TOKYO -- In the three years since the Fukushima nuclear disaster, Japan's power industry has undergone a seismic shift. With the country's nuclear facilities sitting idle, electricity rates have jumped. But power shortages have encouraged conservation and turned renewable energy into a vibrant growth sector.
About 35 of Japan's 54 nuclear reactors were in operation on March 11, 2011. Following the Great East Japan Earthquake, the Fukushima, Onagawa and Tokai Daini power plants were taken offline. Others eventually suspend operations for safety inspections, with all reactors remaining idle as of this month.
Electric utilities have boosted imports of liquefied natural gas and other types of fuel to operate fossile-fuel power stations, with LNG imports climbing to a record high of more than 6 trillion yen ($57.56 billion) in 2012. To pass on the higher fuel costs to customers, six utilities obtained government approval to raise rates. As a result, electricity prices in areas served by Tokyo Electric Power will be up 29.8% by this April, including changes in fuel costs charged in monthly bills.
"I understand why people are opposed to restarting the nuclear plants. But as a business owner, I want lower electricity costs, so I want them restarted," said Nobuaki Katori, president of Tokyo steelmaker Daisan Seiko. The company, a steel plate producer since 1956, has been hit hard by surging energy costs, which now account for the equivalent of 18% of sales, up from 10% before the earthquake. Consequently, Daisan Seiko shut down its works at the end of February.
"Japan had higher energy costs than overseas to begin with," Katori notes. "At this level, we can't stay in business."
Japan's industrial energy bills were 130% above those in the U.S. in 2010, but they are now triple what American factories pay, according to the International Energy Agency.
Japanese consumers have taken the power shortage in stride by using less energy. Peak demand in summer, when air conditioners are humming, totaled roughly 160 million kilowatts in fiscal 2013, down about 10% from fiscal 2010. Customers in Tepco-served areas -- many of whom experienced energy rationing following the March 2011 disaster -- were more willing to save electricity, with peak demand falling 15%.
To curb demand further, utilities are passing out smart meters to customers, which record energy usage in 30-minute intervals and make it easier to gauge consumption.
The industry has undergone a dramatic transformation. Prime Minister Shinzo Abe's cabinet in February approved legislation to fully deregulate electricity retailing in 2016. New entrants to the industry have soared from 46 at the end of fiscal 2010 to 153 as of this month. And the market for photovoltaic power generation more than doubled between fiscal 2010 and fiscal 2012. Mobile phone carrier SoftBank, pub operator Watami and a variety of newcomers are entering the field, heating up competition with established players.
Major utilities had enjoyed regional monopolies and were under no pressure to cut costs. The stepped-up competition will likely force them to think twice before raising rates in the medium term. But unless they can reduce fuel costs, which account for 40% of their overall power generation expenses, rates are certain to remain high. The keys to reducing the fuel-cost burden may lie in restarting nuclear power stations and importing lower-priced U.S. shale gas, which is expected to begin in 2017.