Japan’s worst power crisis in over a decade is a culmination of events starting from the Fukushima disaster, and is an issue that the nation won’t be able to quickly shake.
The world’s third-largest economy has been running on a thinner supply of electricity since the triple meltdown at Fukushima in March 2011 shut its massive fleet of nuclear reactors. Over the following 10 years, market reforms aimed to increase security and clean up the grid led utilities to retire inefficient power plants and further reduce their resources.
The current context was created by that event. Last week’s powerful earthquake caused severe damage to the power grid. On Tuesday, a surprising blast of freezing weather in Tokyo made matters worse. Solar output dropped and there wasn’t enough gas or coal-fired power plants to make up the difference. Now the region’s top utility is scrambling to avoid a blackout in one of the world’s most advanced cities.
The current crisis would have been “much less severe – perhaps almost a non-event – with more of Japan’s nuclear plants online,” said Dan Shulman, the founder of Japan-based consultancy Shulman Advisory, which advises clients on the nation’s electricity market. The impact of the war in Ukraine on fossil fuel prices and an increased dependence on less-reliable renewables could result in more instability on Japan’s grid, he said.
What’s happening in Japan is playing out across other power grids from Texas to Taiwan. Natural disasters, the energy transition, and other challenges are creating new problems for utilities. They’re stretching their grids, triggering blackouts, and this is threatening economies in particular resource-poor or isolated countries like Japan.
With Japan’s grid so stretched, a future earthquake, extreme weather event or fuel supply disruption could trigger another power shortage even after this immediate crisis subsides.
Japan’s issues can be traced to the magnitude 9 earthquake in March 2011, the biggest ever recorded in the country. The tsunami that swept through Fukushima DaiIchi’s nuclear plant, shut down cooling systems and caused three meltdowns in reactor cores.
Japan immediately shut down 54 reactors which provided 30% of the country’s electricity. A combination of strong opposition from the public and complicated regulatory processes have prevented 10 nuclear reactors from being restarted after Fukushima. Nuclear power now supplies less than 10% of Japan’s electricity. It’s been replaced by a mix of natural gas, coal and solar facilities.
“The voting public has been against nuclear generation post Fukushima so it is a tough problem for government to solve,” said Antony Stace, a Sydney-based energy trader who closely monitors the Japanese market.
Knowing the problem, the government accelerated liberalization of power markets, culminating with 2016 reforms to end regional utility monopolies like Tokyo Electric Power Co. This was to increase competition in the retail power market and lower prices for consumers.
There was a surprising consequence. In an effort to get the edge over new competition, local utilities were quick and efficient to eliminate expensive and inefficient backup power plants. This allowed them to reduce costs while offering customers more affordable power rates. This further reduced the supply and took out a crucial piece of emergency infrastructure.
Meanwhile, the biggest competitors to Japan’s regional utilities weren’t so interested in investing in new generation capacity. The main focus of their business was to sell retail electricity they had purchased from an existing power plant or on the spot market.
Japan had only 142 gigawatts worth of available power capacity before last week’s earthquake, according to data from its electricity exchange. It is only 23% less than it was in 2016 just weeks before market liberalization. Oil-fired power capacity—the most expensive of the fossil fuels—dropped by 73% over the same period.
Japan launched a feed in tariff program that increased solar panel installations. While wildly successful, it also crowded the nation’s grid with intermittent power output, making it difficult—and sometimes not very cost effective—to replace retiring thermal power plants.
So when last week’s earthquake hit and knocked offline 12 power plants, Japan had little spare capacity to call upon. The sudden cold blast boosted demand but reduced solar output, forcing the nation’s top utility to ask businesses and households to lower consumption.
It is possible that relief will not be forthcoming soon. According to sources familiar with the situation, several coal-fired power stations could be offline for many months because the machinery used to load fuel was destroyed. That means Japan will need to purchase spot liquefied natural gas, which isn’t an easy task given that the fuel is facing a global supply shortage.
The longer-term view doesn’t look much better. Japan’s effort to drastically reduce dependence on fossil fuels will leave a gap that renewables can’t easily fill for years. The government last year said it aims for renewable energy to make up a third of the nation’s power generation by 2030, up from its previous target of less than a quarter. The revised plan reduces gas- and coal-fired generation roughly by half by the end the decade.
The plan also requires Japan to restart basically all of its 33 operable nuclear reactors—a difficult task given the public opposition. Ten units are still down. All of this makes it more likely that this week’s crisis could be repeated with the next hiccup.
“Many power plants in the country have been closing,” said Go Matsuo, head of Energy Economics and Society Research Institute in Tokyo. “There needs to be a fundamental shift in how to encourage investment in the area. Investment in large-scale power generation takes seven to eight years to decide, so that means there is an urgency.”
Here are more must-read stories from TIME