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Forbes  4 hrs ago  Comment 
Nuclear energy is growing around the world after a decades-long lull, especially in developing countries, creating worry that nuclear energy can lead to the proliferation of nuclear weapons. While the basic principles of nuclear physics are the...
New York Times  Sep 20  Comment 
Before the opening of the United Nations General Assembly, negotiators have discussed a plan to remove the pipes that connect Iran’s nuclear centrifuges.
SeekingAlpha  Sep 19  Comment 
By Cup & Handle: The 2011 tsunami that struck Japan was psychologically damaging for numerous reasons, but especially because global audiences were able to watch the drama unfold on television. Closed-circuit videos (below) of cars performing...
JCN Network  Sep 18  Comment 
Hitachi, Ltd. today announced that it will open a new R&D base in the UK - the European Nuclear Research Centre (ENRC) - on September 30th 2014.
SeekingAlpha  Sep 18  Comment 
By James Bjorkman: Exelon Corporation (NYSE:EXC) is in a somewhat similar position to FirstEnergy Corp., which we looked at recently: both have a regulated arm which supplies electricity to urban areas, and a deregulated arm that generates power....
Reuters  Sep 18  Comment 
* Manufacturers look to developing markets to fill order books
Reuters  Sep 18  Comment 
The Finnish government has decided to conditionally back an updated application from Finnish-Russian group Fennovoima to build a nuclear reactor in the north of the country, prompting the Greens to quit the administration.
The Hindu Business Line  Sep 18  Comment 
India will open talks on civil nuclear energy cooperation with China, Prime Minister Narendra Modi said on Thursday after summit talks with Chinese President Xi Jinping in New Delhi.The...
SeekingAlpha  Sep 17  Comment 
By ValueStreet Research: The Babcock & Wilcox Company (NYSE:BWC) is a provider of equipment and services for power generation systems and North America's only specialty constructor of nuclear components, both to private industry and the US...
Financial Times  Sep 17  Comment 
Finland’s government has come under attack for its continuing support for a Russian-built nuclear reactor




RELATED WIKI ARTICLES
 
Nuclear energy involves a controlled reaction to split atoms of nuclear fuel, typically uranium or plutonium, producing two atoms. When accomplished on a reasonable scale, this reaction releases an incredible amount of heat, which can be used to heat water, producing steam and powering steam turbines, which can then be used to produce electricity.
 A nuclear power plant, with standard cement containment vessel
A nuclear power plant, with standard cement containment vessel

(In fact, nuclear energy starts with Albert Einstein—his classic formula, E = mc^2 actually describes how much energy is released when an atom is split. It’s a lot. To put it in perspective, the energy contained in a pound of uranium used for nuclear fuel (i.e., enriched) is equal to roughly one million gallons of gasoline.)

However, when most people think of nuclear energy, they recall the 1979 Three Mile Island accident in Pennsylvania or the 1986 tragedy involving a Soviet era RBMK reactor at Chernobyl which resulted in an uncontrollable runaway reaction causing a steam break/explosion. Chernobyl became the worst nuclear power disaster ever to occur and has dramatically impacted the public's perception of nuclear power safety. In fact, fears of repeats of these accidents, safety concerns, disputes over storage of nuclear waste, and a web of government regulations has limited nuclear power plant developments over the past 25 years. The last new nuclear plant in the U.S. was commissioned in 1996.

But nuclear remains a force in electricity generation, accounting for roughly 17% of electricity generation around the world. With over 100 nuclear plants, the U.S. depends heavily on nuclear energy. As of February 2010, there were 440 nuclear reactors operating worldwide and a total of 111 reactors under construction or planned for completion by 2020.[1]
 Locations of nuclear power plants
Locations of nuclear power plants
Across countries, nuclear’s prevalence is widely variable— some countries, such as France, generate as much as 80% of their electricity from nuclear power, while others, such as Austria, Sweden, and Italy, have banned nuclear generation as a result of safety concerns or public fears.

Moreover, nuclear power has witnessed a recent renaissance, due to China's rising demand for energy, fears over greenhouse gas emissions, and rising prices for alternatives natural gas and coal. Nuclear energy is not based on fossil fuels, and therefore emits fewer greenhouse gases than competitors coal and natural gas, even accounting for its lifecycle emissions, which include the costs of constructing the plant, transporting the fuel, etc. Moreover, nuclear energy is not as exposed to price fluctuations in oil and natural gas, since uranium and plutonium are used to fuel nuclear plants.

