Kansai Electric unbowed on nuclear power despite cost, legal risk
OSAKA -- Japan's Kansai Electric Power on Wednesday received an extension to the life of a nearly 40-year-old reactor, but the utility still faces costly upgrades and the threat of litigation risk as it tries to revive its nuclear power business.
Kansai Electric currently estimates that necessary safety improvements to the No. 3 unit at Mihama, located about 120km northeast of here in Japan's "nuclear alley," will cost 165 billion yen ($1.5 billion) and take until at least the spring of 2020 to complete.
This is the third reactor approved by the Nuclear Regulation Authority to remain in service beyond a 40-year limit. The Nos. 1 and 2 reactors at the Osaka-based utility's Takahama plant were granted exceptions in June.
Restarting the Mihama unit "is still profitable at this point," Kansai Electric executive Ikuo Morinaka told reporters Wednesday. The company will weigh the upgrade costs and other factors before making the final call on activating the reactor again.
Most Japanese nuclear reactors went into prolong shutdowns after the 2011 Fukushima disaster. Like other regional utilities, Kansai Electric saw earnings evaporate, forcing it to hike rates twice. Cheaper fossil fuels and other factors helped it turn a profit for the first time in five years in the fiscal year ended in March, but the utility continues to bleed customers owing to its high rates.
Following the full deregulation of Japan's retail electricity market in April, Kansai Electric lost about 420,000 residential customers through the end of October to Osaka Gas and other new power providers. A number of corporate, industrial and other high-demand users have also canceled their service contracts. Kansai Electric sold just 61.4 billion kilowatt-hours of electricity in the April-September half, down 5% on the year to a 26-year low.
Kansai Electric considers restarting nuclear reactors a necessary step toward improved earnings and competitiveness. Its latest medium-term strategy, drawn up in April, seeks to bring most of its reactors back online and achieve pretax profit of 300 billion yen or more by 2026.
Safety improvements to the Nos. 1 and 2 reactors at Takahama are under way. The utility also hopes to restart that plant's Nos. 3 and 4 units -- a move currently being fought in court -- so it can charge lower, more competitive rates. And it will put its "best effort" into passing safety screenings for two reactors at the nearby Oi plant, Morinaka also said.
But Kansai Electric may hit bumps in the road. It projects restarting the Mihama unit would improve earnings by 3.5 billion yen, which would allow it to recoup the 165 billion yen spent on safety updates in four years. The actual bill could go higher amid rising construction costs.
Once back online, the Mihama reactor would be able to operate for another 16 years or so at most. The benefits seem small compared with the Oi reactors currently under review by the nuclear authority. There is also the risk that of lawsuits seeking a injunction against the restart, as happened with the two Takahama reactors.
Nuclear power will remain an "enduring" business for Kansai Electric, President Shigeki Iwane declared in the town of Mihama in August. That may be easier said than done.