One of the most powerful seismic events in recorded history, the 9.0 magnitude earthquake that devastated Japan’s Tohoku region on March 11, 2011, generated a massive tsunami that measured over 100 feet in height. The human toll from this tragedy: 15,856 dead, 3,306 missing, 6,025 seriously injured and more than 700,000 rendered homeless.

In the days following the quake, the media’s attention shifted from rescue efforts to the crippled Fukushima Daiichi nuclear facility.

Despite enduring an earthquake of a much greater magnitude than their design specifications, the reactors emerged from the disaster without serious damage and with their radiation containment structure intact. However, the quake did cut off external power to the facility, causing the reactors to shut down automatically and firing up the back-up generators that supply power to the cooling system. These back-up systems functioned as intended.

The massive tsunami that hit the facility roughly an hour after the quake wiped out the generators, taking the cooling systems for all three nuclear reactors offline. With no way to cool the ultra-hot cores, the reactors came close to a total meltdown. Emergency responders resorted to helicopters, trucks, water cannons and pumps to douse the cores and spent-fuel ponds in an effort to prevent catastrophe. Within a few weeks, the reactors were under control. By October 2011, core temperatures had declined to about 80 degrees Celsius; by December 2011, all the facility’s reactors had reached a state of cold shutdown.

What transpired at Fukushima Daiichi was far more serious than the partial meltdown at the Three Mile Island nuclear power plant in March 1979, and the disaster exposed critical design flaws in reactors of this age. Although three workers at Fukushima Daiichi drowned when the tsunami hit and six employees have died since the disaster, a report released by the UN Scientific Committee on the Effects of Atomic Radiation (UNSCEAR) in late May 2012 found that none of these deaths stemmed from radiation exposure.

Although no cases of acute radiation poisoning have been reported, concerns about the long-term health ramifications of the crisis are warranted. According to a 2008 UNSCEAR report on the 1986 Chernobyl disaster, 134 plant workers and emergency responders developed acute radiation syndrome, 28 of whom died from this exposure and 19 of whom passed over the next 20 years. In the case of the latter group, the majority of these deaths weren’t linked to radiation exposure. That being said, some of the survivors have developed radiation-related cataracts, skin conditions and other effects.

Exposure to radiation makes children and adolescents susceptible to thyroid cancer. Estimates attribute about 6,000 cases of thyroid cancer to radiation exposure, though only 15 of these cases had proved fatal as of 2005. UNSCEAR also estimates that 530,000 recovery workers were exposed to 120 millisieverts (mSv) of radiation, while the 115,000 people evacuated from the region were subjected to 30 mSv. Those who lived in contaminated areas for the two decades after the accident were exposed to another 9 mSv of radiation. To contextualize these figures, exposure to 100 mSv of radiation significantly increases an individual’s risk of cancer.

Calculating how many will die of cancer because of the fallout from Chernobyl is a fraught enterprise. Nevertheless, UNSCEAR projects that the cancer rate among the population of relief workers and evacuees from the immediate area might be 3 percent to 4 percent higher than in the typical population. This cancer rate amounts to 4,000 premature deaths that wouldn’t have occurred if the Chernobyl disaster hadn’t happened.

On the International Nuclear Event Scale, the tragedy at Fukushima Daiichi rates at the same level as the explosion at Chernobyl. However, salient differences separate the two disasters.

The plant workers and first responders in Japan were far more careful than their counterparts in monitoring and limiting individuals’ exposure to radiation. Reports about Chernobyl suggest that Soviet officials lied to emergency workers about the risks to convince them to perform dangerous work. Japanese authorities also organized and implemented evacuation procedures for those in the plant’s immediate vicinity much faster than the Soviets did.

The incidence of thyroid cancer related to radiation emissions from Fukushima Daiichi is also expected to be much lower because Japanese authorities were quick to distribute iodine tablets to effected populations, especially children and adolescents. Those living near Chernobyl received no such treatment.

The World Health Organization’s (WHO) report on the Japanese disaster estimates that residents of the Fukushima prefecture were subjected to between 1 mSv and 10 mSv of radiation in the year after the accident. However, the WHO estimates that dosages reached 10 mSv to 50 mSv in two areas closest to the power plant.

The assumptions underpinning these estimates erred on the conservative side, assuming that Japanese citizens ate only food sourced from Fukushima in the year after the disaster. The end result of this exercise suggests that even those who lived closest to the power plant were likely exposed to less than 100 mSv of radiation, the inflection point for a significant uptick in the risk of cancer.

“Worldwide Health Effects of the Fukushima Daiichi Nuclear Accident,” a study conducted by two researchers at Stanford University, estimates that about 130 people will die of cancer in the coming decades because of radiation emissions related to the disaster. The report’s authors also indicated that the number of deaths could range from 15 to 1,300, and estimated that incidences of cancer could increase by as much as 0.5 percent.

