Hats off to the Japanese prime minister for embracing the idea of increasing the country's exposure to renewable energy sources, such as solar, wind and biomass. But can the country really wean itself off nuclear energy?
Investors seem to think so. Nuclear-related stocks - particularly uranium producers like Cameco Corp. - were hit on Tuesday and they were down again in mid-morning trading on Wednesday after Prime Minister Naoto Ka announced the remarkable shift in energy policy this week. The diversified MV Uranium + Nuclear Energy exchange traded fund also suffered.
These investments were already down on their heels, of course, following the devastating earthquake and tsunami that struck Japan in March. The country's crippled Fukushima Daiichi nuclear facility, which has spread radiation contamination, has made nuclear energy a dirty term. It has also raised concerns among investors that plans to expand nuclear energy, particularly in emerging markets like China and India, will get changed.
Before the crisis, Japan had planned to get 50 per cent of its electricity from nuclear sources by 2030, up from 29 per cent right now - a target that involved building 14 nuclear reactors. The shift in policy puts those plans in doubt.
Investors are nervous that the shift is just the start of a global retreat away from nuclear energy, which could hit the price of uranium particularly hard. However, these fears could be overblown. First, any bullish argument in favour of uranium producers never involved Japan in the first place, given its economic maturity and aging population; it involved China, and to a lesser extent India.
Right now, China has just 14 nuclear reactors, which means that it derives about 80 per cent of its electricity needs from coal-burning sources. That is now changing: The country has 25 nuclear reactors under construction, with plans to increase its nuclear capacity 10-fold by 2050.
In the wake of the Fukushima crisis, Chinese authorities did suspend approvals for new nuclear plants and conducted safety checks on those under construction - but so far there has been no indication that its pursuit of energy self-sufficiency is going to change.
As well, I'm no expert on politics, but this nuclear soul-searching strikes me as little more than short-term posturing designed to assuage widespread - and legitimate - concerns about the safety of nuclear power. Will it blow over? Given the initial reaction to other disasters, including last year's BP PLC oil spill in the Gulf of Mexico, I suspect it will.
David Berman