What lies in store for the U.S.’s nuclear future?
There’s a very real possibility that domestic nuclear power may be on the decline, with government-backed wind power rising and tapering off our reliance on electricity generated from coal-fired plants. After all, just last year the wind sector grew by $25 billion (helped in large part by the wind tax credits that were set to expire at the end of the year).
That spurt of growth ended up adding about 13,125 MW of power to the national grid, Businessweek reports. Power prices are already at record lows due to the natural gas production glut, yet wind energy managed to undercut even these levels.
Businessweek reports:
“Right now, natural gas and wind power are more economic than nuclear power in the Midwestern electricity market,” Howard Learner, executive director of the Environmental Law and Policy Center, a Chicago-based advocate of cleaner energy, said in a phone interview. “It’s a matter of economic competitiveness.”
The U.S. Energy Information Administration indicates that by 2014, the wind sector will supply 4.2 percent of all domestic power needs. As of last year, it was providing 3.4 percent of all power needs. The Midwest has benefited in particular, experiencing price drops of almost 40 percent since 2008.
Of course, that also means the impact on the nuclear sector has been strongest in the Midwest. For example, Virginia-based Dominion Resources Inc. (NYSE: D) is not only shutting down a reactor that is no longer profitable, but it is also trying to sell off coal plants.
Exelon Corp. (NYSE: EXC), meanwhile, has issued ominous warnings about rapidly dropping nuclear profit margins. And a coal facility owned by Edison International (NYSE: EIX) has recently gone into bankruptcy.
Bear in mind that nuclear power still contributes 19 percent of national electricity needs. Right now, atomic operators protest that the ongoing market turmoil is a result of government intrusion, artificially distorting the impact of wind energy by propping it up via subsidies. They also insist that nuclear power is clean and has a record of safety.
Of course, incidents like Fukushima, Three Mile Island, and others have generated intense media scrutiny, adding to the perception of nuclear power’s capricious nature.
There are green energy initiatives in several states, under which utilities must purchase wind energy bound to long-term contracts. This is mandated even if such reliance on wind power is unnecessary.
Further, wind farms stand to receive a $22-per-MW-hour federal tax credit. As a result, many wind operators have simply left their turbines going, generating surplus power for the grid, profiting off the per-MW-hour tax credit. The effect would be amusing if it weren’t a serious matter.
The leading states for wind power (Texas, California, Iowa, Illinois, Oregon) actually experience sub-zero power prices when their power grids are flooded by excess power from wind farms.
Such is the scenario against which nuclear power must continue to prove its efficiencies. The January fiscal cliff deal ensured that the wind tax credits were extended through the end of this year, meaning any wind projects that are started this year will receive the 10-year tax credit even if they do not actually come online any time in 2013.
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However, it may be premature to wholly blame wind energy for nuclear’s decline. There is a genuine shift toward cleaner energy, with major companies like Google (NASDAQ: GOOG) and MidAmerican Energy Holdings opting to invest heavily in wind and solar projects.
And, perhaps in tandem, perception has slowly shifted against nuclear energy. Just recently, the Nuclear Regulatory Commission rejected plans to develop a third reactor in Maryland.
The application was filed by Unistar Nuclear Operating Service, but perhaps the fact that that company’s parent company is 85-percent owned by the French government played a major role in the decision. Coincidentally, Maryland recently approved an initiative to develop a large-scale onshore wind facility.
From the Washington Times:
“Maryland already has moved on. With this decision, Maryland’s future is clear: It will be based on clean renewable power, not dirty, dangerous and expensive nuclear reactors,” said Michael Mariotte, executive director of the Nuclear Information and Resource Service, which has long opposed the project.
It may be time to face the fact that the U.S., unlike Germany and Japan and even other nations, has never really assessed its domestic nuclear sector critically. In those countries, there has been public debate and policy changes to better govern the nuclear sector and ensure that Fukushima-like incidents can be adequately controlled.
But such is not the case here, and in any event, new reactors are an unattractive economic prospect right now, given the abundance of energy from wind and natural gas. The future may simply not be that bright for nuclear energy.
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