Media Hyperbole

This litany of statistics isn’t intended to minimize the potential health effects stemming from the disaster, but rather to throw into relief the media’s coverage of an earthquake and tsunami that killed more than 20,000 people.

Media coverage of the disaster at Fukushima Daiichi changed the perceived safety of nuclear power and hit most stocks in the nuclear power and uranium mining businesses hard. Investors must understand the context and scale of the accident; far too many assume that the disaster has permanently derailed the nuclear renaissance. Although some nations plan to scale back their reliance on nuclear power, the technology has a bright future in many energy-hungry emerging economies.

Only two countries with significant nuclear capacity have changed their policies toward nuclear power in a major way since the incident: Japan and Germany. Prior to the Fukushima accident, German Chancellor Angela Merkel had sought to extend the operating licenses on several of Germany’s nuclear power plants, overturning a previous commitment to shut down all of the nation’s 17 reactors. This plan, which didn’t call for any new reactors, came to an abrupt end after the Fukushima Daiichi disaster.

The German public has long exhibited a strong anti-nuclear streak, and the tragedy in Japan increased this hostility. Accordingly, the country has shuttered its eight oldest reactors and plans to phase out the remainder of its fleet by 2022.

Prior to this about-face, nuclear power accounted for about one-quarter of Germany’s electricity mix. We expect the nation to turn to imported electricity and natural gas to fill the void, especially after the nation’s subsidies for solar power have succeeded only in increasing the cost of electricity. All this adds up to rising demand for natural gas, some of which will be imported in liquefied form.

That said, Germany only accounted for about 5 percent to 6 percent of global nuclear power generation; the nation’s new energy policy will have a limited impact on supply-demand conditions in the uranium market.

Japanese public’s support for nuclear power plummeted after the Fukushima Daiichi accident. A poll conducted in March 2012 by Japan Association for Public Opinion Research found that almost 80 percent of the population would like to eventually end the nation’s reliance on nuclear power for electricity. Nevertheless, 69 percent of respondents backed the restart of some reactors to meet electricity demand this summer.

Prior to the disaster, Japan generated about 30 percent of its electricity from 50 nuclear reactors. This proportion was expected to reach 40 percent by 2017 and eventually eclipse 50 percent. In short, increased reliance on nuclear power underpinned plans to reduce carbon dioxide emissions and lower the nation’s dependence on energy imports.

The catastrophe at Fukushima Daiichi forced the nation back to the drawing board. The Japanese government is expected to announce an updated energy plan, a document that will likely call for more renewable energy, natural gas and conservation measures. Reports suggest that the government is weighing three potential end games for the country’s nuclear power capacity: eliminating the use of nuclear power as soon as possible; reducing its contribution to the electricity mix to 15 percent by 2030; or curtailing nuclear power to between 20 percent and 25 percent of the nation’s total generation by 2030.

There are no easy solutions. Because nuclear reactors can run at or near full capacity for extended periods, these facilities are a critical source of baseload power. Solar and wind energy may be popular replacements in the court of public relations, but they are intermittent power supplies. The wind doesn’t always blow and the sun doesn’t always shine; they can’t take the place of the nation’s reactor. To compensate, Japan will likely need to build out its fleet of thermal power plants, especially those fueled by imported natural gas, a relatively clean-burning feedstock.

Regardless of which course the Japanese government ultimately takes, the nation’s transition away from nuclear power will likely occur over decades. Investors should also remember that Japan accounted for only 4 percent of global nuclear power demand in 2011, down from 6 percent before the crisis. The nation’s new energy policy will have only a modest impact on demand for uranium.

The US is the world’s largest producer of nuclear power, with 104 operating reactors. Since the Fukushima accident, the country’s energy policy has seen only modest changes. The US Energy Information Administration’s (EIA) Annual Energy Outlook 2010, published long before the disaster at Fukushima Daiichi, estimates that US nuclear generation capacity would increase by 10 percent between 2008 and 2020 and 12 percent by 2035. The EIA’s latest forecast factors in the closure of several older reactors and calls for nuclear power capacity to increase by 9.6 percent over the next 23 years.

The US has one reactor under construction and 11 nuclear power plants in the planning stage. Polls find that roughly two-thirds of Americans favor the continuing use of nuclear power. In April 2011, shortly after Fukushima, NRG Energy (NYSE: NRG) abandoned plans for two additional reactors in Texas and wrote off its investment in the project, citing regulatory uncertainty in the wake of the Japanese disaster.

However, it’s likely that NRG’s decision to abandon plans for a nuclear expansion is also a function of extraordinarily low natural gas prices. The US enjoys the lowest natural gas prices of any major economy in the world, thanks to plentiful supply from shale fields. European and Asian gas prices have been as much as five times higher than in the US over the past two years. Prolonged low US gas prices make it tough to beat gas as a fuel for electric power plants, whereas nuclear is a far more attractive option in Europe and Asia.

