Given the damage and destruction to Japanese nuclear power plants form the earthquake and tsunami, we wondered what fuels would Japan look to and how that might affect energy prices in other parts of the world, especially the U.S. We also wonder if the general public will throw nuclear power under the bus or make it so expensive that not another new plant is ever constructed.
The Japanese crisis will not affect U.S. prices in the short term. Long term is another matter as as the States and the public rethink the risks of nuclear power operations, especially in coastal nuclear plants located close to major population centers. If nuclear power plants are shut down or power is curtailed, utilities will turn to natural gas and become more gassy. That will put more demand on natural gas and upward pressure on prices and power bills.
From the map below, we know that Japan relies heavily on nuclear power and natural gas imports to provide electric power for its citizens and industry.
Japan is also the largest importer of liquefied natural gas (LNG) in the world. It imports 48 percent of the global LNG, while the U.S. imports 4 percent. It wasn’t too long ago (1990) that Japan’s imports of LNG made up 68 percent of the global LNG. The LNG comes from mostly from Russia, Quatar and Indonesia. Natural gas is liquefied by lowering the temperature to -260° F/ -162.2° C. It is then transported in LNG tankers, like the one below. Once the ships arrive in Japan, the LNG is converted back to a gaseous form and used in power plants.
Japan reported many oil and coal-fired power plants damaged by the earthquake and tsunami. Unfortunately this has exacerbated the problem of providing power to pump water to their damaged nuclear facilities. In the short term, Japan will turn to natural gas and increase its imports accordingly to make up for the lost power from its damaged nuclear power plants.
Fortunately, higher imports of LNG by Japan should not affect U.S. consumers in the short term who can rely on inland supplies of shale gas in the United States. Asian markets will probably see higher natural gas prices as a result of increased demand from Japan. The long term is another story.
Rethinking Nuclear power and Risk in the U.S.
Japan has a great deal of seismic activity and both earthquakes and tsunami's are not out of the question. I have no doubt that the Japanese Government and Tokyo Electric Power Company had adequate safeguards in place at its nuclear power plants. Nevertheless, every energy company and organization in the U.S. and the world that has nuclear power plants is probably rethinking the use of nuclear power. They are also probably modeling similar scenarios at their nuclear plants located in coastal areas and close to major cities.
One can evaluate everything to the Nth degree at the Japanese nuclear units and here in the U.S., but it all comes down to what risk governments and people are willing to live with. No one has a crystal ball and it is indeed impossible to eliminate all the risk. For example, take the previous earthquake and tsunami. What would happen if on top of all of these events there was another earthquake to the south or the same area and another tsunami. Highly unlikely, you say and the probabilities are extremely low. However, who really knows and if it happens, then what.
For all practical purposes the risk of an external threat or a man-made event against a nuclear plant or for that matter any power plant or energy infrastructure may be purely random. Random events play a larger role in our lives and much more than we want to admit. This is what noted risk expert and author Nissam Nicholas Taleb had to say about the Japanese nuclear power disaster:Note 142: Time to understand a few facts about small probabilities [criminal stupidity of statistical science]
(I've received close to 600 requests for interviews on the "Black Swan" of Japan. Refused all (except for one). I think for a living & write books not interviews. This is what I have to say.)
The Japanese Nuclear Commission had the following goals set in 2003: " The mean value of acute fatality risk by radiation exposure resultant from an accident of a nuclear installation to individuals of the public, who live in the vicinity of the site boundary of the nuclear installation, should not exceed the probability of about 1x10^6 per year (that is , at least 1 per million years)".
That policy was designed only 8 years ago. Their one in a million-year accident almost occurred about 8 year later (I am not even sure if it is at best a near miss). We are clearly in the Fourth Quadrant there.
I spent the last two decades explaining (mostly to finance imbeciles, but also to anyone who would listen to me) why we should not talk about small probabilities in any domain. Science cannot deal with them. It is irresponsible to talk about small probabilities and make people rely on them, except for natural systems that have been standing for 3 billion years (not manmade ones for which the probabilities are derived theoretically, such as the nuclear field for which the effective track record is only 60 years).
1) Small probabilities tend to be incomputable; the smaller the probability, the less computable. (Forget the junk about "Knightian" uncertainty, all small probabilities are incomputable). (See TBS, 2nd Ed., or Douady and Taleb, Statistical undecidability, 2011.)
2) Model error causes the underestimation of small probabilities & their contribution (on balance, because of convexity effects). Any model error, just as any undertainty about flying time causes the expected arrival to be delayed (you rarely land 4 hours early, more often 4 hours late on a transatlantic flight, so "unforeseen" disturbances tend to delay you). See my argument about second order effects with my paper. [INTUITION: uncertainty about the model used for calculation of random effects causes a second layer of randomness, causing small probabilities to rise on balance].
3) The problem is more acute in Extremistan, particularly the manmade part. The probabilities are undestimated but the consequences are much, much more underestimated.
4) As I wrote, because of globalization, the costs of natural catastrophes are increasing in a nonlinear way.
5) Casanova problem (survivorship bias in probability): If you compute the frequency of a rare event and your survival depends on such event not taking place (such as nuclear events), then you underestimated that probability. See the revised note 93 on αδηλων. Read more.
Will energy prices go up and what happened to going green?
Right now New York's Governor Andrew Cuomo has ordered authorities to look into the operation of the Indian Point Nuclear plant near New York City. We expect more governors and other organizations to do the same. Of course this may be the beginning of a national debate on nuclear power and where to site it in the future. Of course, if people push to locate the facilities in remote areas, that will require that extensive high voltage power lines to be built. That's pretty much a none starter and both the Obama Administration nor Congress have not succeeded in wrestling this thorny issue to the ground.
If nuclear power plants are shut down or curtailed or if no new nuclear power plants are built, that could cause utilities to get more gassy aka use more natural gas to produce power. That in turn will put more pressure on natural gas prices and the cost of electricity. Ultimately, we will see it in our utility bills.
Going green seems to also be a victim of the Japanese earthquake and tsunami. People are afraid and threatened by radiation. We are sure that global warming is the last thing on their mind. The silver lining may be more emphasis on wind power and solar energy.