July 21, 2007

Japan quake not seen slowing U.S. nuclear revival

By Bernie Woodall

LOS ANGELES (Reuters) - A resurgence of nuclear power in the United States likely won't be stalled by this week's earthquake in Japan that shut the world's largest nuclear plant, industry watchers said.

A 6.8-magnitude earthquake on Monday killed 10 people and flattened homes in northwestern Japan. It also started a fire at the seven-reactor, 8,212-megawatt Kashiwazaki-Kariwa nuclear power plant that burned a transformer, spilled several hundred barrels containing radioactive waste and vented some radioactive waste.

Tokyo Electric Power Co.'s Kashiwazaki-Kariwa nuclear power plant No.7 (L), No.6 (C) and No.5 reactors are seen in Kashiwazaki, Japan, July 18, 2007. (REUTERS/Issei Kato)

Radioactive water and air that leaked is minuscule, far less than scientists say will harm humans. But the event is causing Japanese officials to take another look at the nation's aggressive effort to increase the country's nuclear power generation within a decade in order to satisfy 40 percent of electricity needs. Currently, nuclear power accounts for almost a third of Japan's electricity.

Within a decade, a U.S. nuclear power renaissance is expected to be in full swing. No U.S. nuclear power plants have been ordered since 1978, the year before the Three Mile Island accident in Pennsylvania.

"The incident in Japan will enter into the debate, but the fundamentals that led to the nuclear resurgence are still strong. Nuclear power will remain an important piece of the power equation," said Junaid Chida, a partner at the law firm of Dewey Ballantine, which specializes in project finance.

Those fundamentals include the desire of federal, state and local politicians as well as utilities to make the emissions-free energy that nuclear power provides. Also, after an estimated $3 billion to $4 billion to bring a new reactor on line, it will make relatively cheap, reliable baseload power.

Dimitri Nikas, director of utilities and project finance at Standard and Poor's, agrees.

"The incident in Japan will ensure that people are acutely aware that nuclear generation is not without risks, but I'm not sure it's big enough or significant enough to get companies to derail their plans," said Nikas.

At least 13 companies, including Southern Co., Duke Energy, Entergy, Exelon, FPL Group and Progress Energy are working on applications to the U.S. Nuclear Regulatory Agency to build new reactors.

Almost all of those are planned at the site of existing plants, which Nikas says will make them politically easier to embrace. Also, they are mainly in the U.S. Southeast, which is not a hotbed of anti-nuclear activism.

David Lochbaum, director of the nuclear safety project for the Union of Concerned Scientists, said none of the proposed new plants are in California or Alaska where earthquakes are most likely.

"The event (in Japan) in itself is not likely to change the new reactor designs," said Lochbaum.

As in the Japanese incident, an earthquake near a U.S. reactor -- there are four reactors at two sites on California's Pacific Coast -- is more likely to damage support systems like transformers than the reactor itself. But fires near the reactor could spread to the core, Lochbaum said.

The real impact of the Japanese incident is likely to be in the public's confidence in nuclear power, Lochbaum said, adding that he couldn't predict public response now.

Denise Furey, senior director for global power at Fitch Ratings, agreed and pointed out that the Japanese incident may be in the distant past by the time new U.S. reactors are popular public debate.

"What would slow down development of these (U.S.) projects is environmental groups pushing back," she said. "These plants are so far away from being built. Who knows what factors could affect policy makers between now and then."

(Additional reporting by Scott DiSavino in New York)

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