Power Line
The Federation of Electric Power Companies of Japan Vol.23
February 2004

Harmonizing Nuclear Energy with Deregulation

Japan's first Basic Energy Plan was decided by the country's Parliamentary Cabinet on October 7, 2003, and was subsequently reported to the National Diet. The Plan, which was formulated in accordance with the Basic Law on Energy Policy Making enacted in June 2002, describes the country's overall energy policy for three basic objectives:
1) securing stable supply; 2) ensuring environmental compatibility; and
3) increasing the role of market principles. The application of market principles must be consistent with the first two principles.

Nuclear energy is defined as a semi-domestic energy source in the Basic Energy Plan because nuclear fuel is easy to store; the reprocessing of spent fuel promotes the effective use of resources; and nuclear power emits virtually no carbon dioxide. The Plan clearly states that "Nuclear power generation, including the nuclear fuel cycle, will be promoted as a key power source, based on the premise that safety will be guaranteed."

The Closed Nuclear Fuel Cycle

As confirmed in the Basic Energy Plan and stated in the Atomic Energy Commission's Long-Term Program for Research, Development and Utilization of Nuclear Energy, the promotion of nuclear power is a vital component of Japan's energy policy in terms of security of stable supply and environmental compatibility. Once a closed nuclear fuel cycle has been established within our country, energy resources will be efficiently utilized and long-term energy security will be enhanced.

Therefore, the establishment of a domestic nuclear fuel cycle has been promoted as Japan's fundamental stance since the beginning of our country's nuclear development. Electric power companies in Japan have promoted the use of nuclear energy, including the nuclear fuel cycle, in accordance with the important energy policies of Japan. Private companies have been proceeding with their business operations in specific areas, such as power generation, as they are able to carry out these operations efficiently. As for the nuclear fuel cycle, Japan Nuclear Fuel Limited (JNFL), financed by electric power companies and others, is preparing for the start-up of the commercial operation of a reprocessing plant in July 2006 in Rokkasho Village, Aomori Prefecture. This will be JNFL's main operation.

The Electricity Utility Industry Law was revised in June 2003, and the energy retail market will be further liberalized after April 2005. The private sector will continue to proceed with the Rokkasho reprocessing project, while at the same time, preparations to make nuclear energy viable in the deregulated market continue.

However, in order to promote a closed nuclear fuel cycle, the so-called back-end work, e.g. reprocessing operations and the treatment and disposal of radioactive waste, involves much more time compared with other industries and power sources. In addition, these operations face many uncertainties, as this is the first commercial reprocessing project ever undertaken in Japan. Business risks involving new projects would have been averted under the traditional regulated system, but such risks might not be fully avoided in the new liberalized power market. For this reason, concrete measures and systems, including economic steps, are indispensable, based on the characteristics of back-end operations.

In order to analyze and evaluate the back-end project cost structures and the profitability of nuclear business to discuss such measures and systems, the Subcommittee to Study Costs and Other Issues has held several meetings. The Subcommittee was set up within the Electricity Industry Committee, which is the advisory body to the Minister of Economy, Trade and Industry. The Federation of Electric Power Companies (FEPC) reported to the committee the latest overall back-end operation estimate costs, which total 18.80 trillion yen. The closed nuclear fuel cycle costs account for roughly 20 percent to 30 percent of the entire nuclear power generation costs; and the costs of the back-end work, a part of a closed nuclear fuel cycle, cover approximately 10 percent to 20 percent. Trial calculations have been made on nuclear and other power generation costs, based on the back-end cost estimate. It was concluded that nuclear power generation cost per kilowatt hour is as economical as that of other power sources.

Power Generation Cost/kWh
(yen/kWh; Utilization rate: 80%)
Example 40-year operation period; discount rate: 3%
Oil-fired LNG-fired Coal-fired Nuclear
10.7 6.2 5.7 5.3

The Subcommittee determined that the FEPC made reasonable trial calculations at the present time, and calculated that nuclear power is as profitable as other power sources. On the other hand, this estimate is still a forecast for every back-end operation in the future and, therefore, the committee also pointed out that there are many technical and regulatory uncertainties in the back-end business.

On the basis of the final report of the Subcommittee, measures and systems will be discussed in the Electricity Industry Committee so that the private sector will be able to carry out back-end work smoothly. The conclusion will be made and such systems and measures are to be implemented by the end of 2004.