Should Tokyo select immediate power supply to environmental issues?

Should Tokyo select power supply to environmental issues?

With an earthquake-hit nuclear power plant suspended indefinitely, Tokyo Electric Power Co. is on course to face a double whammy of higher electricity generation costs and backtracking on its greenhouse gas cut promises due to the substitute use of thermal power.

The top Japanese power supplier has been forced to suspend the operation of its Kashiwazaki-Kariwa nuclear power plant in Niigata Prefecture following a series of safety problems caused by a powerful earthquake that struck central Japan. The company has no clear idea about when it can resume operations of the seven reactors at the plant, including six that were scheduled to provide 7.11 million kilowatts of electricity this summer.

Although Tokyo Electric has enlisted the help of other major utilities to overcome anticipated power shortages, their supplies are likely to be mainly thermal power, generation costs of which are much higher than those of nuclear power due to a recent surge in fuel prices. The company may also need to restart its long- suspended thermal power plants to help make up for the shortfall.

The company estimates that power generation costs will increase by some 100 million yen if one one-million-kilowatt nuclear power generator is suspended for a day.This means that if the six reactors remain suspended for a month, it will boost generation costs by over 20 billion yen and will likely cause Tokyo Electric's consolidated recurring profit in the fiscal year to next March to show a shaper drop than the 9.4 pct as currently projected by the company.

The use of thermal power also bodes ill for Tokyo Electric's environmental initiative, under which it aims to reduce carbon dioxide emissions per one kilowatt hour of electricity by 20 pct from the fiscal 1990 level, starting in fiscal 2008. The company has set the target on the assumption of a higher operating rate of its nuclear power plants.

Which way should Tokyo turn now, assuming that it would have to be self reliant for now – nuclear or thermal? What would be more cost-effective in the shorter and longer run? Does this reflect a lurking problem of steep mounting power tariffs in future?