Japan’s energy needs post-earthquake aren’t a worry yet

A spike in Japanese demand for LNG can easily be met, but futures markets should calm themselves.

As Japan struggles to cope with the aftermath of the 11 March earthquake, issues of energy security are becoming more prevalent not only in Japan, but across the world.

Five nuclear power plants were affected by the Sendai earthquake, and of those, one has suffered a partial meltdown – the Fukushima Daiichi plant. Three major oil refineries were also closed. Amid scrambled attempts to avert a full-scale, Chernobyl-style disaster, fears are now rising about how the shortfall in Japan's energy production – which Société Générale estimates to be roughly 11.3 gigawatts, enough to power as many as 11 million households – will be managed for the foreseeable future.

Consumption of electricity generated from nuclear power stands at 30 per cent of Japan's total usage. The government had previously planned to increase this to 40 per cent by 2017, and then 50 per cent by 2030.

Whether or not these plans will now be halted or contested as a result of the disaster at Fukushima I remains to be seen. What is certain, though, is that Japan will have to meet the demand for energy somehow, despite a large impairment in production facilities.

Japan's energy mix still heavily relies on oil, which accounted for 45 per cent of national energy consumption in 2009, but it is also the world's largest importer of liquefied natural gas (LNG) – in 2010 the Japanese shipped over 70 million tonnes of it. The biggest suppliers of oil and LNG to Japan are Saudi Arabia and Qatar, respectively, with the United Arab Emirates the second-largest supplier of both commodities.

With revolutions still raging across the Middle East, the markets have already been pushing up prices, particularly for oil, in fear of an energy crisis, and the increased demand on the region that Japan's predicament may spur could make the problem even more acute. Due to the shortfall in Libyan supply and worries about Saudi Arabia's stability, prices continue to rise. Today Brent crude spot prices increased to $113.99 per barrel, and LNG futures for April 2015 delivery rose $0.22 per MMBtu on the week to $6.08 according to NYMEX.

If Japan does make up its shortfall with LNG, the UK would bear the brunt of this shift in supplies, as LNG accounts for almost 33 per cent of winter demand, and contracts for next year have risen between 10 and 15 per cent on speculation of increased demand. This follows already high gas prices and a particularly cold winter that added roughly £44 to British domestic gas bills.

This chart, taken from Kiran Stacey's Financial Times blog shows how much LNG Japan needed to make up for an energy shortfall after the 2007quake:

PFC Energy made a prediction based on these figures that, with 9.7 gigawatts of capacity lost (estimates vary, as with the Société Générale figure above), this could lead to at least a 500-600 megaton per month leap in Japanese LNG purchases. PFC believes the price for Asian spot will remain around $8-$9 MMBtu.

There are a few factors to consider in support of this conservative estimate. A global gas glut, including Qatar's huge increase in LNG production capacity, will certainly be able to alleviate Japan's demands. In fact, Qatar has already promised to divert more supplies there if necessary, which it would not have been able to do so easily back in 2007. Further, Japan is still able to use supplies from futures contracts at the moment to meet its energy needs, so its demand is lower than expected.

These factors explain the lack of a significant spike in demand so far, but fears driving the rise in futures prices (as opposed to the relatively stable spot prices) bode less well for the long term.

Liam McLaughlin is a freelance journalist who has also written for Prospect and the Huffington Post. He tweets irregularly @LiamMc108.

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The rise of the green mayor – Sadiq Khan and the politics of clean energy

At an event at Tate Modern, Sadiq Khan pledged to clean up London's act.

On Thursday night, deep in the bowls of Tate Modern’s turbine hall, London Mayor Sadiq Khan renewed his promise to make the capital a world leader in clean energy and air. Yet his focus was as much on people as power plants – in particular, the need for local authorities to lead where central governments will not.

Khan was there to introduce the screening of a new documentary, From the Ashes, about the demise of the American coal industry. As he noted, Britain continues to battle against the legacy of fossil fuels: “In London today we burn very little coal but we are facing new air pollution challenges brought about for different reasons." 

At a time when the world's leaders are struggling to keep international agreements on climate change afloat, what can mayors do? Khan has pledged to buy only hybrid and zero-emissions buses from next year, and is working towards London becoming a zero carbon city.

Khan has, of course, also gained heroic status for being a bête noire of climate-change-denier-in-chief Donald Trump. On the US president's withdrawal from the Paris Agreement, Khan quipped: “If only he had withdrawn from Twitter.” He had more favourable things to say about the former mayor of New York and climate change activist Michael Bloomberg, who Khan said hailed from “the second greatest city in the world.”

Yet behind his humour was a serious point. Local authorities are having to pick up where both countries' central governments are leaving a void – in improving our air and supporting renewable technology and jobs. Most concerning of all, perhaps, is the way that interest groups representing business are slashing away at the regulations which protect public health, and claiming it as a virtue.

In the UK, documents leaked to Greenpeace’s energy desk show that a government-backed initiative considered proposals for reducing EU rules on fire-safety on the very day of the Grenfell Tower fire. The director of this Red Tape Initiative, Nick Tyrone, told the Guardian that these proposals were rejected. Yet government attempts to water down other EU regulations, such as the energy efficiency directive, still stand.

In America, this blame-game is even more highly charged. Republicans have sworn to replace what they describe as Obama’s “war on coal” with a war on regulation. “I am taking historic steps to lift the restrictions on American energy, to reverse government intrusion, and to cancel job-killing regulations,” Trump announced in March. While he has vowed “to promote clean air and clear water,” he has almost simultaneously signed an order to unravel the Clean Water Rule.

This rhetoric is hurting the very people it claims to protect: miners. From the Ashes shows the many ways that the industry harms wider public health, from water contamination, to air pollution. It also makes a strong case that the American coal industry is in terminal decline, regardless of possibile interventions from government or carbon capture.

Charities like Bloomberg can only do so much to pick up the pieces. The foundation, which helped fund the film, now not only helps support job training programs in coal communities after the Trump administration pulled their funding, but in recent weeks it also promised $15m to UN efforts to tackle climate change – again to help cover Trump's withdrawal from Paris Agreement. “I'm a bit worried about how many cards we're going to have to keep adding to the end of the film”, joked Antha Williams, a Bloomberg representative at the screening, with gallows humour.

Hope also lies with local governments and mayors. The publication of the mayor’s own environment strategy is coming “soon”. Speaking in panel discussion after the film, his deputy mayor for environment and energy, Shirley Rodrigues, described the move to a cleaner future as "an inevitable transition".

Confronting the troubled legacies of our fossil fuel past will not be easy. "We have our own experiences here of our coal mining communities being devastated by the closure of their mines," said Khan. But clean air begins with clean politics; maintaining old ways at the price of health is not one any government must pay. 

'From The Ashes' will premiere on National Geograhpic in the United Kingdom at 9pm on Tuesday, June 27th.

India Bourke is an environment writer and editorial assistant at the New Statesman.

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