Even if Japan’s nuclear power plants will be brought under control, even if roads, rails and ports are back up, the Japanese car industry will have to deal with a more serious problem: Blackouts.
On Monday, Tokyo Electric Power, or Tepco, will start turning off the power for three hours each to selected areas. This will happen once, in some areas twice per day. When the schedule was put up on Tepco’s website, the server crashed. That was just the beginning of the problems.
Tepco had to shut down reactors at two nuclear power plants as well as five conventional power plants. Tepco is currently 10 million kilowatts short of demand.
“Japanese manufacturers, already hit by Friday’s earthquake in their own operations, will now have to deal with the rolling blackouts planned for greater Tokyo starting Monday,” writes The Nikkei [sub]. “Combined with the disruption of distribution networks, the outage is set to further hamper the companies’ ability to secure supplies of parts and materials.”
Power outages don’t just mean a three hour stop of work. Electric furnaces, used for castings, have to be brought down before the outage and back up afterwards, a long process. When China had power outages a few years ago, it severely affected the industry.
Steel plants of Nippon Steel & Sumikin Stainless Steel are currently shut down. Even if the facilities come back up, “blackouts would force them to shut down, likely impacting automakers and electronics manufacturers,” says The Nikkei [sub]. Tokyo Steel suspended operations at Tepco’s request and may have to shut their plant down if rolling blackouts continue.
Tepco plans to conduct the rolling blackouts through the end of April. Says the Nikkei:
“But the firm will be unable to meet demand in the summer, when air conditioner use pushes up demand as much as 50% from current levels, even if it receives power from other utilities and brings all its fossil-fuel-burning plants on-stream. The company could thus have to keep rationing in place over a prolonged period, forcing manufacturers to reduce output or move production to other regions.”
When Reuters asked Takuji Okubo, chief Japan economist at Societe Generale, about the biggest problem the Japanese industry faces, Okubo answered: “I would say the biggest risk is power.”
The Japanese auto industry already has been evacuating Japan. The current developments will most likely hasten their departure. Oddly enough, the yen is expected to rise sharply on Monday, and the dollar is expected to drop. “Japanese investors will dump overseas assets on Monday and bring their money home to help finance reconstruction,” writes Reuters. The wire service sees “the dollar plummeting versus the yen on Monday” and expects “a sharp slide in Treasuries since U.S. government bonds are a favorite asset of Japanese investors.” Japan is the second-biggest holder of U.S. government debt and has nearly $900 billion in dollar reserves. Some of these reserves will likely be used for rebuilding.
This is a very good reason why nations should keep ample reserves of spare power generation ready to spin up.
The trend in the developed world, however, has been the opposite during the last 35 years or so, as the environmentalists have fought off, tooth and nail, all types of new power generation. This has resulted in utilities relying more and more on efficiency/reliability gains out of existing plants rather than new builds —i.e., instead of building surplus reserves, you just trust that the existing infrastructure is going to be available and online more % of the time than what it was originally designed for.
Someday, there will be a price to pay. The Japanese seem to be there already. Just be grateful this was a one-time natural disaster, and not a war.
This is a very good reason why humans shouldn’t build on Geologically active land – especially islands formed by and nestled on active volcanos.
Never let a good crisis go to waste (Rahm Emanuel). Have your cash ready to invest in Japanese car companies when the stock plummets.
This is a very good reason why humans shouldn’t build on Geologically active land – especially islands formed by and nestled on active volcanos
Surely, now go to your Mr. Fusion powered vehicle and explain that to the first people that went into Japan several hundreds of years ago.
And while you’re at it, you can tell the same to several other countries that live similar situations. For example people that live in California. Or near volcanos (some places in Italy come to mind).
Film all that so we can have a nice documentary on NatGeo or Discovery Channel later.
Why not go try to convince the Japanese that they should leave their centuries old homeland because it happens to be geologically active, or how about most of the population of California and Hawaii?
I suppose Louisianians and Floridians should pack up due to the danger of hurricanes and flooding, and most of the US North and Northeast needs to relocate further south to get away from those nasty blizzards.
