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The nuclear renaissance is in danger of petering out before it has even begun, but not for the reasons most people once thought. Forget safety concerns, or the problem of where to store nuclear waste—the issue is simply cheap, abundant natural gas.

General Electric CEO Jeffrey Immelt caused a stir last month when he told the Financial Times that it’s “hard to justify nuclear” in light of low natural gas prices. Since GE sells all manner of power generation equipment, including components for nuclear plants, Immelt’s comments hold a lot of weight.

Cheap natural gas has become the fuel of choice with electric utilities, making building expensive new nuclear plants an increasingly tough sell. The United States is awash in natural gas largely thanks to horizontal drilling and hydraulic fracturing, or “fracking” technology, which allows drillers to extract gas from shale deposits once considered too difficult to reach. In 2008, gas prices were approaching $13 per million BTUs; prices have now dropped to around $3.

When gas prices were climbing, there were about 30 nuclear plant projects in various stages of planning in the United States. Now the Nuclear Energy Institute estimates that, at most, five plants will be built by 2020, and those will only be built thanks to favorable financing terms and the ability to pay for construction from consumers’ current utility bills. Two reactors now under construction in Georgia, for example, moved ahead with the aid of an $8.33 billion loan guarantee from the U.S. Department of Energy.

What happens after those planned projects is hard to predict. “The question is whether we’ll see any new nuclear,” says Revis James, the director of generation research and development at the Electric Power Research Institute. “The prospects are not good.”

Outside the United States, it’s a different story. Unconventional sources of natural gas also threaten the expansion of nuclear, although the potential impact is less clear-cut. Around the world, there are 70 plants now under construction, but shale gas also looms as a key factor in planning for the future. Prices for natural gas are already higher in Asia and Europe, and shale gas resources are not as fully developed as they are the United States.

Some countries are also blocking the development of new natural gas resources. France, for instance, which has a strong commitment to nuclear, has banned fracking in shale gas exploration because of concerns over the environmental impact.

Fast-growing China, meanwhile, needs all the energy sources available and is building nuclear power plants as fast as possible.

Even in United States, of course, super cheap natural gas will not last forever. With supply exceeding demand, some drillers are said to be losing money on natural gas, which could push prices back up. Prices will also be pushed upward by utilities, as they come to rely on more natural gas for power generation, says James.

Ali Azad, the chief business development officer at energy company Babcock & Wilcox, thinks the answer is making nuclear power smaller, cheaper, and faster. His is one of a handful of companies developing small modular reactors that can be built in three years, rather than 10 or more, for a fraction of the cost of gigawatt-size reactors. Although this technology is not yet commercially proven, the company has a customer in the Tennessee Valley Authority, which expects to have its first unit online in 2021 (see “A Preassembled Nuclear Reactor“).

“When we arrive, we will have a level cost of energy on the grid, which competes favorably with a brand-new combined-cycle natural gas plants when gas prices are between $6 to $8,” said Azad. He sees strong demand in power-hungry China and places such as Saudia Arabia, where power is needed for desalination.

Even if natural gas remains cheaper, utilities don’t want to find themselves with an overreliance on gas, which has been volatile on price in the past, so nuclear power will still contribute to the energy mix. “[Utilities] still continue [with nuclear] but with a lower level of enthusiasm—it’s a hedging strategy,” says Hans-Holger Rogner from the Planning and Economics Studies section of the International Atomic Energy Agency. “They don’t want to pull all their eggs in one basket because of the new kid on the block called shale gas.”

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By Toni Johnson

Fukushima nuclear accident has dealt a major blow to the future of nuclear facilities. While Germany is all set to approve officially to shut its planned nuclear plants, many European nations are weighing pros and cons of similar step.

Barring nuclear plants, the next best major energy source is natural gas as both hydro and thermal plants face stiff opposition from the green groups.

The shift is vividly more towards natural gas — especially gas in shale formations — which will be the main stop-gap energy source until other renewable energy sources become economically viable.

