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Two weeks ago, Japan’s government issued its first ever electricity supply warning for Tokyo and its surrounding prefectures, calling on citizens to conserve power to avoid blackouts. Bloomberg energy reporter Shoko Oda joins Deep Dive to explain why that crisis was a decade in the making.

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Transcript

Note: Deep Dive is made to be listened to, and we recommend this transcript be used as an accompaniment to the episode. This transcript has been generated using a combination of speech recognition software and human transcription, and may contain errors. Please check its accuracy against the episode.

Oscar Boyd  01:09

Hello, and welcome to Deep Dive. From The Japan Times, I’m Oscar Boyd. Two weeks ago, the government issued its first ever electricity supply warning for Tokyo and its eight surrounding prefectures, calling on citizens to conserve power to avoid rolling blackouts. This week on Deep Dive, Bloomberg energy reporter Shoko Oda explains how that crisis was a decade in the making.

Oscar Boyd  01:40

Shoko Oda, welcome to Deep Dive, thank you so much for joining me today.

Shoko Oda  01:43

Thanks for having me on the show.

Oscar Boyd  01:45

Could you take me back a couple of weeks to Tuesday, March 22, the day Tokyo experienced this big power supply crunch? What happened that day?

Shoko Oda  01:55

So it kind of snowballed even from the day before the actual power crunch. And it started on that Monday, when Japan was on a national holiday. Late that evening, the government issued its first ever power supply shortage alert. And this was an alert that was set up after the Fukushima nuclear disaster, but had never been used before. The government was worried that the next day on Tuesday, when temperatures were supposed to be colder than normal for Tokyo, they were fearing that the power supply would be lower than the actual demand. And that would cause rolling blackouts. 

Oscar Boyd  02:33

Because people were trying to heat their homes?

Shoko Oda  02:34

Yeah, basically. So increased demand, and that could cause rolling blackouts in Tokyo and that would really disrupt people’s lives and businesses. From Monday evening, they were telling people power supplies were going to be tight, to please conserve energy as much as possible. And then came Tuesday. And, if I remember correctly, Tuesday morning, it was already raining. And it was really cold. So you have the backdrop for this disaster in the making. Basically, TEPCO was predicting power usage to be at 100% during peak demand, which was around 4 to 5 p.m.

Oscar Boyd  03:10

And then if I remember correctly, it started snowing that afternoon, quite heavily. That cold drizzle in the morning turned to pretty large snowflakes, which, you know, you don’t get snow that often in Tokyo, let alone at the end of March.

Shoko Oda  03:22

Yeah, I remember looking out the window, I think around lunchtime, and seeing the snowfall and having this sense of dread settle into me, because I was fearing that things were going to get worse. But basically, the trade minister at midday had this rare appearance, kind of an emergency press conference. Really, his plea was telling businesses and people to conserve power. And please turn off lights as much as possible. And throughout the day, even before that, we were bombarded by social media tweets from the government and also the Tokyo Electric Power Company, TEPCO. They were really telling people to conserve power as much as possible.

Oscar Boyd  04:13

And did we actually see people take heed of these warnings? What kind of things were people doing throughout the day to conserve electricity?

Shoko Oda  04:20

Yeah, so households were told to turn off power as much as possible. Maybe like everybody should be in one room and have the heating on in that room but turn it off for the other rooms. Factories and businesses in the area were told to dim their lights. Skytree, the Tokyo Skytree is usually lit up in the evenings with very colorful, bright lights. They were off that day because of the request. I don’t know if you guys at Japan Times dimmed your lights, but I think in the afternoon Bloomberg was also dimming lights. I think everybody was trying to pitch in and do their part.

Oscar Boyd  05:00

Yeah, I was messaging with friends throughout the day who were sat at home wrapped in blankets without the heating on, trying to stay warm as the snow fell outside. How much of an impact did these conservation measures actually have?

