LEADING A NUCLEAR AGE

ENERGY POLICY:The world's second largest economy believes there is no alternative for powering industrial expansion

JAPAN IS taking its G8 leadership role very seriously. If in doubt, check out the news, leaked last month, that the world's second-largest economy will announce a 60-80 per cent cut in greenhouse gases by 2050 at July's G8 Summit, one of the most ambitious national targets yet. Exactly how this will be achieved is the subject of great speculation, but most Japanese business and political leaders agree on one thing: nuclear energy will shoulder much of the burden.

A virtually resource-free country, heavily dependent on imported fuel, Japan has long bucked a global trend of freezing or cancelling nuclear projects.

The country relies on 52 reactors for about a third of its power generation needs, but aims to push this to 40 per cent (60-70 reactors) within the next decade. The plans include an ambitious commercial fast-breeder programme and a huge new nuclear reprocessing plant at Rokkasho which will make Japan one of the planet's largest producers of plutonium.

Japan's ministry of economy, trade and industry (Meti) is also expected to green-light the construction of the world's first commercial thermal reactor to run exclusively on spent nuclear fuel, known as mixed-oxide.

Criticism of these projects, and the decision of some countries, notably Germany, to abandon nuclear energy, will not affect Japanese policy, insists the ministry. "Each country has its own conditions in formulating energy policy. Nuclear power remains important for us," says an official.

Meti believes that Japan's decision to stick with this policy, despite a string of scandals and cost overruns, may be about to pay off.

With climate-change fears fuelling a so-called "renaissance" of nuclear power and a promised boom in new construction, Toshiba, Mitsubishi Heavy Industries and Hitachi are gearing up for major expansion abroad.

Analysts expect capital investment by the big three plant and equipment makers to grow by more than €65 million by the end of the decade, doubling production capacity for turbines and reactors.

The prize is a share in the contracts for 150 nuclear plants mooted for construction worldwide over the next 20 years, adding to the roughly 430 reactors already in operation. Many wonder if these plants will ever be built - nuclear power is still considered too risky and expensive for most commercial investors.

"Wall Street doesn't like nuclear power," says the US-based Institute of Energy and Environmental Research, summing up a widespread belief that the industry will never be profitable, let alone safe. But Japan is betting that the growing political lobby behind low-carbon energy will sweep away doubts and put it at the head of the nuclear pack.

Industry leader Toshiba this year announced plans to construct 33 plants by 2015, including several in China, and has already staked a major claim in the US market.

In 2006, the firm paid the British government $5.4 billion (€3.5 billion) for Westinghouse Electric, which this year won its first new contract in three decades to build two reactors in the US state of Georgia. Last month, South Carolina Electric and Gas Company ordered two more reactors from Toshiba to be built by 2016.

Mitsubishi Heavy, meanwhile, has partnered with French nuclear giant Areva and is currently mulling over a stake in Pebble Bed Modular Reactor Pty, a South African government-owned firm that plans to develop 24 reactors. Hitachi and the US-based General Electric company have merged their nuclear power businesses, consolidating the global industry into three powerful multinational camps: Toshiba-Westinghouse, Mitsubishi-Areva and Hitachi-GE.

The mergers are recognition that, for better or worse, the moratorium on plant construction is ending, and that Japanese companies are now world leaders in nuclear technology.

Masaharu Sato, a senior analyst at Daiwa Shoten says: "Japanese companies such as Toshiba are playing a very important role the nuclear industry, in terms of technological expertise and equipment manufacture. Westinghouse has a lot of experience with buildings and design, but the Japanese, and the French, know what goes on inside the plants."

Expect a scramble for contracts and raw materials then over the next couple of years as an industry many thought had been buried by the 1979 Three Mile Island incident and the 1986 Chernobyl disaster judders back to life.

Higher demand has already sent the price of uranium rocketing by 500 per cent since 2003, forcing the major players to improvise. Toshiba, for example, has bought into a uranium mine in Kazakhstan which holds some of the biggest reserves on the planet.

It may seem counterintuitive that Japan of all places is embracing nuclear power. This, after all, is the only nation in the world to have suffered the horror of an atomic bomb, which killed about 250,000 people, and left behind a vociferous anti-nuclear lobby.

But staunch technological support from Tokyo's US ally and corporate pressure to find alternative power sources to Middle East oil, long ago trumped civilian concerns: Japan built its first reactor way back in 1966. The government assures opponents that the dividing line between civilian and military use is non-negotiable, despite a growing stockpile of plutonium and political hints that it may one day be used to make an atomic bomb.

The nuclear-first strategy has also survived a series of deadly blunders, including an accident at a plant two years ago that killed four, and the discovery last year of an earthquake fault close to the world's largest nuclear-power complex in Kashiwazaki-Kariwa. The complex remains closed.

One obvious attraction of the nuclear revival for Japan is a chance to recoup the enormous industrial investment made during the years when much of the world was switched off. Success in the US market would clear a path in Asia, which will account for over a third of the world's new plants, says Michael Richardson, an energy and security specialist at Singapore's Institute of Southeast Asian Studies.

"More than 110 power reactors are generating electricity in six Asian countries, with dozens more under construction in northeast, southeast and south Asia," he says.

India and China both plan a massive expansion in nuclear power in the coming decades. South Korea will raise the percentage of electricity it generates from nuclear power from 45 to 60 per cent by 2035, and then there are emerging economies such as Vietnam, which is about to build its first nuclear plant with help from Meti.

With private investors skittish about laying out €260 million) or more per plant, state backing is seen as crucial. The US government is offering loan guarantees and tax incentives to plant builders; an appropriation bill aimed at kick-starting 30 new reactors there last year set aside $18.5 billion (€11.9 billion) for the sector. US Department of Energy officials have also been shuttling to Tokyo to ask for financial help from the Japan Bank of International Co-operation which is reportedly planning to dole out huge loans to the big three.

Critics say such state intervention proves something they have long suspected: nuclear power is not commercially sustainable, nor should it be, says Satoshi Abe, senior analyst at Daiwa Institute of Research. "I think it is asking too much of the private sector to continue bearing the country's nuclear policy banner."

Many also doubt Tokyo's claim that building more reactors is the only way to stop the planet from cooking.

"The story of whether we succeed on global warming will be long over before the new plants are up and running," says Mioko Smith, director of Green Action Network which opposes the construction of new plants. "To see nuclear power as part of the global warming response is unconscionable."

Despite these concerns, the industry has built up a head of steam that seems unlikely to dissipate anytime soon. Expect to see the Japanese majors, and Prime Minister Yasuo Fukuda, make a strong pitch for nuclear power at the G8 Summit in July.