America's Nuclear Dead End
President Barack Obama told a crowd in Prague two years ago that “we must harness the power of nuclear energy on behalf of our efforts to combat climate change.” In January, in his State of the Union address, and again in last month’s proposed budget for 2012, he backed up his rhetoric with some $36 billion in federal loan guarantees for a spate of new reactors. Republicans, led by Tennessee Sen. Lamar Alexander, have been his partner, with Alexander giving speeches and writing numerous op-eds, declaring that the U.S. “can’t afford to ignore nuclear power.”
During his post-earthquake press conference Friday, Obama reiterated his pro-nuclear stance, saying that the U.S. would, by 2035, be getting 80 percent of its electricity from "clean energy” which he described as "wind and solar and homegrown biofuels, along with natural gas, clean coal, and nuclear power."
Here’s the truth, though: This much-ballyhooed nuclear renaissance was little more than a mirage. Love fission or hate it, the rebirth of America’s nuclear sector—with some 20 reactors reportedly planned for the next 15 to 20 years—was going nowhere fast. And this stillborn rebirth was readily apparent for months before the magnitude 9.0 earthquake and tsunami devastated northeastern Japan, damaging several of the country’s reactors and giving the world its worst nuclear crisis since the Chernobyl disaster in 1986.
Needless to say, the news from Japan, especially for hard-core nuclear advocates like me, depresses on many levels, as it will clearly slow down popular demand and give fresh fodder to anti-nuclear environmental groups, most notably, the Sierra Club and Greenpeace.
“How can you compete with natural gas when it’s priced at less than $4?”
But the forces that already undermined the revival of America’s nuclear sector are largely economic, not political. The most formidable obstacle: the ongoing shale gas revolution. The ability of drillers to unlock vast quantities of natural gas has resulted in an avalanche of methane production and a resulting collapse in prices. Last year, U.S. gas production hit its highest level since 1973. And despite a very cold winter, natural-gas prices have generally stayed below $4 per thousand cubic feet, which is about half the level seen as recently as 2008.
On Sunday morning, I discussed the economics of nuclear with a senior executive in the U.S. nuclear utility sector. He asked, “How can you compete with natural gas when it’s priced at less than $4?” The answer, said the executive, who asked that his name not be used because he was not authorized to speak the media, is, “you can’t.”
Indeed, last September, Exelon Corporation, one of the largest nuclear operators in the U.S., decided to delay construction of a planned two-reactor project in Texas. The company explained that natural-gas prices needed to be at least $8 for the project to make economic sense. Other officials in the nuclear sector have told me that natural-gas prices need to be above $7 for reactors to be economically viable.
Combine low natural-gas prices—which, by the way, are perhaps the only bright spot in an otherwise bleak commodities market)—and the high cost of a big new reactor, say, a Westinghouse AP1000, which may cost $5 billion to $7 billion, and the obstacles facing nuclear become even more obvious. Electric providers can build gas-fired generators much faster than new nuclear plants. Better still, they can do it for one-fifth the cost and avoid the nightmarish process of nuclear licensing and permitting. The myriad of utility regulators at the state level as well as the glacial pace of action at the Nuclear Regulatory Commission, have helped prevent the startup of a new nuclear plant in the U.S. since 1996.
The punch line is this: Long before we started hearing about the possibility of reactor meltdowns in Japan, it was obvious that for the foreseeable future, the U.S. electric sector would only build, at most, four reactors. Aside from two reactors (Summer 2 and 3) that may be built in South Carolina and two others (Vogtle 3 and 4) in Georgia, the U.S. nuclear sector has no solid prospects for new commercial reactor construction. And those four reactors are only economically viable because the companies pushing them are being allowed by those states’ regulators to recover the costs of the plants as they are being built. In other states, new reactor projects must prove their profitability and have power-purchase agreements before construction. As you might expect, even with government-backed loan guarantees, bankers aren’t rushing to finance bet-the-company-size construction projects with budgets of $10 billion to $14 billion for a plant with 2,000 megawatts of capacity that might not come online for a decade.
While multiple factors will prevent nuclear from gaining much traction in the U.S. in the medium term, the enormous power densities achievable with fission assures its commercial viability for many decades to come. Among the more attractive prospects: licensing and construction of modular reactors by companies like Babcock & Wilcox, which could, given their lower cost, allow utilities to invest relatively modest amounts of capital in reactors that could provide baseload capacity. In addition, scientists in India, as well as at Brookhaven National Laboratory on Long Island, continue working on research that could allow use of thorium in the reactor core. That element (which sits two doors to the left of uranium on the Periodic Table) is far more abundant in the earth than uranium and when used in a reactor, may help reduce the proliferation of weapons-grade material.
Furthermore, the world’s insatiable hunger for electricity assures that nuclear energy endures as the best hope for large-scale, dispatchable production of electrons from low- or no-carbon sources. That’s essential given soaring global electricity demand. In November, the International Energy Agency projected that global electricity demand will soar by some 80 percent by 2035. (Over that same time period, the IEA expects oil demand will grow by 19 percent, coal by 20 percent, and natural gas by 44 percent.)
No country is going nuclear faster than China. On Friday, the Japanese newspaper Asahi Shinbun published an interview with Liu Wei, the vice president of China Nuclear Power Engineering Corp., who said that China will build 60 new reactors by 2020. The article ended with Liu discussing his visit to Japan. Last year, he visited the Kashiwazaki Kariwa nuclear plant in Niigata Prefecture, where, he said, he was able to "learn about nuclear facilities and earthquakes. It was a good experience."
Let’s all hope he paid attention.
Robert Bryce, a senior fellow at the Manhattan Institute, recently published his fourth book, Power Hungry: The Myths of "Green" Energy and the Real Fuels of the Future.