JAPAN'S earthquake has left a gaping hole in the nation's power capacity that looks set to last months, threatening to make economic recovery far more feeble than hoped. The first rolling power cuts in the history of the giant Tokyo Electric Power Co (TEPCO) have already closed many plants, with Toyota shutting down until at least Wednesday. Rolling three-hour blackouts have wrecked the clockwork precision of Japan's railways while a thousand schools across Tokyo cancelled classes. Even Tokyo's ubiquitous neon signs have gone dark, a big blow to confidence in a country that lives by routine and order. With a new explosion at a nuclear plant in Fukushima threatening a far more serious radiation leak, the power shortage will not get better anytime soon. “It looks like Japan could be in a ‘power down' state for a protracted period,” said Stephen Roberts, Nomura's chief economist for Australia. “That's what makes it different from other major quakes.” “People tend to compare it to Kobe and assume a “v”-shaped recovery, but Kobe never caused this level of power disruption,” he added. “It means any proper recovery could be delayed right out to the fourth quarter.” Early estimates for the cost of the latest quake run up to around $150-$180 billion, but most analysts have assumed the boost from rebuilding will spark a swift recovery. After all, the Kobe quake of January 1995 is estimated to have cost around $100 billion but the economy rebounded faster from it than many expected at the time. While manufacturing production fell by 2.7 percent in January, it climbed 4.4 percent over the following three months. That largely reflected industry's ability to shift production to plants in unaffected parts of the country. There is certainly still plenty of unused manufacturing capacity in Japan, but far less when it comes to power supply. Analysts at Australian investment bank Macquarie estimated the earthquake and resulting tsunami took a quarter of TEPCO's total capacity of 65 gigawatts, shared between nuclear and oil. In all some 15 nuclear plants were shut down, and it was not clear how many would re-start or when. “We think power supply shortages and rations are likely to continue in TEPCO's supply area for months rather than weeks,” the analysts wrote in a note to clients. And the growing crisis at the Fukushima plant brings into question Japan's whole experiment with nuclear power, which provides about one-third of total generating capacity. “We believe this increases the risk of Japan's nuclear policy being scaled back,” said Macquarie. “But the lack of viable alternatives means this is more likely to relate to safety rather than switching to other sources.” — Reuters Nomura's Stephens said there was perhaps scope to ramp up power output at some of Japan's oil and coal plants, though at great extra cost. Japan's increased demand for coal, oil and LNG for generation would also add to upward pressure on resource prices and so to inflation risks elsewhere in Asia. But even then it was unlikely to be enough to make up the current shortfall in power. “If this lasts to the summer, which is more than possible, there is no way the system could supply the power for air conditioning,” he warned. “Tokyo in summer, without air con? Doesn't bear thinking about.” Even the simplest gas turbine power plants takes between one to two years to build, with coal plants generally a lot longer. And that assumes the government could ram through planning permission in a crowded island like Japan. Still, Japan was lucky to have a potential major supplier of liquefied natural gas (LNG) in Australia, where a number of massive projects are underway. “Any potential switch away from nuclear power is likely to favour gas-fired generation, the most practical low carbon-emission alternative,” said Arnon Musiker, a director in the energy team of ratings agency Fitch. “Australia is well positioned to meet additional medium-term gas demand,” said Musiker, noting the other traditional suppliers in the Asian region were running into gas shortfalls themselves.
