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Today in Energy

March 4, 2019

Nuclear reactor restarts in Japan displacing LNG imports in 2019

Japan's net electricity by fuel
Source: U.S. Energy Information Administration, based on International Energy Agency

In 2018, Japan restarted five nuclear reactors that were shut down after the 2011 Fukushima accident. As those reactors return to full operation, the resulting increase in nuclear generation is likely to displace generation from fossil sources, in particular natural gas. Because Japan imports all of its natural gas in the form of liquefied natural gas (LNG), increased nuclear power production is likely to reduce Japanese imports of LNG in the electric power sector by as much as 10% in 2019.

Japan now has nine operating nuclear units with a total electricity generation capacity of 8.7 gigawatts. Electricity generation produced by natural gas-fired plants in Japan has been declining annually from its peak in 2014 and is likely to decline further in 2019, while generation from nuclear units will likely increase.

In response to the 2011 Fukushima accident, Japan suspended operations at all nuclear reactors for mandatory safety inspections and upgrades, leaving the country with no nuclear generation from September 2013 to August 2015. Existing coal-fired power plants were already operating near full load; therefore, utilities had to import large volumes of LNG to meet electricity demand.

As the five nuclear reactors were gradually restarted in 2018, they began to offset natural gas-fired generation, and as a result, LNG imports decreased as the reactors reached full operation. In 2019, their first full year of operation, EIA estimates that the restarted nuclear reactors will further displace Japan’s LNG imports by about 5 million metric tons per year (MMmt/y), or 0.7 billion cubic feet per day (Bcf/d) of LNG. This amount is equivalent to 10% of Japan's power sector natural gas consumption and 6% of Japan’s LNG imports in 2018.

Consumption of crude oil and petroleum products by power plants also increased between 2011 and 2013, with utilities spending about $30 billion each year for additional fossil fuel imports in the three years following the Fukushima accident. Generation from crude oil and petroleum products returned to pre-Fukushima levels by 2014 mainly as a result of relatively high crude oil prices, and it has since declined further.

Japan liquefied natural gas imports by source
Source: U.S. Energy Information Administration, Japan Ministry of Finance
Note: Other includes Angola, Egypt, Equatorial Guinea, France, Spain, Netherlands, Peru, South Korea, Singapore, and Trinidad.

Japan relies on imported LNG to meet all of its natural gas demand and imports more LNG than any country, averaging 11 Bcf/d in 2016 through 2018. Japan imports LNG from several countries worldwide. LNG imports from Australia have grown in the past two years to account for more than one-third of the total imports, and they have displaced imports primarily from Malaysia and Qatar. In 2016 through 2018, these three suppliers accounted for 60% of Japan’s LNG imports.

LNG imports from the United States account for a small percentage of total imports, but they increased from 0.16 Bcf/d in 2017 to 0.3 Bcf/d in 2018, according to data from Japan’s Ministry of Finance. Japan’s LNG importers have signed long-term contracts with U.S. LNG export projects such as Freeport, Cameron, and Cove Point. Most of Japan’s LNG imports are under long-term contract with existing foreign suppliers, and these contracts are set to expire during the next decade.

The outlook for further LNG import displacement is largely dependent on the number of nuclear restarts, assuming trends in other factors, such as electricity demand and energy efficiency, remain constant. The pace of nuclear restarts has been slow, with the average reactor requiring nearly four years to come back online.

Japan's long-term energy policy calls for the nuclear share of total electricity generation to reach 20% to 22% by 2030, which would require up to 30 reactors to be in operation. Out of the remaining fleet of 35 operable reactors, 9 are currently operating, 6 have received initial approval from Japan’s Nuclear Regulation Authority, 12 are under review, and 8 have yet to file a restart application.

Principal contributors: Slade Johnson, Victoria Zaretskaya