Saturday, July 27, 2013

Post # 86: Nuclear Power – Staring The Dragon In The Mouth

Caution:  this post is extremely "U.S. - centric".  My musings below are focused strictly on the U.S. energy situation.  Things look different outside the U.S....

I am a believer in the "portfolio" approach to energy supply.  You know – spread your dependency across several supply options.  Reduce your vulnerability to problems in any one supply sector.  Some are fond of calling this the "all of the above" approach to energy supply.  And I'm strongly pro-nuclear energy.  I believe it is the only energy source in hand that has the capacity to meet our global energy challenges.  But...

According to the U.S. Energy Information Agency (EIA), based on the last 12 months of electricity generation data, the current U.S. generation mix is approximately 39% coal, 29% natural gas, 19% nuclear, 7% conventional hydro, 6% "other renewables" (primarily solar and wind).

An interesting detail buried in this data is that, despite a very successful industry-wide power uprate program that has yielded ~ 1950 MW of new generation capacity between 2007 and 2012, and expects to add another 500 MWe between 2013 and 2017, nuclear power's slice of the electrical generation portfolio in the U.S. seems destined to diminish over the coming decade.

I really, really hate to say it, but: Nuclear power is in serious trouble in the U.S. 

Why?  Three inter-related drivers:
  • Natural Gas – the new "King of Enegia".  Barring the unforeseen, it appears the wonder-tech of fracking (thank you George Mitchell) is destined to deliver natural gas (in the U.S.) at  $4 to $6 /MMbtu for a long, long time.  (Of course an accident in which fracking is proven to contaminate a major groundwater aquifer, or an explosive growth in construction of U.S. LNG export terminals that allows us to economically export our gas might change that.)  Now don't get me wrong.  Cheap natural gas is a good thing.  In fact, the combination of reduced energy demand, improved energy utilization efficiency, and the on-going switch from coal to natural gas-based electricity production enabled the U.S. to achieve a remarkable feat in 2012.  According to EIA data,  U.S. carbon dioxide emissions in 2012 were almost 12% below our 2005 emissions level.  Remarkable! (See here for a penetrating analysis of this achievement.)
  • Aging Nuclear Fleet – the cost of maintaining 40+ year old nuclear plants is rising and appears destined to continue to do so. The recently-announced retirements of Crystal River (~860 MWe),  Kewaunee (~ 550 MWe), and San Onofre 2 & 3 (~ 2150 MWe) are, at the risk of over-simplification, a likely harbinger of things to come.  Depending on whom one believes, as many as 10 to 12 plants additional plants are also under intense financial pressure due to the combined effect of cheap natural gas and plant maintenance costs.  Mark Cooper, at the University of Vermont, recently released a particularly interesting analysis.  He identifies ten plants he believes are unlikely to weather the financial pressures of today's "Gas is King" environment. It's a sobering picture whether or not one agrees with every element of Cooper's analysis.
  • High Capital Cost of Nuclear Plant Construction – Five new nuclear plants are "under construction" in the U.S.: Watts Bar 2 (@ $4.5B), Vogtle 3 & 4 (currently estimated to be ~ $14B to $15B by Georgia Power), and Summer 2 & 3 ($10B+).  Given the current market capitalization of the U.S. electrical generating utility industry, this is simply too expensive for all but a few utilities to seriously consider.  (Only five U.S. utilities have current market values in excess of $25B : Duke, Southern, Dominion, Excelon and NextEra Energy.)  A choice in plant sizes would help (a la Small Modular Reactors). Regulated markets help by reducing financing risk and bolstering investor confidence.  But with the capital cost of combined cycle gas turbine plants hovering around $1000 / kWe (see EIA Report here), and natural gas at anything approach $4-$5/MMBtu, nuclear isn't going anywhere fast at a buy-in cost of ~ $6,000+/kWe).  And everyone is watching to see if these new plants can actually be delivered at costs close to their current projected levels.
Possible game changers for nuclear?