Pretty much any desirable place to live comes with a certain risk of natural disaster. Even if you set up show in the middle of the country in Kansas, Missouri or Nebraska you have to worry about tornadoes.
Yes, let’s blame the environmentalists. A nice, simple solution to a complicated problem. I feel so much better. Now what was someone saying about those unions?
“This is a very good reason why humans shouldn’t build on Geologically active land”
There are not many places in the world that are totally safe. Therare even earthquake risks in the midwest:
http://en.wikipedia.org/wiki/New_Madrid_Seismic_Zone
Environmentalists may have something to do with this, but at least in the US it is mostly capitalists and a changed regulatory framework. In much of the country electricity generation has been spun off into separate companies, and their electrical output is bid upon. Larger reserves mean both higher capital costs and lower peak prices, neither of which is attractive to those companies, so they keep them as low as possible. This is in contrast to the old days, when utilities were allowed to recover a statutory return on their generation assets, and power wasn’t sold at spot prices in the open market on an hourly basis. There are benefits to the newer approach, but someone is going to have to pay for bigger reserve capacity if that is what society wants to have.
There is a real reason that utllities don’t keep “ample” reserve on hand, at least the amount you are implying. Power plants cost a lot of money and excessive capacity sitting idle return zero. That is one reason why utilities were giving rebates for efficiency improvements. Distribution limitations are equally problematic as well and curbing demand helps get by with the existing distribution limitations. Of course you don’t want to be on the ragged edge of voltage collapse, but it just does not make economic sense to have that much capacity around.
The difficulty of building new generation and distribution is hardly just due to environmental concerns. They certainly play a part but In the more populated areas, NIMBYism from affluent property owners makes it all but impossible to build anything. Fears of falling property values, alleged effects from magnetic fields, unsightly towers, etc make it very difficult to get anything built.
There’s a way to go around the forthcoming electricity rationing that must follow all this events.
Major consumers could install in house generation. Then, when situation solves, get to an arrangement with the utilities or government or both to sell energy when the crisis relieves. Steel factories have MW level consumption, but that may help. The winners in this case would be GE, Siemens, Westinghouse and other gas turbine generator suppliers.
The government and utilities can also ask the people not to use the A/C until is really needed or when temp is above XXX°C or recommend barely comfortable temps for them. Just to name one measure. Distribution of low consumption bulbs might also help.
Last year, in Venezuela there was electricity rationing for several months. I remember how we had to deal in the plant with them. We had a small back up generator that was enough to keep the line moving. At home not much could be done.
The government owned steel and aluminum factories installed some generation capacity. If not they would have been idle for months, with the losses it brings and also the bad publicity for the government. When the crisis was imminent in January 2010, Chavez ordered their electricity use reduced to the minimum.
About the capacity being just the needed to cover the demand, that’s a very short sighted strategy that eventually is going to bite us in the ass later. Population continues to grow, and being more efficient is just not going to cut it, demand will grow with it. Then EVs are coming (I still prefer to have an ICE powered car with either LPG or CNG to reduce emissions) and even if their recharge is done during nights, there’s an end to that road.
As far as disruption to Japanese car production goes, I don’t think we have to worry about a shortage of cars to use. Same for electronics.
Hmm… It makes me wonder will strong Yen and production shortages will lead to price increase on Japan built cars and electronics?
Quite the opposite if, as expected, the BOJ implements QE (quantitative easing) measures to pay for the rebuilding from this disaster. Something that Japan has avoided as the US and China have implemented currency weakening measures, but will likely have little option due to this crisis.
What this means is that we should see a significant weakening of the yen over the next year as Japan rebuilds infrastructure and requires cash to do it (QE is basically printing money). This is compounded as Bernake’s QE-II is winding down in the US and the dollar is expected to strengthen over this time. A weaker yen may come sooner rather than later.
This should help Japanese manufacturers bring in stronger profits and sell Japanese made cars, but it’ll destabilize BOJ’s longer term goal of having Japan become a consumer driven economy. It’ll also bring into question Japanese car companies plans for expansion of overseas manufacturing (which is actually a benefit to them).
In the face of monumental human tragedy, the glib and snarky commentary simply can’t take even one day off. Is that really so much to ask?