Shoko Oda  05:11

Well, I think towards the afternoon, the conservation efforts did kick in. And we were seeing that things were getting a little bit better in terms of supply. And then by the evening, the government announced that Tokyo had avoided the risk of blackouts for that day. I think we can say that conservation efforts did play a role.

Oscar Boyd  05:32

And you said that things got a little bit better in terms of supply throughout the day. So what was being done in terms of bolstering supply?

Shoko Oda  05:39

Sure, so Japan’s power grid coordinator was ordering these power sharing arrangements among TEPCO and other utility companies. So basically, other utility companies were sending power into the Tokyo area to try to offset the demand there. Another thing that TEPCO was doing was they were using this thing called pumped hydroelectric storage. And it’s basically like a hydro-powered battery. You have two reservoirs at the top and the bottom. And when the demand is high, they drop the water from the top reservoir down below, passing a turbine that produces power. And so another interesting thing that was happening that day, TEPCO was tweeting how much water was left at that upper reservoir and what time we might get to zero. And by getting to 0%, we wouldn’t have extra power generating capacity, and hence, we’re in really big trouble, right. And so it was almost like a doomsday clock, like on the hour. Tepco tweeting, “we have 50% right now, 49% now. At 8 p.m., we’re gonna have this many percent.” And I was monitoring that throughout the day, and it really felt like a doomsday clock.

Oscar Boyd  06:55

You mentioned one of the immediate factors that led to this unprecedented electricity supply warning being issued, and that was the unseasonably cold weather that hit that Tuesday. But what other short term pressures led to the crunch?

Shoko Oda  07:08

So a week before that power crunch, we had a magnitude 7.4 earthquake that hit in the evening in Japan’s northeastern Tohoku region. And it was a pretty big jolt; shakes were felt even in Tokyo. And I remember it being a long earthquake, and it was really scary.

Oscar Boyd  07:30

I think it’s the first earthquake I’ve ever experienced in Tokyo where …

Shoko Oda  07:33

Oh yeah?

Oscar Boyd  07:34

I mean, I’ve experienced earthquakes before, but this one I got out of bed, put on a jacket, put on some shoes. Got ready to get out into the street if necessary.

Shoko Oda  07:43

Yeah, so that earthquake took about 14 power plants offline. And that took about six gigawatts of power capacity offline.

Oscar Boyd  07:53

And just to put that into context, one gigawatt of electricity is enough to power around 750,000 homes. And so six gigawatts is equivalent to about 4.5 million homes worth of electricity that was knocked out by the earthquake that took place on March 16.

Shoko Oda  08:09

Yeah. And prior to the power crunch, several of those power plants were still out because they hadn’t fixed them up or they weren’t ready to go back online. As you mentioned, the weather was really cold and cloudy, rainy that day. So what that does is it cuts the output from solar power generation. So on top of that cold weather, we had less than an ample supply of power. And you had a series of unfortunate events that kind of joined together and created this power crunch.

Oscar Boyd  08:49

After the immediate crisis was over, you and your colleagues wrote a really interesting article looking at the challenges that Japan’s power grid has faced over the past decade, and how those relate to this power crunch. So what are some of the longer term factors that led up to this shortage in supply?

Shoko Oda  09:06

Yeah, so there’s a lot of layers to this issue. And obviously, it’s very complicated. And I think there are a lot of nuances to Japan’s energy structures or policies. But for the sake of this podcast, I’m just going to discuss three major reasons. We obviously have to start with what happened after March 11, 2011, in terms of Japan’s stance against nuclear power.

Oscar Boyd  09:30

Okay, so this is the first of those three reasons. Let’s get into that, how did 3/11 change Japan’s energy landscape?

Shoko Oda  09:37

So as everybody probably knows, on March 11, 2011, we had a massive 9.0 magnitude earthquake that hit Japan’s Tohoku region. There were a lot of damages from the quake, but also the tsunami, which overwhelmed TEPCO’s Fukushima Daiichi nuclear power plant. It shut off the cooling system and led to a meltdown at the reactor cores. It was the worst nuclear disaster since Chernobyl, and Japan had to take all of its 54 nuclear reactors offline following the disaster.

