Power Politics in Japan : Energy: The government hopes to reduce oil consumption, but only high prices deter consumers. Despite opposition, nuclear is MITI’s preference.

Enlightened bureaucrats at Japan’s Ministry of International Trade and Industry set worthy national goals and then marshal the country’s resources to reach the goals.

If you think that is how Japan Inc. works, you might want to take a look at the nation’s energy policy.

As the standoff in Iraq pushes oil prices higher, MITI bureaucrats are getting credit for turning Japan into the economy car of the industrialized world--a nation that gets more mileage out of every gallon of oil it uses than just about any other country.

But it is far from clear how much credit MITI should get for Japan’s successes in reducing its dependence on oil, all of which must be imported. Nor is it evident that MITI has chosen a wise course for the nation’s energy future.

Consider:

* Most energy experts here attribute Japan’s energy savings effort to sharp increases in the price of oil in the 1970s--not MITI policies--and those savings still leave Japan heavily dependent on oil.

* MITI’s leadership in developing renewable energy sources such as solar power, although commendable, has produced few results. And electric utility monopolies, backed by MITI, may actually be hindering the development of new energy sources.

* The heart of MITI’s energy policy is a sharp increase in the use of nuclear power, but anti-nuclear sentiment will make attaining that goal costly, if not impossible.

In a recent report, an advisory committee to MITI scaled back ambitious targets for nuclear power. For the first time, the government admitted that anti-nuclear activists had made it difficult to find new sites for power plants. The advisory group nevertheless recommended that Japan add 40 new nuclear power plants in the next 20 years, effectively doubling its nuclear capacity.

Manufacturers and energy analysts say MITI will be lucky if it succeeds in building half that number. MITI’s goal of bringing down Japan’s dependence on oil from 57% of total energy use to 46%, they say, is a pipe dream.

“Japan is always going to be heavily dependent on oil,” says Naoshi Kojima, analyst at the Institute for Middle Eastern Economies. “With the opposition to nuclear power, there is a strict limit to how many new plants they can build.”

Japan has no energy resources to speak of, so the search for a steady source of energy has always been a national priority. It was one of the major reasons Japan gave for entering World War II and sweeping into Southeast Asia.

Energy concerns came to the fore again after 1973, when skyrocketing oil prices set off panic buying and threw Japan’s economy into an inflationary spiral. Without military power to assure supplies, Japan set out to drastically reduce its dependence on oil.

By the time Iraq invaded Kuwait this summer, the country was in better shape to meet the crisis. That was largely because Japan had four months of fuel in storage and because heavy energy users such as aluminum producers had gone out of business.

Moreover, Japan’s dependence on oil for energy had fallen to 56% in 1987 from about 75% in the early 1970s. Still, the United States, using coal and other resources, lowered its oil dependence in the same period to 41%, and some major European industrial nations also are less dependent on oil than Japan.

In Japan, government regulations to encourage energy conservation did help. For example, MITI allowed industry to shorten the depreciation time for investments made in equipment that helped reduce energy use. MITI also established the “Moonlight Project,” investing about $85 million a year to encourage companies to work together on technology that would promote energy conservation.

One such project involves developing giant batteries that utilities can use to store electricity generated when energy demand is low, such as around midnight. The energy can then be released during peak periods--for instance, hot summer evenings when air conditioners get heavy use.

But it was the sudden increases in oil prices in 1973 and 1979 that really forced Japanese companies to invest in conservation, says Hiroshi Tsushima, economist at the Long Term Credit Bank’s Institute of Research and Consulting.

High oil prices had the same effect on U.S. industry. Although Japanese industry cut its energy use per dollar of production by 46% between 1973 and 1986, U.S. industry showed an almost equally impressive 40% cut, according to the Organization for Economic Cooperation and Development.

If Japan comes out looking like a more efficient economy, it’s in large part because of lower energy consumption by its consumers. Because the Japanese live in smaller homes and pay more than three times what U.S. consumers pay for oil, electricity and gas, it is not surprising that they use about a third as much energy per household as Americans.

When low energy prices allowed Japan to lower rates modestly in the late 1980s, the result was a spurt in energy demand driven by larger refrigerators, larger cars and bigger homes. And in those cheap oil years, no amount of MITI jawboning could get industry to spend money on energy conservation measures, Tsushima says.

More than anything, the Japanese government prefers to use economic incentives to change energy consumption patterns. Half of the $4.50-per-gallon that consumers pay for gasoline today, for example, goes for a tax that is used to subsidize alternative energy.

Some of this money goes to such fine-sounding undertakings as the MITI Sunshine Project, which finances research in solar and other new forms of energy. But that research into alternative energy has had only mixed results. Although solar cells are found on watches and calculators everywhere, they remain far too costly to generate energy for use in homes.

