One year later: Fukushima and the Japan cleantech opportunity

The one-year anniversary of the Fukushima disaster, which claimed the lives of 19,000 and left another 325,000 without permanent housing, was observed on Sunday with a moment of silence and prayer at 2:46 p.m., the time at which the magnitude 9.0 earthquake struck in 2011.
In the wake of the disaster, Japan reassessed its energy policy, alongside many nations which have re-evaluated their nuclear power programs. Germany decided to shutter all of its nuclear plants, which provide 23 percent of the country’s electricity, by 2022. Even China took action, putting a temporary freeze on nuclear approvals and reducing its nuclear energy targets.
Japan gets 30 percent of its power from nuclear energy, but as of the one-year anniversary of Fukushima, just two of the countries 54 nuclear reactors are up and running. The rest are shut down, many undergoing testing, with the common belief that the trauma of Fukushima will result in most of these reactors never again coming online.
At a recent conference, I ran into the head of the Japanese office of a global investment bank, and we paused to consider the consequences of suddenly shutting off 30 percent of the power for the world’s third-largest economy. He didn’t think we’d see many of those 54 nuclear reactors online again anytime soon, and when the conversation turned to acquisitions, I asked if he had considered many of the solar companies that have been so beat up, their valuations at all time lows. He just smiled and said, “Yes, we’re on it.”
There’s a massive cleantech opportunity right now in Japan, and one small way to commemorate those who lost their lives in Fukushima is to create safe and renewable sources of energy fed into a reliable grid infrastructure. Last year’s landmark Japanese renewable energy bill, passed in August, set up a feed-in-tariff system similar to what’s employed in Germany and Italy. Though over five months later, major Japanese companies that are planning solar farms, like Mitsui, Toyota and Hitachi, still await clarification on policies stemming from the bill, like what exactly the feed-in-tariff will be priced at.
There have been other gestures, like the one from Masayoshi Son, the billionaire founder of the Japanese telecom, Softbank, who has set up a renewable energy foundation with a modest billion yen ($12.2 million). Softbank will invest another couple hundred million in a renewable energy power generation business.
Son is betting on the future deregulation of the utility market in Japan and has gone as far as calling for a pan-Asian smart grid that would link Japan’s grid with those of other Asian countries through an undersea cable system. What’s more likely going on is that Son sees a high cash flow business, similar to telecom, on the horizon, with utilities getting guaranteed rates for renewable energy.
Son’s not the only one eyeing a Japanese smart grid. Tokyo Electric Power, which operated the Fukushima plant, will begin the first smart meter rollout targeting 3 million customers this year with the goal of getting 17 million smart meters installed by 2019. Japan remains behind smart meter rollouts in the U.S. and Europe, but it could quickly catch up.
Japanese companies have been eyeing smart grid assets, too. Toshiba spent $2.3 billion and reportedly outbid GE to acquire global smart meter maker and grid management software provider Landis+Gyr last May. And more recently, Hitachi invested $30 million in smart grid networking company Silver Spring Networks, an early stage strategic investment that could help Hitachi maintain a strong position in the implementation of the Japanese smart grid.
These are early days of change in Japan, a country that, prior to Fukushima, was the third largest producer of nuclear power and remains the world’s largest importer of liquefied natural gas (LNG) and coal. Looking at 2009 figures, 84 percent of Japan’s energy consumption came from oil, coal and natural gas. And the dream for Japan’s energy future had always been to move nuclear power as a share of electricity generation from 24 percent in 2008 to 50 percent by 2030.
What was so attractive about nuclear for Japan was that the country has almost none of its own hydrocarbon resources. Despite the outrage in Japan over Fukushima and the general feeling that nuclear power should be decommissioned, there will be a creeping desire to return to nuclear as the most practical solution.
Ultimately that debate will divide the country at a time when what is required is a new vision for Japan’s energy policy. The Japanese government should move more quickly to articulate renewable energy policies alongside a strong push for government investment in cleantech. Moves over the past year indicate that the private sector in Japan is eager to step up on both the grid side and the power generation side to get clean power to the market. What Japan needs now is stronger leadership on its energy policy.

Question of the week

What should be done to aid Japan’s transition from nuclear power?