By Kristin Carew, Carnegie-Mellon University
On March 11th, Japan’s Fukushima nuclear power plant was devastated by the Tōhoku earthquake and the tsunami that followed. These disasters caused the plant’s cooling systems to fail, triggering a chain of events including the partial meltdown of the fuel rods inside several units of the plant, multiple hydrogen explosions and fires, dangerously high levels of leaked radiation in the vicinity of the plant, and elevated levels of radiation detected as far away as the United States.
The International Atomic Energy Agency has classified the incident as a level 5 on the International Nuclear Event Scale, or an “accident with wider consequences” similar to the Three Mile Island incident in 1979. However, U.S. and French nuclear authorities have classified Fukushima as a level 6 “serious accident” involving large leaks of radioactive material. If Fukushima meets level 6 criteria, it ranks among the top three nuclear disasters in history, behind the 1986 Chernobyl criticality accident (the only level 7 to date) and tied with the level 6 Kyshtym disaster in 1957.
The accidents at the Chernobyl and Kyshtym plants occurred during an era in which nuclear power was still an infeasible, unsafe, or unpopular option in much of the world. In the last two decades, the context in which nuclear energy is viewed has changed – and not just because of a lack of serious nuclear accidents. Since 2001, industry experts cited by the World Nuclear Association have proclaimed a “nuclear renaissance” driven by growing energy demand, concerns about climate change, rising fossil fuel prices, and attempts to reduce import dependence. While some opposition on safety and environmental grounds persists, the trend has been toward increased utilization of nuclear power.
Although the Fukushima plant was in the uniquely dangerous position of being located near a fault line on the coast of a country frequently affected by natural disasters, the incident has prompted governments around the world to review the safety of nuclear facilities and reconsider policies on nuclear power. Several weeks later, a number of important questions remain unresolved. Could Japan’s crisis end the nuclear renaissance? What effects will Fukushima have on how the world meets expanding energy demands? How will it impact the uranium market, which hit a 3-year high of $76/lb in February and was expected to have strong growth potential?
Consider the responses of the world’s major nuclear power users:
- In the United States, the largest producer of nuclear power, New York Times polling indicates that while overall support of nuclear power has fallen, 47% of Americans believe the benefits of nuclear power outweigh the risks, versus 38% who do not. President Obama has ordered a safety review of existing plants and stated that he remains in favor of nuclear power.
- In the European Union, which has ordered stress tests of existing plants, Fukushima has brought political tensions to the forefront, as some member states are continuing new plant construction and others have issued moratoriums and closed plants. France and Germany exemplify this divide. France produces 80% of its electricity using nuclear power sources, and President Nicolas Sarkozy has emphasized the necessity of a pro-nuclear stance. Meanwhile, Chancellor Angela Merkel, whose Christian Democratic Union lost a long-held state governorship to the anti-nuclear Green Party in late March, has responded to the backlash against nuclear power in Germany by shutting down seven nuclear power plants and halting the extension of the lives of seventeen older facilities.
- Russia remains unequivocally pro-nuclear. Stressing Russia’s commitment to nuclear safety, Prime Minister Vladimir Putin flew to Minsk only a week after Fukushima to sign a contract to build a new plant in Belarus.
- China and India, newcomers to the industry with huge energy demand growth to support, have both signaled commitment to nuclear power expansion. China in particular has emphasized its pro-nuclear stance, while India appears to be cautiously proceeding with new plant construction.
Overall, the global response has been moderate. Stress tests and delays are the norm, while extreme reactions like Germany’s are outliers. The factors underlying the nuclear renaissance are unchanged, and they have a particularly large influence in nuclear-dependent nations like France and in nations facing dramatic increases in energy demand, like China and India. Because nuclear power remains not only a viable solution but a necessary one in these countries, sufficient drivers of growth exist to ensure long-term uranium price increases. However, the immediate reaction following Fukushima was extremely bearish, with uranium mining stocks like Cameco and Uranium One suffering double-digit percentage drops when markets opened the following Monday.
As the world faces a slowdown in nuclear development, uranium demand will remain stable in well-established markets like the United States and France, but growth may be delayed in the emerging markets. However, the supply side of the market is also evolving. In 2010, production from global uranium mines only fulfilled 67% of demand in the energy industry. The remainder of uranium demand was met by the secondary or reprocessed market (essentially, pre-used uranium). A dominant force in this market is the post-Cold War disarmament program known as “Megatons to Megawatts”, which sells highly enriched uranium from Russian nuclear warheads to nuclear energy providers. The supply of uranium from this program is rapidly depleting, and the entire process is scheduled to end by 2013.
Before Fukushima, plans were in place to extend Megatons to Megawatts and continue propping up the nuclear energy market by converting weapons-grade plutonium into an energy source. While many reactors are powered exclusively with uranium fuel rods, some (including Fukushima’s) use a mixed-oxide fuel source composed of approximately 93% uranium and 7% plutonium. While this solution relieves some of the uranium supply pressure, it also introduces potentially catastrophic risks, as plutonium has 1/3 the critical mass of uranium, and in the event of a meltdown, causes five times the latent cancer fatalities of a pure-uranium reactor. As developed nuclear markets reconsider the merits of MOX reactors in the aftermath of the Fukushima disaster, demand is likely to be redirected toward uranium. This demand boost combined with the tightening uranium supply should be sufficient to support uranium’s historic high price levels.
Significant uncertainty remains with regard to the future of nuclear energy and the uranium market. However, the world’s response to the Fukushima disaster and reliance on nuclear energy indicate that predictions of the nuclear renaissance’s demise may be unwarranted. The more realistic outcome is increased scrutiny of nuclear power facilities and renewed focus on safe nuclear technology, which is consistent with growth and increasing prices in the uranium market.
