One of the many things to worry about now that Japan is finally doing what we have been waiting for it to do (devaluing the yen and so pushing up the stock market at speed) is the effect the falling currency will have on the price of its energy imports.
With that in mind it is worth reading this report of a talk given by Stefan Larus Stafansson, the ambassador of Iceland to Japan, at the United Nations University Headquarters in Tokyo late last year.
In it he notes that geothermal has become the backbone of the Icelandic economy – some 66% of its energy comes from domestic geothermal sources (which must have been useful when the krona collapsed in 2008).
However, he also notes that Japan has the world’s third greatest geothermal potential (something that won’t surprise anyone who has ever been on an onsen trip in Japan) and that, were they to use it, the energy produced could replace 25 nuclear reactors.
Yet back in the late 1990s, Japan, under the LDP, made a decision to focus on nuclear power at the expense of all other types. The last geothermal plant in Japan was built in 1999, and all research support from the government was suspended in 2003.
Just as interesting is the fact that nearly all the geothermal turbines used in Iceland are made in Japan – the market is controlled by Mitsubishi Heavy Industries, Toshiba and Fuji.
There is talk about new plants, including one in Fukushima itself, but things aren’t exactly moving very fast.
Perhaps the fall in the yen they have now orchestrated so brilliantly might focus the minds of the LDP a little more on Japan’s long term energy prices and their effect on the current account: last month’s trade deficit came in at yet another new record thanks almost entirely to rising energy costs.
PS: Heating prices in Iceland are the lowest in northern Europe, thanks to the use of naturally hot water to heat homes. Iceland also uses its hot water to farm tropical fish.