Japan: Meti Admits Nuclear Costs More Than Renewables

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Japan's economics ministry has formally acknowledged for the first time that renewable power sources such as solar and wind are cheaper than nuclear, but whether the admission will lead to major changes in the conservative Liberal Democratic Party's nuclear-friendly energy policy remains unclear. The revelation resulted from a months-long project within the Ministry of Economy, Trade and Industry (Meti) during deliberations on the sixth basic energy plan, the penultimate draft of which was released Jul. 21 (NIW Jul.23'21). As part of that effort, a working group within Meti's Agency for Natural Resources and Energy (Anre) issued a preliminary report Aug. 3 that confirmed nuclear had lost its position as the lowest cost power source in both 2020 and, as projected, in 2030. That previous position largely justified Meti's ambitious target for nuclear in the fourth and fifth versions of the basic energy plan, which sought to revive reactor output from nearly zero in fiscal 2015 to 20-22% of total power generation by fiscal 2030. Anre reckoned in 2015 that electricity generated by a model greenfield nuclear power plant in 2030 would cost only 10.1 yen (9¢) per kilowatt hour, compared to 24.2 yen/kWh for commercial solar and 29.4 yen/kWh for household solar, 12.3 yen/kWh for coal, 13.7 yen/kWh for LNG, 21.5 yen/kWh for onshore wind and 11.0 yen/kWh for hydropower. However, Anre's Power Generation Cost Verification Working Group, chaired by Research Institute of Innovative Technology for the Earth president Kenji Yamaji, said in its latest report that the lowest cost power source in 2030 will be commercial solar with a range of 8.2 yen-11.8 yen/kWh (assuming 25 years of operation with 17.2% capacity utilization) followed by household solar at 8.7 yen-14.9 yen/kWh (25 years at 13.8% capacity). Next is LNG at 10.7 yen-14.3 yen/kWh (40 years at 70% capacity) and onshore wind at 9.9 yen-17.2 yen/kWh (25 years at 25.4% capacity) and medium-scale hydropower at 10.9 yen/kWh (40 years at 60% capacity). Nuclear power landed roughly in the middle at 11.7 yen/kWh or more (40 years at 70% capacity), with coal estimated at 13.6-22.4/kWh (40 years at 70%) and offshore wind at 26.1 kWh (25 years at 33.2%). The report noted that the summary power generation cost estimates had been "mechanically calculated" based on construction of a new greenfield power plant for use as reference data for discussion of the sixth basic energy plan, and observed that actual construction costs would reflect local conditions. Even in 2020, nuclear at 11.5 yen/kWh came in higher than LNG fueled power (10.7 yen/kWh) and hydropower (10.9 yen/kWh) and only slightly cheaper than commercial solar (12.9 yen/kWh). In the 2015 assessment, the prime components of the 10.1 yen/kWh nuclear power cost for 2030 included 3.1 yen for capital costs, 0.6 yen for investment in additional safety related measures, 3.3 yen in operating costs, 1.5 yen for fuel, 0.3 yen for accident risk measures, and 1.3 yen for policy-related expenditures. In the new estimate, the Meti-Anre working group broke down nuclear's 11.7/kWh cost into 4.2 yen for capital investments, 3.7 yen for operational maintenance, 0.6 yen for fuel, 1.7 yen for society-related expenditures, and 1.5 yen for policy expenditures. Widening Capital Cost Gap On the flip side, the group recognized the plunging capital costs for commercial and household solar, respectively estimated at 17.9 yen/kWh and 23.9 yen/kWh in 2015, and 8.8 yen/kWh and 14.5 yen/kWh in 2020. The new figures for 2020 are roughly on par with Meti's 2015 forecast for 2030, of 10.3 yen/kWh and 12.9 yen/kWh, respectively. The report suggested that the gap between nuclear and solar capital costs will only widen given the cost of additional reactor safety measures required for compliance with post-Fukushima regulatory standards. "The most remarkable feature of this estimate is that the cost of generating electricity at nuclear power plants was not shown to be the cheapest power source for the first time ever in estimates made by the Japanese government," observed Citizen Nuclear Information Center (CNIC) Secretary-General Hajime Matsukubo. "The draft basic energy plan still mentions the 20%-22% target of total power generation from nuclear by fiscal 2030, but Meti knows that attaining this objective will be very difficult." He predicted the "result will inevitably have a major impact on future energy policy.” Renewable Energy Institute director Mika Ohbayashi also told Energy Intelligence Aug. 11 that ''the acknowledgment that nuclear is more expensive than variable renewable energies (VREs) is a big change for Meti.” Ohbayashi, who participated in the policy review process, said that even though the 36%-38% target for renewables by fiscal 2030 “is relatively small compared to other countries,” Meti “had to define VREs as the cheapest power source.” She also observed that instead of internalizing the benefits of renewable energy, the working group “tried to place additional fossil fuel costs on renewables in the form of 'adjustment costs' for VREs.” Nevertheless, Meti Minister Hiroshi Kajiyama reaffirmed in a Jul. 13 news conference that nuclear power remained "indispensable under the condition of safety" even though its unit cost had risen and it would no longer be the lowest cost power source in 2030. And pro-nuclear think tanks claimed that renewables' cost edge would be overwhelmed by “system integration” costs that would rise with the large-scale installation of renewable capacity. Taiwan Environment & Planning chairman Chao Chia-wei told Energy Intelligence that this assumption is "outdated” and noted that forecasts by the International Energy Agency on technology costs in its stated policies scenario and sustainable development scenario, all show the value-adjusted levelized cost of energy for nuclear exceeding solar, onshore wind and even offshore wind in the US, European Union, China and India. And those estimates include system integration costs. Dennis Engbarth, Taipei City Meti/Anre Generation Cost

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