New Energy Alternative

Generally, it was one of the good news for energy policy in Japan. The United States Department of Energy announced that it had approved the application of a project in Texas for exporting shale gas to Japan. It will be the first time for US to export shale gas to a country without a free trade agreement. The approval had a possibility that US shale gas might be sharing about twenty percent of liquefied natural gas supply in Japan. But its real impact is not clear.

The project is developing shale gas in Freeport, a city on the coastline of Gulf of Mexico. Joining the project, Chubu Electric Power and Osaka Gas is obtaining the right to buy the gas. There are two other similar projects ongoing in US. One is in Maryland with the cooperation of Sumitomo Corporation and Tokyo Gas, and another is in Louisiana with Mitsubishi Corporation and Mitsui & Co., Ltd. for supplying to Tokyo Electric Power Company. When all three projects are approved, shale gas will be a reliable source for energy supply in Japan.

The most fascinating element of US shale gas is its low price. While the average price of imported LNG in Japan has been $17 per a million British Thermal Unit, LNG in US cost only $4 last year. With the unavailability of nuclear power, the price of electricity in Japan is getting high these years. By using cheap US shale gas for thermal power generation, Japan can secure cheap energy that may lead to stable economic growth. Development Bank of Japan estimated that the imported LNG price could be cut by 15% by 2020, if US shale gas would be available.

Another merit for Japan is having competitiveness in energy procurement. About a half of imported LNG now comes from Australia, Malaysia and Qatar. With securing US shale gas, Japan may draw a better deals from those exporters. Russia already suffered from the shift of exports of Qatar from US to Europe. Japan might have good deal with Russia, which is looking for major importers of its natural gas.

It is, however, not clear how Japanese energy market will be flexible for accepting more LNG. Technology looks like making other energy sources obsolete. Hydroelectric generation costs very much to build facilities. Renewable energy is unreliable so far. Nuclear energy is too dangerous. But, Japanese energy structure highly dependent on nuclear power cannot allow LNG replace nuclear power generation. “Atomic Village,” a group of influential people who are involved in the development of nuclear energy in Japan, is too enthusiastic in resuming nuclear power plants to think about energy shift. It is necessary for expanding the possibility of shale gas to encourage political decision of lawmakers in Japan.