With the eyes of the world watching, Japanese soldiers and workers continue to battle to keep the six nuclear reactors at Fukushima from meltdown.
The most technologically advanced nation in the world has been forced to resort to using police water cannons and buckets of water hurled from helicopters to cool exposed fuel rods. Authorities admit they may have to bury the plant in sand and concrete to prevent a catastrophic release of radiation.
The frightening situation is far from resolved, but the crisis has already sent shockwaves through global energy markets.
The dangers of nuclear power have been thrown into the spotlight – halting building projects all over the world; while the third largest economy in the world is desperately importing fossil fuels just to turn the lights back on after the earthquake ripped through the power supply, leaving 1.3 million people without electricity.
In the short term, the need for energy has dropped as factories sit idle and there is little movement around the country.
But that will change rapidly as the reconstruction effort begins. Leo Drollas, chief economist at the Centre for Global Energy Studies, says: “Imagine all the girders needed to rebuild houses, cement for the flyways that have been destroyed, shipping fleets rebuilt, steel going into the trawlers.”
Japan has shut down 11 nuclear reactors in four different power plants. With talk of burying the Fukushima plant, it seems likely that at least six of those are lost for good. The question then is, what will replace them?
The country has more than 50 nuclear reactors – one in ten of the world’s total – squeezed on to its geologically unstable, densely populated land mass. Drollas says: “Obviously in Japan, there will be a major rethink.”
But it is not just Japan. German Chancellor Angela Merkel has already said she will close seven of the country’s 17 nuclear plants; while China has put its plans to build 110 new reactors on hold.
Mark Lewis, head of energy research at Deutsche Bank, says: “The obvious beneficiary of all of this is gas. If you want to build new power stations with relatively low emissions, the advantage of gas is that it’s much cleaner than coal, you can build it within three years, and it is ideal to build in conjunction with renewable capacity.”
Gas works well as a back-up for alternative fuels such as wind or solar, because its output can be altered quickly as levels of renewable output change.
Liquefied natural gas prices shot up 15pc to peak on Wednesday, dropping back slightly by the end of the week.
Coal will also enjoy a renaissance if nuclear’s future is defined by the ongoing Japanese situation, even though this could have disastrous effects for the environment as coal emits one tonne of CO2 for every megawatt of power that it generates, compared with nuclear, which emits no CO2.
Subsequently the cost of carbon surged this week to its highest level since 2008.
These prevailing forces will boost the market for renewable power. As fossil fuels get more expensive, alternative energy needs less subsidies.
But, argue nuclear advocates, the world cannot build renewable capacity fast enough. Kevin McCullough, chief operating officer of RWE npower, the German-owned company seeking to develop two nuclear power stations in the UK, said: “We mustn’t forget about climate change, the impending UK energy gap and the need to keep bills affordable. None of those challenges has gone away.
“No one source of energy can deliver all that, even if you take the most optimistic view of energy efficiency gains. The country needs new nuclear as part of its mix and we must focus on delivering that with safety as the priority.”
Safety is, of course, the sticking point. Nuclear power was only just emerging from the shadow cast by the catastrophic explosion in Chernobyl in 1986. Now Fukushima has given critics the ammunition they need to urge governments to halt their nuclear ambitions. Although this crisis has been much less severe than Chernobyl, commentators say it is worse for the industry as it happened at a modern reactor in a first world country.
Barclays commodity analysts said the Japanese nuclear plants were constructed with an extremely high level of technological sophistication to withstand earthquakes, with safety mechanisms including a tsunami wall.
In response to these safety concerns, the Nuclear Industry Association (NIA) came out fighting. NIA spokesman John Mcnamara said: “Effectively that power station shut down safely. When the earthquake struck, the station shut down and the safety systems kicked in. Obviously there are going to be learning points about the strength of the tsunami .”
Around the world, governments have ordered reviews of nuclear programmes, to “learn the lessons” from the crisis at the Fukushima nuclear plant in Japan.
In the UK, Liberal Democrat Energy Minister Chris Huhne commissioned a report from chief nuclear officer Mike Weightman.
The UK has 10 existing power stations, nine of which are scheduled to close by 2023. The previous Labour-led Government committed in 2006 to building a new generation of plants and eight sites have so far been shortlisted for replacement. But final investment decisions have not yet been made. As Deutsche’s Lewis points out: “No-one is close to the stage where they can start pouring concrete into the ground . This is going to push the timeframe back further still.”
He says it is inevitable that the cost of nuclear power will go up. “The amount of capital investment required to build a nuclear power station to the level needed for public confidence will be greater. And the perceived risk will go up, so the cost of financing [it] will go up. On an economic level it makes nuclear less competitive.”
Funding a nuclear power station is particularly risky in the UK, where the energy market has been liberalised.
“All the nuclear power stations in the UK were built before electricity markets were liberalised,” says Lewis. “You would expect to recover your cost because [of] the price of electricity . Liberalisation changes the game completely.”
Chris Huhne, energy and climate change secretary, has admitted there is an “ongoing potential risk” that investors will lose appetite for nuclear power in the UK following the crisis.
Anecdotal evidence suggests his fears may be realised. Gerard Reid, cleantech research analyst at investment bank Jefferies, says: “From the investor community, the energy funds I am speaking to, not alternative energy funds but funds who have had complete ’360s’ on this and were pro-nuclear, they have gone anti-nuclear.”
The Japanese crisis will also buffet Huhne’s planned electricity market reform, which he has called the biggest shake-up of the industry since the 1980s.
The energy White Paper due in late spring is expected to drive towards a much more open market. Drollas says: “This might make people reconsider whether market solutions have to be pursued at all costs.”
In Germany, which receives 23pc of its electricity from nuclear, the situation is even more acute. The German nuclear power industry has been at the centre of a raging political debate for decades. Last year,
Chancellor Merkel’s government took the controversial decision to extend the life of Germany’s nuclear power plants by 12 years. So it was a major shock when she announced the closure of the oldest reactors this week, ordering a three-month review of the other 10 remaining plants.
Further afield, President Barack Obama has ordered a comprehensive review of domestic nuclear plants.
In Asia, the picture is mixed. China is currently the world’s biggest builder of nuclear reactors, driving government plans forward without the lengthy consultation required in democratic countries.
It, however, appears cowed by the events in Japan, with the Chinese State Council decreeing: “We will temporarily suspend approval for nuclear power projects, including those that have already begun preliminary work, before nuclear safety regulations are approved.”
India, on the other hand, remained firm in its nuclear ambitions. The country of one billion people aims to generate 63GW of nuclear power by 2032, compared with the less than 5GW it generates today.
Until the situation in Fukushima stabilises, the global reaction will keep changing. But already the face of energy markets has changed, possibly for good.