Concerns revived by the nuclear crisis in Japan could well reverse a renaissance in new power plant construction in many countries, while design upgrades to prevent similar reactor failures will make those that are built more expensive.
The 9.0 earthquake and resulting tsunami that struck northeastern Japan on Friday have caused a series of catastrophic failures in several nuclear reactors at the Fukushima Daiichi plant. Attempts to cool overheating fuel rods have led to four explosions, giving rise to fear over how much nuclear radiation may have escaped.
As the crisis has deepened, so has its potential to inflict lasting damage on the nuclear industry.
"Nuclear, long term, will be decided over the next couple of weeks," Abel Mojica, a manager of energy-related limited partnerships atTortoise Capital Advisors,told Bloomberg News. "If there are decisions after the post mortem, that there are additional safety features required, that could add to costs."
The economic ramifications of the disaster could negatively impact companies that build nuclear power plants and supply uranium fuel as well as the utilities that operate the facilities.
The seriousness of the disaster at the Fukushima plant will only add to public pessimism over nuclear power, which in turn will sap political support in democratic nations for building new plants.
In the United States, the crisis revealed old fault lines in the nuclear power debate just when it seemed Republicans and Democrats had found an issue on which they could agree. Many Republican leaders in Congress are major proponents of building new nuclear plants. And U.S. President Barack Obama included $54.5 billion in loan guarantees for new plants in his proposed 2012 budget, triple last year's request.
But in the wake of Japan's disaster, some lawmakers, including Sen. Joe Lieberman (I-CT) and Rep. Ed Markey (D-MA) have called for a moratorium on any new nuclear plants in the United States.
"We don't know where it's going with regard to the nuclear power plants in Japan right now,"Lieberman said on CBS' "Face the Nation" on Sunday. "I think it calls on us here in the U.S. – naturally not to stop building nuclear power plants, but to put the brakes on right now until we understand the ramifications of what's happened in Japan."
Republican leaders aren't so eager to slow down.
"I don't think right after a major environmental catastrophe is a very good time to be making American domestic policy," Senate Republican Leader Mitch McConnell (R-KY) said on Fox News Sunday. "My thought about it is, we ought not to make American and domestic policy based upon an event that happened in Japan."
The White House so far has maintained its support for new plants. Nuclear power "remains a part of the president's overall energy plan,"said White House press secretary Jay Carney at a briefing Monday.
The 104 nuclear power plants in the United States generate 20% of the nation's electricity. Almost no new plants have come online in the past 30 years, however, following the accident at Three Mile Island in 1979.
While no injuries resulted from the accident, which was far less serious than the current crisis in Japan, nuclear power got a black eye in the United States from which it had only just recently started to recover. The disaster at the Soviet Union's reactor in Chernobyl in 1986, which blasted radioactive material into the atmosphere that spread for hundreds of miles, further hardened U.S. sentiment against nuclear power.
But in the past few years, higher costs for fossil fuels and increased concerns about global warming presented nuclear power with a second chance. The Nuclear Regulatory Commission is reviewing 20 license applications from 12 companies that want to build new reactors. Preparations have already begun for two plants, in South Carolina and Georgia. Both are expected to go online in 2016. Depending on the fallout from Japan's problems, as many as eight new reactors could be operational by 2020.
Peter Bradford, a former member of the Nuclear Regulatory Commission, said the disaster in Japan will lead to greater public skepticism and increased regulatory scrutiny.
"The image of a nuclear power plant blowing up before your eyes on the television screen is a first," Bradford told The Wall Street Journal. "That cannot be good for an industry that's looking for votes in Congress and in the state legislatures."
And those unforgettable images may also have regulators taking a harder look at the safety of existing plants, particularly those at risk of such natural disasters as earthquakes and floods.
"Regulators, politicians and activist groups are likely to view power plants of any design faced with similar risks to constitute a potential hazard," Hugh Wynne of Bernstein Research in New York said yesterday (Tuesday) in a report.
Although it will be years before investigations of the Fukushima disaster are completed, recommendations based on what is learned will affect not only future designs but also existing plants.
That could hurt utilities that own the plants, which may be required to retrofit older facilities to meet higher safety standards.
"It's necessary to have a sober and careful reassessment of the seismology," James Acton, an associate in the Nuclear Policy Program at the Carnegie Endowment in Washington told Bloomberg News. "There are valid safety concerns and it will be hard for the industry to rebut those arguments. But if additional safety costs become an economic issue, investors may not be willing to cough up the extra money."
A Global Issue
Globally, the crisis in Japan will almost certainly curb nuclear power in Europe, though the need for power will likely prevent many developing nations from significantly changing their pro-nuclear policies.
The backlash against nuclear power seems strongest in France and Germany.
German Chancellor Angela Merkel announced yesterday that all German nuclear facilities built before 1980 – seven out of 17 plants — would shut down for three months while that nation decides whether to go through with a plan approved last fall to extend their life by 12 years. Most polls show that about 70% of the German people oppose nuclear power.
In France, the Green Party called for a referendum on the future of nuclear power, which supplies 80% of France's electricity.
India and China, on the other hand, are determined to forge ahead, if perhaps a bit more cautiously.
India plans to spend $150 billion on nuclear power plant construction over the next few decades.
"Ours is a very power-hungry country," Srikumar Banerjee, the chairman of India's Atomic Energy Commission, said during a news conference yesterday. He noted that 40% of his country's population lacked power. "It is essential for us to have further electricity generation."
Still, India is watching events in Japan closely. India's prime minister, Manmohan Singh, said a safety review of the country's current 20 reactors would be carried out "with a view to ensuring that they would be able to withstand the impact of large natural disasters such as tsunamis and earthquakes."
China has far more grandiose nuclear ambitions. It wants to spend $511 billion on 245 reactors, with 40 complete and online by 2020. That's good news for nuclear construction companies like General Electric Co. (NYSE: GE), Toshiba Corp's (PINK: TOSBF) Westinghouse and Areva CIP (PINK: ARVCF), as well as uranium mining companies like Uranium One Inc (PINK: SXRZF), Cameco Corp. (NYSE: CCJ), Uranium Energy Corp. (AMEX: UEC ) and BHP Billiton Ltd (NYSE ADR: BHP).
"Evaluation of nuclear safety and the monitoring of plants will be definitely strengthened," Xie Zhenhua, vice chairman of the National Development and Reform Commission, said at a political conference in Beijing on Sunday.
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