Japan Considering Subsiding Nuclear Power Generation

Japan will consider introducing a price-support system for electricity generated by nuclear power to provide utilities with long term revenue stabilization even after the planned full liberalization of the country’s electricity market, the industry ministry said Thursday.

Such a system would enable nuclear plant operators to continue investment in new facilities and upgrade infrastructure even if electricity prices go down after the market is freed up. But it may contradict the government’s pledge to reduce its dependence on nuclear power in the wake of the 2011 Fukushima nuclear accident.

Under the system, modeled on the British framework, a strike price will be set reflecting the massive costs for decommissioning of a nuclear plant and the management of spent fuels. When the market price falls below the benchmark, the differences will be complemented.

Utility firms fear they may not be able to maintain the competitiveness of nuclear power generation when the 60-year regional monopolies of the electricity market — that have guaranteed them large capital costs — collapses.

As part of the shake-up of the country’s electricity industry — following the nuclear accident at the Fukushima Daiichi nuclear power plant that exposed the vulnerability of the nation’s grid — Japan will free up the 7.5 trillion yen market for households and other small-lot consumers around 2016.

via Mainichi

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza