Is Nuclear Energy Still Viable?

Deck: 

Cheap natural gas is not just hurting coal. It’s doing the same to nuclear.

Fortnightly Magazine - August 2015

Domestically, the energy headlines proclaim the pending Clean Power Plan and the wave of natural gas washing ashore in America. While that boom is responsible for enriching the country's economy, it is doing so at the expense of other fuel sources, namely coal and nuclear.

For nuclear energy, the transformation carries some irony: as the nation strives for cleaner air and less carbon emissions, the most promising carbon-free power source faces stiff competition from natural gas, which is cheap and abundant at the moment, and a lot easier to get permitted and built than a conventional reactor.

Over the past three-plus decades, nuclear plants have become reliable and efficient, running at 90-plus percent capacity rates - higher than any other form of electric generation. To top it off, no major accidents have occurred during that time, either domestically or globally. Then Fukushima happened. And that caused the world community to pause and to re-examine its nuclear options. The soul-searching has begun anew.

"I would encourage policymakers and the public to think about nuclear in this new context and to fairly value nuclear for all it brings to the table, especially its ability to produce around-the-clock, carbon-free electricity," says former Senator Evan Bayh, D-Indiana, in an email exchange, referring to this country's options.

He brings attention to a report released in July by the Brattle Group, which was commissioned by the pro-nuclear group, Nuclear Matters. That study says that nuclear energy plants add $60 billion to the U.S. gross domestic product, creating some 475,000 American jobs, either directly or indirectly.

At the same time, Brattle's study points out that nuclear power plants can produce electricity at competitive prices over the long haul. It adds that nuclear energy provides about 63 percent of the nation's carbon-free electricity, avoiding 573 million tons of carbon dioxide emissions linked to climate change.

And as the country comes to terms with the Environmental Protection Agency's Clean Power Plan to cut carbon emissions by 30 percent by 2030, nuclear energy ought to play a prominent role - one that gives states and utilities full credit for the carbon-free power they produce. That, in turn helps preserve the nuclear plants that now exist, and may even encourage new builds, nuclear advocates say.

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And therein lies the rub: the shale gas boom has brought us sustained low prices for natural gas and wholesale energy, making it difficult for nuclear plants to compete in this new and unforgiving merchant world. As such, a few of those units have already retired, notably ones owned by Dominion Resources, Entergy Corp. and Exelon Corp. As much as 6 percent of the total fleet is at risk of closure.

"We must compete against the marginal source: natural gas. And we do not see those prices rising. We need diversification. We need a balanced portfolio," said Chris Crane, chief executive of Exelon at the Edison Electric Institute's annual meeting in New Orleans, before reporters.

If this result is a function of free-market economics, then what's the problem? After all, EPA's climate policies would tend to favor low-to-no-carbon fuels like nuclear power. Yet the legal challenges to that rule will likely delay its planned 2020 implementation. That means nuclear energy will continue to face an uphill battle.

A study by the Institute for Energy and the Environment at the Vermont Law School says the worst is yet to come. Beside the current closures, it warns that as many as 38 reactors in 23 states are at risk of early retirement. There are now about 99 reactors here generating about 19 percent of the country's electricity.

Merchant nuclear units may have a hard time competing against natural gas but can the nation afford to risk losing more productive nuclear plants, given its carbon goals? Consider: In June 2013, Southern California Edison was forced to close its San Onofre Nuclear Generating Station (SONGS) after it was unable to resolve persistent problems with radiation leaks.

SONGS, in fact, had been one of two nuclear plants in the state, providing 17 percent of Southern California Edison's electricity load, at 2,200 megawatts. Natural gas is replacing that fuel there, which has led to a 35 percent increase in greenhouse gas emissions since January 2012, says the California Air Resources Board. Before that, those emissions had been declining in California.

"With gas plentiful and cheap, it puts stress on the other kinds of generation," said Edison International Chairman Ted Craver, speaking on the phone with this reporter. "That said," he added, "nuclear is unique: It is the one large central base-load plant that exists that is not a fossil fuel."

Meanwhile, the pressures mount, and on a global scale. Japan has spent $65 billion on liquefied natural gas imports since its nuclear plants were idled after the 2011 Fukushima accident. That's an increase of 25 percent, says Deloitte Touche Tohmatsu.

And Germany remains committed to closing its 17 nuclear generating stations, which had provided a quarter of that country's generation mix. As a result, the World Nuclear Association says that coal has increased its market share there from 43 percent in 2010 to about 52 percent now.

All this is happening after the release of the latest findings from the UN Intergovernmental Panel on Climate Change. The panel now concludes with 95 percent certainty that humans are mostly responsible for global warming.

To this end, some high-profile climate scientists are proactively courting nuclear energy: "Quantitative analyses show that the risks associated with the expanded use of nuclear energy are orders of magnitude smaller than the risks associated with fossil fuels," write the scientists, who include Dr. James Hansen at the Columbia University Earth Institute.

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While the opposition remains vehement, the message is gaining greater resonance: In the United States, four reactors at two plants are under construction, while the U.S. Department of Energy has been increasing funding for advanced nuclear research and development.

"We should value existing nuclear energy plants now for the benefits they provide instead of having to pay a significant cost down the line as a result of additional premature plant closures," says former Senator Judd Gregg, R-NH, in an email exchange, speaking on behalf of Nuclear Matters.

Meanwhile, China, Korea, the UAE, Saudi Arabia and the UK are embracing that sentiment and advancing nuclear production to address air pollution and climate concerns. China has 20 nuclear plants today and 28 more under construction - 40 percent of all projected new nuclear units, says the World Nuclear Association. A similar dynamic exists in the UK, which approved the construction of two reactors at Hinkley Point that will provide 7 percent of the UK's electricity.

Setting aside the concerns of environmentalists, the main obstacles that the nuclear energy industry faces are economic - the high cost of building plants and the current cheap price of competing fuels like natural gas. But the worries over climate change in combination with the creation of EPA's carbon plan could not only keep nuclear relevant but help it grow in prominence as well.