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Post Fukushima-- Burn More Coal and Oil, and Hire More Engineers Not Regulators

March 20, 2011

By Mark P. Mills

It’s too early to predict the final outcome of the still unfolding accident at Japan’s Fukushima Daiichi nuclear site that began with the heartbreaking tsunami on 3/11/11. But we do know several things; a) there is by any reasonable measure de minimus broad public risk, b) there will be substantial economic costs to Japan, and c) there will be long-run global energy impacts.

The world’s politicians will likely call for even more regulatory oversight on the most heavily regulated industry ever. Obviously regulations matter. But that won’t solve the essential problem of doing better, much better, in the future with respect to the awesome power of nuclear fission. What should happen? We will almost certainly re-think how to pursue nuclear energy. But the re-think should be dominated by what engineers, not regulators, can accomplish. There are applicable lessons from history — perhaps the most telegraphic is the history of the Iron Ring, and The Ritual of the Calling of an Engineer inspired by the 1907 Pont de Québec collapse. Back to this shortly. First, the human side.

Begin with the over-riding fact of the numbing scale of the tragedy from the tsunami itself. Against this tragic backdrop, we have added nuclear fears. But there is just no scenario for Fukushima that comes close to what the Japanese people have already suffered. By now millions have watched the awful real-time videos – in some places the tsunami was a 40-foot wall rushing several miles inland. (A hospital, that remains standing, was totally immersed through the fourth floor.)

Still, nuclear words evoke unique fears. Lurking under much of the hysterical reaction to the dreaded word "meltdown" is an implicit, perhaps explicit, fear of a nuclear explosion. It should go without saying that there is no scenario for such. It is physically impossible. By analogy; trees burn but can’t explode like bombs. Commercial nuclear power plants can’t "go off" (to use the reckless phrase of some prominent media mavens, literally flapping their arms in anxiety). While steam and hydrogen explosions are serious, they’re not nuclear.

That said, Fukushima is already worse than Three Mile Island and closer to the awful Chernobyl accident. Even so, there is no scenario that has Fukushima behaving like Chernobyl. There’s plenty of intelligent on-line commentary on all this. (On broader nuclear issues, see the particularly lucid MIT site, and for those who want more depth, the bibles on radiation health effects, spent nuclear fuel storage and so forth are to be found at the National Academy of Sciences.) Chernobyl did spew an awful lot of radioactivity into the local environment, but there is a fundamental difference between Chernobyl-type and Western reactors. The latter, by analogy, is designed like a car that requires 200 pounds of force to press the gas peddle. The Chernobyl design is like a car with no gas peddle that is always at full throttle, and you control the car entirely with the brake. On top of that, the Chernobyl core, unlike Western designs, was built from combustible material and had no containment.

On the economic front, as Japan’s reaction to nuclear fears spread, that country’s recovery and financial woes will be exacerbated not just by the billions required for the clean-up to follow, but also by the potential for a huge jump in Japan’s oil imports to make up for the lost power if the government decides on a total nuke shut down. As recently as 2007, Japan shut down nearly one-third of their reactors because of a scandal over fraudulent repair records.

Until last week, Japan obtained almost 30 percent of its electricity from uranium, roughly 25 percent each from coal and natural gas, and 10 percent from oil. The country’s plan for decades has been to wean itself from oil-fired power, and minimize coal use. Its existing coal capacity is fully used, and most of the gas-fired capacity is as well. Nearly all the unused, and thus available installed capacity that could be ramped up quickly is oil-fired. If fully employed, those oil units would be enough to make up for all Japan’s nuclear electricity — and they would burn 1.5 million barrels per day. This would cost about $50 billion a year and increase Japan’s oil imports by 30 percent. The resultant electricity would be radically more expensive. On top of that, adding over a million barrels per day demand to world oil markets will have its own impacts.

Which brings us to the global ripples. China, with 27 reactors under construction, has already announced a temporary halt to approval for new nuclear plants. Germany suspended plans for allowing its 17 nukes to get regulatory life-extension. Other nations are saying, planning or agitating for similar. The impact going forward is two-edged. Not only does it appear likely that many nuclear plants will be taken off-line (much) earlier than planned or hoped, but any plans for new construction will also face a stiff headwind. Ironically, only late last year the International Atomic Energy Agency raised its forecast for nuclear’s contribution based on new plans and announced life-extension for old plants. It’s a safe bet the forecast will be revised, downwards. The truth is the world has other options for making electricity, but it won’t be trivial given the scale of nuclear energy’s current and formerly forecast contribution.

Today’s global nuclear fleet provides 30 percent more energy than the entire output of the Saudi oil fields. The most recent forecasts had nuclear energy equivalent to two Saudi Arabias by 2035. In most places the long-term electricity alternative is not oil, but coal, natural gas, hydro and the comparatively new wind and solar vendors. So Fukushima is bullish for wind and solar to be sure – but there is simply no credible way the magnitude of future demand (even with nukes) can be met with wind and solar. The vast majority of new electricity will now come from burning more hydrocarbons. Which ones?

As noted, for Japan in the short term it is clearly mostly oil. That is true as well for a surprisingly number of places in the world. Apparently Vladimir Putin has already directed accelerated development of Russia’s vast Sakhalin oil and gas field to "help" meet expected Japanese demand. Japan imports natural gas in liquefied (LNG) form – they’ll doubtless expand the import facilities and add to the already intense global appetite for clean LNG. Perhaps the U.S. will finally enter the world market as an exporter with its glut of domestic, and hugely under-priced, natural gas.