Oscar Boyd  10:11

And roughly how much electricity was being supplied from those 54 nuclear plants before the disaster?

Shoko Oda  10:17

So up until Fukushima, nuclear power supplied about 30% of Japan’s power needs. And they even had a target before the disaster to increase that to 50% by 2030. But obviously, after the quake and tsunami, everything changed.

Oscar Boyd  10:32

Right. So just under a third of Japan’s electricity supply was coming from nuclear power. It’s now been 11 years since that disaster struck, how many of Japan’s nuclear plants have come back online since then?

Shoko Oda  10:47

So currently only 10 reactors have restarted under the new protocols that were set after the Fukushima disaster in terms of how to restart these nuclear reactors. Nuclear power is now less than 10% of Japan’s power mix. There’s a really rigorous set of restart procedures that these utility providers have to take in order to restart their reactors. The goal now is to have nuclear be 20 to 22% of the energy mix by 2030. But that would require pretty much all of our 33 commercially available fleet to go back online. And, you know, not only are the restart protocols really rigorous, but you also have to take into account court rulings and these local resident groups that oppose having nuclear reactors in their backyards. They file for these lawsuits, which can really delay the restart schedules. So it’s not easy in today’s age to get these nuclear reactors back online.

Oscar Boyd  11:48

So when we relate the loss of nuclear power generation to what happened on March 22, with the power supply crunch, is it fair to say that taking all those plants offline has contributed to a much less resilient electricity supply in Japan?

Shoko Oda  12:02

Certainly. Experts have said, you know, some of the people that we’ve talked to have said, if nuclear reactors were available, what happened with the power crunch wouldn’t have been such a big deal, because we would have had that backup power.

Oscar Boyd  12:16

Okay. You said there were three main factors that you were going to talk about that contributed to the power crunch. If the first is the loss of that nuclear power fleet post 3/11, what’s the second main factor?

Shoko Oda  12:28

Sure. So we will have to start with Japan’s liberalized power market. Like the U.K., and also other countries, Japan has a liberalized power market. And that culminated in 2016, with a reform to basically take away the monopolistic power that these big power companies like TEPCO and Kansai Electric, and all the regional players had. To open up the market, bring more competition, and lower power bills for consumers. And so that was done, but you know, as a result, we now have about 700 power retailers in the market today. But all of these smaller retailers don’t necessarily have their own power generating capacities. And instead, they purchase power from a spot power market, or they also form agreements with existing power plants to get their supply.

Oscar Boyd  13:16

And so what does that mean in terms of, again, the strength of Japan’s energy sector as a whole?

Shoko Oda  13:22

So with liberalization, all of these big power players like TEPCO, and the regional utilities, lost their customers to the smaller retailers that were undercutting them. So the big companies have to start thinking about how to save money. So cost saving measures, basically. And one of the things that they were looking at was how to have a leaner fleet of thermal power plants that cost a lot of money to keep. There’s also less incentive to replace them once they are retired, because they’ve lost that demand. So that’s one of the more management-business perspectives of why we’ve had less and less thermal power plants over time. But you also have to consider again, going back to the decarbonisation background, Japan now has this target to cut carbon emissions by 46% versus 2013 levels by 2030. And now we want to go carbon neutral by 2050. Why would big power companies like TEPCO want to keep up these thermal power plants when they are at risk of becoming stranded assets in the future? So these power companies are losing the incentive to retain and maintain their thermal power plants.

Oscar Boyd  14:34

So this contributes to a lack of resilience within the power system as a whole? 

Shoko Oda  14:39

Yeah, so you know, this all contributed to reasons why the power crunch happened on that day. Japan only had about 142 gigawatts worth of available power before the quake on March 16. And that was 23% lower than 2016.

Oscar Boyd  14:55

And 2016 was when big market liberalization happened.

