A Year of Fukushima's Economic Fallout

It has been a year since the devastating earthquake and tsunami of last March struck Japan, disrupting businesses and lives in that country and financial and material supply chains worldwide. While the global economy has not fully recovered, most of the businesses depending on goods and services from Japan have made accommodations, and normal operations have mostly resumed.

But the earthquake and tsunami had far-reaching, perhaps unprecedented, effects on the future of nuclear power. While conventional assessments of the events that destroyed four operating Japanese nuclear reactors rank the event behind the 1986 Chernobyl explosion in the Ukraine, those nominal rankings may understate the 2011 accident. The multiple meltdowns and explosions at the Fukushima site may have caused more lasting and deeper harm to the worldwide nuclear industry than Chernobyl. The event in what was then the Soviet Union was at least partly an artifact of communism. The graphite-moderated, dual power and weapons RBMK design was unlike anything seen in the West for decades. Also, the Soviets were notorious among western observers for their careless attitude toward nuclear safety and the lack of any sort of regulatory regime for reactor oversight.

Japan Pays a Price

Not so Japan. Everything about the hefty Japanese nuclear program, which provided a third of the nation’s electricity, was conventional and familiar. The Fukushima reactors were General Electric Mark 1 boiling water machines, perhaps the best understood and among the most common in the world, mainstays of many nuclear programs. The owner and operator was Tokyo Electric Power Co. (Tepco), one of the world’s largest private electric companies, well capitalized, conventionally managed, and highly regarded in the rest of the world. Regulation was based on the U.S. model, with a separate, government agency, the Nuclear and Industrial Safety Agency (NISA), allegedly offering independent oversight of the nuclear operators and staffed with veteran engineers and analysts.

Yes, there were hints that not all was well with the Japanese approach to nuclear regulation. Critics had long complained of Tepco’s blasé approach to nuclear issues and of the cozy relationship between the nuclear utilities and the government regulators. In 2002, Tepco acknowledged it had falsified records at the Fukushima Daiichi Unit 1 reactor (the first to melt down and blow up in the 2011 crisis), leading to a temporary shutdown of all of the company’s nuclear fleet. A 2007 earthquake caused significant damage to a Tepco unit, but, according to critics, NISA did little to ensure that the utility applied the lessons from that accident to its other units. But many industry observers brushed off the critics as ill-informed and biased against nuclear power. Among nuclear industry insiders, Japan was generally considered the very model of the modern nuclear power system.

So when the seawalls failed at Fukushima Daiichi in March 2011, and four units suffered irreparable damage—costing Tepco over what experts estimate could be in excess of $40 billion and possibly leading to the demise of the utility itself—the nuclear programs in the West were shaken to the core. It was unlike anything that happened after Chernobyl, when the nuclear mantra was "it can’t happen here." What happened at Fukushima Daiichi could happen anywhere. Says Kiyoshi Kurokawa, head of an independent Japanese group commissioned by Japan’s parliament to examine the accident, "The lessons Japan can learn are globally relevant, because such a disaster can happen again."

Germany Deserts Nuclear

The reaction came rapidly. Germany, a technological icon that has long had a successful and innovative nuclear power sector but has also long been ambivalent about the power of the atom, scrapped its plans for a nuclear revival. Europe’s largest and strongest economy, Germany gets a quarter of its power from nuclear (compared to 20% in the U.S.). When Angela Merkel became chancellor in 2010, she reversed the policy of the previous government, which had been to shut down the country’s nuclear program by 2021, announcing life extensions plans for German reactors.

Following Fukushima, Merkel’s government did a 180-degree power slide. The government first ordered the seven oldest plants shut down for the duration of a review of the country’s nuclear power commitment. Following the review, the Merkel government said those plants would not reopen, another would be shut immediately, and the remaining nine units would all be closed by 2022. Germany, said the government, would rely on renewable energy to make up the generating slack caused by abandoning nuclear power, although many analysts suggest that Germany will be forced meet its power needs by gas-fired generation and imports from France’s heavily nuclear system.

The costs to German consumers are likely to be very high. An estimate by Siemens, which built all of Germany’s 17 nuclear plants, pegs the cost of replacement of the nuclear capacity at about $2.15 trillion (1.7 trillion euros). A Siemens executive told Reuters, "This will either be paid by energy customers or taxpayers," but that is largely a distinction without a difference.

Even in resource-poor and nuclear-rich France, Japan’s atomic woes have had policy fallout. After Fukushima, as was the case in most countries, including the U.S., France ordered a review of its state-owned nuclear power plants by the government’s regulator, the Autorité de Sûreté Nucléaire (ASN). ASN concluded—not surprising in a country where nuclear supplies three-quarters of the electricity—that it would not close any reactors. More surprising, however, the French regulators said major steps are needed to shore up safety at the nation’s 58 reactors "as soon as possible," with a price tag in the billions of dollars. The news account in The Wall Street Journal noted, "The ASN report comes amid a major emerging debate on nuclear power in the 2012 French presidential election." 

While French voters will get a chance this year to register their views on nuclear power, in Italy Fukushima’s political fallout led Italian voters to reject a rebirth of nuclear last year. Following Chernobyl, Italy began closing its four reactors; the last shut down in 1990. In 2008, amid the renewed worldwide enthusiasm for nuclear as a tactic in the war against greenhouse gases, the Berlusconi government announced it would revitalize the Italian atom, and announced plans for up to 10 new reactors to generate 25% of the country’s electricity by 2020. After Fukushima, Berlusconi announced a one-year hold on his nuclear ambitions and held a referendum in mid-year. Berlusconi fully expected voters to endorse his nuclear vision; instead, they rejected it decisively, with over 90% opposing the plan. Six months later, amid the European economy meltdown, Berlusconi’s government fell. 

