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Nuclear power rides an economic roller coaster

By Paul Choiniere

Publication: The Day

Published September 29. 2013 4:00AM

A decade ago, it appeared that the nuclear power industry in the United States was paused for a revival. Troubled by Middle East entanglements that had brought massive terrorist attacks to the homeland, there were cries to end the nation's dependence on foreign oil. Getting a stagnant nuclear energy industry moving again provided one means.

The Nuclear Regulatory Commission was at work approving a new generation of nuclear reactors said to be easier to build, less complex, safer. High prices for natural gas, a competing electric generation fuel source, added to the rosy outlook. The 2005 Energy Policy Act included tax credits, loan guarantees and other incentives to encourage new construction, no nuclear plant having gone online since 1996.

In the intervening years, the outlook has changed dramatically. It now appears more likely the nuclear industry is entering a period of steady decline, rather than preparing for a rebirth.

Domestic natural gas prices have plummeted due to the success of hydraulic fracturing - fracking - to tap gas deposits heretofore inaccessible. Deregulated wholesale "merchant markets," including in New England, which place a premium on lower pricing, are driving electric generation toward natural gas.

Adding to the pricing pressure is lower demand for electricity in the United States, caused by a combination of the sluggish economy and improved conservation. Less demand equals lower prices.

It has not been a good year for the nuclear industry. Four reactors have shut down. Vermont Yankee will become a fifth next year. This will leave the nation with fewer than 100 nuclear plants for the first time in decades. The industry acknowledges that at least two of the closings, Vermont Yankee and Kewaunee in Wisconsin, directly relate to price competition.

"And they are the greatest concern, particularly because both plants were - and are - solid performers," said Richard Myers, vice president for policy development at the Nuclear Energy Institute, when speaking to the World Nuclear Association annual gathering in London earlier this month.

The two nuclear plants under construction in the country, the Vogtle plant in Georgia and Summer plant in South Carolina - set for completion in 2017 and 2018 - benefit from a regulated market and supportive state laws that help generate financing and emphasize long-term power stability. Yet cost overruns and delays have raised questions about the sustainability of those projects.

In July Mark Cooper, senior fellow for the Economic Analysis Institute for Energy and the Environment at the Vermont Law School, issued a report "Renaissance in Reverse: Competition Pushes Aging U.S. Nuclear Reactors to the Brink of Economic Abandonment." He provided a list of nine plants facing particularly tough pressures that leave them vulnerable, with the Dominion-operated Millstone Power Station in Waterford on the list.

Faced with this situation, the NEI is on a public relations campaign to convince policy makers that nuclear power should be supported and expanded not because it is cheaper - because it is not - but because it provides for energy diversity, reliability and does not produce greenhouse gases.

They make the argument that the shift to natural gas may produce short-term price reductions, but is a dangerous long-term strategy, with New England particularly susceptible to trouble. New England now depends on natural gas for more than 50 percent of its electricity supply, double the level of its dependence in 2000. It is not healthy, NEI argues, for a region to become overly dependent on one power source.

Last year, when severe cold snaps resulted in heavy natural gas use for heating, supplies tightened and electric power prices temporarily spiked in New England. Overall, however, prices are lower due to the move toward natural gas.

In a region of the country desperate to reduce energy prices and compete for industry, arguments for diversity seem unlikely to carry much weight with policy makers. As for reducing greenhouse emissions, lawmakers are more likely to support solar and wind power. The NEI's arguments suggest a level of desperation.

After talking with reporters earlier this month, delivering mostly bad news, Myers, of the Nuclear Energy Institute, concluded, "though the short-term picture is challenging, the long-term prospects for nuclear energy in America remain strong."

Whistling past the graveyard came to mind.

Paul Choiniere is editorial page editor.

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