Wednesday, March 18, 2009

"Economic Woes" DIDN'T Delay U.S. Nuclear Power Expansion

Yesterday's Reuters story claiming that "economic woes delayed U.S. nuclear power expansion" has a few of its time-lines and facts off. Here's the first paragraph of the story:

The sputtering global economy and frozen credit markets have shrunk the first wave of a highly touted U.S. nuclear power renaissance.
That's news to me. Back in January, NEI released a paper detailing how the nuclear industry has grown by 15,000 jobs over the past couple of years in anticipation of this "renaissance." Back to Reuters:
Nuclear industry advocates had predicted more than a dozen new reactors worth $100 billion or more generating at least 15,000 megawatts of power in the United States by 2020.
It wasn't a prediction, it was a goal of DOE's Nuclear Power 2010 program (pdf) made back in 2002. Reuters:
Then the economic slump hit. Now, Cambridge Energy Research Associates expect four to eight new reactors providing 5,000 MW to 10,000 MW by 2020.
Actually, NEI made this statement more than a year ago at our 2008 annual presentation to Wall Street (see page 12) when the first of today's "economic woes" were barely starting to emerge. NEI tamped down expectations way before today's rough economic patches so it's quite a bit inaccurate to attribute our lower forecast to today's mess.

The rest of the Reuters piece gave no more examples of how the "economic woes" are delaying U.S. nuclear power expansion. In fact, it quotes the NRC as saying the opposite:
"The economy has not affected what the NRC expected" in license applications, spokesman Scott Burnell said.
Looks like the authors of the Reuters story need to do two things. 1) do a little more research to provide time-lines of when things were said, what was said, and by whom. And 2) come up with a headline that actually matches the facts and story. Here are a couple of suggested headlines: Goal for Dozens of New Reactors by 2020 is More Likely to be Met by 2030; Licensing of New Nuclear Plants Unaffected by Economic Woes; or Only Four to Eight New Nuclear Plants Expected to be Online Next Decade (this was a popular headline last year after we stated this at the Wall Street presentation).

5 comments:

Anonymous said...

I agree with your specific criticisms of the article, and how they misquoted NEI. The economic downturn will not affect nuclear plant plans much, as the economic issues should be mostly over by the time construction begins.

That said, it continues to disturb me how NEI and other industry representatives are low-balling estimates of nuclear’s potential and future growth. My expectation is that most of the 33 plants that are planned (and have or will file COLs) will be built by 2020. By 2030, another 100 plants will be built (for a total of 130 new plants, and 230 in operation). The industry should prepare for that rate of plant construction.

I must ask the NEI the following questions. Given that CO2 limits will be imposed, how will we be generating our baseload power in 2030? Does NEI know something that we don’t? If you think we will only have a dozen or so new plants by then, you must believe one of the following. 1) Conservation and renewables will be able to provide most of our electricity by 2030, at an economical price. 2) Coal w/ CO2 sequestration could provide most of our power at an economical price. 3) We will simply blow off doing anything about global warming, or (at least) put a limit on the cost of a CO2 credit that is low enough (i.e., $10-$20) that coal w/o sequestration is still cheapest. Only #3 has any likelihood of being true (sadly).

With a couple possible exceptions (e.g., Idaho, Amarillo), all of the 33 COL applicants are solid utilities with substantial nuclear background that appear to be very serious and have made substantial preparatory investments. I would like to know which of these proposals NEI thinks will not actually go forward, and why they think so. According to the article below, AREVA certainly seems to think that all four of its US EPR projects will go forward, and will be built by 2019. NEI seems to think that only Calvert Cliffs will go forward. Why?

http://www.syracuse.com/news/index.ssf/2009/03/nuclear_power_company_owner_sa.html

The only explanation I can think of for such predictions is that it hasn’t really sunk in what hard limits on CO2 will really mean. Is it that NEI’s members (who have coal plants) can’t imagine a future w/o coal? A more honest estimate of what would (must) really happen by 2030 under hard CO2 limits is the EIA study linked below, whose core case predicts an over 200% increase in nuclear generation (and nuclear being over 60% of generation) by 2030.

http://74.125.95.132/search?q=cache:GLlbs6nO5u4J:www.appanet.org/files/PDFs/EIALWanalysisAPPAreport052008.pdf+EIA+Nuclear+2030&cd=10&hl=en&ct=clnk&gl=us&client=opera

Jim Hopf

David Bradish said...

That said, it continues to disturb me how NEI and other industry representatives are low-balling estimates of nuclear’s potential and future growth.

Low-balling? The only thing we've said is that we think 4-8 nuclear plants will be built by 2020 in the US. By 2030, we'd love to see hundreds of new plants but we're not going to make that kind of prediction because markets change. Plus, anytime someone makes a prediction and they're wrong, their mistake is remembered and brought up all the time (such as what was brought up incorrectly in this article). Lewis Strauss also comes to mind.

We have read a lot of studies that project energy scenarios for the future and it's pretty clear that the majority of them conclude that nuclear energy has a bright future under any CO2 free world. NEI doesn't need to make projections, they are already out there. If these nuclear plants are supposed to happen, then they will and we're definitely preparing for it.