Other Countries Reassess Nuclear

In the U.S., where the ill-named nuclear renaissance had been demonstrating the industrial version of the blind staggers well before Fukushima, events in Japan caused the tottering edifice to collapse. A year after Fukushima, the best the nuclear industry can look for in the U.S. is construction of four new units by 2020, two in Georgia and two in South Carolina, both states where supine regulation is a time-honored tradition. Government nuclear loan guarantees established in the feckless 2005 Energy Policy Act proved too little, too late even before Japan spooked nongovernmental investors into further catatonia.

A late-year report from consumer activist Mark Cooper at Vermont Law School concluded that the cost of nuclear power in the U.S., which was climbing rapidly even before March 11, 2011, could increase another 50% following new regulatory requirements likely to flow from Fukushima. Former Nuclear Regulatory Commissioner Peter Bradford commented, "This is an important moment to compare what is really likely to happen over the next 10 years with the industry’s expectations when the ‘nuclear renaissance’ was first announced a decade ago. When that comparison is performed properly, it becomes clear that we are witnessing not a revival but a collapse in expectations for new reactor construction." 

Late last year, the Worldwatch Institute, among the least hyperbolic of environmental groups, reported that 2011 saw a global decline in nuclear generation, driven by a slumping economy. "Despite reaching record levels the previous year," said Worldwatch, "global installed nuclear capacity—the potential power generation from all existing plants—declined to 366.6 GW in 2011, from 375.5 GW at the end of 2010." The nuclear share of world commercial primary energy usage fell to around 5% in 2010, from a peak of about 6% in 2001 and 2002. In 2010, noted the group, construction began on 16 new reactors, "the highest number in over two decades." In 2011, the number fell to just two, while 13 reactors closed in the first 10 months of the year. 

The Worldwatch report notes, "To maintain current generation levels, the world would need to install an additional 18 GW by 2015 and another 175 GW by 2025. In the aftermath of Fukushima and in the context of a fragile global economy, an increase that sharp is improbable."

The only bright spot for the nuclear business is in Asia, and even that market could disappoint. Global Asia, the journal of the East Asia Foundation, wrote last summer, "While some European countries have started rethinking their nuclear programs in the wake of the Fukushima nuclear power plant disaster in Japan, emerging Asian nations are not. With a pressing need to ramp up power capabilities to provide for their growing and ever more affluent populations, they know that nuclear power is their only real hope." China put its bullish nuclear plans on hold following Fukushima and mounted a project to develop new safety rules. At the end of the year, those new rules were complete and the country announced it would resume its ambitious program of building new reactors. Still, observers of the Chinese nuclear program have long complained that it is difficult to figure out just how many plants the country will build in the coming years, as figures vary from month to month and from one government agency to another. 

The Korean press noted in December that efforts to site new reactors in that country, where nuclear power is already a fixture accounting for some 30% of the country’s electricity, have run into public opposition. The Korea Herald reported, "The government’s plan to install new nuclear reactors in the country’s eastern shore faces stiff opposition from residents, stoking safety concerns in the aftermath of a Japanese disaster." 

In Taiwan, which gets 20% of its electricity from nuclear plants, national elections in mid-January narrowly kept the pro-nuclear KMT party in control, as President Ma Ying-jeou won 51.6% of the vote against DPP party challenger Tsai Ing-wen. While the economy and relations with mainland China were the main issues between the two major parties, challenger Tsai Ing-wen also campaigned against nuclear power, saying she would retire Taiwan’s six operating reactors and end construction on a unit supposed to start up sometime this year. While Tsai lost the election, Taipei Times reported that green parties and candidates did well in legislative races.

Meanwhile, in Japan, a country that was once a major force in nuclear power is moving rapidly toward the rear. As plants have closed for refueling since the Fujushima catastrophe, they have not restarted. In April, it is likely Japan will be getting no electricity at all from its 54 nuclear plants. Noto Kan, who was premier a year ago when the plants melted down and blew up, has transformed himself from a nuclear stalwart into an anti-nuclear activist. "I would like to tell the world that we should aim for a society that can function without nuclear energy," he told the Wall Street Journal in late January, prior to giving a speech at the World Economic Forum in Davos, Switzerland.

Savvy nuclear industry observer Margaret Ryan, who was for many years the editor of trade newsletter Nucleonics Week, commented last November, "For the nuclear industry, 2011 was Biblical. Earthquakes. Tsunamis. Tornadoes. Floods. Fires. 2011 had everything but plagues of locusts. Since 2001, nuclear critics had been worried about airplanes smashing into plants or dirty bombs. This year nature reminded everyone it can still throw a haymaker, and the reverberations from 2011’s onslaught appear set to dominate U.S. nuclear power in 2012."

Last year, as March began, the worldwide prospects for nuclear energy looked reasonably bright. While the "nuclear renaissance" hype was a bit over the top, there were still reasons to expect a better-than-average year for the nuclear business. No more. Those expectations were wiped away by a massive earthquake and a tremendous wave of seawater in Japan a year ago.

—Kennedy Maize is MANAGING POWER’s executive editor.