The future of nuclear power in the US
May 20th, 2007 by Paul Joskow, Massachusetts Institute of TechnologyNuclear power now accounts for almost 20% of the electricity produced in the United States. However, the last nuclear power plant completed in the U.S. entered commercial operation in 1994 and no new nuclear plants have received construction permits since the Three Mile Island accident in1979. If the existing fleet of nuclear plants were to run only until the end of their initial license periods, the supply of electricity from nuclear power would begin to decline in about 2015 and reach zero in about 2030. How may this pattern change?
The future for investment in new nuclear plants in the U.S. is brighter than it has been for many years. The support and subsidies from the federal government contained in the Energy Policy Act of 2005 and the earlier reforms in the federal licensing process have given the nuclear industry what it says it needs to “get over the hump” and stimulate a significant program of investment in new nuclear power plants. It’s now up to the industry to deliver on its claims about construction costs, operating performance, and financing costs.
All things considered, I believe that investment in new nuclear plants is likely to proceed more slowly than may be implied by the recent euphoria in the industry. I believe that projects are most likely to proceed (a) on existing sites, (b) in states that have not adopted competitive market models, and (c) where there is support from local authorities. Among the competitive states, Texas is the most likely candidate for investment in new nuclear plants for both economic and political reasons. A nuclear investment program will be larger and proceed more quickly if the nuclear equipment vendors and the construction firms are willing to take on more of the construction cost and operating performance risk than they did during the 1980s, at least until the first dozen of so plants are completed and credible information about construction costs, construction time, and regulatory costs and delays have been confirmed by actual experience rather than hypothetical spreadsheet calculations. Finally, if the U.S. adopts a cap and trade program for CO2 emissions that yield prices in the range of $25 to $50/ton of CO2, it will make investment in new nuclear power plants much more attractive financially than it is today, especially after the 2005 Act’s subsidies are exhausted.
To know more, download my 30 page paper ‘The future of Nuclear Power in the United States: Economic and Regulatory Challenges’.
May 21st, 2007 at 7:01 pm
The biggest problem that the US nuclear sector has to face is the supply of uranium. The current equivalent consumption of natural uranium is around 19,500 tonnes per annum, whereas indigenous primary mining produces only 1,500 tonnes, so that it is 90% dependent on imports from Canada, Australia and the agreement to take diluted highly enriched ex-weapons uranium from Russia. Unfortunately Canadian and Australian production is falling and the agreement with Russia is due to end soon.
In Australia the production from the next mining project, the Olympic Dam expansion as an open pit will not go ahead until 2014 and in any case will at full production only provide 15,000 tonnes of the looming 40,000 tonnes per year deficit. The project is subject to a feasibility study due in 2009, with then 4 years of overburden removal, requiring much additional diesel to be imported. The viability of the project depends on the price of its co-product, copper and cannot be guaranteed to go ahead if world recession leads to a fall in the price of copper.
The carbon credits cannot be earned on a global basis as the carbon released from the mining, milling and processing in Australia and elswhere needs to be taken into account. Liquid fuels will be the main problem in the US and nuclear power can provide only an inefficient production of hydrogen by electrolysis.
April 5th, 2008 at 9:57 pm
It is true that economics of nuclear power plants in the US have changed a lot since the last constructions in the 70’s: NPP’s performance improved a lot (less O&M costs and a higher – from 60 to 90% – capacity factor) while construction time decreased. That makes NPPs more attractive than before for investors. However, the decision to build new nuclear power plants in the future will also depend on political factors which are supposed to encourage NPP’s competitivity.
The main problem of NPPs is that they are much more capital intensive than other competing technologies (pulverized coal or CCGT). Since in new NPPs projects, investors will need to take more of the risks associated (construction delays, market changes, variation of discount rate,…). Therefore, uncertain factors for NPPs project are less tolerated. Three uncertainties can affect the future of nuclear power in the US:
• The uncertainty about energy market structure: As it is explained in Joscow’s paper, competitive energy markets are less favourable to nuclear power plants than regulated energy markets. Since the regulatory and competitive environments have changed in many US states, this causes new financial risks for investors which were not taken into account before.
