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Japan is nervous about its energy security

A single objective drives Japanese energy policy: energy security. Emissions should be reduced, to be sure, but that is secondary. Renewables will grow, but coal will remain the largest single source of supply for the foreseeable future while natural gas, which produces fewer emissions, is cut back.

The real winner is nuclear power, which only seven years after the horrific events at Fukushima is back in business and set to grow steadily. Those are the conclusions of the new Japanese national energy plan to 2030, published last week. 

Japan remains the world’s third-largest economy in terms of nominal gross domestic product — even after two decades of low growth — and a big energy consumer despite a highly efficient pattern of use. 

The country will remain an important player in the global energy market but is nervous about import dependence. The oil embargoes of the 1970s opened Japanese eyes to the risks of relying on oil from the Middle East. The nuclear accident at Fukushima in March 2011, followed within weeks by the closure of the entire fleet of Japanese nuclear reactors, led to a rapid growth in imports of liquefied natural gas and a surge in Asian gas prices.

That surge has now subsided as 19 of Japan’s nuclear stations have come back on stream. As a result of this, and of general oversupply around the world, Asian gas prices — even after an uptick this year — are now only at half the levels they reached at the peak in 2014. But Japan does not want to find itself in a position of risk. 

The question is how the country defines that risk. There is absolutely no shortage of gas in the region — from Australia and Indonesia and, beyond that, from Qatar and the Middle East. There are huge volumes of gas in eastern Siberia and a growing supply from the US that will be supplemented over the next few years by more associated gas produced as a byproduct of oil from shale rocks. Prices will vary but Japan is economically strong and well able to pay.

The risk, as seen from Toyko, must be defined around the security of the open trade routes required to bring the gas to Japan. 

The contrast with the Chinese approach could not be more obvious. China has increased its oil imports to more than 9m barrels a day — more than a fifth of world oil trade, making it the world’s largest oil importer, ahead of the US this year for the first time. According to the latest bullish study from the International Energy Agency, China will become the world’s largest gas importer next year, with LNG shipments set to continue growing, and a 60 per cent increase expected by 2023.

China, of course, has plenty of coal of its own and is increasing the volume of electricity produced from renewables and nuclear. But, even so, the country’s import dependence in the key commodity markets of oil and natural gas keeps growing. The shift under President Xi Jinping from the traditional Chinese philosophy of self-reliance is unprecedented.

Having previously expected Beijing to revert to that traditional approach, I have to accept that I was wrong and that it now trusts in its ability to assert its power in the world to secure the supplies it needs, whatever the circumstances. 

In economic and military terms, Japan is now clearly the second power in Asia. It cannot halt the assertive Chinese approach to the islands it claims in the South China Sea, any more than it can do anything but watch events unfold on the Korean peninsula.

The American alliance with Japan is said to be strong — but what does that mean in practice? Would the US now send ships and troops to keep open the trade routes through Asia? Nominally the answer is yes, but the reality could be very different. 

Japan can see the risks and is moving to limit them. The new energy plan is rational. Asia has become a dangerous place and, in the event of open conflicts, energy trade would be an obvious vulnerability.

The writer is visiting professor and chair of the Kings Policy Institute at King’s College London

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