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  • More to the Story on Nuclear Power and Cheap Natural Gas

    Two major financial news publications, the Economist and The Wall Street Journal, published major articles in the past week arguing that the American nuclear renaissance has ended before it ever really began. While the articles differ slightly in their presentation, the basic common thread is that new nuclear power cannot compete with cheap natural gas.

    The problem with this basic narrative is twofold. First, it does not fully recognize how quickly markets change. Secondly, it ignores the potential benefits that would result from better policy.

    If markets were static, then challenging such notions would be nearly impossible. Certain things are facts. Natural gas is very inexpensive. Building a nuclear plant is expensive and seemingly getting more expensive.

    But that is not the end of the story.

    Natural gas is cheap. No question. But it has been cheap before. Indeed, it was very cheap at about the same time the nuclear industry was last declared dead. And that’s not the only parallel. The world was responding to a recent nuclear accident at Three Mile Island (TMI), and nuclear plant construction costs were on the rise.

    This caused a shift toward natural gas. As demand grew, so did its price. In 1980, natural gas cost $4.39 per 1,000 cubic feet. By 2008, it had risen to $8.43 (inflation adjusted). Producers began to seek alternatives by the early 2000s.

    Back to nuclear.

    As natural gas use was growing through the mid-2000s, the nuclear industry was refining its product. It continued to bring plants on line that had been permitted prior to the TMI accident and worked to hone its safety procedures and operational efficiency. The numbers show the progress. In 1979, American had 72 plants on line. Today there are 104.

    Back then, America’s reactors operated at an average capacity factor of less than 60 percent. That means that the average plant spent 40 percent of that year not producing electricity. Today, reactors routinely exceed 90 percent capacity factors. This has resulted in low-cost, reliable electricity. And because the cost of fuel makes up a small percentage of actual costs, nuclear power prices do not vary over the lifetime of the plant. Best of all, these benefits are buoyed by increasing safety.

    This progress positioned nuclear power to mount a comeback by the late 2000s. Indeed, 18 utilities submitted applications to the Nuclear Regulatory Commission to build nearly 30 new reactors.

    Now, once again, with cost estimates rising for nuclear power, natural gas prices dropping, and renewed public anxiety fueled by a major accident, some like the Economist and The Wall Street Journal are questioning whether nuclear power has a future.

    Part of the answer can be found in the Journal’s article. It points to three concerns regarding over-reliance on natural gas:

    • Diversity of fuel source. As one of the executives interviewed clearly states, even if one fuel source is cheap, there is great value in fuel diversity. An over-reliance on a single fuel will likely result in higher costs.
    • Long-term prices are unpredictable. Few expected the precipitous drop in natural gas prices that has occurred since 2008. Likewise, no one is predicting any near-term price spikes. However, if history is any guide, we should expect a rise over time. The lower prices go, the less incentive there will be to find additional reserves. The Wall Street Journal reports that this is already happening. And demand will surely increase as more natural gas is used for home heating and electricity production, and industrial applications and export opportunities emerge.
    • Fuel supply. There is also growing concern that existing pipeline capacity will not be adequate to support growing demand.

    The rest of the answer lies with the nuclear industry and the federal government and how they interact. As the industry underwent significant safety and operational reform after TMI, the time is now for another significant reform effort geared toward relating to the federal government. These reforms should include:

    • Regulatory reform. America’s nuclear regulator, the Nuclear Regulatory Commission, does an outstanding job at regulating public health and safety for existing plants in a slow/no-growth market that is built around a single technology. It is not built to regulate a technologically diverse, growing nuclear industry.
    • Waste management. While the private sector efficiently manages front-end (fuel-related) activities and plant operations, the government remains in control of America’s dysfunctional regime for waste management. Under the current system, there is little connection between used-fuel management programs, economics, and the needs of the nuclear industry. Any successful plan must grow out of the private sector, be driven by sound economics, and provide access to the funds that have been set aside for nuclear waste management activities.

    Though there are no guarantees, nuclear power—despite much adversity—has proved to be much more than a survivor. The right policy reforms today will open up markets to more abundant, more affordable, and even safer nuclear energy.