But even if gas surges in the coming years, markets will continue to be dominated by trade between neighbors rather than becoming truly global.

Obstacles to a global market

Unlike oil, natural gas faces several obstacles to transportation, so markets tend to be overwhelmingly regional. Pipelines, for example, are expensive and are hampered by geographic and political challenges. Liquefied natural gas, or LNG, is easily transported but still limited by the small number of ports and ships currently available — and receiving ports have outpaced shipping facilities.

While there has been tremendous global growth in LNG, the U.S. Energy Information Agency’s (EIA) 2010 global energy assessment found that pipelines, not LNG, will remain the predominant mode of gas transportation for the next two decades. LNG capacity is expected to more than double between now and 2035 to about 19 trillion cubic feet (tcf) per year, up from about 8 tcf in 2007. However, that is still very small in comparison with the 156 tcf of global natural gas demand that is expected in twenty-five years.

Production remains largely dominated by three regions, the Middle East/North Africa, North America, and Russia/Eurasia. Russia alone accounts for about 20 percent of the total global gas trade in 2009—but this is down from 30 percent a few years ago. Meanwhile, North American gas production, though significant, is almost entirely consumed by the U.S. Several companies have applied to convert U.S. LNG terminals for export, but the effect of this conversion on markets is far from clear.

The Middle East and Africa — particularly Qatar – dominate LNG exports and provided more than half of all LNG traded in 2009. Though the Middle East claims almost half of the world’s conventional natural gas reserves, pipelines are not a viable option for the region’s main customers in Asia. Japan and South Korea are the largest consumers of LNG, accounting for about half of the global LNG trade.

China rising?

What emerges from this picture is the importance for many countries of increasing local production, particularly of shale gas, which some analysts see as a game changer.

After assessing gas reserves in 32 countries, the EIA now estimates that shale gas could increase recoverable gas globally by as much as 40 percent. In the United States, shale gas has already jumped from less than one percent of U.S. production a decade ago to 23 percent in 2010. Overall, shale gas has the potential to reduce dependence on imports for several countries, including China and South Africa, as well as provide opportunities for exports for some others.

Indeed, China looks like the biggest winner, potentially having access to a third more shale gas than the U.S., according to the EIA (report PDF). China, so far, has been slow to develop natural gas – it represents only about 5 percent of its energy consumption–but that should change in the coming years.

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The push to move away from nuclear power because of the crisis at the Fukushima No. 1 power plant has propelled demand for gas on a global basis — and the subsequent rise in its prices will inevitably hurt Japanese buyers, according to a department head of an Edinburgh-based research and consultancy firm.

“There is an impact (by antinuclear movements) on gas demand because gas and coal will end up replacing some of the nuclear generation that is lost,” Noel Tomnay, head of global gas research at Wood Mackenzie Ltd., said in Tokyo.

“At the global level, no one can build renewable sufficiently fast enough to remove the need for either fossil fuels or nuclear generation. Consequently, you are making a political choice between carbon emissions and nuclear generation,” said Tomnay, who is on a one-week visit to the country to hold conferences and meetings with his clients amid growing demand for gas.

Domestically, the trouble at the Fukushima plant and the suspension of the Hamaoka nuclear plant in Shizuoka Prefecture in line with the government’s request have prompted efforts to beef up procurement of liquefied natural gas as an alternative to nuclear energy.

Tomnay said that due to rises in transportation costs triggered by higher crude oil prices and an increase in demand in other parts of Asia, Japanese buyers would need to pay more to attract LNG cargoes.

Wood Mackenzie has projected that nuclear power generation capacity will be about 40 gigawatts less by 2020 than it had previously expected and about 70 gigawatts less by 2025 due to expected delays and suspensions of nuclear power plants worldwide.

He said gas prices rose particularly in Europe as the Fukushima accident rekindled strong memories of the 1986 Chernobyl disaster and its impact, fueling antinuclear movements, including in Germany, where a moratorium on nuclear power was decided on shortly after the Fukushima accident struck.