Shoko Oda  14:58

Yep, so you can see over time how we’ve lost power capacity and we’ve been running on thin margins for some time. And, you know, this isn’t a trend that’s going away, a lot of these power plants will also go offline in the upcoming years, so we’re going to have less and less available capacity.

Oscar Boyd  15:23

I think that takes us nicely to the third factor that you’re going to talk about, which is the growth in renewables, and particularly of solar, which is gradually replacing those fossil fuel plants that are being phased out. How has the growth of renewables shaped Japan’s power grid and its resilience in times of crisis?

Shoko Oda  15:40

Sure. So Japan introduced a feed-in tariff program in 2012. And that was largely successful in installing a lot of solar panels throughout the country. But you also have to think about solar as being not a stable source of power. You know, it’s swayed by things like weather or cloudiness. And you see something like the power crunch on March 22. On a cloudy, rainy day like that, you really can’t rely on solar panels. So it’s not a good replacement to cover for what we call baseload power, which is that minimum power that you need to provide.

Oscar Boyd  16:19

Because the power it produces is so variable, and we don’t yet have the battery capacity to store excess energy and make it a more consistent source of electricity.

Shoko Oda  16:30

So yeah, I think that’s kind of a technology that needs to be developed in parallel. And, you know, I think companies are looking into that realm.

Oscar Boyd  16:50

I know you’ve simplified it, but even what you’ve laid out just now shows how complex it is for Japan to ensure that it has a stable energy supply as it continues to deal with the long tail of the 3/11 disaster, it juggles market liberalization and also tries to work towards its targets for renewables. On top of that, you then have an earthquake that knocks out existing supply as well as unseasonably cold weather that pushes the system over the edge with increased demand. It doesn’t sound like there are quick fixes to a lot of these issues, though. So would you say Tokyo is out of the woods? Or might we see a repeat of what happened on March 22, in the future?

Shoko Oda  17:29

Yeah, it’s very possible, something similar could happen again. The trade ministry has said that we’ll have pretty tight power supplies during this upcoming winter as well. And in terms of peak summer season, in the upcoming summer months, some of the thermal power plants that went out because of the earthquake are not back online yet. I don’t want to jinx anything, knock on wood that this doesn’t happen, but who knows when we’re gonna get hit by another big earthquake and who knows if that might take more power plants offline? So we’re definitely not out of the woods and I think it’s something that could certainly happen again.

Oscar Boyd  18:10

Do we know when those damaged plants from the March 16 earthquake might come back online?

Shoko Oda  18:14

So some of them have a schedule for coming back online, and I think I saw some of them, they’re not sure specifically when that might come back on, it might be before summer or during the summer months. But you know, in the sweltering heat, you need to turn on your AC and that’s when you have demand spike up for cooling. So hopefully, they get them back on.

Oscar Boyd  18:37

Yeah, fingers crossed. I’m not sure I can survive Japanese summer without some aircon. While all of this is happening, though, I’m aware that in the background, we’ve also got a global energy supply challenge following Russia’s invasion of Ukraine. A lot of sanctions have been placed on Russia’s economy, including on its oil and gas sectors, and that sent prices for those commodities soaring around the world. How are these raised prices impacting Japan’s energy supply at the moment?

Shoko Oda  19:07

So the war has led to a global commodity rally and things like oil and natural gas prices have been at record highs. That’s obviously really bad news for Japan because we import most of our energy supply. Just to give some figures, Japan is the world’s second biggest LNG importer, and 9% of it comes from Russia. And the majority of the other supply comes from places like Australia, Malaysia, Qatar. With oil and gas prices going up,, it’s raised electricity bills in Japan. I don’t know if you’ve seen your power bill lately, but it’s on an upward trend. Maybe not related to power, but also equally important is the fact that gasoline prices have shot up in the country. And not just gasoline but other oil products like kerosene, and that’s really impacting not just households but industries. I’ve spoken with people that run bathhouses, dry cleaners, and they rely a lot on oil products. And they’re feeling the pinch. The government is trying to tamp down the rising gasoline prices and they’ve been handing out subsidies to oil refiners since January, but that has not done too much to suppress the upside. Now they’re talking about a more extreme measure, which is lowering gasoline taxes, because Prime Minister Fumio Kishida has an upcoming election in the summer. So he really wants to tackle this and make sure that the voters know that he’s taking care of it.

