As of the end of 2010, Japan was generating about thirty percent of its electricity from nuclear power from its fleet of forty-two commercial power reactors. They intended to raise nuclear power generation to forty percent. Then, in March of 2011, a tsunami flooded the Fukushima power plant and four of the six reactors at the site were destroyed. Nuclear materials were released into the atmosphere and ground water. All of the reactors in Japan were immediately shut down.
Now, seven years later, only eight of the forty-two reactors are in operation. Serious problems and shortcomings remain in the current system of compensating people and organizations for damages resulting from nuclear accidents such as Fukushima.
In the aftermath of the Fukushima disaster, a group from the Japanese Atomic Energy Commission has been working on ways to improve the way in which nuclear accident damage is compensated but they have not yet brought fourth a formal proposal. The electric power and insurance industries failed to support the AEC group’s proposals. It appears as if the Government has no intention of solving these problems in the near future. Instead, they have been focusing on restarting more of the idle operational reactors which is considered by some to be irresponsible.
The current compensation system requires that operators of nuclear power plants sign contracts with the government and private insurance companies in order to finance compensation payouts that may result from accidents at their nuclear power plants. Unfortunately, these mandated contracts are limited to about a billion dollars per nuclear power plant. This is obviously far too little for realistic coverage considering that the payout so far for the Fukushima disaster has been about seventy billion dollars.
Following the Fukushima disaster, TEPCO, the owner and operator of the Fukushima power plant, was unable to raise the money required to cover the compensation claims. The Government came up with a “makeshift” program to pay the claims. The program consisted of having the Government pay the claims and then recover the cost over decades of payments from TEPCO and other major electric utilities.
The explanation that the Government provided for this approach was that utilities should work together to provide the massive amounts of money required to cover the cost of major nuclear accidents. The system devised for the Fukushima disaster was intended to be used again if another nuclear disaster occurred. Critics of this approach claimed that a system of mutual aid among competitors could be not be realistically sustained because due to the liberalization of the retail power market, power generation was becoming more competitive.
A better way has to be found to raise the massive sums of money required to pay for major nuclear disasters from the utility companies, their stakeholders and the government. A good first step would be to increase the insurance coverage for accident-caused losses. In addition, the government needs to continue to collaborate with nuclear related industries to develop a comprehensive plan.
One big issue is the possibility that a utility company could be bankrupted by a major nuclear accident. In this case, it is logical to assume that the government would have to step in to pay for compensation. But then it would need to find a way to recover costs from other players in the nuclear power market.
Raising insurance premiums for big electricity utilities could result in a substantial increase in the cost of electricity to consumers. This would be a burden for the citizens of Japan, but it would also be a more realistic approach to pricing electricity. The Government has claimed that nuclear power is cheaper than alternative energy sources but, factoring in the insurance for future accidents, it becomes obvious that this is just not true.
Contributing to the confusion over compensation for nuclear accidents is the fact that the government has been actively promoting nuclear power for decades. If there is another major nuclear accident in Japan, it will be very difficult for the government to maintain its support for nuclear power.