The emergency at the Fukushima nuclear power plant, caused by the devastating tsunami, has had a number of implications for international energy and coal markets. The failure of safety measures and the resulting threat of a meltdown at Fukushima led many to cast doubt on the future of the nuclear industry.
Governments, responding to a concerned public, have begun to implement stricter safety regulations on their existing nuclear plants as well as reviewing plans for new installations.
Outside of Japan, Germany was probably the country that responded quickest and most dramatically to the crises due to a political and social environment that has been traditionally hostile to nuclear energy, which produces about a quarter of the country’s electricity. Almost immediately the German government closed seven older reactors for a safety review and later declared that it would close down all nuclear reactors by 2022 with a pledge to make up the shortfall with a huge investment in renewable sources and a drive for energy efficiency. Longer term the German government has pledged to generate 80% of their electricity from renewable sources by 2050. These ambitious plans will require unprecedented investment into every aspect of electricity generation/transmission and should take several decades to implement. In the meantime the more traditional sources of power generation such as coal and gas will be needed to make up the shortfall from the lost nuclear capacity with increased electricity imports from neighbouring countries also playing a part. This change in the energy mix has already seen an increase in demand for thermal coal in the region and increases in spot prices.
The increase in demand for coal in Germany will be further exacerbated by the plan to close all coalmines in the country by 2018. Coalmines in Germany are currently heavily subsidised by the state with production steadily decreasing for many years, resulting in just 14.1 Mt produced last year. European regulations prohibiting subsidies for the mining industry will see German coal production fall to about 12 Mt in 2012 before being phased out completely in 2018. These developments should present new opportunities for the non-subsidised coal mining companies in Poland and the Czech Republic to supply the extra coal fired capacity that will be needed in the coming years.
Articles prepared by:
Stephen Hough,
Market Analyst,
New World Resources
shough@nwrgroup.eu