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29 the national bureau of asian research nbr special report #46 | september 2014 TSUTOMU TOICHI is a Senior Advisor for Research at the Institute of Energy Economics, Japan. Dr. Toichi can be reached at . Japan’s Response to Its New Energy Security Challenges Tsutomu Toichi EXECUTIVE SUMMARY This essay examines Japan’s new energy security challenges and assesses its responses amid the country’s ongoing energy policy overhaul and the dramatic changes taking place in global energy markets. MAIN ARGUMENT Japan is in the midst of a major shift in its energy mix. As a result of the Fukushima Daiichi nuclear accident of March 2011, the role of nuclear energy in power generation will unavoidably decline in coming years while gas-fired power generation will increase its share. Consequently, it is a pressing issue for Japan to ensure a stable supply of LNG while minimizing the procurement costs. Doing so will require Japan to address not only economic and market questions but key questions for its energy security strategies, such as the implications of growing dependence on Middle East resources and concerns about the freedom of navigation in critical energy sea lanes. With this in mind, Japan could strengthen energy security for itself—and the region—by promoting greater energy cooperation among Asia-Pacific countries, in particular with China, South Korea, and Russia. Additionally, as it is difficult for Tokyo to protect critical energy sea lanes by itself, Japan-U.S. cooperation will be increasingly important for ensuring freedom of navigation. Because energy security is closely linked with national security, diplomacy, economic competitiveness, and climate change, the government should develop a long-term and comprehensive energy strategy to accomplish Japan’s national interests. POLICY IMPLICATIONS • If Japan becomes excessively dependent on gas-fired power generation, a new risk factor may arise in the country’s energy security due to the high cost of power generation and the very small LNG stockpile in Japan. • Depending on U.S. policy and actions toward Syria and Iran, heightened political and socialinstabilitiesintheMiddleEastmaycallforJapantoenhanceitseconomicassistance as well as its human resource development activities in the Persian Gulf countries. • Additional gas export projects out of Russia provide a good opportunity to build a win-win relationship between the two countries, given that Russia is seeking to expand into the Asian market and Japan aims to reduce procurement costs and diversify its supply sources. 31 JAPAN’S RESPONSE TO ITS NEW ENERGY SECURITY CHALLENGES u TOICHI A s a consequence of the Great East Japan Earthquake and the Fukushima Daiichi nuclear accident of March 2011, Japan’s energy policy has come under pressure, including calls for a fundamental re-examination and revamp. Although nuclear power has played a central role in Japan’s energy security since the oil crises of the 1970s, public opinion about its future use is now divided due to heightened safety concerns following the Fukushima accident. While the suspension of all nuclear power plants continues as of summer 2014, thermal power generation has been charged with making up for the lost capacity, with power generation fueled by liquefied natural gas (LNG) assuming the largest role. However, soaring oil prices, at times exceeding $100 per barrel, have increased the fuel cost for power generation. Consequently, while most power utilities are operating LNG- and oil-fired power generation at full capacity in an effort to avoid power failure at any cost, they have also been obliged to raise electricity rates significantly to survive. Such supply uncertainties and the escalated cost for power have become a major cause for concern for the current administration as it implements its growth strategy, popularly known as Abenomics. This current situation has near-term as well as longer-term implications. Regarding the restart of inactive nuclear power stations, at the end of July 2014, nineteen units were either undergoing or awaiting an audit in accordance with the new regulatory requirements developed by the Nuclear Regulation Authority. By autumn 2014, two nuclear power stations that have met the new requirements and obtained local community approvals are expected to begin the restart procedures. However, because it takes from six months to one year or more to audit a nuclear power plant, the power supply situation is expected to remain tight for the time being. In the medium to long term, the share of nuclear power in Japan’s total power supply will inevitably become lower than it was before the earthquake and tsunami. Nuclear power stations not only will be decommissioned if they fail...


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