Last year at this time, the world watched in horror as the Japanese struggled with containing the fallout from the disaster at the Fukishima Daiichi nuclear station. The disaster ranked as the most devastating nuclear industry accident of all time. A year later there is still great concern that the damaged reactors are under control and there is a view that it will be decades before the accident will be cleaned up. Along with the cleanup the human cost will be unknown for years as the level of contamination and radiation exposure to Japanese living in the area is still unknown.
In the aftermath of the accident the Japanese took the decision to shutdown their entire reactor fleet. As of today only one reactor of the fifty four in Japan are currently operating. Japanese public opinion towards nuclear power has swung decidedly negative.
An overwhelming majority of Japanese people want to ditch nuclear power, according to a poll published today one year on from the massive nuclear disaster at the Fukushima Dai-ichi power station.
The poll conducted by the Japan Association for Public Opinion Research and published by the Tokyo Shimbun newspaper found that 79.6 per cent of the 3,000 adults asked were at least more or less in favour of eventually ending the country's dependence on nuclear power.
Some 43.7 per cent of respondents believe Japan should gradually reduce its dependence on nuclear power and eventually do away with atomic energy altogether.
Another 35.9 per cent agreed with that position more than they disagreed with it.
Only 4.5 per cent backed a nuclear future, with 12 per cent saying that they leaned towards supporting nuclear power.
The poll results reflect an understandable negative mood towards nuclear energy among the Japanese. However moods change with realities. Unless Japan is prepared to downsize their economy and forgo a modern society they have virtually no choice but to move ahead with the restart of their nuclear industry. The fact is that the country has no natural resources and this is the reason nuclear was embraced to begin with. Currently, Japan is importing LNG as a replacement fuel for gas generators to produce electricity. Unfortunately costs are skyrocketing as LNG prices paid by Japan in November reached a record US$16.96/btu and were as high as US$16.76/btu at the end of January. The other problem besides the cost of LNG is that this type of generation, according to Japan's Institute for Energy Economics, can only meet around two thirds of Japans energy needs once all the reactors are offline. The imports of LNG and crude oil that have been used as a substitute for the lost nuclear generation have led to Japan's trade deficit exploding to records.
The country's trade deficit of 2.49 trillion yen in 2011 was the second largest since World War II. That also contributed to the nation's current-account surplus sliding to a 15-year low in 2011.
The earthquake and tsunami led to the idling of nuclear plants and a surge in energy imports. Japan's liquefied natural gas imports rose 12.2 percent to a record in 2011 as power utilities increased thermal power generation.
Energy needs accounted for most of the gain in imports in January.
"The deficit is still expanding against a background of increasing energy imports," said Masaaki Kanno, chief Japan economist at JPMorgan Chase in Tokyo. "Unless we see a significant increase in the operating rate of nuclear power plants, eventually the rising cost of power will be translated to the corporations."
Unless the Japanese want to live a life of blackouts and experience a lower standard of living I would suggest eventually the reactors will be switched back on albeit with far more regulation and oversight. It appears the government and industry also understands this and is moving in this direction.
Ruben Lazo, Chief Commercial Officer at Areva, stated in a March 26 interview at the company's headquarters in Paris, "I'm sure that Japan will restart a few reactors this year, and complete all necessary measures to restart many others in 2013 and 2014." "Responsible governments won't tie the whole industrial and economic development of their country to a single source of energy," Lazo said. "Manufacturers want some predictability in power prices that can't be provided by gas, while nuclear is the only energy that can guarantee some price stability."
Here in the US we have quietly seen two approvals for recent new builds of reactors for Southern Company's Vogtle 3&4 units in Georgia. Pictures of the construction site can be seen here. The other approval is for South Carolina Electric and Gas and Santee Cooper to build a new plant at the site of the existing V.C. Summer nuclear power plant in South Carolina.
What is interesting is that Americans still are in favor of nuclear power according to a recent Gallop poll. 57% of Americans, which is near the historic high range, see nuclear power as being safe while 40% see nuclear power as being unsafe. The poll was taken after the Fukishima disaster which makes it even more relevant. This is in direct contrast to the view taken in Germany where the government was forced by panicked public opinion to announce that they intend to phase out nuclear power by 2022. Seven older reactors were immediately taken off line and the lost production was replaced by coal fired electrical production. How the Green Party, which lobbied for the nuclear shutdown, will reconcile the additional 370 million tons of carbon dioxide (CO2) emissions through 2020 that will be added to the atmosphere due to the coal burned to replace the furloughed nuclear generation has not been explained. I am sure that if asked some combination of wind and solar will be offered as the answer. Unfortunately for German industry, this will not allow for the maintaining of their industrial domination in Europe. I suspect that before 2022, like in Japan, economic interest will allow for some type of compromise position.
Regardless of what Japan and Germany choose to do with respect to nuclear power countries like China, India, Russia, and many smaller countries are moving ahead with expanding their nuclear fleets. The fact is that world energy demand will increase 80% by 2030 and for these energy starved countries, 1.8 billion people in the world still have not turned on a light switch, nuclear power will be part of a total energy mix and solution. Considering this fact and also considering that the price of uranium is still depressed it is my thesis that insufficient capital has been attracted to the uranium sector to allow for sufficient mine supply.
In fact the amount of uranium from mines is not sufficient for current operating nuclear power plants already online. The deficit has been filled with down blended uranium from decommissioned nuclear missiles such as the Megatons to Megawatts program which is set to expire next year. This is especially concerning for a country like the US which only domestically supplies around 7% of uranium that it uses in its reactors. My view is that increased use of nuclear power will lead to substantially higher prices for uranium in the next few years as the mine deficit begins to assert itself on the uranium price. I am long the Global X Uranium ETF (URA).
Disclosure: I am long URA.
