High Cost Key Roadblock to New US Nuclear Plants
Date: 30-Mar-07
Country: US
Author: Scott DiSavino
The country needs more baseload generation to meet growing demand for electricity. Support for nuclear power is growing among politicians, the public and even some environmentalists because of low operating costs and the lack of emissions of greenhouse gases that contribute to global warming.
"Investors are open and interested but still need to be convinced. The financial community has long memories. They lost tens of billions of dollars" during the 1980s and 1990s when utilities built the current reactors, said Caren Byrd, Morgan Stanley Executive Director, Global Power and Utilities Group.
"The most important thing the industry can do is to keep the operating reactors safe and reliable. If anything happens to those units, that is it," Byrd added.
The US Nuclear Regulatory Commission has streamlined the licensing process that has delayed the operation of some current reactors. Still, nuclear reactors are massive projects that cost billions of dollars and take years to build.
The construction of a new reactor, estimated to cost up to US$4 billion to $5 billion, is a make-or-break decision for most US utilities, the biggest of which (Exelon Corp. of Chicago) has a market cap of less than US$50 billion.
"The market cap of the companies is small compared with the cost of the projects, which requires a significant amount of state and federal support," said Richard Myers, vice president of the Nuclear Energy Institute, the industry's lobbyist.
GOVERNMENT SUBSIDIES
The most important federal program is the loan guarantee provision of the Energy Policy Act of 2005, which, depending on how the Department of Energy implements the program, could allow companies to fence off investments in new reactors without compromising other operations, Meyers noted.
But Jerry Taylor, senior fellow, at the Cato Institute, said the government should not subsidize the nuclear industry.
"If the government is worried about carbon dioxide, they should tax carbon, not subsidize nuclear power. If nuclear power has merit, investors will embrace it," Taylor said.
If the federal government decides to regulate carbon, as some panelists guessed could occur over the next several years, it would likely make it easier to finance nuclear power.
"The nature of nuclear technology is that it can generate huge amounts of energy without carbon dioxide emissions," Clay Sell, deputy secretary of the US Department of Energy, said.
Climate change is a real problem and nuclear power can be an important part of the solution, said John Woody, business solutions fellow at the Pew Center on Global Climate Change.
"What the nuclear industry really needs is a mandatory climate change policy," Woody said.