London (Platts)--21Mar2011/507 pm EDT/2107 GMT

The crisis at Japan's Fukushima nuclear plants has prompted leading energy-consuming countries to review the safety of their existing reactors and cast doubt on the speed and scale of planned expansions around the world.

The events at the Fukushima-1 plant already rank as the worst nuclear incident in the world since the Chernobyl disaster in what is now Ukraine in 1986, and have renewed public fears about the safety of nuclear power.

The emergency comes at a critical time for the industry, with governments in most of the world's biggest economies looking to build new nuclear power plants as they seek to build new baseload generation capacity without increasing carbon emissions.

In China, the government ordered safety inspections of the country's existing nuclear plants and suspended approval of new projects.

China operates 13 nuclear plants and is building more than two dozen others, putting it at the center of the global expansion of nuclear power.

Further ahead, the country has plans for another 50 or more plants as it struggles to meet soaring demand for energy.

In India, the government has ordered safety checks at its existing plants but has not ordered a rethink of ambitious expansion plans.

"China and India will lead in the global construction of more than 80 GW over the next decade. As a minimum, we expect this incident will slow expansion plans while lessons are learnt. In a more extreme scenario, there could be a public backlash against nuclear power which could substantially reduce the planned build out," Bernstein Research analysts said last week.

GERMAN CLOSURE

One of the most immediate reactions to events in Japan came from Germany, where Chancellor Angela Merkel's government announced the temporary closure of the country's seven oldest nuclear reactors, with a combined capacity of 7 GW.

The reactors are being taken off line within the framework of a three-month moratorium on lifetime extensions in the Nuclear Energy Act. Passed in October 2010, the law extends the lifetimes of the seven reactors commissioned before 1980 by eight years, and newer reactors by 14 years.

Widely criticized as unconstitutional, the moratorium may have to be followed by an amendment to the law.

German public opinion was already hostile to the idea of new nuclear plant, and the country was looking to gradually replace existing nuclear capacity with renewables.

Switzerland moved as swiftly as Germany in taking action. On March 14, Swiss President and Energy Minister Doris Leuthard said authorization processes for three new reactors would be put on hold while safety standards were checked and, if necessary, revised. Existing plants will also be re-examined, she said.

"In Japan there are two problems: the age of the reactors and the emergency systems. The situation is very similar in Switzerland. The damaged reactors in Japan are from the same generation as Muhleberg and Beznau. Fukushima-1 is more or less the same type of reactor as our 40-year-old Muhleberg," said Walter Wildi, a former president of the Swiss Nuclear Safety Inspectorate.

There was a cautious reaction from the UK, where the government is hoping nuclear power will play an increasingly important role in generating low-carbon electricity.

UK REPORT

UK Energy and Climate Change Minister Chris Huhne called on chief nuclear inspector Mike Weightman to draw up "a thorough report on the implications of the situation in Japan and the lessons to be learned."

A draft, to be prepared in cooperation internationally with other nuclear regulators, is to be produced by mid-May and a final report by September.

"It is essential that we understand the full facts and their implications, both for existing nuclear reactors and any new program, as safety is always our number one concern," said Huhne.

In evidence to the Climate Change Committee on market reform, Huhne was critical of politicians elsewhere in Europe rushing to judgement, but recognized the Japanese disaster could damage investor appetite for nuclear, and was wary an over-reaction could increase costs of new build unnecessarily.

"France and the UK, the two EU countries where new nuclear plants are due to be operating this decade are, due to their geography, more protected from such natural disasters and therefore the new build program is unlikely to stop," Citi said in a report last week.

"In Germany, where a law extending nuclear lives was approved last year but faced strong opposition from the public and is being challenged by state governments, the anti-nuclear sentiment could intensify further," it said.

In the US, President Barack Obama has ordered the Nuclear Regulatory Commission to conduct a "comprehensive" safety review of nuclear power plants.

Obama told a press briefing the US had gone through "exhaustive studies" to ensure safety under natural disasters, but that it could nonetheless learn from the crisis in Japan.

LONG-TERM IMPLICATIONS

Although global nuclear expansion plans may get back on track, some analysts suggest the Fukushima disaster will have long-term implications.

Bernstein said it could prompt a longer-term shift to gas, with the world buying an additional 25-50 million mt/year of LNG, on top of the doubling of LNG requirements from 200 million mt/year to 400 million mt/year over the next decade to 2020.

"The only low carbon fuel which can compete with nuclear power in baseload power generation is natural gas. As a result of this incident, we expect that gas-fired power generation will grow more quickly than expected," Bernstein said.

Despite the challenges, global efforts to combat the negative effects of climate change cannot succeed unless nuclear power is part of world's mix of electricity generation, Societe Generale said in a report.

It said that in addition to 442 operational reactors around the world, 103 GW of new nuclear power is expected to come online before 2020 and 162 GW before 2030.

"Nuclear is seen by many only as a 'bridge' to the future zero-emission power technologies to be developed and made economical for large scale deployment. But this bridge is necessary," the bank said.

--Staff reports, newsdesk@platts.com

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