When federal regulators last week approved the first two new nuclear reactors in 34 years, nuclear-power proponents hailed the victory, calling it a “clarion call” signaling the resurgence of a long-dormant industry.
But experts say that a nuclear renaissance is still a long way over the horizon and that this particular approval is just a case in which all the stars aligned.
“Nothing happened. Nothing changed,” said Mark Cooper, an economic analyst of the nuclear industry at the Vermont Law School’s Institute for Energy and the Environment. “There’s not one investor on the planet that will look at that decision and think that something has changed. None of the problems of nuclear have changed.”
Cooper added that there was another important signal about the industry’s future prospects this week: The Obama administration proposed no new money for loan guarantees that were crucial to the development of the two reactors approved last week by the Nuclear Regulatory Commission.
In its 2013 budget proposal released on Monday, the White House requested $770 million for the Energy Department’s Office of Nuclear Energy to develop small modular reactors and to work on nuclear-waste management. But the administration did not request more funding for the department’s loan-guarantee program, which has been a huge incentive for the cost-encumbered nuclear industry.
The new reactors approved for construction at Southern Company’s Vogtle plant in Georgia are set to receive an $8.3 billion loan guarantee from the Energy Department, which conditionally awarded it to the company two years ago.
Experts say the biggest obstacle to a revival of the nuclear industry is cost, on top of the safety concerns raised by last year’s meltdown at the Fukushima plant in Japan following an earthquake and tsunami.
The Vogtle plant’s two new reactors are being built in a rate-regulated market — a more favorable environment for nuclear power. In deregulated states, utilities compete head to head for the electricity market, but in Georgia utilities are controlled by a state authority that makes decisions about rate increases and construction plans.
“In that environment, you can tend to have a more long-range plan,” said Leslie Kass, senior director of business policy and programs at the Nuclear Energy Institute, the industry’s main lobbying group. In this kind of market, ratepayers can be counted on to help finance the cost of nuclear construction, she said.
Kass said the licensing of new reactors for the first time since 1978, the year before a near meltdown occurred at the Three Mile Island plant in Pennsylvania, is “great news” for the industry. But she acknowledged that the low price of natural gas, slowing electricity demand, and deregulated states are formidable obstacles for new nuclear-power plants.
Natural-gas prices have been dropping rapidly in the last three to four years, from around $8 to only $2.50 a unit. Even natural-gas drilling is being scaled back in light of the low prices coupled with reduced demand in a sluggish economy. “Given low demand, no baseload power is being built,” explained Kass.
Despite the many hurdles facing the industry, nuclear power still has plenty of support from the administration.
In his visit to the site of the newly approved reactors on Wednesday, Energy Secretary Steven Chu threw the weight of the administration behind the industry’s potential growth. “The resurgence of America’s nuclear industry starts here in Georgia,” Chu said. “The Obama administration is committed to doing our part to help jump-start America’s nuclear industry.”
Lawmakers on Capitol Hill were a bit more cautious about declaring that a revival is coming.
Senate Energy and Natural Resources Chairman Jeff Bingaman, D-N.M., said that he thinks “the economics continue to be the issue.”
Bingaman added, “We need to find out what we’re going to be able to do by way of loan guarantees in the future. There’s a lot of resistance to that.”
But former NRC member Peter Bradford said that government backing is the only way that nuclear power will ever get the funding it needs to get off the ground.
“The problem is not fundamentally low natural-gas prices or falling demand or Fukushima costs,” said Bradford. “The fundamental problem is the concept of economic risk that includes all of those and other things that could go wrong and haven’t.”
The risks and uncertainties tend to scare off private investors, Bradford added, leaving the nuclear industry to rely more heavily on what he calls “dumb money” from the public sector.
This article appears in the February 17, 2012, edition of NJ Daily.