New Nuclear Energy Grapples With Costs
Exelon Sees Weak Market, Others Think Climate Concerns Will Propel Industry
Marianne Lavelle
for National Geographic News
Published May 20, 2010
This story is part of a special series that explores energy issues. For more, visit The Great Energy Challenge.
President Obama may be pressing for the nation to increase its supply of nuclear power, but the market is pushing in the opposite direction—at least in the view of one of the leading figures in the U.S. nuclear business.
John Rowe, chief executive of Chicago-based Exelon, operator of the nation’s largest fleet of nuclear power stations, says the economics of the electricity business have changed sharply in just the past two years, dimming the prospects for a significant number of new nuclear reactors in the United States.
Though Obama has touted nuclear as “our largest source of fuel that produces no carbon emissions,” cleanliness is not a benefit that currently shows up on the bottom line. Without congressional action to make competing fuels that emit greenhouse gases more expensive, Rowe says, fossil fuel plants are still cheaper to build. “I just don’t think nuclear has a chance in a pure marketplace without a carbon price,” Rowe said last week in Washington, D.C., in a speech hosted by Resources for the Future, a think tank focused on cost-benefit analysis in environmental policy.
While Rowe noted that some companies are still working on nuclear projects, he pointed out that they tend to be in “rate-based jurisdictions.” In other words, they are in traditionally regulated states where monopoly power companies can sometimes recoup the costs of building nuclear plants during construction through the rates they charge their customers.
Exelon, in contrast, operates only in states where deregulation has created competitive markets. In effect, it sells the power it produces into the electricity marketplace. And because electricity prices have dropped—particularly due to new, abundant supplies of natural gas—Rowe thinks that building new nuclear plants does not make economic sense now.
Renaissance Delayed
Rowe’s pessimism is a change from his view in 2007, when Exelon announced plans to build two new nuclear units in Victoria, Texas. At the time, the plan was one of a flurry of proposals that industry advocates said signaled a “nuclear renaissance” in a country that hasn’t seen construction of a new reactor in 30 years. Some of the past environmental resistance to nuclear power due to safety concerns has eased because the big reactors are capable of delivering a large amount of “baseload” power—a steady supply of electricity that doesn’t fluctuate like that produced by solar or wind—without carbon dioxide emissions. And although new nuclear plants are costly, Congress in 2008 approved $18.5 billion in federal loan guarantees for new nuclear plants. Those guarantees are seen as essential for the industry to obtain financing, especially given the risk that projects may not make their way through the lengthy approval process.