• The uncertainty about government policy: The new incentives of the energy policy act from 2005 and the new licensing process from the NRC which will reduce licensing delays will undoubtedly increase attractiveness of nuclear power. However, the efficiency of incentives and licensing process are yet to be proven on new NPPs projects. Moreover, competitiveness of NPPs depends on CO2 emission price, and this price and its future evolution is unclear for investors (scenarios range CO2 emission price from 0$/ton to 50$/ton)
• The uncertainty about new constructions processes: There were no new NPPs built in the united states since the 70’s. Since then, technologies have changed and the new NPPs will be from a different technology than the existing ones. Therefore, even if the knowledge and the performance of the already existing NPPs have increased, there is a new uncertainty for investors about the new construction costs, construction time and O&M costs of the future NPPs which will be built in the US.
The first point can be resolved by, as said in Joscow’s paper, building the new NPPs on already existing sites and states where energy markets are still regulated. However, the incentives given for renaissance of nuclear power in the US are political decisions: A topic not discussed yet is the shale oils: The united states are the world’s biggest reserve of shale oils which have therefore a strategic importance. NPPs are the best candidates in many projects to help for the recovery of these oils (to furnish the heat needed). Therefore, the government may want NPPs to be built in new sites in new states. To encourage the investors, the financial incentives need to be clearer on the long term, and a clearer CO2 emission price would help the investors to decide.
On the last point, it is likely that the investors will profit from the nuclear renaissance all over the world (especially in China, where the new models of third generation nuclear power plants – AP1000 and EPR- will be constructed in the next few years): Problems linked with assessment of O&M costs and construction delays will disappear with adequate knowledge of other new NPPs constructions. However, this passive attitude could delay the future program of nuclear power plants in the United States and leave it behind in comparison with nuclear programs in other countries.
April 25th, 2008 at 5:24 pm
Obviously, the nuclear option is an important carbon-free source of power. In the US, coal-fired generation currently accounts for nearly 50% of the electricity produced, and represents 90% of the carbon emissions from electricity production. To make a significant contribution to reducing greenhouse gas emission, the American nuclear capacity has to be widely expanded, at least tripled. The recent deal between Westinghouse Electric and Georgia Power to build two AP1000 in a site near Augusta is the first NPP construction project in 30 years. Is this project a prediction of a real nuclear renaissance in the US?
The cost-effectiveness of nuclear power is clearly a vital issue to make it attractive, since today coal-fired generation is much cheaper. But there are still other unresolved fundamental problems that have to be tackled if the US plans to choose the nuclear option. The fact that nuclear power is carbon-free does not mean that NPPs do not have health and environmental effects. Many countries such as Sweden, Italy and Germany have decided not to build new NPPs after the two serious accidents of TMI and Chernobyl. But safety is not the main problem of nuclear power anymore. Indeed, today, nuclear power is one of the safest choices for electricity production, compared to coal-fired generation for instance.
But I believe that an important issue for the future of nuclear power is the long-term management of nuclear wastes. Among the numerous types of nuclear wastes, a non-negligible part is long-lived and highly radioactive. Deep repository in a stable geological layer is likely to be the solution widely chosen. The US Department of Energy chose Yucca Mountain for the final disposal of the American spent nuclear fuel. But although the Yucca Mountain Repository was meant to accept wastes by 1998, 10 years later, the circumstances are still blocked. Moreover accumulating spent fuel close to the different reactor sites cannot be a viable solution. That is why the future of nuclear power will probably also depend on the possible success of long-term nuclear waste management.
April 18th, 2009 at 5:44 pm
The just announced ruling by the US EPA that will result in regulation of Carbon dioxide and other greenhouse gas emissions, is likely to be followed by the US Congress passing legislation for a GHG cap and trade system, which should price carbon emissions sufficiently high that (in my opinion) the economics around nuclear power will become considerably more attractive.