A Reprieve For Nuclear?

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The US, France, Germany and several other countries are scrambling to find the money and political will to extend the life of ageing nuclear reactors.  This reflects a growing consensus that the global economy needs more megawatts now.  We previously discussed this issue in our blog of March 25, 2022, ”Coal Versus Climate, Now Versus Sometime,” in which we suggested that the clearest, short term solutions were coal and conservation.  In addition, to the extent possible, extending the life of existing nuclear capacity will help to meet interim requirements.

The key question for investors is, how will nations meet their long term energy requirements?  Some answers may come from Japan’s efforts to address its short and long term needs.  Japan, surrounded by oceans and enemies, will have to come to grips with its current reliance on imported fossil fuels. Not only are there environmental issues, fossil fuels have become much more expensive.

Twenty years ago, nuclear plants generated approximately 33% of the country’s electricity, with an apparent path towards further expansion.  However, the political overreaction after the 2011 tsunami that triggered a disaster at the Fukushima nuclear plant, put a stop to that. Currently, nuclear accounts for about 7% of Japan’s electrical energy.  Only a few months ago, it appeared that Japan would seek to reopen more of its nuclear reactors.  More recently, the prime minister seems to be waffling.

Investors should find Japan’s struggles interesting and instructive.

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA

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