Monday, June 27, 2011

U.S. nuclear industry was in serious trouble before Fukushima and now is stalled

The Fort Calhoun nuclear power plant surrounded by Missouri River floodwaters, 14 June 2011. The direction of river flow is indicated by the arrow.

Washington DC (SPX) Jun 17, 2011 – Even as Germany, Japan, Switzerland and other nations move to abandon existing and planned nuclear reactors, the United States is on a path to see at best only a small handful of already planned, government-backed reactor projects proceed, a group of experts have said.

While reversals for the nuclear power industry overseas have attracted substantial media attention, relatively little focus has been paid to such developments in the U.S. as the mothballing of the South Texas Project in Texas (once a prime candidate for a federal loan guarantee), the Calvert Cliffs-3 reactor expansion in Maryland (another federal loan guarantee candidate despite major complications presented by foreign ownership issues), and the decision this week by the French industry leader Areva to halt production at a Virginia reactor component plant - a direct result of the turndown in the industry's prospects.

The industry's situation is now such that even the controversial Obama Administration proposal for $36 billion in Treasury-backed loan guarantees for new reactors likely would be a case of throwing good money after bad, according to the experts.

Peter Bradford, former member of the United States Nuclear Regulatory Commission, former chair of the New York and Maine utility regulatory commissions, and currently adjunct professor at Vermont Law School on "Nuclear Power and Public Policy," said: "Even before Fukushima events over the last two years had amply demonstrated that new nuclear power was a bad investment in the U.S. Cost estimates had continued to rise while those of alternatives fell. Wall Street rating agencies were uniformly skeptical.

Constellation pulled out of Calvert Cliffs last October. Exelon did the same for its proposed Texas reactors, and did so in the context of a review of its low carbon options that showed new nuclear to be far more expensive than most of its other choices .

Bradford added: "Since Fukushima, NRG has pulled the plug on South Texas and the County of Fresno in California has reconsidered its support for new nuclear units there. If the past is any guide, there will soon appear stories about how the U.S. nuclear renaissance was well underway before being stalled by the one-of-a-kind nuclear accident at Fukushima.

Just as we are often wrongly told that the first nuclear construction wave in the U.S. ended because of the accident at Three Mile Island, industry spokespeople will use Fukushima to obscure the fact that new nuclear has been priced out of the market in the U.S. for many years.

Under these circumstances, adding additional exposure to American taxpayers in the form of nuclear loan guarantees can't be justified."

Paul Fremont, managing director of equity research, Jefferies and Company, Inc., said: "The estimated cost of building a new nuclear plant varies widely from $4,500 per KW estimated by NRG for its cancelled project in Texas to $6,350 per KW estimated by Southern Company for its project in Georgia.

Today, nuclear represents the highest cost option to construct compared to traditional technologies including coal at an estimated cost of $2,000-$3,000 per KW and gas combined cycle units at $950 per KW. According to Jefferies analysis, the best economic alternative for new build today is gas based on forward prices ranging from $4.40 expected in 2011 to $6.00 in 2015."

Fremont added: "In March 2010, Jefferies published a report on nuclear new build titled 'Sympathy for the Devil' arguing that absent U.S. government subsidies, gas prices would need to be $8.50 per MCF or higher to earn reasonable (10 percent) returns on new nuclear investment. […]

US Nuclear Industry Was In Serious Trouble Before Fukushima and Now Is Stalled

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