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Japan turns off last nuclear reactor amid fears of surge in gas prices

This article is more than 8 years old
A survey by the business group the CBI found that around 95% of British business leaders are worried about the cost of energy
Fukushima Nuclear power plant  in Japan
As nuclear plants are decommissioned Japanese imports of liquefied natural gas (LNG) have soared, pushing up prices. Photograph HAP/Quirky China News/Rex

Japan will switch off its last nuclear reactor on Monday, amid fears that a growing dependence on gas imports there could push up electricity bills in the UK.

Kansai Electric Power's only functioning reactor was scheduled to be disconnected from the power grid and then shut for planned maintenance, ending hopes that an industry that until three years ago provided 30% of the electricity to power the world's third largest economy would stage a quick recovery.

Continuing problems at the Fukushima plant, where radioactive water has continued to spill into the sea, and a reluctance by voters to back what looks like a badly managed industry, have led to more than 50 nuclear plants being closed, sending Japanese imports of liquefied natural gas (LNG) back to levels last seen after the 2011 tsunami.

Energy analysts said that Japan's shutdown, combined with Germany's commitment to end nuclear power production by 2022, was pushing up gas prices on the international markets.

Rising demand for gas combined with the cost of subsidies for renewable energy, much of which is added to household and business bills, is expected to push up energy prices in the west.

According to the CBI, there is a growing unease among UK businesses that energy costs look likely to rise.

A survey and report published by the business lobby group the CBI found that around 95% of British business leaders are worried about the cost of energy and that more than three-quarters of them have little faith that matters will improve in the next five years.

The pessimistic view about government policy – and inaction – may be related to the way in which energy has overtaken transport as the chief area of concern among the 526 executives polled by the CBI and the business services firm KPMG.

"The huge number of businesses concerned about energy supply and costs is alarming," said John Cridland, the CBI's director general. "The government must get the energy bill on to the statute books and bring forward secondary legislation to give potential investors the certainty to deliver the energy infrastructure we need to keep our lights on."

German businesses have complained that they pay the highest energy bills in the EU following the pioneering decision to subsidise renewable production. Much of the subsidy cost is passed on through higher bills, forcing major manufacturers BMW, Mercedes and Siemens to pay double the cost of electricity in the US. The German chancellor, Angela Merkel, has promised to cut subsidies to solar and wind farm operators, but has yet to specify the size of the cut or the timescale.

It is also unclear what will replace the more environmentally friendly forms of electricity if operators are discouraged from further investments by lower subsidies. At the moment Germany and the UK have dramatically increased their consumption of coal and gas to make up the shortfall from nuclear production. At their conference in Glasgow, the Liberal Democrats said the prospect of rising gas prices meant it was necessary for the UK to back further investment in nuclear power.

The UK's trade deficit widened in 2003 when the country became a net importer of oil and gas, and the situation is projected to deteriorate as production falls over the next 10 years.

Japan, which ran huge trade surpluses until the Fukishima disaster, has seen its balance of payments thrown into reverse by the costs of purchasing LNG.

Japan consumes about a third of the world's LNG and it is likely that demand will grow to record levels over the next couple of years. LNG imports rose 4.4% to a record 86m tonnes, and 14.9% in value to a record 6.21tn yen (£39bn) in the year to March.

Imports are likely to rise to around 88m tonnes this year and around 90m tonnes in the year to March 2015, according to projections by the Institute of Energy Economics Japan, based on 16 reactors being back online by March 2015.

Thirty months on from the Fukushima disaster, such is the level of public concern about nuclear safety that the government is struggling to come up with a long-term energy policy – a delay that is having a profound impact on the economy and underlining just how costly a nuclear-power-free future may be. "There's talk the Abe administration is putting heavy pressure on the regulator [to restart reactors]," said Osamu Fujisawa, a Japanese-based independent oil economist.

"It's obviously the economy the administration is [concerned about] [rather than safety]. Otherwise, the business community will look away, [which would be] an end to the Abe administration."