From the May 2011 issue of Research Magazine • Subscribe!

May 1, 2011

What Next for Japan’s Energy?

Japan crisis changes energy outlook

Japan’s natural disaster has dramatically shifted the world’s view of nuclear energy. Countries like China, Germany, India, Switzerland and the United Kingdom are rethinking their nuclear energy plans.

The situation in Japan prior to the accident was as follows: nuclear power accounted for roughly 25 percent of Japan’s electricity. Imported energy, like petroleum, accounted for the bulk of Japan’s energy supply, while coal and natural gas made up around 35 percent of Japan’s energy supply.

Where will Japan obtain its future energy needs? The nation will need to rely on coal, natural gas and petroleum for its energy needs to make up for the losses at the Fukushima Daiichi nuclear plant. Six of the four reactors are irreparable and will be decommissioned.

Nuclear ETFs that own stocks within the sector like the Global X Uranium ETF (URA) and the Market Vectors Uranium+Nuclear Energy ETF (NLR) have been hit with a spell of volatility. Both nuclear ETFs have bounced off their recent drops, but the stability of future earnings is a big question.

ETFs that are likely to benefit from the fallout in nuclear energy stocks are the PowerShares Wilderhill Clean Energy ETF (PBW), Market Vectors Coal ETF (KOL), Sector SPDR Energy (XLE) and First Trust ISE-Revere Natural Gas Index Fund (FCG).

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