The US was never expected to be a major builder of new reactors but regulatory policy has not turned negative on nuclear since Fukushima. Expect a handful of additional reactors in coming years to offset reactors that are closed as they come to the end of their useful lives. There has been no major policy shift away from nuclear at the national level.

Jilting the Greens

France’s fleet of 58 nuclear reactors generates about 75 percent to 80 percent of the nation’s electricity. A leading proponent of the technology since the 1970s, France has one advanced reactor under construction at Flamanville in Normandy and has plans to build a second at Penly in northern France.

French public support for nuclear power suffered after the disaster in Japan. But a poll in March 2012 found that only 42 percent of French citizens supported a plan by the Europe Ecologie-Les Verts (France’s Green Party) to shutter the nation’s reactors. About 62 percent of respondents indicated that they trust Electricite de France (Paris: EDF) to prevent a similar disaster at its power plants.

There had been some concerns that the election of Socialist Francois Hollande as president of France would be a negative for nuclear power. During the heat of the election campaign in late 2011, Hollande agreed to shut down 24 of the nation’s reactors and halt new construction as part of a pact with the Green Party.

However, Hollande’s move was clearly more about politics than policy. At the time, the Socialist leader felt he might have to form a coalition with the Greens to run France after the election. This anti-nuclear motivation is now gone, because the Greens had a weaker-than-expected showing in the French elections and Hollande won by a larger-than-expected margin.

After the election, Hollande dropped the Green pact almost immediately, citing union opposition to any plans to scale back nuclear power or nuclear construction projects. Hollande stated that he supports the construction of new nuclear reactors and will not oppose those plans. His sole nod to the Greens is that he agreed to close France’s oldest reactor, Fessenheim, which exports a significant portion of its output to manufacturing firms in Germany.

Meanwhile, the growth story for nuclear is intact because most of the growth in planned capacity was to come from emerging markets including China, India and Russia. All three of these countries have largely reaffirmed their commitment to nuclear expansion.

In particular, China currently produces less than 2 percent of its electricity needs from nuclear power; this percentage will increase rapidly in coming years to keep pace with domestic demand that’s growing at an average annual rate of 10 percent.

Twenty-six nuclear power reactors are under construction on the Mainland, with an additional 51 facilities at some stage of advanced planning. Prior to the Fukushima Daiichi accident, Beijing had planned to increase the nation’s nuclear power capacity to 80 gigawatts (GW) from 11.9 GW. However, after the disaster in Japan, the government suspended approvals for new plants and conducted a comprehensive safety inspection of all its operating reactors, as well as those under construction.

This review process has almost run its course, and construction has resumed on a number of facilities. In June 2010, the State Council approved a nuclear safety plan that will be in force through 2015, though these requirements shouldn’t prove to be a major impediment. Recent generations of reactor designs eliminated many flaws in older models, including the need for an external power supply to cool the core in an emergency. China has also enhanced flood controls at nuclear power plants in coastal regions.  

Although China has yet to update its goal for nuclear power, media outlets have suggested that authorities may lower the target to between 60 GW and 70 GW from 80 GW. Investors should also consider that China has a long history of exceeding these targets. In fact, if China builds all the reactors currently planned or proposed, the Mainland’s installed capacity would swell to more than 200 GW.

Higher Uranium Prices Ahead

Bottom line: concerns of a dramatic global reaction against nuclear power in the wake of Fukushima are way overblown. Global demand for uranium, the key fuel used in nuclear reactors, should continue to grow at a roughly 4 percent annualized pace over the coming decade largely driven by increased use in emerging markets such as China.

The supply side is also supportive of higher uranium prices. In 2011, uranium mining operations produced 58,000 metric tons of the feedstock, well short of global demand. Historically, the secondary market has bridged the gap, often in the form of government stockpiles or reprocessed Russian nuclear warheads. However, the Russian government will terminate its Megatons to Megawatts program at the end of 2013, placing the onus on mining outfits to offset the decline in secondary supplies.

Although uranium is relatively plentiful, production costs are the biggest impediment to supply growth. Cameco Corp’s (TSX: CCO, NYSE: CCJ) McArthur River uranium mine yields high-grade uranium ore and generates solid returns at the current spot price of $50 per pound. However, this mine, which produces about 15 percent of global supply, is the exception rather than the rule.

Many of the greenfield mines in development aren’t profitable in the current pricing environment, prompting some companies to mothball expansion plans over the past year. To incentivize miners to ramp up production, uranium prices would need to increase to at least $80 per pound.

China has taken advantage of weak uranium prices to add to its stockpile whenever the feedstock dips to the low end of its trading range. Investors should follow Beijing’s example.