There are some contradictions about the US nuclear power industry which have rich potential for creating confusion among citizens, the press, and elected officials. For instance, nuclear power is cheap to operate, but wickedly expensive to build and repair. Ben Paulos takes a look.
“We dance round in a ring and suppose,
but the Secret sits in the middle and knows.”
– Robert Frost
The US nuclear power industry is in trouble, with as many as 15 to 20 plants at risk of closure, according to the Nuclear Energy Institute. This has spurred a flurry of advocacy by nuclear plant owners, assisted by some advocates concerned about the impact on carbon emissions if they are replaced by fossil fuels.
But nuclear’s long history has created a complicated landscape that makes easy answers hard to find.
For instance, nuclear power is cheap to operate, but wickedly expensive to build and repair. It is clean in terms of air pollution, but creates deadly radioactive waste. It is safe, unless there is an accident. It gets fewer direct federal subsidies than renewables, but has enjoyed decades of taxpayer funded research, job training, licensing, and finance, and would not exist without federally subsidized insurance.
Most ironically of all, it is strongly supported by free market conservatives, yet can only exist in a centrally planned economy where it is sheltered from any investment or market risk.
These contradictions have rich potential for creating confusion among citizens, the press, and elected officials.
But the people who actually make the decisions about our electric system are less confused. As far as banks, regulators and utility executives are concerned, nuclear power is radioactive.
Dancing in a ring
There is a ring of advocacy around nuclear power, with groups like the Breakthrough Institute and Third Way, prominent climate scientist James Hansen, and ‘60s era environmentalist Stewart Brand helping the Nuclear Energy Institute and a few nuke-owning utilities. The advocates are driven by the idea that nuclear power is needed to reduce carbon emissions, since they think wind and solar are inadequate to the task. The industry is simply trying to extend the life of valuable assets in the face of competitive pressures.
For many years, the industry promoted a “nuclear renaissance” that would be ushered in by a new generation of advanced reactors – smaller and cheaper, with passive safety features – or by the generation after that, with exotic technologies like thorium. They were successful in winning supportive policies from Congress and some states, including R&D, loan guarantees, streamlined licensing, and a production tax credit (PTC), similar to one for wind power, worth about $850 million per year for new plants. Less touted but probably most important of all is “construction work in progress,” or CWIP, where state regulators force customers to pay for a plant before it is finished, since banks won’t make such a risky investment.
The problem with the renaissance was that few utilities were interested.
Two new projects are being built, but they use conventional technology, not advanced. In Georgia, the Southern Company is adding two more reactors to their Plant Vogtle. Original costs were estimated at $6.1 billion, but the project is three years behind schedule and 50 percent over budget. In South Carolina, the V.C. Summer plant is being built by South Carolina Electric & Gas and Santee Cooper, a state-owned utility. That two-reactor plant was estimated at $9.8 billion, but costs have risen to at least $12 billion. Both projects rely on CWIP, federal loan guarantees, and federal tax credits.
The Watts Bar plant was recently finished by the Tennessee Valley Authority – but 44 years after construction began. The project was launched in 1972 and suspended in 1985, only to be revived in 2007.
Rear guard actions
With the nuclear renaissance foundering, advocates have retreated to a more pressing concern, helping utilities keep existing plants alive. Wholesale market prices have fallen in many regions of the US, due to greater energy efficiency, flat demand, cheap natural gas from fracking, and the rapid growth of wind and solar power. Nuclear plants in competitive markets, especially smaller ones with just one reactor, are struggling to compete.
In recent years, eight plants have been closed or slated for closing due to poor economics. Other plants, like San Onofre and Crystal River, have been closed in the face of massive repair bills.
To protect existing plants from the rigors of competition, the plan now for nuclear owners and proponents is to change the rules to bring in more revenues, or in their words, to “properly value the attributes” of nuclear power. One strategy proposed in New York and Illinois is to change state renewable energy mandates to “zero emission” mandates, making nuclear power eligible. New York is expected to issue a plan this summer while the Illinois legislature adjourned recently without taking action.
Outside the few utilities that own nuclear plants, there is very little interest in nuclear. The people who actually make the decisions about the power system – regulators and utility executives – have moved on.
In a recent industry survey by Utility Dive, executives put nuclear power near the bottom of their list of concerns. Only 11 percent thought their utility should invest more in new nuclear generation, compared to 65 percent for storage and 47 percent for renewables.
Another survey by PWC found that globally, only 26 percent of utility executives thought nuclear power would have a “big impact” on their market by 2030, compared to 71 percent for energy efficient technologies and 60 percent for solar.
In a global trend toward competition in the utility sector, the financial risks of nuclear have made it the odd man out. Nuclear plants cost billions of dollars to build and repair and have lead times of ten years or more, making it impossible to predict what future revenues will be. If investors have to bear the risk of investment, rather than captive consumers, they won’t touch nuclear.
Wind and solar power are modular and quick, meaning they can be developed in any size with lead times of less than a year. Global trade in technology means they can survive the ups and downs of any individual market. And heavy competition creates relentless pressure for improvement and cost reductions.
It’s been clear for some time that new nuclear is not competitive. The surprise now is that even existing nuclear plants can’t compete with gas, efficiency, and renewables.
While advocates argue that nuclear doesn’t get as much policy support as renewables – a debatable point – the problems go much deeper. The secret is that nuclear power is not compatible with 21st century markets and policies. No amount of dancing will change that.
Bentham Paulos is an energy consultant and writer based in California. His views are his own, and don’t necessarily represent those of any of his clients.