Post # 104: The Sunset of U.S. Nuclear Power?

This is a post I thought I would never write.  It is one I do not enjoy writing. 

I’ve been thinking a lot lately about the future of nuclear power in the U.S.  I’ve concluded those of us in the “pro-nuclear” camp need to face the likelihood that the brightest days for commercial nuclear power in the U.S. are behind us – at least for the balance of this century… that no one reading these words today will live to see the long-awaited “Nuclear Renaissance” in the U.S.  

Put simply, I’ve come to believe the most likely scenario for nuclear power in this country is that it will fail to maintain its current (~ 20%) fraction of the U.S. electricity generation mix for the remainder of the 21^st century – and may never return to its current level of market penetration.  I believe this is almost a certainly through mid-century, and highly likely through the remainder of this century.  I hope I'm wrong.

There are a number of potential events (discussed below) that could change my prognosis.  Some of these events might trigger a nuclear renaissance, while others would probably terminate the nuclear power option in the U.S. 

Allow me to layout the facts as I see them, and engage in a bit of not-too-far-fetched speculation.  I actually don’t think it requires much clairvoyance. Reality is staring us in the face.

THE STATUS QUO

• The miracle of fracking has made natural gas “too cheap to meter” – the “Gas Glut”.

• We have very limited means (i.e. few Liquified Natural Gas [LNG] terminals) to export our abundant natural gas.  So the price of natural gas here is relatively isolated from world market pressures.

• About half the commercial nuclear power plants in the U.S. operate as “merchant generators” in deregulated markets.

• Deregulated electricity “markets” place little value on:
• Supply reliability
• Supply availability
• Supply diversity

• Nuclear power plants in deregulated markets are shutting down because they cannot compete with the price of electricity produced from fracked natural gas.

• Nuclear power plants only come in “one size fits all” mega-plants.

• The capital cost of available nuclear power plant designs is obscenely high – untenable absent some revolutionary (to the nuclear power industry) financing strategy.

• The U.S. nuclear regulatory structure is, in many ways a great success and the standard for the world, BUT it obstructs innovation, ensconces technology lock, and promotes a “good-enough is the enemy of better” mentality throughout the industry.

• The American public is largely ambivalent about nuclear power.  Spent fuel disposal is a real concern for a vocal minority – but it seems to be the problem that will never go away.

THE BASE CASE SCENARIO TO 2040

• Three dozen nuclear plants (1/3 of fleet) shut down within the next 10-15 years (possibly much sooner) because they cannot produce electricity cheaply enough to compete with fracked gas.

• Perhaps a half-dozen new nuclear power plants are built in the U.S. during the next 20 years.

• Nuclear’s portion of U.S. generation mix decays monotonically over next 25 years to ~ 13-15% of the U.S. electricity generation mix by 2040.

• The only “Renaissance” that occurs is a  “Decommissioning Renaissance” (a term coined by my friend Eric Abelquist at ORAU).

THEN WHAT? – LIFE AFTER 2040

The answer to the question of whether or not nuclear power in the U.S. has seen its best days depends critically on what happens between now and 2040 as the U.S. takes a “Nuclear Nap”.

Factors That Might Revive Nuclear Power In The U.S.

I see a few events that might occur in the next couple of decades that would portend a brighter future for nuclear power:

• A “Fracking Fukushima” occurs – an event (such as the contamination of a major ground water aquifer) that results in much tighter regulation or perhaps even prohibition of natural gas fracking in the North America.  In such a scenario, the price of natural gas would escalate dramatically, making the price of nuclear-generated electricity an attractive alternative again.

• Orwellian carbon tax is enacted that penalizes natural gas, petroleum and coal – obviously making nuclear power and renewables energy sources more price competitive.

• A major focus on Domestic LNG Terminal Construction enables the U.S. to export our natural gass, and raises domestic natural gas prices to world market values (a slow effect, no doubt, but one that makes nuclear power more price-competitive).

• For those of you who are banking on Small Modular Reactors of all sorts – a Revolutionary Reduction in the Capital Acquisition Cost & Operating Cost of nuclear power plants dramatically lowers the barrier to plant acquisition and economic operation.  I’m skeptical about the likelihood of this particular dynamic. Small reactors would reduce the absolute acquisition cost of a nuclear power plant, but barring some other event, I don’t see a revolution coming in the operating cost of nuclear power plants (large or small).  After all, if a fully-amortized large plant operating in today’s deregulated market cannot produce electricity cheaply enough to compete with natural gas, I’m skeptical a new plant – of any size – will be able to reduce the price of electricity production sufficiently to slay the natural gas dragon.

• Finally, the Emergence of Enlightened Regulated Electricity Markets – markets that place a tangible value on reliability, availability, and diversity of electricity generation sources.  Such markets would seek a strategically-mixed portfolio of electricity generation assets to reduce the overall dependence of electricity production on a single “fuel source”.

Factors That Might Turn Out The Lights On U. S. Nuclear Power

On the other hand, there are a number of potential developments that could drive the last nail in U.S. nuclear power’s coffin:

• A Breakthrough in Carbon Capture and Storage (CCS) Technology – puts coal back on the table. The U.S. transitions from a “Gas Glut” to a “Coal Glut”.  No one needs nuclear anymore for baseload capacity.  Twenty-five years is a long time for researches to tackle a challenge.  Is there a solution out there for CCS, or will it remain a technology similar to nuclear fusion – always just over the horizon?

• A Breakthrough in Battery Technology – eliminates the renewable energy (solar and wind) penetration barrier, obliterating the grid instability problem posed by “excessive” penetration of these time- and frequency- varying electricity generators.

• An American Fukushima-like accident at one of our commercial nuclear power plants – results in the permanent shutdown of the majority of the U.S. nuclear fleet.  (I have previously shared my view that the Japanese people have actually responded to the events at Fukushima in a more sanguine manner than I believe the U.S. population would if such a major accident occurred in the U.S.)

Wild Card Events

There are, of course,  some “Wild Card” events that could happen during the next 25 years.  I'm speaking of events that would throw all the silverware in the air.  Here's my #1 chaos generating event:

• The mega-event would be a huge Geomagnetic Storm that decimates the North American Grid – forcing a rebuild of both the Generation and the T&D network.  The impact of such an event (which is overdue if history is any guide) is hard to predict.  Solving the nuclear power riddle might be the least of our problems if it were to occur. (Actually, I’d be more concerned about avoiding an American Fukushima if a catastrophic geomagnetic storm occurred.)

AND SO…

One of the (few) benefits of aging is that I’ve become more willing to “stare the dragon in the mouth”.  My analysis leads me to conclude the nuclear industry can put itself out of business by poor safety performance, but it needs a “little help” (probably a “lot of help”) from somewhere else to remain a viable energy alternative in the U.S. through the remainder of this century and beyond. 

We are all notoriously bad at predicting the future.  (After all, who predicted the fracking revolution?)  Whether U.S. nuclear power is sliding into a beauty rest or a coma remains to be seen.  But the next twenty-five years are a crucial time period.  Are we seeing the Sunset on U.S. Nuclear Power, or just a “Nuclear Nap” to be followed by Sunrise on the long-awaited nuclear renaissance?  No one can know.

Just Thinking,

Sherrell