IN DEPTH: The fallout from Fukushima

After the March 2011 earthquake and tsunami that killed almost 20,000 and caused a meltdown at the Fukushima Daiichi nuclear plant, it became clear that much of the landscape along Japan’s northeast coast had been changed forever.

The landscape had changed for renewables too, as the ensuing public outcry and safety fears forced the government to begin shutting down the country’s 50 undamaged reactors.

Almost immediately, the energy-hungry country was struggling to meet its electricity demand and was soon importing a record amount of expensive natural gas. With little domestic fossil-fuel reserves of its own, aside from dirty coal, it was clear that an overhaul of the country’s energy policy was needed — and it was needed fast.

Tokyo realised that the answer would be an increase in renewable energy — which would not only be cheaper than imported gas, but also improve national energy security.

But the path to a greener energy mix is unlikely to be smooth. Lawmakers finally agreed last autumn to phase out nuclear power by the end of the 2030s. But the new centre-right Liberal Democrat Party (LDP) government — voted into power in December — may change tack.

The new trade minister, Toshimitsu Motegi, told a recent press conference: “We can’t say for sure that Japan will be free of nuclear power by the 2030s.”

The country’s powerful utilities — entrenched supporters of the LDP — are pushing to restart more nuclear reactors (two were brought back on line last year), playing on concerns about Japan’s struggling economy and claiming that a substantial ramp-up in renewable energy would be too expensive.

But for others, the need for alternatives is clear.

“The nation hasn’t come to a consensus on nuclear power. But I feel responsible for what happened,” says Eiju Hangai, a former director of new business at Tokyo Electric Power Company (Tepco), which owns the destroyed Fukushima plant.

Hangai was not involved in the group’s nuclear business but he grew up in Minamisōma, a coastal city devastated by the tsunami, 20km from the Fukushima reactors.

Residents there had to leave their homes and were only allowed to return last April.

Fifteen minutes south of the city, at the edge of the exclusion zone around the still smouldering plant, hundreds of houses lie abandoned, many with walls ripped into pieces from the ground up, revealing the destructive path of the tsunami. Rusting trucks litter the fields. Outside a former amusement arcade, a cluster of fridges stand like sentries in the eerily silent car park.

No-one has returned to clean up. This close to the exclusion zone — an area traced 10-20km around the plant, depending on the location — radiation levels are still deemed too high for habitation.

But in Minamisōma itself, much of the local population has returned. Along the beach, an area has been cleared for sorting the debris washed up by the tsunami.

Huge mounds of scrap — organised into tidy piles of wood, metal and crushed vehicles — are the only evidence that before the tsunami there had been more than 50 homes on this site. It is here that Hangai is overseeing a small solar project, backed by ¥100m ($1.1m) from panel supplier Toshiba and ¥90m from the government. Toshiba is also planning its own 100MW array in the area.

“This should be a symbol of recovery,” he says. “I want the children of Minamisōma to learn about a new kind of energy.”

That seems likely if the local government gets its way. Fukushima prefecture unveiled a plan last March to get 100% of its energy from renewable sources by 2040.

Massive projects will be needed to hit this target, such as the 1GW floating wind farm being planned 20km off the coast from the Fukushima reactors.

And all across the country, companies are announcing new investments in clean-energy projects.

FIT boost

On 1 July last year, Tokyo unveiled one of the world’s most generous feed-in tariffs (FITs) —¥42 per kWh for solar power — and investment in the sector surged by 75% from 2011 to 2012, according to data compiled by Bloomberg New Energy Finance (BNEF). Thanks to the FIT, $16.3bn was committed to the sector during 2012, mostly to large solar projects, which can earn annual returns of around 9%, says Yugo Nakamura, a BNEF analyst in Tokyo.

This new capacity is not just being built by energy companies, all kinds of businesses are getting involved — from Japan’s large trading houses to property groups, oil refiners and convenience-store chain Lawson.

One of the most enthusiastic — telecoms group Softbank — has announced plans to build more than 260MW of clean-energy projects, including the country’s largest solar farm, a 111MW project on the northern island of Hokkaido.

“Renewable energy must be increased in Japan at full speed,” says Masayoshi Son, the company’s billionaire chairman.

But achieving a significantly larger share of renewables for the long term will require bigger projects, and specifically, much more wind capacity, according to government estimates.

“Solar plants can be built rapidly. It’s a good short-term solution, but they’re not going to replace a massive amount of nuclear capacity with solar,” says Dean Enjo, an analyst at CLSA Japan Equities.

For a long-term shift, Japan’s notoriously unstable governments need to overhaul the country’s monopolistic electricity sector and make huge investments in both the grid and costly innovative offshore wind technology.

Up to ¥5.2trn must be spent on power lines alone to lift the proportion of renewables in the energy mix to 35% by 2030, according to a government estimate last year.

Regional monopolies

Currently, ten regional vertically integrated utilities monopolise the power market in each of their zones, leaving them unable — or unwilling — to transmit energy from remote, resource-rich areas to population centres. They also block projects that they deem a threat to grid stability.

“The lack of an open, transparent electricity market is a major barrier to renewable energy,” says Tomas Kaberger, the Swedish head of the Japan Renewable Energy Foundation (JREF), which was recently set up by Son with ¥1bn of his own money.

Last year, a government committee started work on a proposal to restructure the sector, to open up the power market and unbundle transmission. But it is unclear if the new LDP-led government — which has strong backing from the utilities and the big business lobby, known as keidanren — would support it, says Shuta Mano, a senior policy researcher at JREF.