Even under the most favorable market conditions including a tax on CO2, nuclear plants are still expensive to build. Life would be easy for utilities to build nuclear plants if they had market caps like General Electric or Exxon-Mobil. Instead, most electric utilities have market caps between $10B-$20B which is not much if they're looking to build a $6B-$8B plant. Therefore, loan guarantees and CWIP and other financing measures that can help mitigate the cost are necessary. There are currently only enough loan guarantees available for about 3-4 nuclear plants. And only several southern states allow CWIP. So maybe you could understand our hesitancy of saying all 33 proposed reactors will be built by such and such time.

Anonymous said...

Dave,

Our power needs must (and will) be met, so with hard CO2 limits (which will take coal off the table as a new generation option), utilities will find a way to finance new nukes, one way or another. Most analyses I've seen show that with hard CO2 limits, loan guarantees (or other subsidies) are not necessary for nuclear to win out for baseload generation.

I'm concerned about what message is sent when the industry's leaders tell the utilities that they think the majority of their planned projects will not succeed or go forward. I'm even more concerned about the message it sends to the entities that make up the nuclear supply chain (e.g., heavy forging manufacturers, etc..).

When deciding how much foundry capacity to build, these people need to know what the scale of new build will be in the future, and they may look to the industry's leaders for guidance. NEI is telling them to plan on a US build rate of 1-2 plants per year (out to 2030), when the real need will be more like a plant per month.

The only plausible reason I've heard so far for the dramatic escalation of nuclear plant costs is that we have 3-4 times as many orders as the supply chain can provide. Thus, a bidding war results, and the price of plant components rises way above their real cost, to the level required to weed out most of the projects.

The result is a double tragedy. Not only is the number of new plants cut down by a factor of several, but the few plants that are built go on record as being obscenely expensive, making nuclear look bad and vindicating the anti-nukes.

The answer, of course, is to build enough foundries (supply chain) to meet future demand. However, if the industry's leaders project only a small number of future plants, it will become a self-fullfilling (and defeating) prophecy. Only a small amount of foundaries will be built, which will indeed limit the number of new plants to what the industry leaders projected.

In addition, since a bidding war will occur for the limited number of plant components (such that most projects are priced out of the market), nuclear goes down in history as being an extremely expensive (and failed) energy source, just like the anti's always said it was.

I can only hope that these NEI projections will not affect utilities and supply chain manufacturer's decisions as much as I think they might. I'm hoping that if they have 33 plant orders, they will gear up to build 33 plants....

Jim Hopf

David Bradish said...

Our power needs must (and will) be met, so with hard CO2 limits (which will take coal off the table as a new generation option), utilities will find a way to finance new nukes, one way or another.

What if hard CO2 limits never come? William Tucker's article (which you commented on) comes to mind about how it may be politically impossible to pass this type of legislation.

I'm concerned about what message is sent when the industry's leaders tell the utilities that they think the majority of their planned projects will not succeed or go forward.

That's not what we're saying and I need to correct the time frame from what I said earlier. NEI has said that the first wave of new nuclear plants will total about 4-8 by 2016 (I said 2020 previously). I don't see how this statement is in anyway telling the utilities that their projects won't go forward. In fact, it's the utilities who are the ones telling us that they plan to go full speed ahead or that they'll go slow. Unistar in Texas and Idaho, as well as FPL in FL still haven't even filed their COL apps to the NRC. Exelon and Entergy suspended their COLs under review by the NRC. And I can bet that most utilities planning to build two AP1000s such as at Cherokee County, Comanche Peak, STP, Harris, Levy, Summer, Vogtle and Bellefonte will build them one at a time so they could manage cash flow effectively.

NEI is telling them to plan on a US build rate of 1-2 plants per year (out to 2030)

Where did you find that? I don't know anyone at NEI who has made that build-rate projection.

I'm hoping that if they have 33 plant orders, they will gear up to build 33 plants....

We hope so too. But they're not going to build them all at the same time. You can't go from building zero plants for a couple of decades to all of a sudden building 33.

I share your optimism but we can't get ahead of ourselves considering we're still at the early stages of this "renaissance." Many things could happen to derail all of our plans.

Anonymous said...

Dave,

Based on your blog post, and page 12 of NEI's 2008 Wall St. presentation, I got the impression that the "plan" was for 4-8 plants by 2020, and for the rest of the ~30 plant projects to roll in by 2030. This equates to ~20 plants between 2020 and 2030, or ~2 per year. People have also often been referring to the amount of plant required for nuclear to stay at ~20%, which, again, corresponds to ~25-30 new plants by 2030.

Anyway, I just watched Mr. Fertel's testimony before the Senate Energy Committee and his message was more optimistic than what I thought NEI had been saying. He referred to 4-8 plants by 2016 as opposed to 2020 (as you pointed out). He also referred to 4-6 plants per year being necessary to meet our CO2 goals, and how he believed that we could definitely accomplish that, given that we did before in the first wave (in the 70s). This is a message that I have absolutely no problem with!

I should also point out that I thought Mr. Fertel did an incredibly good job at the hearing! (It didn't go nearly so well for poor Mr. Cochrane....) We couldn't have asked for the hearing to go any better than that. We definitely have strong bipartisan support in the Senate. The House may be more of a problem, however.

Jim Hopf