|Entergy's Bill Mohl|
Another way of looking at the economic value of existing U.S. nuclear generation is to consider the potential cost of replacing it. Based on data publicly available from the U.S. Energy Information Administration, Entergy has calculated that building gas-fired Combined-Cycle Gas Turbine (CCGT) plants to replace the approximately 101,000 megawatts of capacity provided by U.S. nuclear plants would cost between $100 and $110 billion dollars. An investment of this magnitude to replace an existing asset class would be enormous for the U.S. power industry. To provide some perspective, in 2011 U.S. investor-owned utilities (including stand-alone transmission companies) invested slightly more than $30 billion aggregate in transmission and distribution facilities – well under one-third of the low end of the range of the estimated cost that would be required to replace nuclear generation with CCGT plants. Moreover, the $100 billion to $110 billion replacement cost estimate does not include any costs of expanding pipeline capacity to serve new gas-fired plants. The adequacy of pipeline capacity is a key consideration, as was recently demonstrated in New England.A few weeks ago, NEI's Richard Myers took note of some local market conditions in New England that clearly contradicted the conventional wisdom that American is awash in cheap natural gas, a topic that Energy's Bill Mohl also touched on this morning:
Nuclear power is a crucial contributor to maintaining America’s air quality. Nuclear generation produces virtually no carbon emissions. Since 1995, U.S. nuclear plants have prevented the release of more than 11 billion metric tons of carbon dioxide into the atmosphere. Renewable energy sources can contribute to environmental sustainability, and should be considered for inclusion in a generation portfolio, taking account of emissions, cost, operating characteristics, land use, and other factors. Clean-coal technology shows promise but is not yet as cost-effective as existing nuclear as a source of baseload power. As reliable sources of baseload generation, nuclear plants provide a foundation in the power supply portfolio to support emerging wind and solar power projects, which are characterized by intermittent availability.
Again, as our own Richard Myers mentioned, the spot price of natural gas in the Northeast at the end of January was anything but cheap:
Earlier in my testimony I noted that nuclear and coal traditionally were the primary fuels used to provide baseload power in the United States. Over the last ten years, improvements in power plant technology coupled with recent low gas prices have created the opportunity to operate CCGTs as baseload units as well. While there are benefits to being able to operate CCGTs as baseload, diversification is a prudent strategy for a generation portfolio, just as it is for an investment portfolio. Sound utility resource planning practices suggest that “you don’t want to put all your eggs in one basket.” In addition to its other benefits, nuclear generation provides a valuable hedge for electric consumers against potential gas price volatility.
Bill Mohl testifies before the Energy and Power Subcommittee.
Aside from price concerns, there are also challenges presented by the existing pipeline infrastructure and its ability to meet rising demand, particularly in certain regions of the country such as New England.
Consider that replacing all U.S. nuclear units with gas-fired generation would require an additional 14.5 billion cubic feet per day of additional gas supply, a 70% increase over the 20.8 billion cubic feet per day of gas that electric generators used in 2011. Natural gas fired generators do not have on-site fuel inventory and must be continuously supplied through a pipeline system, and while some facilities may have access to gas storage facilities to ensure continuous supply, many facilities do not. Supply issues can arise during peak times, when pipeline capacity is needed to satisfy the demands of local gas distribution companies to serve homes and businesses, in addition to the needs of power plants that may not have contracts for firm delivery. By contrast, nuclear plants have up to eighteen months of fuel supply on site and do not compete with residential and business consumers for fuel, making nuclear plants far less likely to be affected by fuel supply interruptions.Plenty of interesting facts to keep in mind. We'll share a link to the full text of the testimony once it's posted to the NEI website.
In summary, every source of energy has advantages and disadvantages. We know this to be true in transportation, home heating and also with electricity. Each generation source varies in terms of cost, economic and environmental impact, and other factors that complement and may be weighed against each other. Generation diversity is simply necessary to ensure a reliable and secure generation portfolio for the nation.
UPDATE: The complete video archive of the hearing has been posted to YouTube:
Finally, click here for a complete transcript of today's testimony.