A Nuke-Out Punch

While the world watched one huge energy breakthrough in Asia this week, another potentially big energy development slipped by with little notice: a Japanese court nixed the long-awaited restart of the country’s nuclear reactors.

That could pose a huge headache for the government of Shinzo Abe, which is committed to a nuclear restart as a way to stanch the bleeding in an economy battered over the last two years by high bills for imported energy. And it could further push Japan toward Russia in a quest to find fuel to keep one of the world’s biggest economies humming.

The Fukui District Court in Japan ruled this week that safety concerns should preempt a restart of a pair of nuclear reactors run by Kansai Electric Power Co., which were the first out of the gate as the country began to ramp back up atomic power after the 2011 Fukushima accident, but which were taken offline last year for maintenance.

The court essentially argued that avoiding catastrophe is more important than avoiding high power bills, and suggested that the Japanese nuclear industry had not really learned the lessons of Fukushima, especially when it comes to protecting against earthquakes and tsunamis.

The court said that it had doubts whether the "safety technology and equipment" at the Kepco reactors would be sufficient to guard against a similar disaster. "To the contrary, it forces us to admit that this is a fragile notion without a firm basis, predicated on an optimistic outlook," the court ruled, according to Reuters.

The court dismissed the utility’s argument that power bills will be higher without nuclear energy, arguing that, as the Japan Times put it, "the real loss of national wealth is when people become unable to live stable lives on their land." Nearly 100,000 people remain displaced from the area around Fukushima because of radioactive soil.

In Japan these days, in other words, Godzilla is not the only big scary thing unleashed by nuclear power.

The district’s court ruling by itself doesn’t legally kneecap the nuclear restart; earlier this month, an anti-nuclear advocacy group lost a similar legal effort to halt the restart of Kepco’s Ohi reactors, and higher courts have tended to side with power companies thus far. Still, it certainly makes it a much tougher political push than before. Public opinion has been consistently antinuclear since Fukushima. The latest poll this spring showed 59% opposed to any nuclear restart, with only 28% in favor.

"This is definitely bad news for the Abe cabinet, which has been trying to regain confidence" in the nuclear restart, said Jane Nakano, an expert on Asian energy at the Center for Strategic and International Studies.

Indeed, the Abe government is committed to putting nuclear power back in the energy mix, after three years with virtually no contribution from atomic power, and after the previous government had advocated phasing out nuclear power altogether.

This spring, the government unveiled its latest energy plan, which called nuclear energy an important source of baseload power, even if the government acknowledged that it will be difficult after Fukushima to again rely on nuclear energy for one-third of Japan’s electricity generation.

The Japanese press seized on the court ruling to criticize the government’s love affair with nuclear power. "The ruling was intended as a strong warning against a headlong rush to bring reactors back online based only on limited scientific knowledge," chided the Asahi Shimbun on Thursday. "The Abe administration and the power companies need to stop and reflect" on the ruling, the Japan Times said.

Industry Minister Toshemitsu Motegi said that the court ruling would not affect the safety review currently being carried out by Japan’s Nuclear Regulation Authority, which is charged with making sure that the country’s 48 reactors comply with a new, more stringent set of post-Fukushima safety regulations. The NRA is currently inspecting 18 reactors at 11 different plants to see if they can be restarted. The utility immediately appealed the district court ruling, which it called "regrettable."

So what does this mean for Japan’s energy future? In the short term, regardless of what happens with the legal wrangling over the Ohi plants, there’s little prospect of an immediate nuclear ramp up: delays in interpreting the new NRA rules have kept almost all the country’s reactors offline.

That will leave expensive, imported natural gas as the country’s main fallback. And it is fantastically expensive: the latest Japanese trade figures show cargoes of liquefied natural gas cost $18.3 per million British thermal units, a standard measure–or more than four times the cost of natural gas in the U.S.

Importing all that fuel is devastating Japan’s trade balance, which for thirty-odd years before Fukushima had always been in the black. Since then, the deficit has steadily widened. In 2013, Japan’s trade deficit ballooned to about $112 billion. This year, things actually look worse: data through the first four months show a trade deficit of about $56 billion.

One option that Japan has been pursuing since Fukushima is closer energy ties with Russia, which is making its own push to Asia. Even after Russia’s annexation of the Crimean peninsula, Russian officials flew to Tokyo to talk up the prospect of big energy deals between the two countries.

Lingering question marks about the pace and scale of the nuclear restart will only make Japan more eager to line up long-term natural gas contracts with Russia, which is working hard to elbow its way into the global LNG trade. One important side effect for Japan (and South Korea, another big gas importer) from Russia’s energy deal with China this week: it should put downward pressure on Asian LNG prices, which could ease some of Japan’s economic woes. But that won’t likely happen until the beginning of the next decade.

By then, with any luck, Japan’s own investment in "burning ice," or methane hydrates may start to pay dividends. But one thing is now abundantly clear: the road to Japan’s nuclear restart will not be quick or easy.