As crews in Japan scramble to contain what has been called the world’s worst nuclear crisis in 25 years, governments around the world are questioning the safety of nuclear power. Germany temporarily shut down its older nuclear power stations, while China has postponed approval of new nuclear plants. Other countries, including the U.S., are calling for more scrutiny of nuclear policies and plant locations.
Some analysts speculate that the crisis could eventually send the world’s energy prices higher. Natural gas for April delivery rose 1.8% to $4.244 per million British thermal units in the first four days of trading this week in New York. Natural gas futures are up 3.4% from a year ago. And in a survey by Bloomberg news, 6 of 14 analysts say that natural gas futures will rise through April 1 on speculation that damaged reactors in Japan will divert cargoes of liquefied natural gas from the U.S.
What’s more, Anuj Sharma, an analyst at Pritchard Capital Partners in Houston, says prices could rise in the long-term if lessons from Japan result in more regulations that could add to costs.
The crisis has rightfully sent jitters across the nuclear industry. News that Japan advised against feeding tap water to infants due to higher radiation levels sounded alarms globally, with the U.S. being the first nation to block some food imports from Japan.
No doubt the developments are scary, but the crisis may serve more as a cautionary tale than the big game-changer over nuclear power. In a report released this week, Capital Economics senior economist Andrew Kenningham makes two strong points for why the crisis will have limited impact on global energy markets.
For one, the so-called “nuclear renaissance” that many say could transform global energy markets is not as big a renaissance as it might seem. It’s true that a significant portion of Japan’s electricity output — about 30% — comes from nuclear. And like many countries before the crisis, Japan was planning to boost that share over the next several years. But Kenningham, citing estimates from the International Energy Association, says that nuclear power isn’t forecast to be that big of a player in global energy markets. The association estimates that generation of nuclear power would rise by 20% between now and 2030, but the share of nuclear in electricity generation would fall from 14% to 11% during the same period. And in the grand scheme of things, this would make up a relatively small portion, 6%, of the world’s total energy supply.
The big player in nuclear is China. In the coming years, it is poised to have the world’s biggest appetite, accounting for 45% of expected growth in nuclear power. China has currently suspended approvals of new nuclear plants, but Kenningham expects it to go ahead with its nuclear program eventually.
In fact, it may have no other choice. China, the world’s second-largest economy, currently depends on fossil fuels for almost all of its energy — much of it generated from high-polluting coal. Officials have acknowledged that’s not sustainable given that the country’s rapidly growing economy has produced an almost insatiable appetite for more power. President Hu Jintao has said he wants renewable sources to produce 15% of China’s energy by 2020 and and it’s currently developing wind, solar and hydroelectric power. No doubt nuclear power is in the mix — China is building nuclear reactors faster than any other country in the world, with projects representing 60% of all nuclear power plant construction globally.
It’s clear that Japan’s crisis will have an impact on the way governments around the world handle nuclear energy production in the future, but that won’t necessarily result in higher energy prices overall.
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