Nobuo Tanaka's hair is on fire. The immediate past executive director of the International Energy Agency is on a mission attempting to alert officials in the United States, Japan, Europe, China and elsewhere that post-Fukushima Japan may be approaching an energy death spiral.
Tanaka's argument is mathematical at its core. He argues that if Japan does not find a way to 'turn on' its now shuttered nuclear energy reactors, not only will Japan's already sluggish economic condition be crushed with much larger oil and gas imports from Russia, Southeast Asia and the Middle East -- but because of the costs and risk uncertainty -- Japan's powerful manufacturing base may begin pulling out of the world's third largest economy. In a morning meeting with me last week, Nobuo Tanaka said that if Japan didn't get its domestic energy production back on line soon, Japan would experience serious 'deindustrialization.'
Japan has 54 nuclear energy reactors -- only two of which are running at the moment and both of which are scheduled for regular check ups and will shut down either late this month or in early May 2012. As regular maintenance has required shutting down plant after plant, none of Japan's governors has allowed the nuclear energy plants to be returned to operation.
On top of the post-Fukushima nuclear plant disaster, global tensions with Iran are threatening Japan's dependence on Iranian oil exports, which Japan's share amounts to about 300,000 barrels a day.
This makes Japan's current potential daily energy deficit about 800,000 barrels per day.
Tanaka, who after leaving the International Energy Agency is biding his time now as Global Associate for Energy Security and Sustainability at Japan's Institute of Energy Economics, acknowledges that the Saudis have offered Japan, Europe and others who are jittery about the growing tensions with Iran more of its own domestic capacity, which most put at about 2 million barrels a day. Tanaka says the problem is that that's just not enough to manage global shortfalls if there is a strike on Iran and oil flows are interrupted -- and he believes that the Saudis will favor European needs over Japan's.
But even all this is not the end of the squeeze.
Japan's other partial energy option is the importation of liquified natural gas (LNG) -- which it imports from Malaysia, Brunei, Qatar, UAE, Indonesia and Australia. Japan needs to further boost imports if it can but prices for LNG are surging. The combined energy deficit Japan is facing would require a net increase, according to Tanaka, of LNG and oil that would run about $40 billion a year -- wiping out completely Japan's trade surpluses and more.
In meetings hosted by the Center for Strategic and International Studies this past week, Nobuo Tanaka made an appeal for the US to export some of its cheap LNG supply to Japan. The price of LNG in Japan is currently four times the price in the United States.
However, House of Representatives Natural Resources Committee Ranking Member Edward Markey has over the last several months been agitating in speeches and correspondence with Energy Secretary for the US to restrict LNG exports -- thus keeping prices low in the United States and leaving key strategic allies like Japan vulnerable to surging global LNG prices and to the geostrategic flirtations from Russia. Tanaka said that with Russia, about which the US has increasing concerns about its mercantilist global energy behavior, Japan may be forced to build new grid and pipeline infrastructure with Russia given the cold shoulder the US is thus far showing Japan.
To some degree, without the Pulitzer and best-selling energy reality books to his name, Nobuo Tanaka is the Daniel Yergin of Japan and has an encyclopaedic knowledge of the patterns and vectors of energy production and consumption by all the major global energy actors. His warnings matter -- and yet Japan's political leaders, he believes, have not honestly talked with the Japanese public about the hard choices it faces and a possible economic unraveling that comes with the status quo national nuclear energy allergy.
Tanaka thinks that the U.S. could play a constructive role in helping Japan weather its challenges -- not just in exporting cheaper LNG but it helping bridge the 'trust gap' between Japanese citizens and their government.
The former senior Japan Ministry of Economy Trade & Industry official joked that the only place in the world where an elected legislature may be less popular with its citizens that the US Congress is Japan -- where government incompetence and false statements made during and after the earthquake, tsunami, and nuclear plant disasters have collapsed Japanese trust in their officials. And trust wasn't high before these incidents.
Tanaka realizes that there is a legitimate debate to be had about the safety and management of Japan's nuclear energy facilities and that standards need to be improved and a national conversation has to take place -- but that a total rejection of nuclear energy will send Japan over a cliff as deindustrialization is triggered by energy shocks.
One solution he thinks is for former US Nuclear Regulatory Commission commissioners and other US-based, respected nuclear energy experts form an ad hoc commission designed to consult with the Japanese nuclear energy industry and political authorities -- and to create what would be a bilateral, or perhaps even an international, peer review structure. This might allow Japanese citizens to possibly fasten their trust in the international Commission even if doubtful about the solvency of their own business, political, and energy leaders.
It's an interesting proposal -- one that gets to the core issue of trust and lurking uncertainties about nuclear energy in Japan. Some critics could argue that creating such a US-Japan or international commission would allow Japan to push this needed debate under the rug and cover up dangers lurking in Japan's energy system.
Maybe so -- but it also seems that Nobuo Tanaka could be right that Japan's economic future further unravels if it doesn't figure out some way to get safe nuclear energy back online.