With the decision by Hitachi Ltd. to “freeze” its plan to build two nuclear power reactors in the United Kingdom, all of the overseas nuclear power plant projects pursued by Japanese firms — with the backing of the government seeking to promote export of nuclear power technology as a key pillar of its efforts to boost infrastructure sales in overseas markets — have now effectively been derailed. Hitachi cited its judgments on the “economic rationality” of the U.K. project as the reason for halting the plan — an allusion to the declining profitability of the nuclear power business due chiefly to the surging cost of safety investments in the wake of the 2011 meltdowns at Tokyo Electric Power Company Holding’s Fukushima No. 1 nuclear power plant.
Prime Minister Shinzo Abe has long taken the initiative to promote the overseas sale of Japanese nuclear power plants through top-level diplomacy. However, the nuclear power plant business cannot be a part of the nation’s growth strategy if its business feasibility is in doubt. The government and related industries need to face up to the situation surrounding the nuclear power business — which continues to face difficulties domestically as well — and reassess the way forward.
The Fukushima nuclear disaster, triggered by the March 2011 Great East Japan Earthquake and tsunami, has radically changed the global nuclear power market landscape. The cost of nuclear power, which had been promoted as a relatively inexpensive and “clean” source of energy that does not emit carbon dioxide, spiked as additional safety investments inflated plant expenses.
The cost of Hitachi’s project to build the two reactors in Anglesey, Wales, which began in 2012, has ballooned from the initial estimate of ¥2 trillion to ¥3 trillion. Another project pursued by Mitsubishi Heavy Industries Ltd. to build four reactors in Turkey has also been hampered by the swelling cost — which reportedly shot up from an initially estimated ¥2.1 trillion to ¥5 trillion. Toshiba Corp. has pulled out from the overseas nuclear power business after the huge losses incurred by its subsidiary Westinghouse Electric Co. in its nuclear power plant projects in the United States.
Even with a spike in plant construction costs, the nuclear power business would make economic sense if the expected earnings surpass the investments. But Hitachi reportedly decided to halt the U.K. project after it became clear that even with public support from the British government it could not possibly realize profits. The economic competitiveness of nuclear power has also been blunted by the sharp expansion of renewable energy such as solar and wind power after the Fukushima nuclear accident and its plummeting costs — although Japan lags far behind other major economies in this respect.
Behind the government’s drive to promote the sale of nuclear power plants overseas has been the domestic market’s bleak business prospects. While the government and the power industry have pushed for restarting the nation’s nuclear power plants idled in the wake of the Fukushima disaster, once they have cleared the tightened plant safety standards, only nine reactors at five plants have been put back online. The additional costs of safety investments required under the new Nuclear Regulation Authority standards to make the plants more resilient to natural disasters such as earthquakes and tsunami — estimated to range from ¥100 billion to ¥200 billion for each reactor — have prompted power companies to decide to decommission 23 aging reactors so far (including the six at Tepco’s Fukushima No. 1 plant).
As popular opposition in Japan remains strong against reactivating the idled plants, there is no prospect that the construction of new plants will be approved in the foreseeable future. The drive to promote the export of nuclear power plants may have been intended to make up for the loss of demand in the domestic market. But earlier plans for Japanese makers to build plants in Lithuania and Vietnam were canceled, while a civil nuclear cooperation pact signed with India in 2016 — which was aimed at paving the way for Japanese nuclear plant exports to the country — has not resulted in any deal. Along with Hitachi’s decision to halt the U.K. project, Mitsubishi Heavy Industries is reportedly set to abandon its plan in Turkey.
Even without construction of new plants, there will be demand for maintaining Japan’s existing nuclear power plants, and for decommissioning its aging plants. What to do with the spent nuclear fuel and the high-level radioactive wastes from the plants will also be among the challenges that confront Japan’s nuclear power business. There will be plenty of work for the industry, and it will be crucial to develop and maintain the technology and manpower to deal with the tasks.