At this point it seems impossible to imagine a scenario that doesn’t involve a significant setback to the nuclear industry around the world, and in the US specifically where investors had begun believing in some sort of “renaissance.“
Something has to replace that lost (expected) power generation, and there’s a good chance the winner is coal.
Given the challenges with the Japanese nuclear facilities, we expect fossil fuel generation will be used to partially offset the near term generation losses related to the nuclear fleet to the tune of 5-10mm tons. We would not be surprised to see unscheduled shutdowns of nuclear facilities around the globe as regulatory bodies seek to review nuclear safety procedures in the wake of the Japanese crisis. The incremental demand will add more pressure to the global supply/demand balance for thermal coal, which has been tightening as of late as evidenced by the recent move in API 2 (delivered price into Europe) which has surged in the last 6 months and will likely move higher on the increased Japanese demand.
Longer term implications could materialise for pricing as regulatory bodies around the globe will discuss/review nuclear fleets. Furthermore, objections to new nuclear build will likely increase as NIMBY (not in my back yard) objections will increase. In the US, long-term generation build will be directed toward NatGas generation; however, the discussions may help to push out some coal plant retirements as US generation needs are evaluated. Additionally it could slightly alter the negative environmental perception of coal plants as they will not be viewed as a safety threat when compared to nuclear as an alternative.
Coal is something that’s been analysed extensively by Gregor Macdonald, who has been an observer of the world’s return to coal.
These two charts of his — showing coal’s role in the global energy mix in both 1998 and 2008 — are instrsuctive.
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