Japan eyes operating up to 9 nuclear reactors from current 5 by winter: METI minister

Japan's Minister of Economy, Trade and Industry Koichi Hagiuda said July 15 that the country will work to operate up to nine nuclear reactors by winter, up from five currently, amid a severely tight supply-demand outlook.

"Following the directive from the prime minister, we will work steadily to proceed resuming operations at nuclear power plants with a basis assumption of assuring safety, as well as urging restarts of mothballed power plants to secure a maximum supply capacity," Hagiuda told a press conference.

"While we do not have an overall breakdown of additional supply capacity for winter at present, we will work to operate up to nine [nuclear] reactors from the five reactors operating currently by reviewing nuclear power plants' repairs and inspection schedules and steadily work with companies to secure additional supply capacities of about 10 thermal power plants," he said.

Hagiuda's remarks come after Japanese Prime Minister Fumio Kishida said July 14 he had directed the METI minister to have up to nine nuclear reactors to be operational by winter and secure capacity from 10 additional thermal power plants to ensure sufficient generating capacity, given the severely tight supply-demand outlook.

"Once accomplished, we will have the highest [power] supply capacity in the last three years," Kishida said, adding that the operation of up to nine nuclear reactors equate roughly 10% of Japan's total electricity consumption volumes. "As per the government's responsibility, we will make every effort to ensure stable power supply for this winter as well as in the future by considering various measures."

Supply impact

Analysts have mixed views on the impact from the Japanese premier's directive on fossil fuels demand because some nuclear power plants have been expected to restart during the winter power demand season.

"The announcement, in my view, is to assure the public that we have some capacities returning for the winter demand period, but the underlining requirement to import LNG and coal does not change as Japan is still reliant on thermal for much of its power needs," said Kaori Tachibana, associate director of S&P Global Gas, Power & Climate Solutions.

"Given the current situation, it will make a lot of sense to restart many of its nuclear reactors but this is only possible through approval by the Nuclear Regulation Authority who evaluate and certify that the reactors have met the stringent safety requirements laid out after 2011," Tachibana said. "As part of the restart, local regulatory consent is also needed which can be difficult given Japan's history in nuclear."

Japan is currently operating 5.03 GW of nuclear power generation across five reactors -- Kansai Electric's Ooi 1.18 GW No. 3, Shikoku Electric's Ikata 890 MW No. 3, Kyushu Electric's Genkai 1.18 GW No. 4, Sendai 890 MW No. 1 and 890 MW No. 2, according to METI.

Increasing to nine nuclear reactors would add Kansai Electric's Takahama 870 MW No. 3 and 870 MW No. 4 and Ooi 1.18 GW No. 4 reactors, and Mihama's 826 MW No. 3 reactor, according to a METI source.

Once operating up to nine nuclear reactors, Japan would have 8.77 GW capacity from nuclear power generation.

After securing additional capacity of 10 thermal power plants, Japan could have 5-8 GW of capacity, mostly from gas-fired power, the METI source said.

Company sources with two western Japan based power utilities that are operating nuclear power plants this winter said the utilities see their winter LNG requirements as balanced over demand for now.

"At this point, it is really up to how much [nuclear power] is operated," said one of the sources. "Winter LNG [requirement] is balanced for now, and we do not have any room for spot [LNG] although we need to swap [some cargoes]."

For Japan overall, the additional nuclear power generation capacity is expected to cut the reliance on LNG by around 2% winter over winter, unless colder-than-normal temperatures arrive, said Jeff Moore, manager of LNG Analytics Asia at S&P Global Commodity Insights.

Takayuki Nogami, chief economist at Japan Oil, Gas and Metals National Corp., or Jogmec, said that Japan's LNG demand could increase by up to 1 million mt to 2 million mt over December-February from the additional capacity from 10 thermal power plants, creating a need for extra procurement including from spot trades.

"We cannot rule out possibilities of seeing measures actively taken to ensure stable energy supply this winter because of prolonged uncertainty on the LNG supply and demand from such factors as changes in temperatures, solar power output depending on weather conditions, Russia's energy supply situations including on natural gas, and LNG export terminal operations," Nogami said.

Supply concerns

The rare directive from the Japanese premier July 14 to ensure power supply came after METI had already heightened concern over potential LNG supply disruptions after Russia June 30 issued a decree referring to an operatorship shake-up of the Sakhalin 2 LNG project.

Over half of the 9.6 million mt/year LNG production capacity at the Sakhalin 2 project at Yuzhno-Sakhalinsk in Russia, in which Japan's Mitsui has a 12.5% stake and Mitsubishi 10%, is committed to Japanese offtakers.

Russia accounted for 9% of Japan's total LNG imports of 74.32 million mt in 2021, its fifth-largest supplier, according to data from Japan's Ministry of Finance.

Japan had said June 7 there was a risk of Russian LNG supply disruption rising to an unprecedented level, strengthening its tone on a potential fuel procurement risk for power generation amid intensifying competition for fuel as Europe steps up efforts to reduce its dependency on Russian energy.

The fuel procurement risk was noted as part of a package of actions approved at a ministerial-level meeting earlier June 7 aiming to ensure the country's extremely severe summer and winter power supply-demand balances.

Speaking after the meeting, which took place for the first time in five years, Hagiuda at the time said the Tokyo to Kyushu areas were not securing a level required to ensure stable power supply this winter, with the Tokyo area having a negative reserve ratio.

In response to the fuel procurement risk and an increasing trend of higher-than-expected power demand during peak seasons, Japan decided on a series of actions, including restarting mothballed power plants, undertaking additional fuel procurements and utilizing renewables and nuclear power, Hagiuda said.

All of Japan's 10 power supply areas are required to have a minimum 3% reserve power supply capacity ratio over demand levels of 10-year highs during the peak demand months.