The Death of Nuclear Energy

We’re watching another milestone pass us by, dear readers — one that many will be glad to put behind them.

Exelon has recently announced that the final operating nuclear reactor at Pennsylvania’s Three Mile Island will be shut down for good in 2019.

As the site of the U.S.’s worst nuclear accident to date, keeping it running even this long has been a controversial choice, to say the least.

The fear and stigma behind this energy source has been taking the industry down piece by piece for decades, and this may be a sign that recovery just isn’t in the cards.

At least nearby Harrisburg residents won’t have to worry about that pesky nuclear anymore!

Instead, they’ll have to worry about where the missing 837 megawatts of energy will be coming from once the plant is out of commission.

Nuclear Options

“Copy Japan” isn’t usually the first thing that comes to mind in a pinch, but in this case it might be the U.S.’s smartest move.

You see, after the Fukushima disaster in 2011, Japan shut down its entire nuclear industry. This cut 54 nuclear reactors totaling 48.3 gigawatts of energy — about 27% of the country’s total energy production — out of the equation.

Of course, another seriously damaging consequence of this catastrophe has been the negative reactions toward the nuclear industry as a whole (which is not only one of the cleanest sources of energy we have, but also one of the most efficient).

Since then, a handful of reactors have been turned back on, but the damage has been done.

The U.S. is facing a similar situation, only in slow motion.

After the accident at Three Mile Island, preceded by Chernobyl and followed by Fukushima, U.S. attitude towards nuclear dropped and never really recovered. The industry has been suffering ever since.

Even though total nuclear capacity did rise for a few years after the accident, it’s stagnated in comparison to other U.S. energy sources.

Since 1988, it’s accounted for about 20% of U.S. energy production.

Considering annual energy production has risen by more than 25 gigawatts in that time, it’s clear nuclear just isn’t keeping up the pace.

Of course, we know what’s going to be replacing it already, don’t we?

Much like Japan has done, the U.S. will be increasing its use of natural gas in a big way. Above is just one reference case from the Energy Information Administration, but it’s obvious that this fossil fuel is taking the lead in any case.

The Story So Far

As U.S. coal and nuclear capacity both slide steadily downward, natural gas is not only making up for lost capacity but also covering new energy demand.

However, this is where the U.S. and Japan will differ moving forward.

After Fukushima, Japan became the world’s top importer of liquefied natural gas (LNG), and it still holds that title today. The country accounted for nearly 32% of all LNG purchases last year.

But those volumes have been declining for one simple reason: imports are expensive.

It’s especially rough in a country whose currency is doing as poorly against the dollar as the yen has been, and since the 2014 peak, Japan’s LNG imports have dipped in favor of cheaper coal.

Here’s the kicker: Japan doesn’t have much domestic supply of either fuel.

No matter what, the country will be paying up for imports from around the world or facing major energy deficits.

The U.S. doesn’t have this issue.

Thanks to abundant shale supplies, the U.S. is profiting big from growing overseas imports of LNG, and it’s got plenty of domestic supply to cover growing demand.

Unlike Japan, we’re cutting coal use and replacing both that and nuclear with cheap, reliable natural gas. As you can see in the chart above, that trend isn’t looking to slow anytime soon.

Moreover, the U.S. is fast becoming one of the world’s largest LNG exporters.

With just six functional export terminals and a handful more in the works, it may not look like it, but the International Energy Agency expects the country to be among the top three LNG exporters — alongside Australia and Qatar — within the decade.

In the last five years alone, natural gas exports out of the U.S. have risen almost one trillion cubic feet per year. LNG exports reached 52 billion cubic feet in February, quite a jump from the previous high of 14 billion cubic feet in January of 2011.

Now, most of this still goes to energy-starved Mexico, but as the infrastructure improves, more and more LNG will be heading out of U.S. ports.

And with gas prices still riding low, we’re seeing the biggest benefits from both cheap power and high export profits.

Until next time,

Keith Kohl

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A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.

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