This post by Jane Nakano at CSIS is a follow-up to Part 1, which was published yesterday on May 22, 2010.

U.S.-Japan Partnership in the Era of Global Nuclear Renaissance

While the U.S. nuclear industry continues to find itself in the uncertain policy environment at home, civilian nuclear power program is taking off around the world. According to the Energy Information Administration, its forecast for nuclear electricity generation in 2025 is 25 percent higher in its 2009 publication than that published 5 years ago. The strong increase is driven primarily by non-OECD (Organization for Economic Cooperation and Development) Asia: 7.8 percent per annum from 2006 to 2030, including projected increases of 8.9 percent per annum in China and 9.9 percent per annum in India. Nuclear energy is receiving greater interest in the Middle East, too. In recent years, in addition to countries with a long history of nuclear energy pursuits like Egypt and Turkey, Bahrain, Jordan, Kuwait, Oman, Qatar, Saudi Arabia, the United Arab Emirates, and Yemen have indicated their intent to develop nuclear energy. American and Japanese nuclear energy industries are going global, too. In 2006, Toshiba acquired the nuclear business unit of Westinghouse. In 2007, Hitachi and General Electric formed a nuclear business joint venture. Mitsubishi Heavy Industries and Areva of France formed a joint venture company in 2009, as well. The American and Japanese nuclear industries seem remarkably complementary to one another. While Japan has a smaller domestic market with a declining electricity demand due to the aging of its population, the U.S. market is potentially large. The Japanese are relatively inexperienced in expanding business globally. Meanwhile, the U.S. industry has been more successful in entering into the global market. Furthermore, the Japanese have greater technical capability and plant construction experience from the continued growth of a domestic program that the U.S. lacks.  The global nuclear power market is becoming competitive as ever. For example, both GE-Hitachi and Toshiba-Westinghouse competed for providing nuclear plants in the United Arab Emirates in December 2009, but lost out to the Korean Electric Power Company led consortium. Most recently, the contract to build nuclear reactors in Vietnam was purportedly lost to Russia’s Rosatom in February 2010.

No consensus has yet to emerge as to what the U.S.-Japan teams should have done differently to win the UAE and Vietnam contracts. Regardless of the cause, the commercial partnership has arrived at the point where a close examination is warranted for national security as much as for commercial reasons. Nuclear nonproliferation and the development of civilian nuclear power program remain closely intertwined. Therefore, their failure to work together successfully in the nuclear industry would diminish the American and Japanese voices in shaping the course of the nonproliferation debate in this era of global nuclear expansion.