In his State of the Union Address, President Barack Obama drew attention to nuclear energy, calling for “building a new generation of safe, clean nuclear power plants.” While the president did not go into more details in the address, a misconception on the White House blog about the role of nuclear power has prompted this post. In particular, that blog says in analyzing the president’s energy recommendations that Americans can “reduce our dependence on foreign oil” in part through “the renewal of our nation’s nuclear energy industry.”
However, according to the U.S. Energy Information Administration, oil generates less than 2 percent of U.S. electricity. Oil is mostly used for powering cars and trucks. Electric-powered vehicles would obtain some energy from nuclear power plants. Although President Obama supports these types of vehicles, it will take many years to decades before even a substantial portion of America’s cars and trucks are electric-powered.
Clearing up this misconception presents an opportunity to help inform the national dialogue about the present status and potential future for nuclear power in the United States. (Future postings will examine other aspects of U.S. energy policy.)
Nuclear energy provides approximately two-thirds of the non-fossil fuel electricity production in the United States. About 19 percent of U.S. electricity is generated by 104 nuclear reactors. While the United States has the largest nuclear fleet in the world, the nuclear industry has not had a new U.S. reactor ordered and carried to completion in more than 30 years.
Despite this dry spell, nuclear power use has grown. Over the past 30 years, the proportional use of nuclear power more than doubled due to continued construction in the 1980s and 1990s of some plants ordered in the 1970s, increased power ratings for many reactors, and increased operational and safety performance that resulted in capacity factors rising from less than 60 percent to 90 percent or higher. (Capacity factor measures the fraction of the time that a plant is operating at full power.)
President Obama is right to urge continued attention to nuclear safety. As indicated by the improved performance of almost all the plants, the industry has made dramatic strides in strengthening safety since the Three Mile Island accident in 1979. But another major accident anywhere in the world could bring to a halt plans for a major expansion of nuclear power.
Focusing on safety is becoming increasingly important because the U.S. reactor fleet is aging. In recent years, the U.S. Nuclear Regulatory Commission has approved license extensions for dozens of reactors so that they may operate up to 60 years instead of a nominal life of 40 years. Assuming all reactors receive these extensions and assuming continued safe operation, the United States will not have to retire a reactor until about 20 years from now. But 20 years is relatively brief for nuclear reactor planning purposes because it can take 10 or more years to bring a nuclear power project to completion. Perhaps many reactors could extend their lives to 80 years. Research and development is needed to determine if this is possible. In addition to this initiative, utilities, government, and industry need to assess whether and how to build new reactors.
But how will the country afford new reactors when each one can cost several billion dollars? Utilities are reluctant to risk more than 10 percent of their market capitalization on any individual construction project. One reactor project can easily exceed this threshold. The president indicated that his approach is “passing a comprehensive energy and climate bill with incentives that will finally make clean energy the profitable kind of energy in America.” The climate legislation that was proposed last year could, if passed and properly implemented, send a market signal that may favor increased use of nuclear and renewable sources of electrical power. Another approach that has not gained political traction is to assess a fee or tax on greenhouse gas emissions. To make it more politically palatable, the vast majority of this money can be refunded to citizens and a small portion can be set aside for research and development on energy technologies.
The Energy Policy Act of 2005 offered a number of incentives and federal loan guarantees for nuclear and renewable energies. In particular, the loan guarantees of $18.5 billion would only be enough to cover all or most of the costs of two to four reactors over the next decade. Many utility executives, especially those in deregulated markets, say that they need federal loan guarantees to give investors confidence.
Should the government offer more loan guarantees? The answer depends on the risk of default and on the opportunity costs. Even if nuclear power is perceived as a relatively safe investment, it has to be weighed against other energy choices. Low natural gas prices, for example, tend to drive utilities to use this power source because the construction cost for a natural gas plant is much less than for a nuclear plant. According to the 2009 update to the MIT study on nuclear power, overnight costs for constructing a nuclear plant was at $4,000/kW compared to $850/kW for a natural gas plant (in 2007 dollars). (Overnight costs assume that the plant can be constructed overnight. This is of course a fiction and due to the long time to construct a nuclear plant, its financial costs –the cost to borrow money—tend to be higher than for natural gas plants.) New discoveries of natural gas have made this source look more desirable. This source, nonetheless, is finite. What has been lacking is a long term strategy for reducing the country’s use of fossil fuels. Assessing the external costs such as environmental and security on fossil fuels is a necessary step. Internalizing those costs into the price of these fuels will make nuclear and renewable energies look more cost competitive.
When the president referred to nuclear power as “clean,” he was likely signaling that an operating reactor does not emit greenhouse gases unlike coal, oil, and natural gas fuelled power plants. Critics of nuclear power, however, are adverse to the label of clean because of radioactive waste. The United States has yet to decide on a responsible disposal path for high level nuclear waste. Yucca Mountain, the proposed final repository for spent nuclear fuel, is barely hanging on life support.
President Obama and Senate Majority Leader Harry Reid have formed a blue ribbon commission, whose members were announced on January 29, to assess over the next two years the disposal options. Even if Yucca Mountain is brought back as an option, it will not be able to accept spent fuel until the 2020 time period. And the projected inventory of spent fuel will soon exceed the congressionally mandated limit on Yucca Mountain’s storage although a 2006 Electric Power Research Institute study assessed that storage capacity is at least four times the congressional limit. While the country struggles toward finding consensus on a final nuclear waste repository, the safe and secure interim solution is to store spent fuel in dry casks. But doing so should not be used as an excuse to procrastinate making a decision on long term storage.
The State of the Union address clearly indicates President Obama’s willingness to support continued nuclear power use in the United States. This is a start, but sustained leadership is needed on ensuring the safe longevity of the nuclear fleet, financing new plants, determining the real costs of all power sources, including those costs in the market price, and disposing of nuclear waste in a safe and secure manner.