Since oil prices have gone through the roof, nuclear has caught its second wind; at the middle of 2009, the U.S. Nuclear Regulatory Commission (NRC) had received 17 applications for combined construction and operating licenses (COL) for 26 new nuclear reactors. The U.S. currently has 11 nuclear plants, but plans to double that number by 2020 and triple it by 2025. [2]

Economics of nuclear energy

 Comparison of costs to produce electricity
Comparison of costs to produce electricity

The economics of nuclear energy are differentiated from its main competitors in electricity generation, natural gas and coal, by the fact that nuclear energy typically has high construction costs and low variable operating costs. As a result, the cost competitiveness of nuclear energy depends highly on initial construction costs and the cost of capital for nuclear power companies. Drivers of the initial construction costs include investment in new technologies, especially for increased safety, and government regulations and permitting requirements for grid connections, safety, and storage. Cost of capital can be driven by a wide variety of factors including the state of interest rates around the world, but typically, governmental regulation of nuclear energy has heavily influenced the availability and pricing of capital for nuclear energy projects. This includes at one time heavy subsidies for nuclear power and more recently, strong restrictions on nuclear energy development. The first successful deployment of nuclear energy was actually conducted by the U.S. Navy, and nuclear energy still powers a vast number of submarines and navies around the world.

Power Generation Costs for Various Energy Sources in 2008[3]
Fixed Cost (cents/kWh) Variable Cost (cents/kWh) Total Cost (cents/kWh)
Coal 4.1 3.3 7.4
Natural gas 2.8 7.8 10.6
Nuclear 8.0 0.8 8.8
Wind 8.2 0.0 8.2
Energy Return by Source in 2008[4]
Energy return on Energy Invested
Coal-fired power plant 2.5
Nuclear power 4.5
Hydroelectric power 10
Wind power 35
Natural gas 10.3
 U.S. Electricity Generation by Source
U.S. Electricity Generation by Source[5]

As a result of the economics above, input costs (i.e., fuels) constitute a lower share of final cost of energy production than do the input costs for natural gas and coal power plants— the Nuclear Energy Institute estimates this share to be 78-94% of final energy costs for fossil fuel plants, versus only 26% for nuclear power plants.

In the US, while the Coal and Gas Electricity industry is projected to be worth $85 billion by 2013, Nuclear Power generators are forecast to be worth $18 billion. In the longer term, growth is set to continue among nuclear and renewable energies. Change in any industry so infrastructure-heavy is time-consuming, but change is slowly coming. Despite this, Coal and Gas are expected to be viable industries for a long time yet, and are still projected to be the number one means of generating power in 2050. [6]

Regardless, nuclear has always been, and will likely continue to be, cost competitive with its main competitors, coal and natural gas. Exact estimates of costs vary, but the IEA suggests rough cost parity over the next 30 years, not including any potential carbon trading or tax system, which would hit both coal and natural gas harder than nuclear power.

Drivers of nuclear power

Given that the economics of nuclear are relatively stable and have been clear for a number of years, nuclear power has been driven by a variety of other factors.

The Need for Investment

Since no new plant has been started since 1977, no one knows exactly how much a new one would cost, or how long it would take to build, so investors don't want to finance a venture that is so risky. Still, in the last few years, utilities have applied to build over 30 new nuclear power plants around the U.S.[7] The cost of building these reactors, however, doubled since 2006, with Moody's estimating the cost at roughly $8 billion - twice the cost of a coal plant and three times the cost of a natural gas plant.[8] While fuel costs for nuclear power are lower than for coal and natural gas, the high initial investment makes a nuclear plant less attractive to potential investors.

Nuclear power is also likely to be key to the ongoing emergence of such economies as China and India,[9] seen in their goals to double their nuclear capacity within the next 5-10 years.[10]

  • 68 reactors are scheduled to be built in Asia, as energy demand is driven by economic expansion. About three-quarters of this growth is expected to occur in China (the fastest growing nuclear energy market) and India, which have announced plans to build 31 and 18 reactors, respectively.[1]
  • In Russia, Ukraine, and Armenia, it is anticipated that 23 reactors will be built, offset by one closure in Armenia and six in Russia.[1]
  • In Finland, a new European Pressurized Water Reactor is being constructed and, when completed, will bring the country’s total to five nuclear reactors.[1]
  • In France, the construction of a second European Pressured Water Reactor is expected to begin in 2012.[1]
  • South Korea’s generation blueprint anticipates that by 2020 roughly half the country's electricity will be nuclear-generated.[1]
The Obama Administration Supporting Nuclear Energy

In February 2010 President Obama announced that the U.S. Energy Department had approved a loan guarantee of $8.3 billion to help the Southern Company and two partners build twin reactors in Burke County Georgia. The project may also be eligible for loan guarantees from the Japanese government; the reactors were designed by Westinghouse, a unit of Toshiba. The builders hope to have a license to build and run the plant by the end of next year.

The loan guarantees were authorized by the Energy Policy Act of 2005 and is the first award from $18.5 billion in loan guarantees provided for under the 2005 act. In addition to the award Obama proposed tripling the available loan guarantee amount to $54.5 billion.

