Small modular reactors (SMRs) are nuclear generating units that are about the size of railroad cars and provide about one-tenth to one-fourth the power of full-size reactors. As a result, they...
Nuclear Power: A Second Coming?
Here’s what’s driving the renaissance.
gas-fired generating capacity accelerated, from an average of about 6,000 MW annually through much of the 1990s to approximately 40,000 MW in 2001, peaking at roughly 53,000 MW/year in 2002 and 2003. By then, it was clear that gas-fired capacity was being built to serve baseload demand, and it was being built in place of coal-fired and nuclear plants because gas-fired capacity represented the lowest investment risk at a time of punishing business uncertainty.
Only a relative few warned that growth in demand for natural gas was unsustainable; that consumers of natural gas, and of electricity from natural gas, would face punishing price volatility, and that demand growth and supply constraints eventually would combine to price much of this new gas-fired generating capacity out of the market. Today, we are paying the price for more than a decade of underinvestment in critical electric power infrastructure.
Driven largely by higher oil and natural gas prices, fuel costs for the electric sector increased by 35 percent last year—from $68 billion in 2004 to $92 billion in 2005. Recall that spot natural-gas prices were in the $6 to $7 per million BTU range through the summer of 2005, even before two major hurricanes wrecked the gas production and processing infrastructure along the Gulf Coast and sent spot prices soaring north of $10 per million BTU.
Add to this continued upward pressure on the cost of coal-fired generation. Spot prices for SO 2 allowances soared above $1,500 per ton late in 2005. Those prices are clearly not sustainable. But most analysts forecast long-term equilibrium prices in the range of $800 to $1,000 per ton—significantly higher than the $200-per-ton prices that prevailed until late 2003—as the markets internalize the tighter limits on emissions mandated by the Clean Air Interstate Rule.
Evidence that the surplus generating capacity around the nation is disappearing also surfaced. For the first time in a decade, U.S. reserve margins dropped in 2005, according to recent analysis by Cambridge Energy Research Associates (CERA). Summer electricity demand increased by the equivalent of 30,000 MW to 35,000 MW, and a surge in retirements virtually offset new generating capacity coming on line.
All this adds up to a bleak outlook. If there is a silver lining, it is this: Today’s electricity markets reinforce the strategic value of generating capacity that can provide large volumes of baseload electricity, without emissions, at stable, predictable prices. More than anything else, the renewed interest in, and commitment to, nuclear power reflects the fundamentals in the energy markets.
Managing the Risks
Nine companies, consortia, or joint ventures are planning approximately 12 new nuclear power plants in the United States (see Table 1) . This first wave will enter service in 2015 or so.
This did not happen overnight. In 2000, the Nuclear Energy Institute assembled the companies already heavily invested in nuclear power and launched a program to create business conditions under which companies could build new nuclear plants when they needed new baseload capacity. The initiative had two major elements: To demonstrate that the new licensing process created by