Thursday, September 22, 2011

TEPCO and the Japanese Energy Crisis

A few days ago, The Economist posted an interesting article on the energy crisis in Japan. The earthquake and following tsunami in Japan was terrible, made worse by the nuclear accident at Fukushima. The nuclear power plant that was damaged and went into meltdown was maintained by what seems to be the universally hated Tokyo Electric Power Company (TEPCO), an electric utility servicing areas of Japan including the areas affected by the earthquake.

Now the mistakes that TEPCO made in failing to cool the reactor cores was one thing, but deliberately withholding information was another. However, as the article points out, the problems are rooted deeper than what happened during the nuclear meltdown. The main problem with Japan's energy is that there are 10 regional monopolies, including TEPCO, with their profit margins each fixed by the government. Increasing their costs increases their income, therefore prices remain high, almost double what residents of the United States pay for.

So TEPCO is not only involved in the current energy crisis in Japan, but also represents the structural issues of Japan's energy business. Despite the shout-out for change, some people want TEPCO to remain as they are for now so that they are able give out compensation. Earlier today it was reported that TEPCO has started to send full compensation request forms for businesses, a process that started with evacuees on September 12th. Details are sketchy, and considering the forms for individuals are 60 pages long, I assume this will be a long procedure. The problems for service and tourist businesses include the fact that the rate of income decrease won't be equalised by the compensation because "Tokyo Electric said it would exclude a portion believed to have been caused by reasons other than the crisis". How large this portion will be is worrying.

And that's not to mention that Japan, as a whole, is suffering. 15 799 people died in the earthquake and ensuing tsunami. To have survived this, but lose your home and business by a meltdown that could have either been prevented or handled far better during the disaster is adding insult to injury.

So yes, it's hard to sympathise with TEPCO, even though they too have been joining the Japanese people in their drive to conserve energy (the statistics of which are outstanding, by the way). TEPCO are planning to costs, and are considering cuts to pensions and workforce. I'm also hearing reports of a loan-waiver call, contrasting to what Japanese officials denied to do back in May.

Understandably, confidence in nuclear energy has plummeted. Reformers want the break-up of these energy monopolies that are stagnating the development of innovation for green-energy technologies, which are right on their doorstep. A split between energy transmission and generation would allow new firms to enter with new ideas on how to handle Japan's energy, as The Economist explains. I don't know enough about the energy business, let alone what Japan's is like, however it seems that long-term, sustainable changes need to be taken as soon as the victims of both natural disaster and company ineptitude are compensated accordingly.

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