And then there is King Coal (’evil’ coal for the folks that wear-sneakers-and-backpacks-with-their-suits). This is an easy call – without regard to whether it is good or bad, coal use will go up. The principal long-term baseload electric power fuel arbitrage is and has been coal-v-uranium. Traders figured this out. Uranium pricing has already been hammered off it’s 2010 bull run. Coal will go on a run now – check out the Dow Jones coal stock index on 3/11/11 — because the world’s economy will keep growing, and because electric demand grows at twice the rate of overall energy demand.

There will be winners and losers in the post-Fukushima world – not to diminish the sad losses incurred by the people and nation of Japan. There are some obvious iconic directional examples of winners, of which there are a multitude, and numerous ’hidden’ players in respective sectors (e.g., it takes orders-of-magnitude more ships to move a BTU in coal and oil than in uranium).

The near-term is certainly bullish for Mr. Putin’s oil and gas aspirations, and Canada’s producers like Canadian Natural Resources [NYSE: CNQ], and Suncor [NYSE: SU]. It’s also bullish for major coal companies like Peabody [NYSE: BTU] and Rio Tinto [NYSE: RIO], and smaller players like Rhino [NYSE: RNO – full disclosure, the fund I am affiliated with is a major shareholder], and LNG-centric companies like Shell [NYSE: RDS]. It is bullish too for utility-scale solar suppliers like First Solar [NASDAQ: FSLR] and China’s Yingli [NYSE: YGE], and wind turbine companies like Vestas [NASDAQ: VWSYF] and Suzlon [LNI: SUEL-LN].

But a diminution of the role of nuclear energy will be a real loss to the world. It is the only energy source – period – that has a fundamental phenomenology up to the staggering demands of the future world’s economy. The volume of a couple of apartments in New York City’s Hell’s Kitchen, if filled with nuclear fuel rods, has enough energy to power everything (cars included) in that city for a year – something that would require millions of tons of coal transported in thousands of rail cars. But if we can’t build nuclear power plants that don’t make people think they’re going to Hell, odds are they won’t get built. And that’s where the engineering, not the regulations matter.

I understand people’s fears. I’ve witnessed it first hand when I spent the week of the accident at Three Mile Island, and the weeks and months following, talking to dozens (hundreds actually) of groups. Nuclear energy is, correctly, viewed as different than just burning stuff. It is different. That’s why it is especially useful, and requires especially careful engineering. There is no doubt accidents will continue to be a threat, but a lot can be done to minimize risks associated with existing reactors. There is even less doubt that new reactors will be better and safer. But a fundamental re-think of the basic design may be necessary now if nuclear energy is to go forward. Engineers have done this before. Which brings me back to the Iron Ring.

There’s already plenty of finger-wagging about banning things because of the risks associated with any energy source. There is no free lunch whether with coal mining or deep-water drilling, or for those who are honest, in the enormous underlying mining and chemical infrastructure needed to build vast arrays of wind and solar farms. Even candles are risky. The great Chicago Fire of October 8, 1871, apocrophally started in Mrs. O’Leary’s barn with a candle, raged two days and killed 300, leaving 100,000 homeless. And this March 25th is the 100th anniversary of the horrific 1911 New York City Triangle Shirtwaist Factory fire (one of the all time worst U.S. industrial accidents, which took 146 lives). Our ancestors healthy respect for fire was confirmed in reality and enshrined in myth.

Nuclear fission in the context of the span of history is, like the ancient discovery of fire, game-changing. People instinctively know that. It requires an entirely higher level of (achievable) engineering discipline. The world’s nuclear engineering community needs to come together to achieve a new level of excellence – infused through the builders and regulators as well. While it might sound a bit cultish, this is a place where cult-like devotion to detail is in order. It has been done before. In the nuclear Navy for one. And, historically, more broadly.

In 1922, the great writer Rudyard Kipling – who held a life-long admiration for the Royal Corps of Engineers from his first-hand experience with them in India at the apogee of the British Empire – wrote a pledge for engineers called "The Ritual of the Calling of an Engineer" where newly minted engineers are given a plain iron ring. Kipling stated its purpose:

  • "The Ritual of the Calling of an Engineer has been instituted with the simple end of directing the newly qualified engineer toward a consciousness of the profession and its social significance and indicating to the more experienced engineer their responsibilities in welcoming and supporting the newer engineers when they are ready to enter the profession."

The ritual is Canadian, and was created because of another engineering tragedy where the world’s longest cantilever bridge, spanning Quebec’s mighty St. Laurence River, collapsed in 1907, killing 86, and collapsed again in 1916 killing 11 more. The idea of the Iron Ring emerged from those serial failures, to instill a sense of rigor, moral obligation and discipline in engineers – with the iron ostensibly coming from the fallen bridge. The bridge ultimately got designed and built properly – it still stands today and is the longest cantilever in the world.

We have now had two nuclear bridges to our energy future collapse – TMI and Fukushima. (Chernobyl doesn’t count in engineering terms – it was never a bridge to anything – but it counts in the public mind in the string of three ’strikes’ in living memory.) This was not supposed to happen even once in a century, never mind twice in three decades. The bar has to be raised.

The time may have come for something like the Zirconium Ring, a new order and standard of excellence applying not just to engineering but nuclear construction, management – and regulation as well. (Zirconium, for those who have been asleep for a week, is the metal alloy used to hold the ceramic-like nuclear fuel.) Perhaps this or something like it will happen. We’ll see.

But in the meantime there is one safe prediction: The Chinese will quickly lift their temporary ban, examine the engineering fundamentals, raise standards (not regulations, but standards – there’s a difference), and move on with building their nuclear plants, and designing an entirely new generation of inherently safer ones. Then, when inevitably the West decides to build nukes again after burning another few tens of billion tons of coal and oil, we’ll buy not just Chinese T-shirts, batteries and loans, but Chinese reactors too.

Original Source:



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