Oscar Boyd  20:50

And are these rising energy prices causing Japan to reevaluate its energy supply and where it gets its energy from? 

Shoko Oda  20:56

Well, I think it sparked a debate over nuclear power and whether Japan should return to using more nuclear power. There was a panel within the ruling Liberal Democratic Party, and also the opposition Ishin no Kai party, that put in requests to the government to say that ‘this is an emergency, power bills are going up on the back of expensive fuel, we need to restart nuclear reactors faster.’ And so it really is, I think, creating this environment for that debate. And interestingly enough, I think a Nikkei survey from the end of March showed that a narrow majority of the Japanese now supported restarting reactors. So I think it’ll be interesting to see, depending on how long this expensive fuel price continues, whether that’ll spark even more debate.

Oscar Boyd  21:48

And this is the first time since 2011 that a majority of the public, and I think the stat is that 53% currently, say that the nuclear plants should be restarted. It’s a slim majority, but it is the first time in 11 years that a majority have wanted these plants restarted.

Shoko Oda  22:06

Yeah, and I don’t think it’s just Japan that’s having that nuclear debate. European countries are also, whether they were pro nuclear or anti nuclear, they’re having it. I think everyone’s kind of forced to reckon with the idea that perhaps a degree of nuclear power is needed in times like these.

Oscar Boyd  22:25

I want to ask: Obviously the LDP is pushing for this, or at least parts of the LDP is pushing for a nuclear restart. And we now have this slim majority of the Japanese populace who say, yes, we’re fine with this going ahead, we’re fine with restarting these nuclear plants. But how easy would it actually be at this point to turn the nuclear plants back on?

Shoko Oda  22:47

Yeah, that’s another thing, just because politicians are saying we need to restart, it doesn’t work that way. After the Fukushima disaster, they made a very rigorous restart procedure. And that’s run by an independent regulatory body, the Nuclear Regulation Authority. So just because politicians are asking for an expedited restart doesn’t mean they will. Unless this restart procedure dramatically changes to allow utilities to restart quicker, I don’t think it’s going to really change the speed of things. You also have to keep in mind, again going back to the local opposition, they’re going to be filing for court cases and stuff like that. And those take time as well. So I think the reality of it is, the LDP might be pushing for it and the public sentiments might be changing. But unless those, I guess procedures and local community sentiments change dramatically, you’re not really going to see much difference.

Oscar Boyd  24:02

You’ve touched on the fact that Japan is looking to transition away from fossil fuels, and the country is trying to fulfill its climate change obligations that it pledged at COP26 back in November. In other countries, I think we’ve really seen, in response to the Ukraine-Russia war, a debate about the future of energy in these countries. And it seems to fall, as per usual, on two distinct and opposing sides. One side saying, ‘this is absolutely the time we should be transitioning to cleaner fuels. And we should be looking at this war in conjunction with COP26 and transition targets and really push these technologies and make sure we get on a cleaner pathway.’ And then at same time, you have a separate group of people saying, ‘no, this is the time to bolster the existing assets we have when it comes to fossil fuels like oil and gas and increase drilling and open everything up.’ Is this conversation being had in Japan at the moment, and if so, where is it heading?

