What’s Stopping New US Nukes?
May 4th, 2010 by Fereidoon Sioshansi, EEnergy InformerIt is much easier building nuclear power plants in an authoritarian country, one with a central planning organization, or with a single state-owned power enterprise. That explains why China and South Korea, for example, can push ahead with ambitious nuclear construction plans.
The same applies to France, where there is virtually a single, dominant, state-owned power company, Electricité de France (EDF), which can be directed to build more reactors with government’s backing. It is much more difficult in the US and the UK, where the private sector is expected to assume the risks in investing significant sums to build new reactors – and this explains why neither country has managed to make much progress despite both governments’ strong support of the nuclear power industry.
Top 10 nuclear powers
Nuclear power plants require large up-front investments, tying up massive amounts of capital during long and highly uncertain construction phase before any revenues, let alone profits, can be generated for the shareholders or lending institutions. Because of their considerable economies of scale – most reactors come in 1,000+ MW size – some utilities prefer to build 2 or more reactors at a single site if they are going to build any. At current prices, 2 reactors could easy cost $10-14 billion, depending on a number of variables and assumptions on the key cost-drivers.
That is a large chunk of money to tie up for good many years, especially in view of the fact that, at least in the US, the industry is highly fragmented with mostly small or smallish utilities – currently there are over 3,000 utilities in the US – for whom such an investment would seem suicidal. But even among the large utilities, $10-14 billion would represent a significant percentage of their market capitalization.
Exelon, currently among the largest utilities in the US and the biggest nuclear operator with 12 working reactors, has $47 billion in assets. Most others are smaller, in the $30 billion range. Making a $10-14 billion nuclear investment means putting roughly a third of their assets at risk. If the industry were more consolidated, as some analysts prefer, this would make it relatively easier to build new nukes.
Big assets, big investments
By contrast, the global oil giants such as ExxonMobil and Chevron have market capitalization in the $150-300 billion range. For them, a $10-14 billion investment, while large, is much more manageable. As a point of reference, Exxon paid $14 billion in state and federal taxes in the US in 2008 alone.
This explains the current push in the US to offer nuclear loan guarantees and as further explained in Policies that support new nuclear power plant development, available from website of the Nuclear Energy Institute (NEI), a lobbying and trade association representing the nuclear power industry.
Fereidoon Shioshansi
This post is extracted from EEnergy Informer, May 2010 issue.
May 5th, 2010 at 5:52 pm
loan guarantees may not be enough …
The US should look at a model where a federally sponsored company provides capital to build and own reactors, while leasing them under long term agreements to any utility.
The federally sponsored company would provide capital to utilities provided they met business-case criteria. Utilities would still choose reactor designs & deal with regulatory things.
Alternatively the federal company could also be responsible for provding capital for building the reactors, and would own them. The power company would lease the reactor. Reactor design would be chosen by the power company, but limited to those thought viable by the federal company, according to a transparent process of decision making, in which any nuclear company, foreign or domestic, could apply for inclusion. This is the government picking “winners and losers” in reactor design, but it effectively does this already, with the regulatory commission. Utilities currently have a hard time accurately evaluating reactor vendors’ claims about the products they are buying (both construction and operation costs). Furthermore, this evaluative expertise presently needs to be duplicated in each entity purchasing a reactor.
May 6th, 2010 at 4:48 pm
Unfortunately, since there’s not a nuke on every corner you’re still not going to get your expertise. And when have the regulatory commissions ever been useful? They certainly didn’t stop Three Mile Island. Nor do they have a good history of making sound financial decisions. Worse yet, I’m in Texas. We’ve had a nuke here for a long time. Comanche Peak. For decades it was run at 6% of its total operating capacity. Even now that DFW is drowning in coal-fired smog and our electricity prices are some of the highest in the nation, it still only runs at 12% capacity. It was built in 1974 – nearly 40 years ago. The cost of it has long amortized. The power coming from it is essentially free at this point. Do we dial it up? No, we start building more coal and natural gas plants….
And since it’s nuclear, it should NEVER EVER be a foreign company. The last thing you want is some jihadis getting control of a power plant located on US soil. Its so much easier to do background checks and monitoring on our own citizens. Our level of assurance that the information is true and correct is much higher.