I can think of a few:
  • As previously mentioned, should there be a case in which fracking is shown to pollute a ground water aquifer, a change in regulatory regime would almost certainly lead to a higher cost of natural gas.
  • Another major accident at a commercial nuclear power plant.  Nail in coffin...  Game over.
  • A major expansion in domestic LNG export terminals and the associated LNG supply infrastructure would open international markets for our natural gas and would almost certainly lead to an increase in domestic natural gas prices (presuming production levels did not increase in a manner to off-set the international demand).
  • The promise of Small Modular Reactors to be more affordable from the capital cost standpoint could prove to be true.  (I'm not sure how this happens if no one is ordering them.)
  • New nuclear reactor technology might dramatically reduce the capital and operating cost of nuclear power plants (I'm not sure how this happens when, in real terms, there's almost no significant investment in game-changing nuclear power technology.)
  • Regulated electricity markets could expand in the U.S. – lowering investor risk and making large electricity generating capital projects more attractive from the investor standpoint (what are the odds?)
  • A radically new, more attractive investment model could be developed, in which more investors come together to finance a nuclear power plant and share the risks – similar to the petroleum platform financing model long used in the oil industry.  Sounds like a "White Knight" scenario...
  • Watts Bar 2 and the new Vogtle and Summer plants could come in on schedule and cost.   This would bolster industry and investor confidence.  But I'm not sure that's a game changer.
  • Nuclear power could be "socialized" in much the same way other "civil infrastructure" (such as the interstate highway system) has been.  (I don't think so...)
It would be fascinating to apply a supercomputer and some game theory analysis to evaluate various scenario combinations.  Barring that, and based strictly on the computer between my ears, I'm having trouble coming out of this analysis with a picture that bodes well for nuclear power in the U.S. over the next couple of decades.

Sometimes you just have to stare the fiery dragon in the mouth.  Yes, you will probably be burned.  But you'll have a much better understanding of the challenges you face...  Now where did I put those flame-proof goggles?

Just thinking...


  1. Sherrell,

    Cost is THE ISSUE!. The game-changer can be liquid fuel nuclear reactors. The only way to convince the developing world to stop burning coal for power is to provide an alternative: energy cheaper than coal. The DMSR really does have that potential. We'll never get it licensed in the US with the current NRC and current EPA rules, but there is entrepreneurial activity in Canada, Asia, SE Asia, and Africa. Even Bill Gates and TerraPower are examining thorium molten salt reactors. Please check out THORIUM: energy cheaper than coal at

  2. Sherrell,

    You forgot ~$36 Billion NextEra Energy (NEE).

    And something new to look at, which I only became aware of during the middle of last week, is this newly-formed, TN-based company that I am still trying to gather more information on, American Atomics.

  3. Robert and Joel:

    Thanks for your comments...

    ROBERT: As you no doubt know, I'm a supporter of further exploration of a 21st century molten salt reactor. I would love to see a low-power MSR prototype designed, built, licensed, and tested. But I have a very healthy respect for the amount of effort required to do that and to accomplish the even more challenging goal of bringing any radically different (from LWRs) reactor to market. I'm unaware of any true DESIGN for a modern MSR. Pre-conceptual and (perhaps) conceptual CONCEPTS – yes. Something approaching a real DESIGN – no. I do not believe one can generate credible cost estimates until one has a fairly mature DESIGN. During my years at ORNL, we generated a number of advanced reactor concepts at various levels of definition. And we did attempt rudimentary cost and economics analysis. Done correctly, such analyses can suggest relative capital and M&O cost and economics performance, link design features and cost drivers, begin to illuminate cost sensitivities, and point to promising areas for design optimization. That's about it.

    JOEL: You are, of course, correct about NextEra Energy. Thanks for the reminder. That raises the "big boy" list to five owner/operators with market cap greater than $25B, but it really doesn't impact my conclusion regarding the challenge of financing multibillion dollar plants.

    I have to confess I know practically nothing about American Atomics except that their CEO is Jack Campbell, and they have the same name as a Arizona company who got into a real mess with mismanagement of tritium several years ago....

    1. Whenever I hear the word ‘sustainable’ I think I am about to have my BS meter peg high.

      Our job in the power industry is to provide our customers power when and where they need it with insignificant environmental impact. If I was at Oak Ridge looking for the worst of the worst, I would check out TVA’s Kingston coal plant.

      Well I have and I would love to have lake front property near the power plant.

      As an old guy I would like to be as sustainable as a steam plant. My first commercial nuke plant should be shutting down about now based on expectations at the time. Now it would appear that I will be lucky to live long enough to see it shutdown.

      We know how to build and make nuke plants a long time. This does not take anything away from those folks who do it will fossil fuels. However, it sure looks like the fossil folks are making power that is relatively sustainable too.

    2. Kit,

      Thanks for the comment. I agree the word "Sustainable" is over- and misused. However, it is a valid technical term. I don't think you'll see much "BS" here.

      I live just a few miles from the Kingston Steam Plan. Know the area well. It is (still) beautiful and TVA is working hard to address the legacy of the ash spill.

