New Japanese Nuclear Safety Measures Could Cost Nuclear as Thermal Rises to Compensate

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Researched by Industrial Info Resources East Asia (Kofu-shi, Japan)--New nuclear safety measures set forth by the Japanese government are likely to cost electricity companies in the country. Each reactor upgrade could cost upward of $250 million on average, and with 44 commercial candidates, excluding the Fukushima Daiichi and Daiini reactors, companies could expect a total of $11 billion. For new build reactors still on the books for Japan, these additional safety measures could raise the cost of construction by up to 5%.

These safety measures include the ability for a reactor to maintain secondary cooling in the event primary cooling facilities are disabled. The loss of cooling facilities due to power failure resulted in the meltdown of three reactors at Fukushima Daiichi, sparking what has become the worst nuclear accident since Chernobyl. Some companies, such as Chubu Electric Power Company Incorporated (TYO:9502) (Chuden) (Nagoya, Japan), are already upgrading facilities. Chuden was ordered by the government to build a more secure seawall to protect its sole nuclear power station on the coast of Shizuoka prefecture, an area home to some of the most devastating earthquakes and tsunami in Japan's history.

Currently, only 11 of Japan's 54 nuclear reactors are operational following the restart of Unit 4 at Genkai nuclear power station, owned and operated by Kyushu Electric Power Company Incorporated (TYO:9508 ) (Kyuden) (Fukuoka, Japan). Genkai Unit 4, however, is scheduled to go offline by the year's end for scheduled maintenance along with four other reactors. As of October, Japan's nuclear power generation was down more than 70% compared to the previous year.

Due to the severe drop in Japan's nuclear energy utilization, thermal power generation was up nearly 40% during the same month year-over-year (y/y). Oil consumption rose to 12.6 million barrels in October, while the use of liquefied natural gas (LNG) increased more than 30% y/y. Tokyo Gas Company Limited (TYO:9531) (Tokyo), which imports up to 15% of Japan's LNG, expects that its imports will reach 18 million tons per year by 2020.

Tokyo Gas, as well as several other companies such as Kansai Electric Power Company Incorporated (TYO:9503 ) (Kanden) (Osaka, Japan), are in the process of boosting LNG and natural gas power stations. Kanden will begin repower work at its Himeji natural gas-fired power station in Hyogo prefecture by the end of the year, while Tokyo Gas plans to begin addition work at its LNG-fired Ogishima power station in Tokyo next year.

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