World Energy Market Adjusting to Japan Nuclear Crisis

By Greg lakus | Houston

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Snow falls as rescue workers in Japan search for victims of earthquake and tsunami -Photo: AP 

The earthquake and tsunami disaster in Japan has disrupted that Asian nation's power plants, including nuclear facilities that are still threatening the area with radiation leaks. The crisis at Japan's nuclear plants has caused a re-assessment of nuclear power plants and projects worldwide and could cause an uptick in demand for other sources of energy including coal, petroleum and natural gas. But energy experts do not believe the Japanese crisis will cause a major upset in world energy markets or even a major pullback from nuclear energy.

The disaster in Japan will have some short-term effect on the world energy market, but energy experts say there is unlikely to be a strong long-term impact. Japan is the third largest economy in the world and it imports almost all of its energy, with nuclear plants, until now, providing around 27 percent of the country's electrical generation. The price of crude oil dipped in recent days on speculation that Japan's demand for oil will continue to be low for many months to come as a result of the catastrophe. Damage to ports and refineries in Japan as well as a lack of electrical power to run those facilities has already caused a sharp decrease in petroleum use.

But Ken Medlock, an energy analyst at Rice University's James Baker Institute for Public Policy, says Japan will be importing some of its oil in a different form. “That crude is going to be redirected to other refineries and Japan will, as soon as they can get things back up and running with some sense of normalcy, will be importing petroleum products instead of crude, likely from some of their Asian neighbors, possibly from the US as well because we have some slack in our refining capacity here,” he said.

Some economists have suggested that there may be a spike in crude oil prices in coming months as Japan imports more oil to use in its recovery and rebuilding effort.  But Medlock does not foresee that either, because he believes the Japanese will have to restrict much of their normal energy usage until they have fully recovered.

“There's a lot of people who will not be driving in their cars they way they were before the accident. Their power consumption patterns may not be the same and quite frankly, the Japanese have demonstrated in the past when they have crises that they are willing to ration electricity to their customer base. I suspect they will do that even as they start to rebuild,” he said.

Medlock does see some increase in Japan's use of coal and natural gas as the country repairs coal and gas-burning power plants damaged by the earthquake and perhaps uses those plants more than nuclear plants for electricity generation. Japan is already imports more coal than any other nation. But, Medlock notes, building new power plants will take a long time and the world market will have time to absorb the additional demand.

The picture for nuclear, however, is mixed. While the Japanese struggle to deal with their current problems it is too early to say what  impact this disaster will have there. But news reports about the disaster are seen around the world and many people are now rethinking their plans to use nuclear power.  Here in Texas plans for expansion of a nuclear plant south of Houston have been shelved. Germany  has shut down seven of its nuclear plants, France has increased inspect, but is continuing its extensive use of nuclear power and Italy remains committed to building its first nuclear power plant.

Robert Bryce, author of the book  “Power Hungry” is an energy expert who advocates more use of nuclear energy. But he concedes the fear kindled by images of the stricken plants in Japan will set back the industry in some countries.

“Regardless , I think, of what happens from now forward, the psychological effects, the political issues surrounding nuclear are going to be much more difficult for any country or any company that is proposing to build them, particularly in the West,” Bryce said.

But Bryce says developing nations are likely to continue their aggressive programs to build nuclear capacity. China, which accounts for around 40 percent of the world's planned nuclear reactors, has suspended approval of new plants because of the crisis in Japan, but once new safety measures are instituted, the projects will probably move forward.

Bryce says interest in nuclear will continue because countries hungry for more electrical power have few other options.“For India, for China, for a lot of other developing countries nuclear is going to continue to be their most attractiveoption simply because of basic physics and math. The power densities that you can get with nuclear are just not available anywhere else,” Bryce said.

Bryce also notes that the damaged reactors in Japan were built decades ago before the development of safer designs that address some of the problems the Japanese now face in containing radiation and preventing a reactor meltdown.

“This is an important accident, it is going to change the industry, but a lot of the reactors that are now being designed are this new Generation Three reactors, they use passive fueling designs that should be far safer than the boiling water reactors that are 40-years-old-plus that are now causing the problems in Japan,” Bryce said.

Some environmental groups and anti-nuclear activists have suggested that Japan should abandon its nuclear sector and opt for “green” energy projects like wind and solar. But, as Robert Bryce has long argued, such energy alternatives are no where close to being able to replace the energy generated by a nuclear plant. Both wind and solar produce intermittent energy, depending on when the wind blows and when the sun shines, and neither of them are yet capable of producing more than a small fraction of  the energy demanded by a nation like Japan. In order to recover and get its economy back on track, Japan will have to rely on what is left of its nuclear power sector and increase its use of coal, natural gas and oil.