      Thanks again for the comment.

  4. Regarding the “challenging goal of bringing any radically different (from LWRs) reactor to market,” it does look like a dead end – without a significant change in top management.

    I think that we can clearly see that in the US DoE’s recent announcement, “Energy Department Announces New Investments in Advanced Nuclear Power Reactors”:

    The four projects selected by DoE all relate to solid fuel, liquid-metal cooled reactor concepts.

    Likewise, DoE’s “SMR licensing technical support programme” is targeting small LWRs, including the mPower design by Babcock & Wilcox, the NuScale LWR, Westinghouse’s W-SMR, and the SMR-160 by Holtec.

    Moreover, in their “Advanced Reactor Concepts Technical Review Panel Report” the DoE said that “The technology specific R&D would be for gas-cooled fast reactors, LBE-cooled fast reactors and sodium-cooled fast reactors. Technology specific R&D for other concepts is not being supported at this time due to the long term fuel cycle development requirements that would be necessary for thorium fueled concepts..”
    (see )

    Here's one way to look at it....

    1. Jaro,

      Thanks for your comment.

      As to a "change in top management"... though your comment appears to be aimed principally at the DOE, I would argue that changes are needed in at least four "top management" communities: Congress, DOE, NRC, and INDUSTRY. I've previously blogged about the problem with lack of innovation in the nuclear power industry. Nuclear power is a potentially dangerous, risk averse, and highly regulated environment. One in which "good enough" and "approved" are the enemies of "better". I fully understand why the existing vendor community have taken rather conservative and evolutionary approaches to SMRs. They have to convince someone to buy one, and no one wants to buy the first of kind. Even securing power purchase agreements is a real challenge, in part because potential clients have no confidence the power can actually be available within the schedule supplies with new technologies are advertising. But now combine cycle gas turbines and $4 natural gas.... that they can hang their hats on...

      The real question is – assuming non-evolutionary technologies can be made to work as their advocates claim and that they will be acceptable from the public (safety) risk standpoint – WHO FOOTS THE BILL FOR BRINGING THEM TO MARKET? Especially in the economic environment we're in now...

  5. As you hint in the no longer vertically integrated (de-regulated) markets the economics is not there for a new nuclear plant. Consider that under this structure, it is the generator who would have to build the plant. But financing is likley to be unavailable unless the generator has signed contracts with power retailers. But for a power retailer, new nuclear is like a pig in a poke, the retailer does not know what the price for the power will be or when the plant will be online. Given that most retailers are incented to sell electricity at the lowest possible price, (which was the reason for the deregulation in the first place), and they are not heavily capitalized, they won't sign up to buy power from a plant in the early stages of construction. From their point of view a combined cycle gas turbine plant is better because its power cost is more predictable, and the time till a new plant is on line is far shorter and more predictable. It is interesting that the new plants cited are in the areas with the traditional electric service model, where the utility gets a profit of a percent of the installed systems cost. In addition the utilities want the rate payers to pay for the plant somewhat even before it generates power, thus shoving costs onto the rate payers.
    It is this structure brought to us partly courtesy of Enron, that in states like Tx and Ca mean economically there will be no new nuclear plants built there.

    1. Lyle,

      Your comment is a good illustration of one of the reasons new nuclear is in trouble in the U.S....

      Thanks for reading my blog.

    2. "From their point of view a combined cycle gas turbine plant is better because its power cost is more predictable"

      The power cost of anything gas-fired flaps in the breeze of the local delivered price of natural gas.  The Henry Hub price has spiked as high as $14/mmBTU recently.  Delivered prices in the Northeast have topped $30/mmBTU, for a fuel cost of 17¢/kWh in a 60% efficient CCGT (O&M and amortization extra).

      The fuel (variable) cost of nuclear is about 0.7¢/kWh.

  6. There is another completely unique and new nuclear technology branch underdevelopment. See Additional technical and financial data can be provided via the e-mail identified at the reference website

    1. Keller,

      I'm pretty familiar with the generic concept of "hybrid power systems". My friend and colleague Charles Forsberg (formerly of ORNL and more recently of MIT) has been exploring the concept (on paper) for some time. It's a good concept (on paper). The engineering and economic challenges of integrating diverse technologies (thermal, mechanical, chemical, etc.) has, until now and probably for some time in the future, chilled enthusiasm of the folks with the financial resources to pursue it. I don't see that changing anytime soon.

      Thanks for reading my blog!