Contrary to power company figures, cost of nuclear power generation highest: research

Mainichi Japan.  July 23, 2011

Utility companies across the country continue to tout the low cost of nuclear energy on their websites.

Tohoku Electric Power Co. boasts nuclear power’s economic efficiency, while Hokkaido Electric Power Co (HEPCO) the stability of its cost. Each site comes with bar graphs indicating the cost of generating power through various power sources, and the figures are exactly the same regardless of the utility. For every kilowatt-hour of power generated, hydroelectricity is listed as costing 11. 9 yen, petroleum 10.7 yen, liquefied natural gas 6.2 yen, coal 5.7 yen, and nuclear 5.3 yen.

In a section of its website responding to questions sent in by elementary school children, Chubu Electric Power Co. informs us that nuclear power “is the cheapest.” The media, including the Mainichi, have often cited the information provided to us by power companies.

However, Kenichi Oshima, a professor of environmental economics and policy at Ritsumeikan University, has done some calculations and has reached a completely difference conclusion. Oshima says that the cost for a kilowatt-hour of electrical power between fiscal 1970 and fiscal 2007 was 10.68 yen for nuclear, 3.98 yen for hydroelectric, and 9.9 yen for thermal generation, with nuclear-generated power coming out as the most expensive. These calculations were even presented at a meeting of the government’s Atomic Energy Commission last September. So how does one explain these two different conclusions?

First of all, there is a huge gap between estimates given by power companies and figures derived from actual records.

The figure “5.3 yen per kilowatt-hour of power” as the cost of nuclear power generation is an estimate submitted in 2003 by the Federation of Electric Power Companies of Japan (FEPC) to a subcommittee of the Committee for Natural Resources and Energy, an advisory body to the Minister of Economy, Trade and Industry. The estimate presupposed a power plant that began operations in the 2002 fiscal year and would run 40 years with a utilization rate of 80 percent. Construction costs were calculated based on an actual power plant that had recently begun operations, and foreign exchange rates and fuel prices needed to calculate the cost of importing fuel were derived from economic indices at the time. It’s a government-endorsed figure that has continued to give nuclear-power generation the “low cost” seal of approval.

Oshima’s calculations, meanwhile, have been based on actual performance figures found in utilities’ corporate financial reports. These reports list various expenditures including labor and fuel costs, as well as depreciation expenses, by power source, which are plugged into a mathematical formula established by the Ministry of Economy, Trade and Industry (METI) and used by power companies to calculate electricity production costs. Dividing source-specific “expenditures” by “actual generated power,” we come up with 8.64 yen, 9.8 yen and 3.88 yen per kilowatt-hour for nuclear, thermal, and hydroelectric power, respectively. Already at this point, the figures differ from the estimates.

Furthermore, in the calculations, Oshima included funds from the national government — in the form of subsidies to local municipalities and other financial assistance — to expenses.

“The public foots the cost of fuel through power bills, but if you trace the financial assistance from the national government back to their source, they’re taxes,” Oshima says. “My calculations looked at how much of the burden of power generation is resting on the shoulders of the public.”

A major pillar of the government’s financial assistance comes in the form of subsidies as stipulated in Japan’s three power source-related laws. According to Oshima’s research, 70 percent of past subsidies given out based on the laws were funneled toward nuclear power projects.

Oshima says that such subsidies, in essence, are all “nuclear power subsidies.” This is how he reached the conclusion that every kilowatt-hour of power generated by nuclear power costs 10.68 yen.

“The national government’s method of calculating data is valid, but because it is based on the premise that nuclear power plants run at 80 percent capacity, which is higher than the actual rate (70 percent), the final cost comes out as being lower,” says Oshima. “The reason the cost of hydroelectricity is so high (in the national government’s calculations) may be because the calculations presuppose that hydroelectric plants will operate for 40 years. In fact, many hydroelectric facilities have been in use 60 years or longer, and because their depreciation has ended, costs are kept down. We cannot reach the conclusion that nuclear power generation is inexpensive, at least according to my calculations.”

There’s also a problem that’s specific to nuclear energy. As Oshima points out, massive amounts of money are needed to dispose of spent nuclear fuel, of which there are two options. There is what’s called direct disposal, which entails burying the used fuel underground. The other option is to reprocess and reuse the spent fuel in a process known as a nuclear fuel-cycle. Japan’s current nuclear policy aspires to the latter by using a fast-breeder reactor to burn spent plutonium and uranium, but such a reactor has not yet reached commercial viability. “Pluthermal” power generation, or the burning of MOX fuel made from a combination of plutonium and uranium in existing reactors is being conducted for the time being.

In 2003, the FEPC submitted an estimate for the total cost of treating nuclear waste to the aforementioned subcommittee of the Committee for Natural Resources and Energy. The amount: 18.8 trillion yen. Of that total, 11 trillion yen was allotted for the actual reprocessing, 2.5 trillion yen to the disposal of highly radioactive waste produced during reprocessing, and 1.1 trillion yen to MOX fuel processing. The cost of reprocessing is already included in utility bills, but Oshima does not think this will suffice.

“Some expenses, such as that of reprocessing MOX fuel, have been left out,” Oshima points out. “Moreover, the costs for the reprocessing plant that was built in the Aomori Prefecture village of Rokkasho are calculated on the assumption that it will run at 100-percent capacity, but looking at cases abroad, such a thing is impossible. Since just half of spent fuel will be reprocessed there, the total cost will actually be twice as much as the 11 trillion yen that has been estimated.

“Will the public be open to such a high-cost project? If we were to funnel funds earmarked for reprocessing and the nuclear budget, it would be very feasible to get power generation with renewable sources of energy off the ground.”

Meanwhile, Takeo Kikkawa, a professor of business history at Hitotsubashi University, accepts the legitimacy of Oshima’s preliminary calculations, but also points out the importance of assessing whether power is expensive or cheap from the standpoint of corporations and other heavy utility consumers.

“In fact, in Europe, commercial electricity is cheapest in France, a nuclear-power proponent, and the most expensive in Italy, which abandoned nuclear power. METI has estimated that if all the nuclear plants in Japan are stopped, fuel costs will rise by 3 trillion yen in the next fiscal year,” says Kikkawa. “The cost of maintaining the nuclear power plants will remain the same, and there will be the additional fuel costs, which will amount to higher electricity bills. If that were to happen, we’d be hearing complaints that the manufacturing industry could no longer exist in Japan.”

Power companies increased the number of nuclear power plants to make a stable supply of electricity possible. It has done so while harboring many contradictions, however, according to Kikkawa.

“In Japan, private corporations have operated nuclear power plants but they could not have done so without the involvement of the national government. Finding new sites on which to construct plants would have been difficult without the support of government subsidies, and financial assistance from the government is essential in nuclear waste disposal. When you think about the fact that the country’s largest utility, Tokyo Electric Power Co., is at risk of going bankrupt due to its responsibility for the (ongoing nuclear) crisis, nuclear power is not something that can be handled by private corporations.”

The longer the disaster plays out, the greater the cost of countermeasures and compensation payments will become, leading eventually to an increase in the burdens imposed on the public, whether it be in the form of higher electrical bills or something else.

Kikkawa says that there’s already been a transformation in public opinion. “The public by now is leaning toward eliminating our dependence on nuclear power. The point of contention is shifting to the ‘how’ of abandoning nuclear power.”



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