As nuclear engineers battle today to prevent a meltdown of the reactors in Fukushima, a risk expert has highlighted the wider impact of the Japanese disaster on energy markets.
Andrew Horstead, risk specialist at energy and carbon management company Utilyx, said that the impact of the Japanese earthquake and its knock-on nuclear effects was starting to show in global commodity prices.
And as the Swiss government today suspended plans for an upgrade of its five reactors, he highlighted the questions now being asked around the world about the long-term viability of nuclear as a generation source.
“German environment groups are already putting the government under pressure to reverse its decision to extend lifetimes of the country’s nuclear reactors, while the future of nuclear in France has also been called into question,” he said.
“The crisis in Japan will also strengthen anti-nuclear sentiment here at a time when the UK is looking at a wave of nuclear new builds over the coming two decades to meet the UK’s low carbon generation targets.”
Mr Horstead stressed that it was too early to understand both the full short- and long-term implications on energy demand following Fukushima, but he added “the market is certainly spooked”.
“Today we have seen a 5p, or 8%, jump in UK spot gas prices.Japan is the world’s largest importer of LNG, accounting for around 40% of global demand, and the potential for a sustained increased LNG demand for Japan’s power generation could divert supply away from the UK lifting prices.This will drive UK power prices up given the dominance of gas in the UK generation mix.”
However he added that with the Japanese cooling season still three months away, “it may be a little while before we see a manifest increase in demand and the price hike seen today is more of an overreaction”.
He added that South Korea, Indonesia, Qatar and Russia have all said that they will step up deliveries to Japan, “which would take some of the heat out of the European market”.