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New Nuclear Construction: Still on Hold

A number of factors point to expanded nuclear generation. But when?
Fortnightly Magazine - December 2003
  • the World Wildlife Fund observes, "Since wind is an intermittent electricity generator and does not provide power on an 'as needed' basis, it loses some value on a per kilowatt-hour basis, compared to traditional electric generation that can provide baseload power. On the other hand, wind provides benefits in terms of reduced emissions and elimination of fuel risk that can more than make up for this lost value." 10 As well as biomass derived from energy crops, geothermal may be better suited to baseload generation, but the degree of market penetration is expected to be relatively modest.

Even given their higher capital costs, nuclear plants, once built, have generally lower operating costs than their fossil-fired counterparts-an advantage that will increase as greater restrictions are placed on fossil fuel pollutants. According to the Nuclear Energy Institute, 2002 was the fourth successive year in which "nuclear energy was the low-cost leader for baseload production of electricity," with production costs of 1.71 cents/kWh, in comparison with coal-fired power plants, 1.85 cents/kWh; natural gas plants, 4.06 cents/kWh; and oil-fired plants, 4.41 cents/kWh.

Increased demand will make investment in new baseload capacity imperative in coming years. It is highly likely that when this occurs, nuclear power will be the only available technology well-suited to baseload operation that can contribute substantially to meeting this demand without also contributing to global warming, urban ozone pollution, acid rain and other environmental and public health impacts of burning fossil fuels.

Investment Community Views

Despite the greatly improved operational efficiency of existing plants, and the improved economies of scale resulting from industry restructuring, the investment community remains generally skeptical of new projects in competitive electricity generation. Wall Street is shying away from construction of any type of new plant until debts from the recent merchant energy fiasco are paid off. Power industry stocks have suffered major losses, especially those companies relying heavily on natural gas. Most of the failures to date have been in the merchant energy sector and were a result of over-investment in gas-fired units. However, Wall Street does have some special concerns about nuclear investment, based on uncertain construction costs and risks to company earnings during potentially protracted construction of the first new nuclear plants. Moreover, the investment community views the potential for accidents, and concerns about nuclear waste and terrorism directed at the nuclear industry, as risks that must be taken into account.

The companies that could build the new nuclear units also remain skeptical, concerned that in a competitive environment they cannot afford to tie up a large investment for several years before any earnings on that investment will materialize. Thomas Capps, chairman of Dominion Resources, put it the most bluntly, in recent comments to Public Utilities Fortnightly: "Right now I don't think anyone in this country is going to build another nuclear plant. We certainly are not. There is too much risk." 11

Entergy could be the most serious contender. Writing recently in Nuclear Plant Journal, Entergy Nuclear CEO Gary Taylor said: "Entergy is considering a two-track course on new nuclear-advanced light water reactors for the