Shoko Oda  25:02

Yeah, like you mentioned, it is really a moment for both of the sides to make that case. In terms of renewables, Japan has an ambitious target for installing renewables. They want to have 36 to 38% of the energy mix from renewables by 2030. And the big thing now is offshore wind. Japan is opening up a series of offshore wind sites to auctions in the upcoming years. And so they do have that in mind. But at the same time, I think from the government’s perspective of making sure that we have energy security, they kind of see fossil fuels, like gas, continuing to have a place in the energy mix until we fully decarbonize. They see it as a transition. Perhaps how they view fossil fuels is a little bit different from Europe, where I think the calls are a little bit louder to push for renewables as quickly as possible. Japan has always said this transition has to be taken in a gradual manner. And you’re going to have things like this war, but also you have to consider things that Japan doesn’t have resources. We are geographically different from Europe that’s connected by pipelines and there’s all these differences between Japan and other countries, right. So the government has always said, transitioning into green, doesn’t have to be in a cookie cutter model, like one cookie cutter model per se, and that there should be various paths to achieving that goal. So I think it’s really difficult. On the one hand, you do want to achieve the targets that Japan has set, and they’re pushing for it. But things like offshore wind does not go online in just a few months, it takes a really long time to install. So what are you going to do in the meantime to make sure that Japan has energy security? Well, then you’re going to have to turn to things like fossil fuels like gas to at least cover you until we make that switch to renewables.

Oscar Boyd  27:15

We’ve spent most of this episode discussing the supply side of the energy equation. But one of the things that we saw on March 22 was this call for widespread energy conservation. And I suppose the other way Japan could go about addressing its energy needs in the future is to put more emphasis on reducing demand by setting things like higher efficiency standards, improving insulation in homes and buildings — things like that. Do you think this energy crunch will place a greater focus on efficiency to make sure that the country is actually using less energy to start with?

Shoko Oda  27:50

So the good news is, I think Japan is already on the front runner in terms of energy conservation and efficient technologies. You have household appliances that use power very efficiently. And we’ve always had this very participatory model of getting people to pitch in to help save power during an energy crisis. So the good news is that’s already in place. But I guess on the flip side, in regards to any further plea or asking people to cut back even further, I’ve spoken with experts, and they are not sure how much of an impact that it will have. Whereas compared to places like the U.S., you know, if you ask people to cut back on energy usage a little bit more, it might have a bigger impact.

Oscar Boyd  28:40

Because other nations are using more energy to start with per capita, they have a greater potential to reduce that energy use if asked to?

Shoko Oda  28:48

Yeah, conservation might have a more visible impact in places like that, versus Japan. But what happened on March 22, it looks great on paper, when you say, ‘oh, people pitched in and saved power, and we were able to avoid blackout risk.’ And, you know, the government was thanking people on social media, TEPCO was thanking people on social media for pitching in and doing their part to help. But at the end of the day, that doesn’t solve any of the problems we discussed today, right. And those are all very structural problems that will take a lot of work and will take a lot of time for Japan to figure out and kind of rejig and then decide what works and what doesn’t. So it shouldn’t be a silver bullet. I think it’s great that people comply and help and I think that’s nice, but it shouldn’t be the end-all solution.

Oscar Boyd  29:50

Shoko, thank you very much for joining me today.

Shoko Oda  29:52

Thank you for having me.

Oscar Boyd  30:00

That was Bloomberg energy reporter Shoko Oda. Many thanks to her for joining me and I put links to her recent articles about Tokyo’s energy crisis in the show notes. Also in The Japan Times this week, a newly published report from the Intergovernmental Panel on Climate Change says that oil platforms, coal power plants and other fossil fuel assets could lose trillions of dollars in value in the coming decades, as the battle against climate change gains momentum. The report says that these assets are likely to become stranded and worth less than expected as fossil fuel demand is limited to reduce greenhouse gas emissions. Also, East Japan Railway Company said on Tuesday that all lines of its Tohoku shinkansen will resume services on April 14, after last month’s earthquake damaged tracks and caused one bullet train to derail. Trains will run at reduced frequency and speeds until after Golden Week, in May. Those stories and all of the latest news from Japan at japantimes.co.jp. If you’ve enjoyed this week’s episode, please do leave us a rating or review on Apple Podcasts or Spotify. It really does help others find the show. We’ll be back next week, but until then, as always, podtsukaresama.