Such a rise in gas demand in Europe “could continue for a couple of years, and if it does, gas prices in Europe will rise significantly,” Tomnay said.

Amid such rises, Tomnay said, it is “understandable” and “sensible” that Japanese firms are ensuring the diversity of LNG supplies, such as from North America, where it is cost competitive with Australia, one of the major suppliers of LNG to Japan.

Chubu Electric Power Co., two Japanese gas firms and an incorporated administrative agency agreed to join in Mitsubishi Corp.’s shale gas project in Canada earlier this month.

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By Eric Watkins

LOS ANGELES, May 4 — As part of a review of the nation’s growth strategy, Japan is considering a drastic shift in its energy policy to better deal with the consequences of the Mar. 11 earthquake, tsunami, and nuclear crisis.

“The growth strategy, mainly its energy environment policy, must be transformed in quality,” said Koichiro Gemba, Japan’s national policy minister, referring to policies developed in June 2010.

Under that growth strategy, Tokyo aimed to have the nation’s economy expand a real 2% or more on average by fiscal 2020, by focusing budgetary allocations and accelerating deregulation on seven designated areas such as energy and the environment.

Under the revised growth strategy, however, Japan reportedly will put more emphasis on the development of renewable energy such as power generated by solar, wind, and geothermal heat, as well as the enhancement of electric accumulators.

More to the point, Japan will seek to secure electricity without depending on nuclear power too much.

Government sources said projects for exporting nuclear power plant technologies will “inevitably” be revised as a perception is prevailing among government officials that it would be difficult for a country which let a nuclear crisis happen to sell such plants overseas.

Last October, Japan agreed with Vietnam to construct two nuclear power plants, and it has been in negotiations with Turkey for similar exports. But Tokyo may halt such projects at least until Japan completes its investigation of the radiation leakage at nuclear facilities damaged after the earthquake and tsunami.

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The ongoing nuclear disaster in Japan may undermine support for nuclear power in the U.S. If it does, other sectors of the energy economy stand to benefit — none more than the natural gas industry.

A natural gas boom is already underway in the 400-million-year-old Marcellus shale reserves beneath Pennsylvania. That boom is apparent on a hilltop about an hour from Wilkes-Barre, Pa., where the farmland and forest give way to a brand new industrial site known as the Lathrop compressor station. It’s a collection of pipes and compressors that help move natural gas from local wells to market.

“There are about 75 wells behind this particular station, and plans to double that over the next couple of years,” says Michael Dickinson, a manager for Williams Companies Inc. The company operates two compressor stations in Pennsylvania, with plans to add three more. It’s also building a new 30-mile stretch of pipeline to transport natural gas on to Philadelphia and New York City.

“Those pipelines are kind of like the railroads are to the coal industry, or the high line wires are to the electricity industry,” Dickinson says. “We have to have those pipelines — that infrastructure — to get this gas to the place that it can be used.”

Impact On The Marcellus Shale

The Marcellus shale, which runs from Kentucky to upstate New York, contains one of the largest natural gas reserves in the world, although the gas has been difficult to extract until recently. Energy experts say the accident at the Fukushima Dai-ichi nuclear plant in Japan may accelerate development in Pennsylvania, as the U.S. and other countries will likely put the brakes on plans for additional nuclear power plants, at least in the short run.

“The big beneficiary here will be natural gas,” says Daniel Yergin, chairman of IHS Cambridge Energy Research Associates and author of the Pulitzer Prize-winning book The Prize: The Epic Quest for Oil, Money and Power. Natural gas is relatively clean and cheap to burn, he says, while environmental regulations in the U.S. make new coal plants unlikely. Meanwhile, renewable power sources like wind just aren’t ready to satisfy the demand for electricity.

