June 10, 2009
Nuclear power's challenges are unending. At the heart of the issue now is whether the energy form is a cost-efficient alternative or whether it remains a black hole.
In the United States, some notable members of Congress are saying that the country needs to build 100 new nuclear reactors over the next 20 years, all to achieve energy independence and to meet the nation's clean air goals. That would in essence double the current output from 20 percent of the electric generation to 40 percent -- at a cost of about $700 billion.
"Climate change may be the inconvenient problem, but nuclear power is the inconvenient answer," said Sen. Lamar Alexander, R-Tenn., in a speech before the Oak Ridge National Laboratory. "Right now there are 17 proposals for 26 new reactors in licensing hearings before the Nuclear Regulatory Commission. That's a start. But I think we need to go well beyond that. I propose that from the years 2010 to 2030 we build 100 new nuclear reactors to match the ones we already have operating."
But grassroots organizations are drowning out those calls. They are arguing that the construction would be done at taxpayers' expense while the development of such technologies is failing to live up to its promises. Case in point: AREVA's undertaking in Finland where it has promised to build the most state-of-the-art nuclear reactor in the world. The project's cost, however, has risen from an estimated price tag of $4.2 billion to about $8 billion -- and no one can say exactly when the reactor will come on line.
That's a sobering thought, given that on average 12 reactors would have to be built worldwide each year by 2030 to have a huge affect on reducing greenhouse gases. That's according to the Nuclear Energy Agency at the Organization for Economic Cooperation and Development, in a piece referenced by The New York Times.
The simple reality, the paper notes, is that it probably can't be done. Of the 45 reactors now under construction around the globe, 22 of them have encountered delays. AREVA, in fact, is behind schedule and over budget in its home country of France -- where it is building a reactor vastly similar to that of the one in Finland. Consider furthermore that the demand for construction supplies as well as uranium will push up cost even more. With Russia, China, India and parts of Western Europe all interested in increasing their nuclear stakes, the bidding has already begun.
"A number of U.S. companies have looked with trepidation on the situation in Finland and at the magnitude of the investment there," said Paul Joskow, a professor of economics at the Massachusetts Institute of Technology, a co-author of a 2003 report on the future of nuclear power, in The New York Times. "The rollout of new nuclear reactors will be a good deal slower than a lot of people were assuming."
Political Winds
According to the Edison Electric Institute, energy demand in this country is expected to increase by 30 percent by 2030. And during this time period, power generators will be under increasing pressure to limit their greenhouse gas emissions. Those dynamics would tend to favor nuclear production, which has increased its average capacity factor from about 70 percent in the 1970s to 90 percent today.
Currently, 104 nuclear reactors operate with a combined generating capacity of about 100,000 megawatts. The price tag to build a nuclear facility in the days before the incident at Three Mile Island totaled about $1 billion. Now, however, it is $6 billion to $9 billion. Meantime, the building process has doubled from five years to 10 years.
The challenge going forward is to win investors who recognize the risks tied to regulatory and legal concerns as well those hazards associated with construction and technology. Wall Street, for example, is concerned that the Nuclear Regulatory Commission could mire the licensing process in red tape while specific communities could entangle the process in the courts. The repercussions would lead to construction never-ending delays that make projects cost prohibitive.
That's the impetus behind provisions enacted under the Energy Policy Act of 2005. The law provides for loan guarantees of up 80 percent of a project's cost, while it also provides tax credit of 1.8 cents per kilowatt-hour for 6,000 megawatts of capacity from new nuclear power plants for the first eight years of operation -- a total of roughly $18.5 billion. The act also extends the Price-Anderson Act that limits utilities' liability with any potential nuclear accident.
To help jump-start the nuclear revival, the U.S. Department of Energy has highlighted four reactors that it says will be eligible for the loan guarantees. One of the objectives is to create more standardization thereby reducing start-up costs. Beyond that, Sen. Alexander says the total of projects to receive such assistance should be raised to 12. That would better enable nuclear technologies to enter the market and prove their worth. Traditional capital markets would then become more accessible to nuclear developers.
"If you are not going to build a coal plant, then the only other choice is nuclear plants," says Adam Cohen, associate laboratory director for at Argonne National Laboratory. "Longer term you will see more nuclear meeting base load. We are not waiting for international input. But we are waiting for economic and political changes to occur."
Power generation construction costs are rising across the board and nuclear is no exception. The difference is that the industry's uncommon history gives it tougher odds. Other nations, however, are forging ahead. Their experience will invariably affect the political climate in the United States and ultimately influence the energy path that this country chooses to take.
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Ken Silverstein EnergyBiz Insider Editor-in-Chief
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