August 21, 2014 / 11:44 AM / in 3 years

Japan may guarantee price for nuclear power to prop up industry

TOKYO, Aug 21 (Reuters) - Japan will consider guaranteeing prices for electricity generated by nuclear plants to help the country’s struggling utilities, which have lost about $35 billion in the three years since the Fukushima disaster saddled them with extra costs.

Japan’s nuclear plants are in shutdown with no schedule for restarts after the meltdown at Fukushima in 2011, leading the country’s utilities to turn to expensive fossil fuel imports.

But even if they can get their reactors running they face higher costs to meet new safety requirements just as the government is pushing through plans to allow more competition in the industry. They also face possible costs for decommissioning older units that are too costly to upgrade.

The move was floated by a trade ministry panel as an example of supporting the nuclear industry financially like Britain’s “Contracts for Difference” scheme, which guarantees nuclear operators fixed rates for power.

The panel, which is in charge of making detailed policies in line with the government’s basic energy plan, did not give a schedule for finalising the scheme.

Propping up nuclear power, promoted for decades by Japan’s ruling Liberal Democratic Party as cheap, safe and reliable, is likely to be at odds with public sentiment which has turned against atomic energy since Fukushima.

If the market price of electricity falls below a pre-set level, consumers would pay the gap to the utilities, according to the British example discussed on Thursday at the panel.

On the other hand, should the market price rise above the pre-set price, operators would pay back the difference to protect the consumers from overpaying.

Japan in 2012 introduced so-called feed-in tariffs that guarantee higher prices for renewable energy, which sparked a wave of investments, particularly for solar power, but it still contributes to a fraction of electricity needs.

Utilities have been forced to increase fossil fuel imports, especially liquefied natural gas and coal, to generate electricity, paying about 3.6 trillion yen ($34.68 billion) extra every year since the crisis.

All of Japan’s 48 nuclear reactors have been shut since last September. Two have received initial clearance to restart but are unlikely to be reactivated before next year. (1 US dollar = 103.8200 Japanese yen) (Reporting by Kentaro Hamada and Osamu Tsukimori; Editing by Aaron Sheldrick and David Evans)

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