Gas Will Gain from Nuclear Negativity

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"We expect that nuclear's loss could be natural gas' gain."

Gas prices have remained low for some time due to a global gas glut following the development of shale gas in the U.S., but new reservations about the safety of nuclear energy could increase demand for gas significantly. This also implies that electricity prices may have to rise.

The continuing drama in Japan has prompted China to suspend new nuclear plant approvals. The country has at least 25 nuclear plants in the pipeline and 12 under construction.

"Any hazards must be thoroughly dealt with, and those that do not conform to safety standards must immediately cease construction," a Chinese State Council statement said last week.

This is significant as China was expected to be responsible for 40% of the world's new nuclear build.

"We believe that events at Fukushima could change national energy policies in nuclear countries, with potentially both shutdowns of existing nuclear plants and fewer new nuclear installations," Robert Clover, HSBC's head of alternative energy said. "However, we expect that nuclear's loss could be natural gas, energy efficiency and renewable's gain."

Clover believes that there will be higher safety and other costs for new and existing nuclear facilities, which would render nuclear power less economic or even uneconomic.

He also forecasts upward pressure on international liquefied natural gas (LNG) and EU gas prices as generation is swung to gas turbines. He expects this will lead to a "re-evaluation of current planned energy policy in all nuclear countries with a greater focus on energy efficiency measures plus gas and renewable installations."

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