    Posted in Energy, Featured [slideshow_deploy]

    7 Responses to More to the Story on Nuclear Power and Cheap Natural Gas

    1. Sam Mullins says:

      OBAMA LIES AGAIN !…US reserves—43 times greater than the current world‘s proved oil reserves, 180+ years worth of domestic energy.
      see this link:
      http://www.netl.doe.gov/energy-analyses/pubs/Ener

      EXERT: “the estimated sum of these resources totals approximately 51 trillion barrels of oil equivalent—43 times greater than the current estimate of the world‘s proved oil reserves. If only 2–3 percent can be recovered economically, the United States will secure additional energy reserves equal to the current estimate of the entire world‘s proved oil reserves. This supply would endure for more than 180 years at the current rate of U.S. oil consumption (.025x51trillion/7bnb/yr).: end quote… from offical US-DOE/ USGS & NETL government joint agency study/report 2007…

    2. Sam Mullins says:

      This US-DOE, USGS, NETL and EIA federal govermental agencies decade long study/report that estimates 2-3 times the oil reserves of Saudi Arabia in the US Rockies. Raytheon & Schlumburger have jointly developed a RF-technology process that will alow us to access 1.8 to 2.2 trillion barrels from the Rockies alone…For our American Economy, For our future & American Jobs, For our American Energy Security and Independence for centuries to come, it is essential that we develope these resources NOW.
      If government can control how when and where we travel, GOVERNMENT will control us COMPLETELY… That is why they want us to be DEPENDENT on MASS TRANSIT and the Government, including electric cars, controled via government control of electrical grid by use of “smart meters” & utilities regulatory authority already given to government…
      CAN YOU SAY BIG BROTHER ? CAN YOU SAY MARXISM ?
      IT’S WAY PAST TIME FOR AMERICA TO ACCESS OUR OWN RESOURCES and STOP SENDING OUR PETRO-DOLLARS TO OPEC COUNTRIES & TERRORIST THAT SEND IT BACK AT US IN BOMBS & BULLETS !
      Sam T. Mullins
      27+ years Petroleum Exploration Geologist
      Co-founder, Santa Rosa Tea Party Patriots
      Proud Father 8 year 4 time combat veteran

    3. ?rfan ERGUN says:

      Native H.264 set-up for Adobe Flash Player indicates that American Republicans like ruling the American nation like Syria: Before Obama.. %50 of American nation's voters were not voting just like it was in Syria and by appearance of Him %80 of American voters voted.

      Investment on nuclear energy is a way to exploit American nation. Because if this is not being fairly shared by the other nations for world's prosperity in terms of peace.. this is not a thing which would help the true prosperity of the American nation: If you help Mexico to grow in true agriculture and gain trade and their export potentials+quality instead of carrying on State Gangs Drug Wars.. then the whole of the Americas will be able to begin having true peace and prosperity.. And "Manning.." will have nothing to do….:

      U.S. Attorney General Eric Holder is currently blocking implementation of voter ID laws in South Carolina and Texas. It’s the latest battle in the fight for voter integrity at the ballot box and the reason two supporters of voter ID are launching a robust defense the laws. “We believe this offensive by the Justice Department must be met with a counteroffensive,” said Ken Blackwell, Ohio’s former secretary of state.

      I do see that Republicans had lost presidential elections by a great margin.. Yes.. U.S. is to have arrangements for their Native H.264 for it is some peoples choice not to share things with the world and keep local. Yes.. had the world been a huge united states and the capital were New York.. No one on Earth would vote for the American Republicans but the world Nation would VOTE FOR MR. OBAMA!

      • Todd says:

        Does any one understand this comment? Clearly a pro-socialist democrat so it shows the state of mind the Democratic party is counting on.

      • Bobbie says:

        first off from your last comment, the people of world nations that would vote for Mr. Obama, obviously doesn't live by, with or led by truth. Therefore lie or not, whatever sounds good they'll go with and if things don't come out the way the leaders' words says it will, oh well, we as the people of world nations don't deserve truth of words from our leader, exceptions without accountability. Hey, just like a lot of America's elected leaders, today!

        So we pray. 2ndly, anyone who doesn't want voter integrity obviously supports fraud. the more rules you add to something you don't have to the more fraud is enabled. 3rdly, investing in nuclear energy will only exploit the ones that choose to be. 4th, I don't understand your first paragraph? At all! I tried… and 5th, I totally agree with Todd!

    4. O_Henry says:

      The USA could be fully energy independent in less than 10 years. Here’s how: 1)begin placing small nuclear reactors (after the designs used safely in our submarines and aircraft carriers for more than 50 years) in every town of 10K population (more reactors where the population is larger i.e. Chicago, New York, etc) or more. Replace the large grid with local electrical grids during this transition. 2) start fueling stoves, hot water heaters, dryers etc. with hydrogen rather than natural gas. The by product of hydrogen combustion is H2O so drains would be needed but a small price for renewable energy. Also, this gets around the corrosive nature of a hydrogen application for an internal combustion engine. 3) make natural gas applications available for the garages and drives of homes for small scale Compressed Natural Gas use in automobiles.

    5. O2BMe says:

      I will be a supporter of nuclear energy when waste management problems are solved safely. We are still a long way solving that problem.

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