Written by Chu Yao Quan

Increased entropy for the nuclear energy market?

In April 2016, Japan liberalised the local electricity market, paving the way for renewable energy companies to sell their electricity to a wider range of consumers at competitive prices. Many consumers have enjoyed the benefits of cheaper electricity, but it has also intensified cost competitiveness among the companies generating energy from different sources.

Nuclear energy has always been contended as the most economical form of electricity generation. However, the 2011 Fukushima disaster prompted Japan to impose tougher safety standards for all nuclear plants. This led to rising operational costs, which diminishes the attractiveness to produce energy from nuclear sources.

The Japanese government thinks otherwise.

From an economic standpoint, it is intuitive for one to produce the most of a good at the lowest cost possible. However, Japan’s pledge to fight climate change at the 2015 Paris Agreement has pushed her to look at nuclear and renewable energy as an alternative source to fossil fuels. In consideration of the consistency needed to produce a minimum level of energy to the whole of Japan, the Japanese government prefers nuclear energy to its alternatives. Additionally, the government believes that nuclear energy production provides positive externalities, for it does not pollute the environment or emit greenhouse gases.

Households willing to paying more for “economical but risky” electricity?

To tackle the rising operating costs, Japan’s Ministry of Economy, Trade and Industry is considering an introduction of a subsidy to nuclear plant companies. However, to make the subsidy into a reality, it was proposed that the subsidies would most likely come from taxpayers. Moreover, the public remains largely opposed to the resumption of operations at nuclear plants, largely due to safety risks associated with a nuclear disaster. Thus, it remains to be seen in the eyes of the public if rising electricity bills would justify producing the “most economical but riskiest electricity”.

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