Still, Kaberger maintains that there are clear incentives for a market overhaul. “Japan has had the highest electricity prices in Asia for decades. There’s significant potential for prices to go down, and environmental performance will improve significantly with more efficient energy production.”

Another incentive for sustained support for renewable energy is the creation of stronger, domestic technology companies.

“One of renewable energy’s best selling points is that it is really domestic. Despite the fact that nuclear is often classified as domestic, uranium must be imported,” says Kaberger.

Japan’s strong yen has pummelled exports by domestic solar manufacturers such as Sharp, Kyocera and Panasonic. Now, a growing local market has given them a good opportunity to recover some of their former lustre, says Izumi Kaizuka, research manager at the RTS consultancy.

But the strong yen — and the generous FIT — are helping outsiders too. While some project owners and banks prefer Japanese PV modules because of their track record, Chinese suppliers are eagerly pushing into the market, offering “very strategic prices” to grow their share, says Kaizuka.

Europe’s solar companies are arriving too. Germany’s SMA is supplying inverters to a 70MW plant in Kagoshima in the south, while Spain’s Gestamp Solar plans to invest $1bn in building plants in Japan over the next three years.

Kaberger says the costs of solar projects have already declined quite significantly, as engineering, procurement and construction companies make efficiency gains from each installation.

“The Japanese renewable-energy industry needs to be at least as efficient as the European and North American industries,” he says. “Japan has proved it can beat others in other sectors so why shouldn’t it be the same in renewables?”

Offshore wind

Japan’s home-grown wind companies are set to bloom in this post-Fukushima era, especially in the emerging offshore market.

The country had just 2.5GW of wind capacity at the end of 2011, and the new FIT has done little to boost the onshore sector, which is hampered by a shortage of suitable land, a lack of transmission capacity to remote areas and a burdensome environmental-impact-assessment law.

Offshore is where the potential lies. Conscious of a shrinking order book among its shipbuilders, Tokyo has given strong backing to major new floating wind projects in recent months, including the 1GW wind farm off the coast of Fukushima.

Here, a consortium of 11 companies is aiming to install the first of three floating turbines next year — supported by ¥12.5bn from the regeneration funds for the tsunami-hit region. If the pilot is successful, the firms could move to a large-scale phase by 2017.

This project alone could turn Onahama port into “the Bremerhaven of Japan”, bringing jobs and industry to the area, says Tomofumi Fukuda, deputy general manager at trading house Marubeni, which is co-ordinating construction.

But the strong local fishing co-operatives are less convinced of the benefits. The designated site is one of Japan’s prime fishing grounds thanks to the confluence of warm and cold currents. It is especially prized for kare, a kind of flounder caught by trawling the seabed.

Fishing has come to a halt since the Fukushima accident, with no demand for a catch from the surrounding waters. But the 1,300 fishermen from the area’s strong co-operatives are worried that a wind farm will prevent any return to their traditional livelihood.

“We’re trying to tell them that more fish will come to the turbine floater area,” says Fukuda, who has been meeting the co-operatives every week for months. “They are starting to show a possible acceptance of the three-year demonstration phase. Then they can fish around there and see what the impact is. We’re getting more confident that we can get consent by February or March.”

Even if the project gets the go-ahead, there are fears that Japan will be unable to keep costs down.

“Many things in Japan are unnecessarily expensive,” says Per Christer Lund, director of the Norwegian Environmental Technology Center in Tokyo. “They are very strict on regulations, they use a lot of people, and there is a lack of competition for equipment and services. Utilities have a very cosy relationship with suppliers and that drives up prices.”

The highest costs come from the anchors and chains required on the floating structures, says Fukuda. “We think, to make it feasible, we need to minimise the floaters and make the turbines even bigger. I’m looking at 10MW machines so we can reduce the per-kW costs. Then if we installed 20 floaters, we could build a project of 200MW. That’s my [current] target.”

The stakes are high. Japan is vying with neighbour South Korea to make a breakthrough in commercialising floating technology.

For Marubeni too, it’s a new chance to grow in its home market. The company exited the domestic wind sector in 2008, after losing money on small projects.

“Before the earthquake, the domestic power business was very quiet and dominated by ten monopolies. There were no development opportunities for us. Now it’s completely different,” says Fukuda.

“It’s very important for Fukushima,” says Takeshi Ishihara, a professor at the University of Tokyo, who is leading research efforts on the project.

The facility would demand a number of world firsts, he adds.

These include the world’s first floating substation and the world’s largest dynamic power cable (ie, one that moves in the water).

“Dynamic cables are sometimes used in shipbuilding, but the standard use is 6.6kV,” says Ishihara. “For offshore wind, we need a capacity of ten times this amount.”

Logistics will be a challenge too. Japan has no deep ports, so shipbuilder IHI Marine has shortened the depth of the substation’s spar buoy — the underwater base that keeps it afloat — to about 32 metres, less than half that of the Hywind floating turbine off the coast of Norway.

The substation will need to be built in the firm’s Yokohama factory and then towed out from the dock in Tokyo Bay, through one of the world’s busiest shipping lanes, and can only be installed between June and August, when there are fewer typhoons.

“The swell is very, very big in the Pacific Ocean, even without any wind,” says Ishihara.

If the project makes it past the pilot phase, a different kind of floating structure is likely to be chosen that can be assembled in Onahama port.

“We would need to build 30 floaters for the large-scale wind farm,” Ishihara explains. “That’s equivalent to building 30 high-rise buildings in one year.