From the Editor - Japanese Tragedy Will Alter Future Energy Plans

Steve Fiscor
The world witnessed another tragedy last month when a magnitute 8.9 earthquake rocked northern Japan only to be followed by a major tsunami. Our hearts and prayers go out to our friends in Japan that have lost so much. We also wish Godspeed to the brave individuals who opted to stay and try to contain the nuclear disaster at the Fukushima Daiichi power plant. Similar to miners rushing in after a cave in or an explosion, they are knowingly risking their lives to help save others.

Japan does not mine much anymore, but it consumes quite a bit of raw materi- als. The country is a significant importer of aluminum, copper and iron ore. Among the hardest hit companies were Dowa Holdings, Hitachi, Mitsubishi Materials, Mitsui, Nippon Steel and Pacific Metals. Reports from the field indicate that some of the copper smelters had to declare force majeure on concentrate shipments. Steel mills reported more damage to coke batteries than the mills themselves. Many port facilities will be out of commission for months, maybe years, including the Ports of Sendai, Ishinomaki and Onahama.

On top of the massive casualties, financial loss and cleanup effort, one has to wonder about the long-term affect this tragedy will have on society. The World Bank has estimated the damage to be $224 billion. The reconstruction effort will take at least five years. Another country will now be competing for natural resources in a market already strapped tight. Then, there is the question of power generation. From an engineering perspective, nuclear power is arguably the most efficient way to produce power. Unfortunately, just as the sector was about to awaken from a 30-year coma induced by the Three Mile Island incident, the world saw the reac- tors at the Fukushima Daiichi nuclear power plant explode. Immediately, Germany decided to idle one-third of its nuclear capacity. China said it will freeze approvals for new nuclear power plants until it is satisfied with safety plans. The spot price for uranium suffered a steep decline.

Forecasts regarding new power generation investments made just months ago, according to McIlvaine Co., are now being revised to reflect lower investment in new nuclear power plants and higher investment in alternatives. Experts do not expect a massive shift to gas for base-load power generation. Gas can be converted into liq- uid fuels. Any big disparity between the price of oil and gas, according to McIlvaine, will eventually be eliminated by building gas-to-liquid plants. Longer term, the biggest shift will be from nuclear to coal.

China is a major coal producer and it was expected to account for about 40% of new nuclear capacity. India and other emerging economies will also be influenced to put more emphasis on coal. The seaborne coal market, however, has suffered sev- eral major interruptions during the past few years. Even if power producers can afford the coal, availability will remain an issue. Unless the industry marshals a major effort to increase production, coal cannot be expected to fill the gap. Japan will rebuild much more quickly and efficiently than other parts of the world that have suffered the same destructive natural forces. The new neighbor- hoods, factories and ports will be better than ever. The world, however, will face some new realities on demand and prices for raw materials and difficult decisions regarding the future of its energy mix. The common sense answer is a balanced port- folio that includes nuclear power generation. Unfortunately, the general population remains largely uninformed about energy issues.

Steve Fiscor, Editor-in-Chief, E&MJ

As featured in Womp 2011 Vol 03 -