CEOs at Odds over Nuclear Energy Future

Ken Silverstein | Apr 01, 2012

Even nuclear energy pros are divided. While none of them doubt either the safety or the reliability of the current plants, they are split as to whether future facilities will figure prominently into this country’s generation portfolio.

For years, building up to what had been termed the Nuclear Renaissance, the return of nuclear power seemed inevitable. The fuel form, which is relatively emissions-free, is a bonus for climate advocates while the uranium that is used to feed the reactors is plentiful. And for three-plus decades, the plants had become reliable and efficient, running at 90-plus percent capacity rates -- more than any other form of electric generation. To top it off, no major accidents had occurred here.

Then Fukushima happened. And that caused the world community to pause and to reexamine its nuclear energy options. While those considerations have been ongoing -- nuclear concerns around the world are cooperating in an effort to prevent such a disaster again -- the shale gas phenomenon keeps persisting. Such unconventional natural gas is not just cheap and abundant but it can also be used in combined cycle generators that are efficient and that can get easily permitted. 

There’s 104 nuclear plants now operating in the United States, which generate a fifth of the nation’s electricity. 

What now? “As someone who loves nuclear, it is a large speculation,” says John Rowe, former chief executive of Exelon, at the EnergyBiz Leadership Forum. “It is 30 years before it breaks even. I think the combination of low natural gas prices and Fukushima will set a real nuclear renaissance back by several decades.

“We should maintain the technical knowledge if it would be needed 20 years from now,” Rowe continues. “But I’m genuinely uncertain that it will be needed.” He says that wind and solar will become more economic over time, and along with natural gas, may obviate the need for new nuclear power plants.

Illinois-based Exelon operates 22 nuclear power plants, more than any other U.S. utility. It has used its political clout to get the Obama administration to up the amount of loan guarantees provided to first-of-their-kind nuclear facilities. The amount authorized had been $18 billion but the White is trying to increase that to $54 billion.

Right Path

To that end, Southern Company and its partners are building two new units where two other nuclear reactors now reside. The total price tag is estimated at $14 billion. Of that, the partnership snagged an $8 billion loan guarantee. They will put up the $6 billion balance.

The U.S. Nuclear Regulatory Agency granted a license to the project in February, prompting Southern to say that the units would be operational by 2017. The agency is also considering an application from SCANA Corp.

Is Southern to be applauded? “I think so,” says Mark Kinevan, chief operating officer of The Energy Authority, in Jacksonville, at the EnergyBiz conference. While natural gas may be the path of least resistance, he says that experience teaches utilities pros to always diversify.

If natural gas is to win by default and utilities are to get rid of all their coal and nuclear, future utility chiefs will have some sleepless nights, adds Tom Farrell, chief executive of Dominion Resources. Despite the fact that it is a difficult case to make in today’s low-cost natural gas environment, utilities must diversify to hedge against future risks.

Farrell points out that U.S. nuclear regulators have been working closely with utilities -- even before Fukushima -- to ensure against worst-case scenarios. Obviously, lessons learned in that case will get figured into the current regiment. The U.S. East Coast, for example, suffered a 5.8 earthquake last summer where Dominion’s plants are located. They performed as advertised.

“Companies that know how to run nuclear efficiently will succeed,” says Farrell, at the forum. “I don’t think Fukushima will disrupt nuclear here. Nuclear plants have lots of protections. There is an enormous amount of information that will help fine-tune these designs. It will be the cheapest power we have for our nation.”

Once a new plant is built, the operational costs are nominal and over a 40-year time period, such facilities have proven to be cost effective. If lawmakers attach a price to carbon, then nuclear will look even more attractive, advocates say, noting also that natural gas has a history of volatility.

“It takes a far-sighted regulator to understand that over time you will need more generation,” says Tony Earley, chief executive of San Francisco-based PG&E, at the forum.

Indeed it does. But that’s a tough case to now make. Today, all roads lead to natural gas. In time, that will change. And when it does, nuclear energy’s advocates will find more political and financial support.


EnergyBiz Insider is the Winner of the 2011 Online Column category awarded by Media Industry News, MIN. Ken Silverstein has also been named one of the Top Economics Journalists by Wall Street Economists.

Twitter: @Ken_Silverstein

energybizinsider@energycentral.com

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