The serious problems at the nuclear power plant in Japan have raised new doubts about the safety of nuclear energy. New exploration has yet to resume in the Gulf of Mexico after last year’s blowout of a BPoil well. And coal plants have been under a shadow because of their contribution to global warming.
Meanwhile, natural gashas overcome two of its biggest hurdles — volatile prices andquestionable supplies. In large part because of new discoveries in theUnited States and abroad that have significantly increased knownreserves, natural gas prices have been relatively low in the last twoyears.
It is far too early to say for sure whether the calamitous events inJapan may roll back the global nuclear revival and lead to a surge innatural gas demand. It is also too early to say whether officials incharge of nuclear policy are just paying lip service to the public’ssafety concerns in the wake of the unfolding disaster.
Still, with the global demand for energy expected to grow by doubledigits in coming decades, analysts are anticipating a new boom in gasconsumption. Given the growing concerns about nuclear power and theconstraints on carbon emissions, one bank, Société Générale, callednatural gas the fuel of “no choice.”
“At the end of the day, when you look at the risk-reward equation,natural gas comes out as a winner,” said Lawrence J. Goldstein, aneconomist at the Energy Policy Research Foundation. “It’s a technicalknockout.”
Financial markets have already started to price in this new interest ingas. Since the disaster in Japan, uranium prices have dropped by 30percent, while natural gas prices in Europe and the United States haverisen by about 10 percent. Officials from several countries, includingChina, Germany, Finland and South Africa, said they would review theirnuclear strategies.
Utilities are also reconsidering natural gas as a potential source ofstable power, a function historically filled by coal and nuclear energy.Utility chiefs have been wary of price fluctuations of natural gas,particularly in the last two decades.
But that may be about to change, according to John Rowe, chairman of Exelon,the biggest nuclear utility in the United States. He argued thatbuilding a nuclear power plant would be prohibitively expensive, whilenew rules limiting carbon emissions by the Environmental Protection Agencywould require costly investments to scrub emissions from coal-poweredplants. This means that utilities will increasingly switch to naturalgas.
“Natural gas is queen,” Mr. Rowe told a panel at the American Enterprise Institute in Washington this month.
That view was endorsed by a report to be released on Tuesday by the Bipartisan Policy Center and the American Clean Skies Foundation,which predicts that natural gas consumption will increase because of anabundance of new supplies, some of them in the United States, that arelikely to keep prices relatively low.
Global natural gas production rose by 44 percent in the two decades from1990 and 2010, while gas reserves grew by 67 percent. After peaking at$13.58 per thousand cubic feet in 2008, gas prices in the United Statesaveraged $4.38 last year. What is more, natural gas emits about half asmuch carbon dioxide as coal when it is burned to produce one kilowatthour of electricity.
The immediate market for natural gas will likely be Japan, which islooking to raise its fuel imports after a fifth of its nuclear powercapacity was shut down, including the troubled Fukushima Daiichi plant.And Tokyo Electric Power says that the rolling blackouts in the countrywill continue at least into next winter.
Japan already imports a third of global liquefied natural gas shipmentsand its import terminals, mostly in the south, were not damaged by theearthquake. Nuclear power and coal each accounts for a quarter ofJapan’s power generation, while natural gas accounts for 30 percent,according to analysts with the Raymond James financial company.
“It could be that the Honshu earthquake is the catalyst whichfundamentally reshapes our approach to global energy,” BernsteinResearch analysts wrote last week.
Many oil companies have anticipated this shift. At Royal Dutch Shell, natural gas production overtook its oil output in recent years. Exxon Mobilbought XTO Energy last year to raise its presence in the growingdomestic shale gas market. It has also developed significant resourcesin Qatar, which holds the third-largest reserves of natural gas in theworld, after Russia and Iran.
Huge new projects dedicated to liquefied natural gas — in which gas isfrozen, compressed in liquid form for easier shipment, then returned to agas state at import terminals — have been mushrooming around the world.
In Papua-New Guinea, Exxon is leading a $15 billion project to build and develop an LNG plant to supply Asian customers. Chevronrecently began engineering work on the $40 billion Gorgon gas projectin Australia, along with Shell and Exxon. Russia, for its part, isplanning to develop huge new fields in the Arctic.
Natural gas is not without problems. To unlock methane from hard shalerocks in the United States, energy companies use hydraulic fracturing, amethod that has been criticized on the grounds of polluting watersources, including rivers and underground aquifers.
But energy policy must balance out these hazards with the concerns aboutnuclear power, as well as the still unresolved problem of what to dowith spent nuclear fuel that remains radioactive for hundreds of years.
“Nuclear power has suddenly found itself going from being (arguably)part of the solution for future green energy to a now dangerous relic ofthe cold war era,” Deutsche Bank said in a report last week.
In the United States, where no new reactor has been built since theThree Mile Island accident in 1979, the attitude toward nuclear powerhas been ambivalent. Last year, the president asked the EnergyDepartment to provide some financial backing for nuclear operations,including two reactors planned for Georgia.
But in the aftermath of the Japanese disaster, the administrationordered a comprehensive review of safety at nuclear plants.
At the same time, the industry has found it nearly impossible to developand finance new plants. In December, for example, Exelon dropped itsapplication to build a plant in Victoria County, Tex., in the face ofopposition.
Utilities have also faced a challenge in renewing their existingoperating licenses. The Pilgrim Nuclear Power Station, in Plymouth,Mass., has been waiting for a new license for five years because oflitigation and court delays. State officials in Vermont have beenbattling to shut down Entergy’s Vermont Yankee plant, which began operations in 1972.
There are 104 nuclear reactors in the United States, which contribute 23percent of the nation’s electrical power. Twenty reactors haveapplications pending with federal regulators to extend the plants’operating lives by as much as two decades, according to Bloomberg News.
“We are likely to do to nuclear licensing what we did to offshorepermitting,” Mr. Goldstein, of the energy policy foundation, said. “Wewill delay and stall.”
David Jolly contributed reporting.