction, the operation costs to generate additional electricity from now on is so much less than the cost figure above, which would amount at 5 yen/kWh. In other words, the marginal costs of electricity generation from nuclear power is so small that any attempt to replace nuclear power with other fuel sources, particularly with fossil fuel, will require the electric rates to be raised.

The plan has economic analyses on the scenario, arguing it would lower Japan's GDP by 1.2 to 7.6%, but the range is too large to draw any conclusion. Given the recent struggle over electricity rate raise, it is difficult to imagine that the public will accept much higher rate than today. The plan has yet to address the funding issues to deploy renewable energy at large scale.

Technical Feasibility

The other problem is the technical feasibility of massive introduction of renewable energy, which is less well-known to the general public than the cost problem mentioned earlier. According to the Mid- and Long-term Roadmap for Global Warming Measures, which explores the potentials of renewable energy sources and energy conservation measures and is the basis for the Innovative Strategy for Energy and the Environment, solar and wind are expected to account for about half of electricity generation from renewable energy sources.

Current and Planned Electricity Generation from Renewable Energy Sources (TWh)
% (2030)
(Source: the Ministry of the Environment)

Since the plan expects renewable energy sources to generate about 30% of electricity in 2030, solar and wind will be responsible for about 15% of electricity generation. This may or may not pose significant challenges to the electric grid. Because electricity generation from these sources are dependent on weather, the output varies not only from day to day but also from second to second. Solar and wind are thus called variable or intermittent energy sources. The variability of solar and wind can be problematic to the grid. Demand and supply always needs to be in balance to maintain constant frequency within a grid; if this fails, it could alter the frequency of electricity and possibly cause power outage or damage electronic devices everywhere.

There are several possible solutions to this problem: (1) demand side management (and smart grid), which controls the demand either mechanically or through pricing incentives, (2) deployment of rapidly responsive thermal plants, and (3) energy storage, mostly likely in the form of pumped storage hydroelectricity (PSH). These solutions are costly, but it is possible that a combination of these techniques will enable a large introduction of intermittent energy sources.

Possible Fuel Mix in the US for Summer 2050
(Source: National Renewable Energy Laboratory)

The problem of the plan is that it basically neglects the problem per se. My sources tell me that there was no simulation over the impact on each electric grid, and it is unclear if the plan's planned fuel mix is even technically possible.

On the contrary, the National Renewable Energy Laboratory, a research arm of the Dep. of Energy (of the United States), has recently conducted a very detailed study called the Renewable Electricity Futures Study. This study examines when and where renewable energy is harvested and how it would impact the grid, and it simulates various load and weather scenarios at hourly level. The simulation's resolution is astonishing, and it even explores electricity interchange among all major grids in the US.

Renewable Energy Generation Bases in 2050
(Source: National Renewable Energy Laboratory)

This is the level of analysis needed before the government announces the bold plan (which now sounds unlikely to be carried on by the next administration), because even inspiration goals could alter investment decisions.

In sum, regardless of your position on the plan's goal to phase out nuclear power, the plan fails to examine economic and technical hurdles to achieve the goal and identify countermeasures to solve the obstacles, and I cannot help saying the plan will turn out to be nothing but pie in the sky.

In the next blog post scheduled in November, I will discuss the flaws in economic and energy demand forecasts embedded in the plan.

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