(EnergyAsia, March 17 2014, Monday) — With Japan’s nuclear power capacity still idle, coal’s share will soon rise to account for more than 25% of its primary energy mix for the first time in about half a century, said the country’s leading energy think tank.

In a recent report, the Institute of Energy Economics Japan (IEEJ) predicts the country will increase the use of natural gas and coal to meet its energy demand despite plans to revive the use of its nuclear power plants which were shut down after the earthquake-tsunami tragedy of March 2011.

In its report on Japan’s economic and energy outlook through the next financial year ending March 31 2015, the IEEJ said the country’s primary energy supply will increase for the current year with demand for natural gas and coal reaching record-high levels.

“Primary energy supply in Japan in FY2013 (ending March 31 2014) will increase by 0.7% from the previous year,” said the report.

Japan’s coal demand will surge by 3.2% this year and by a further 0.9% in FY2014 for its fourth consecutive annual increase. The IEEJ expects the demand increase to continue despite rising prices from tightening conditions on the global markets, and a hike in the domestic oil and coal tax.

Japan will use more coal to generate electricity as well as produce cement and steel as its economic recovery takes hold helped by the “Abenomic” policies of the government of Prime Minister Shinzo Abe.

But its energy cost will continue to rise and inflict a growing burden on the fragile Japanese economy, said the IEEJ, outlining different scenarios where power companies will be allowed to re-start some of their nuclear reactors during FY2014.

In the lowest-cost case involving up to six nuclear reactors generating electricity for nine months to March 2015, the IEEJ predicts the cost of power generation cost to rise by 3,500 yen per MWh, compared to FY2010.

“(This reflects” the additional spending on fossil fuel imports of 7.3 trillion yen required to replace the loss of electricity generated using nuclear power,” it said. The reduced fossil fuel import bill will help raise the GDP by 0.17%. (US$1=102 yen).

In another scenario where up to 16 reactors are allowed to operate for an average of eight months for the year, the IEEJ predicts Japan’s spending on fossil fuel imports will drop by 2.4 trillion yen, reducing power generation cost by 2,500 yen per MWh. The lower import bill will reduce the risk of further rises in electricity tariff and add 0.17% to the GDP.

Nuclear energy supplied 30% of Japan’s electricity before the 9-richter earthquake struck off the country’s eastern coastline and caused a tsunami that destroyed its giant Fukushima nuclear power plant on March 11 2011.

The IEEJ expects fossil fuel-fired power plants to generate a record 740 TWh of electricity in the current financial year ending March 31.

With the re-start of some nuclear reactors, it expects Japan’s coal-fired power generation capacity to rise by 1.5% in the coming year, helped by the recent additions of the unit 2 at the Hitachinaka plant and unit 6 at Hirono.

Natural gas-fired power capacity will increase by 1.7% to as much as 400 TWh while the oil-fired capacity will “decrease substantially”, said the IEEJ.

Primary energy supply (million tonnes of oil equivalent)
Historical                Projection        Year-to-year changes
FY2010    FY2011    FY2012        FY2013    FY2014        FY2012    FY2013    FY2014
514.1    491.1    484.3        487.7    486.1        -1.4%    0.7%    -0.3%

Coal    119.1    112.8    117.7        121.5    122.5        4.3%    3.2%    0.9%
Oil    211.9    217.6    220.9        220.6    201.1        1.5%    -0.1%    -8.8%
Natgas    95.5    112.0    116.6        117.6    118.8        4.1%    0.9%    1.0%
Hydro    18.2    18.5    16.7        16.7    17.1        -9.3%    -0.2%    2.0%
Nuclear    60.7    21.4    3.4        2.0    17.3        -84.3%    -41.6%    782.3%
Others    8.7    8.8    9.1        9.3    9.4        2.5%    2.3%    1.6%

Final energy consumption (million toe)
Historical                Projection        Year-to-year changes
FY2010    FY2011    FY2012        FY2013    FY2014        FY2012    FY2013    FY2014

343.6    334.4    329.9        331.5    330.3        -1.3%    0.5%    -0.4%

Oil products
178.1    172.1    168.8        169.4    167.9        -1.9%    0.3%    -0.9%
Natural gas and city gas
35.0    36.3    36.3        36.5    36.6        -0.2%    0.6%    0.4%
Coal and coal products
38.0    37.8    37.7        37.8    37.8        -0.3%    0.4%    0.0%
Electricity
88.9    84.8    83.9        84.6    84.8        -1.0%    0.8%    0.2%

Real GDP (JPY2005 trillion)
512.5    514.0    517.5        530.8    535.0        0.7%    2.6%    0.8%

Exchange rate (JPY/$)
85.7    79.1    83.1        99.4    100.0        5.1%    19.7%    0.6%

Balance of trade (JPY trillion)
5.3    -4.4    -8.2        -9.8    -6.2        84.9%    20.3%    -37.4%
Exports
67.8    65.3    63.9        72.2    77.7        -2.1%    12.9%    7.7%
Imports
62.5    69.7    72.1        82.0    83.9        3.5%    13.7%    2.3%
Fossil fuels
18.1    23.1    24.6        27.1    25.4        6.6%    10.0%    -6.1%

Power generation mix
Historical                Projection        Year-to-year changes
FY2010    FY2011    FY2012        FY2013    FY2014        FY2012    FY2013    FY2014
Electricity generation (TWh)
918.2    857.4    822.0        825.9    827.2        -4.1%    0.5%    0.2%
Coal    23%    24%    25%        27%    27%
Natgas    31%    42%    47%        48%    48%