Fukushima May Shut 30 of World’s Oldest Nuclear Plants, UBS Says

Japan’s nuclear crisis will limit life extensions for atomic plants and could force as many as 30 reactors to close worldwide, according to UBS AG analysts.

“Countries will definitely think twice about life extensions,” Per Lekander, an analyst at UBS, said in a telephone interview today. “My closure assumptions are very conservative, I think there may be more.”

The shutdowns will drive up power prices and increase consumption of fossil fuels, jeopardizing policies that aim to cut carbon dioxide emissions, UBS said. The total capacity of the world’s 30 oldest operating nuclear power plants is 14,639 megawatts, about 4 percent of the global total for atomic power.

The Fukushima emergency raises “larger credibility” issues than the 1986 accident at Chernobyl because it happened in an advanced economy and is taking longer to get under control, UBS analysts including Lekander said in a note to investors today. The duration of the accident is “unprecedented,” he said.

A 9-magnitude earthquake and subsequent tsunami severed power and damaged reactors at the Fukushima complex about 220 kilometers (135 miles) north of Tokyo. Workers have been spraying water on the reactors to cool radioactive fuel rods in the worst nuclear accident since Chernobyl.

“Previous major accidents, at Three Mile Island and Chernobyl, both led to strong popular and political movements questioning whether nuclear power generation can be operated in a safe way,” Lekander said. “These accidents led to higher safety standards and nuclear phase-out decisions in some countries. We believe Fukushima will have a similar impact.”

Forced Closures

Plants that may be forced to close include two Electricite de France SA reactors at Fessenheim, located 1.5 kilometers (less than a mile) from the German border. E.ON AG will lose 2.2 gigawatts of capacity, the analysts said. Fifty-five of 104 reactors in the U.S. have been operating 30 years or more, the analysts said. This compares to 18 that have been operating that long in Japan and 14 in Russia.

“Having nuclear in your portfolio is clearly introducing a risk,” Lekander said. “Tepco was perceived to be a low risk stock; two weeks later there’s a discussion of whether this company is going to go bust.”

While the age and design of the plant may have made it more vulnerable, only the most recent reactor technologies such as Westinghouse Electric Co.’s AP1000 would have been able to cope with an event of this magnitude, the UBS analysts said. All future power plants may be required to use passive cooling systems that operate independently of external power sources, they said.

“The design of the power plant never anticipated the scale of tsunami that hit it and the company seems to have had no contingency plan for such an event occurring,” Lekander said.

Raise Capital Costs

The accident is likely to make investor-owned utilities like Windsor, England-based Centrica Plc may reconsider plans to invest in new nuclear. In the U.S. and Europe, the capital costs of new nuclear to be as much as $6,000 per kilowatt hour, the analysts said. This is likely to drive an increase in the use of gas- and coal-fired generation in Europe and the U.S.

“Governments may allow new nuclear, but then you have the second issue of whether nuclear is profitable and then you have the third that maybe the risk perception is wrong and investors may not want to invest,” he said. “Shareholders will be negative on nuclear and then managers will be negative on it.”

Energy prices across Europe are likely to increase and countries will be forced to use more gas generation, making it difficult to meet climate change targets, he said.

“This will benefit everything that is in the gas value change,” he said. “The discussion in the past has been about gas market over-supply and now gas is the only alternative.”

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