Pennsylvania Hopes To Become The ‘Texas’ Of Natural Gas

“Natural gas now has become much more competitive as a source of new electric generation in the United States,” Yergin says. “That was true before the nuclear accident. It is even more true after the accident.”

Pennsylvania Gov. Tom Corbett is eager to exploit the state’s gas reserves. In his first budget address since taking office this year, the Republican announced his goal of making Pennsylvania into “the Texas of the natural gas boom.” Supporters of increased natural gas drilling say Pennsylvania needs the thousands of new jobs the gas industry promises.

Fear Of Drinking Water Contamination

But the issue is increasingly divisive. In order to get natural gas out of the Marcellus shale, drillers have to use a process known as hydraulic fracturing or fracking. That produces lots of wastewater, which critics fear will contaminate drinking water supplies.

Those concerns got a lot of attention in Gasland, director Josh Fox’s Oscar-nominated documentary. The natural gas industry and state regulators denounced the film as misleading and one-sided. But those who study the industry say you can’t dismiss its claims entirely.

“The industry in earnest is trying to do the right thing in, you know, most cases,” says David Yoxtheimer, a hydrogeologist at Penn State University’s Marcellus Center for Outreach and Research. “Now, have there been some unfortunate environmental incidents? No doubt about it. So, what we need to do is make sure we do have the proper regulations in place, make sure the companies are using the best available technologies,” he says.

For now, regulators in New York have put a moratorium on new gas wells while they study the environmental impact. In Pennsylvania, Corbett created a commission to explore whether new regulations are necessary. The group will report back to him this summer. But Pennsylvania regulators may have to work fast, because no one expects the natural gas industry to wait.

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CLEVELAND, Ohio — America’s energy future is at a crossroads, a top executive with the U.S. Chamber of Commerce said here Tuesday. Unless more power plants, including wind turbines and nuclear reactors, are built now, the nation will “pay the piper.”

Karen Harbert, chief executive of the U.S. Chamber’s Energy Institute, said the legislative deadlock over climate change and tougher environmental laws, along with “a cascade” of more stringent regulations and a “litigation stampede” has stymied many projects.

Harbert appeared at a conference sponsored by the Greater Cleveland Partnership, the EWI Energy Center and its Nuclear Fabrication Consortium, a manufacturing advocacy group headquarter in Columbus.

She has been stumping across the nation since March with the chamber’s message of “energy reality,” in an effort to educate the public that the nation has waited too long to build new power plants and new infrastructure.

“Policymakers must consider the long-term consequences of action — and inaction– on energy policy,” she said. “America is in need of more sources of energy, more energy infrastructure and more jobs.

“From the fallout from the oil spill in the Gulf to proposed EPA regulations on carbon dioxide emissions, it is critical that the policy decisions made today do not hamper our ability to address our energy challenges tomorrow.”

In an interview, Harbert said the Nuclear Regulatory Commission is taking too long to approve the construction of new nuclear reactors. There are about two dozen reactors proposed, at one stage or another in the approval process. Most are years away from construction.

The NRC, though, has hired hundreds of new employees to process the applications and limited the opportunity for anti-nuclear advocates to slow down permitting.

Since Congress in 2005 said it would set aside about $36 billion to help with new construction, the cost of building a new reactor has gone to more than $8 billion.

Though the conference was focused on the necessity to build nuclear because the nation’s 104 reactors are aging, Harbert also said in an interview that wind and solar must be built.

But she cautioned that these technologies will not replace the large coal-fired and nuclear power plants, in part because the big power plants produce huge amounts of power.

Keynote speaker for the event was Patrick Moore, a co-founder of Greenpeace and one-time nuclear foe who since 2006 has said that nuclear power should be expanded to replace coal-burning power plants.

About 88 percent of all power generated in Ohio is produced in coal-fired power plants. About 70 percent of the power in Northern Ohio is from coal. FirstEnergy Corp. operates two nuclear reactors: Davis-Besse in Oak Harbor and Perry, 35 miles east of Cleveland, on Lake Erie.

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