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Clean Energy Gets a Boost in Japan

Apr. 05, 2011 1:44 PM ET
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Long Only, ETF investing, Energy

Seeking Alpha Analyst Since 2009

Harris Roen is a financial writer with a passion for understanding the economic activity of our interconnected world. His previous experience of over 15 years as a professional portfolio manager helps him ground-truth the hype through independent research and analysis, providing valuable information for readers. Mr. Roen filters through numerous economic mainstream and specialty media reports, looking for clear, dependable information. Key economic data such as interest rates, investor sentiment, earnings and debt are constantly monitored to discern vital long-term market trends. Independent thinking is used to distill data into trends that can be turned into actionable strategies. Individual companies and mutual funds are examined in detail to see who rises to the top regarding present quality and, more importantly, positive future prospects. The Roen Financial Report has a specific focus in the energy arena, where high-quality companies that are building a future less dependent on coal and foreign oil are sought out. The goal at the Roen Financial Report is to present expert content in a useful, affordable newsletter. The publication strives to make recommendations solely on clear, deliberate strategies in an understandable, helpful manner.
The recent earthquake and tsunami in Japan is heartbreaking. The devastating loss of life, dislocation of families, environmental damage and disruption of economic activity are all distressing stories that will continue to play out over the years. Additionally, Japan is facing an enormous reconstruction effort on a scale unprecedented in modern history.
According to the Insurance Journal, the cost of damages from the earthquake and tsunami are estimated at $185 to $308 billion (¥16 to ¥25 trillion). This makes it by far the costliest natural disaster ever to occur. Damages are more than double those of the Kobe earthquake (also occurring in Japan), which before this event was the world’s most expensive natural disaster.
Japan is the third largest industrial nation in the world. It is also an island nation with no significant domestic fossil fuel resources. This means virtually all of Japans energy requirements are imported. Considering the ongoing chaos at the Fukushima Daichi reactor, mounting oil prices, and unrest in the Gulf states, it is not surprising at all that Japan is looking to renewable energy sources for reconstruction.
A very significant example of this focus on renewables is a recent announcement from Japan’s Chief Cabinet Secretary Yukio Edano. In a report by Platts News, Edano stated unequivocally the need to rethink Japan’s energy sources:
"Considering the damage inflicted this time, alternative energies will become one of the important pillars [of reconstruction].  [Solar] energy or biofuels, so to speak, clean energy, these will be boosted and beefed up in order to overcome the damage done by this disaster."
According to a recent report by the U.S. Energy Information Agency (EIA), Japan is the world’s largest importer of liquid natural gas and coal, and the third largest net importer of oil. Fully 11% of energy consumption is produced form nuclear (see EIA chart below). Yet only 1% of Japan’s energy currently comes from renewables. For one of Japan’s highest level policy makers to talk about clean energy is a major shift in Japan’s energy policy.

There is no question in my mind that cleanup and rebuilding efforts on the northern coast of Japan will be thorough and unrelenting. Japan’s resilient people will seek to turn this disaster into an opportunity. As growth in demand for solar and other renewables is dropping in huge markets like Europe, Japan will likely be a growing market for alternative energy companies in the years ahead.

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