Moreover, as oil prices fell in the late 1980s, enthusiasm for renewable energy sources flagged. The Sunshine Project’s budget next year will be 185 million yen, down from a high of 325 million in 1987.

Unless the Persian Gulf crisis leads to substantially higher oil prices over the long term, few see renewed enthusiasm for such projects.

In June, MITI substantially lowered its prediction of the potential for alternative energy sources, estimating that they would provide, at most, 2.7% of the nation’s energy needs in the year 2000, not the 4.5% originally targeted.

The only government effort in alternative energy that hasn’t felt the budget squeeze is nuclear power. In 1988, Japan’s nine utilities spent $4.9 billion on construction of new nuclear power plants.

MITI has allocated virtually all the tax money set aside for alternative energy development to nuclear power. This year the government spent $2.9 billion to support it.

“Nuclear is our focus for generating electricity,” says Moritoshi Kato, manager of general planning at Tokyo Electric Power Co., the world’s largest private utility, with $30 billion in revenue. “It is the most stable and reliable source of energy.”

But there are a lot of problems with the nation’s nuclear strategy--public opposition, for one.

With so many people, so many earthquakes and no safe place to store nuclear waste, “Japan isn’t suited to nuclear power,” argues Junzaburo Takagi, a nuclear chemist.

Takagi was a lonely voice in Tokyo 17 years ago when he started the Citizens Nuclear Information Center. Now, the latest poll taken by Asahi Shimbun, a major Japanese daily, found that 49% of the respondents were against nuclear power, compared to 29% in favor.

Activists are taking advantage of the anti-nuclear sentiment to mobilize localities to bar utilities from establishing new sites for nuclear power plants.

In large part because of this activity, the industry now says its lead time for building a new atomic power plant is 27 years, up from 16 years in the 1980s.

The anti-nuclear sentiment has been hardened by a growing number of incidents, including one at a Tokyo Electric nuclear power plant a few hundred miles north of Tokyo that raised questions about the utility’s management.

A few days into the new year, alarm bells had gone off, signaling a malfunctioning recycling pump. Supervisors at the plant, evidently hoping to save the company some money, kept the plant operating, believing that repairs could be delayed for a week, at which time a regular inspection was due.

The day before the inspection was scheduled, however, the vibrations got so bad that the utility was forced to close down the plant. Although no radiation escaped, the plant was so badly damaged that it has been shut since.

Critics also note that Japanese nuclear plants lack emergency evacuation plans, because it would be impossible to move Japan’s millions quickly in an emergency.

Further, the nuclear industry’s reliance on a limited overseas uranium supply undercuts the argument that nuclear power offers energy independence. “It is the same situation as in oil,” admits Kazuhisa Mori, executive director of the Japan Atomic Industrial Forum. “There isn’t much remaining supply.”

Japan’s costly solution to the problem is to build a reprocessing plant capable of removing the plutonium from spent fuel and then build a breeder reactor, a next-generation nuclear plant that would create new fuel from small amounts of plutonium.

Both projects, which have already cost taxpayers several billion dollars, are being delayed by popular concern over safety risks and by questionable economics, according to U.S. nuclear scientists familiar with the project.

Then there is the nettlesome question of nuclear waste. Large amounts of rainfall and geologically unstable grounds make the nation unsuited for long-term storage, said one nuclear scientist with the U.S. Department of Energy. “They may have to make a deal to store the waste in the U.S. or Chinese deserts,” the scientist said.

Critics of Japan’s nuclear policy would like to see Japan use more liquid nitrogen gas and speed up the development of renewable energy sources.

But the total monopoly now granted to Japan’s nine electric utilities creates little incentive for change, they say.

With the government responsible for handling nuclear waste, the utilities need not calculate the real cost of the power, according to the critics. And utilities lose sales if they encourage consumers to use solar panels or save energy.

JAPAN’S ENERGY OUTLOOK In percent share 1988 Oil (kl): 57.3% Coal (mt): 18.1% Nuclear (kw): 9% Natural Gas (kl): 9.6% Hydroelectric (kw): 4.6% Geothermal (kl): 0.1% Alternatives (kl): 1.3% 2000 (fiscal year) Oil (kl): 51.6% Coal (mt): 17.4% Nuclear (kw): 13.2% Natural Gas (kl): 10.9% Hydroelectric (kw): 3.7% Geothermal (kl): .3% Alternatives (kl): 2.9% 2010 (fiscal year) Oil (kl): 46% Coal (mt): 15.5% Nuclear (kw): 16.7% Natural Gas (kl): 12% Hydroelectric (kw): 3.7% Geothermal (kl): .9% Alternatives (kl): 5.2% Source: Ministry of Trade and Industry