Nuclear Accident May Raise Japan’s Atomic Power Generation Costs

A nuclear accident may raise the cost of atomic power generation by as much as 1.6 yen per kilowatt hour, a Japanese government panel said, casting doubt on whether it’s a cheap source of electricity.

The estimate assumes that a severe nuclear disaster costs about 5 trillion yen ($64 billion), based on the accident at Tokyo Electric Power Co.’s Fukushima Dai-Ichi plant in March, a sub-committee of the Japan Atomic Energy Commission said in a draft report today. The panel presumes a nuclear accident on the scale of Fukushima occurs once in as many as 500 years.

The report will be used to compare power generation costs as the government discusses Japan’s future energy policy. The panel headed by Tatsujiro Suzuki, JAEC’s vice chairman, was set up in September to review the policy after the Fukushima accident in March forced 160,000 people to evacuate.

“Cost comparison of various power sources is easy to understand for the public but often used by some people to claim what the best energy for Japan is,” said Hironobu Unesaki, a nuclear engineering professor at Kyoto University in western Japan. “Cost is important for sure, but it all depends on how you set up preconditions to make an estimate.”

The electricity industry claimed before the disaster that nuclear energy is the cheapest power source. The cost of atomic power was estimated at 5.3 yen per kilowatt hour while coal, natural gas, oil and hydro were calculated at 5.7 yen, 6.2 yen, 10.7 yen and 11.9 yen, respectively, according to a 2004 estimate by the Federation of Electric Power Companies of Japan, a group of 10 regional power utilities.

Fukushima Liability

“If the risk cost of a nuclear accident is included in calculations of atomic power generation costs, it is necessary to make a comparison in the same manner after estimating the accident costs of other power sources,” the panel said.

The assumed 5 trillion yen cost of a severe nuclear disaster should be revised as the liability from the Fukushima accident may increase, according to the panel’s report.

The utility known as Tepco may have to pay 4.5 trillion yen in compensation to those affected by the disaster by March 2013, a government panel headed by bankruptcy lawyer Kazuhiko Shimokobe said last month. Decommissioning four damaged reactors at the plant, located about 220 kilometers (137 miles) north of Tokyo, may exceed the estimate of 1.15 trillion yen because of “uncertain factors,” the Shimokobe panel said.

The JAEC panel estimated the cost of reprocessing nuclear fuel at about 2 yen per kilowatt hour and a rate of 1 yen per kilowatt hour for burying spent fuel.

To contact the reporter on this story: Tsuyoshi Inajima in Tokyo at tinajima@bloomberg.net

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net

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