Japan Steel Industry Warns Huge Power Cost without Nuclear

Japan Iron and Steel Federation warns Japanese manufacturers’ cost would increase by around 1.66 trillion yen for power if the government would stop all of domestic nuclear power plants and increase renewable energy to 20% of the power supply. The federation estimates the manufacturers’ recurring profit decreases by around 12% with the higher cost. Under the estimate, electric furnace steel makers would be loss making with 1.25 times higher cost of their recurring profit.

The federation estimates power generation cost will increase by 3.5 trillion yen when thermal power plant will replace all of nuclear power plants. The higher cost will result in 3.7 yen per kilowatt hour of higher electricity cost. Under the condition, Japanese manufacturers’ cost increases by around 860 billion yen or around 6% of recurring profit. With the higher cost, domestic electric furnace steel makers’ recurring profit decreases by around 65%.

Renewable energy would increase electricity cost by 3.4 yen per kWh when renewable energy would represent 20% of the total power generation in early 2020 and fixed price renewable energy purchase program would cover the more than 20% of the generation. Under the condition, Japanese manufacturers’ cost increases by around 800 billion yen or around 6% of recurring profit. With the higher cost, Japanese electric furnace steel makers’ recurring profit decreases by around 60%.

The federation warns such higher cost could encourage Japanese manufacturers to move the production base to offshore countries when the manufacturers already suffered from higher corporate tax, disadvantage from smaller free trade zone, higher target for carbon dioxide reduction and higher yen rate. The federation urges the government to revise the energy policy and warming gas control target for better competitiveness for Japanese manufacturers including steel industry.