Two other potential borrowers may win guarantees soon as well. The Scana Corporation and Santee Cooper want to build a nuclear plant near Jenkinsville, S.C., and UniStar is planning a reactor in southern Maryland, adjacent to the Calvert Cliffs reactors.[11]

A Setback for Nuclear Energy

In late 2007, the city of San Antonio and NRG Energy announced a partnership to build two new nuclear reactors. The estimated cost was $5.8 billion and looked like it would receive government loans from the Department of Energy. However, in 2008 cost estimates rose to $13 billion and by April 2009 an independent report estimated costs could be as high as $22 billion. Then in December 2009 San Antonio's municipal utility, CPS, backed out of the venture entirely and sued NRG. The lawsuit stated that NRG and Toshiba—which was contracted to construct the reactors—had lied about the price tag of the venture. Currently NRG will not move forward with the plant unless it can obtain a government backed loan, leaving the fate of the San Antonio plant up in the air.[12]

The lawsuit and rapidly growing price tag not only stalls a promising plant, but demonstrates the uncertainty and difficulty of nuclear plant development. Debates over plant designs and safety issues continue to delay other plant estimates and create uncertainty for investors and taxpayers. Government involvement in plant development must be carefully considered as the more involved the government gets in nuclear plant development the more likely taxpayers will have to pay for failed ventures.

Uranium Prices are Fluctuating

The world's uranium sources are controlled by even fewer countries than control the world's oil sources.
The world's uranium sources are controlled by even fewer countries than control the world's oil sources.[13]

On the supply side, uranium production has been growing at a snail's pace, the major players have started locking up long term supply, and Russia and the U.S. have slowed down their refined uranium sales programs.[14][15] Uranium prices fell 40% from October 07 to March 09.[16][17] The global financial crisis is to blame - nuclear power plants represent huge capital investments, and demand for electricity is driven by business activity. With cheap credit a luxury of the past, raising billions of dollars for projects that won't start earning for at least six years has become very difficult.[18]

The world production of uranium in 2008 was approximately 114 million pounds of U3O8 while demand was 172 million pounds, 90% of which came from eight countries, which are, in order of greatest to least production[19] :

Every year since 1985, the world's consumption of uranium has been greater than its production.[20] In 2008, uranium producers met only 66% of worldwide demand. To help meet this shortfall, reprocessed uranium and plutonium from the dismantling of Russian and U.S. nuclear weapons has been used.[19][21] The World Nuclear Association estimates that uranium mining will need to increase by almost 300% in the next two decades.[21] The Australian Bureau of Agricultural and Resource Economics estimates that uranium prices will rise 22% from $46.4 in 2009 to $56.7 in 2010 due to the widening gap between uranium supply and demand.[22] NYMEX Uranium futures for December 2010 are in the $48.50 range.

Uncertain Supply of Nuclear Weapons for Uranium Production

The U.S. and Russia are both involved in the Megatons to Megawatts Program which decommissions nuclear warheads and recycles the bomb-grade uranium into fuel-grade uranium. The agreement between the two countries expires in 2013, and the program is not guaranteed to be continued.[23] If the program is discontinued, it would restrict the supply of uranium and drive up uranium prices. If the agreement is renewed, still there is a limited supply of Cold War-era nuclear weapons and eventually this significant source of uranium will disappear.

China and India's Uranium Demand

In 2009 Indian reactor demand for uranium was estimated at about 3 million pounds and is expected to rise to as much as 10 million pounds in 15 years.[24] India has 17 reactors operating and six under construction, and another 23 reactors are expected to come on line in the next eight years. China has 11 reactors operating, 16 under construction and 35 new plants expected to come on line within the next eight years. China's uranium demand is expected to grow 4-6 times by 2020, as the country increases its annual installed nuclear power capacity to 40 million kilowatts from 9 million present.[25] The sharp increase in the demand for uranium from India and China will continue to raise the price of uranium.

Environmental concerns

Comparison of Carbon Footprints for Various Energy Sources
Comparison of Carbon Footprints for Various Energy Sources[26]

Environmentalists have had a love/hate relationship with nuclear power plants, and vice versa. When nuclear energy was first deployed in the U.S., numerous concerns were raised about the environmental ramifications of nuclear power, especially where and how to store used nuclear fuel and the environmental impact of nuclear plants. More recently, some environmentalists have endorsed nuclear power as a clean alternative to coal and natural gas for electricity generation, comparable to other forms of renewable energy. In the U.S., there is a long-running debate over whether to store nuclear waste in the Yucca Mountains. As solutions emerge to the storage problem in particular, and environmental concerns more broadly, this will propel further adoption of nuclear energy. In addition, as the costs of carbon emissions increase, this will drive nuclear energy adoption as an alternative.

Safety concerns

While the Three Mile Island accident radiation never breached the containment building, Chernobyl was an unmitigated disaster, killing several and indirectly harming tens of thousands nearby residents. The hangover from these events has been long and painful. The safety debate around nuclear centers around two risks— (1) the risk of a major accident and (2) the risk of long-term exposure to nuclear radiation. In the case of the former, significant advances in plant design offer several alternatives to the faulty Soviet era RBMK design used at Chernobyl, nearly all of which feature “passive fail safe” designs, which means that in the event of system failure for whatever reason, the reactor shuts down automatically, containing the radiation from all nuclear reactions and safely dissipating any excess heat. Debate continues regarding long-term exposure to nuclear radiation, though the weight of scientific evidence seems to suggest that there are no deleterious effects of long-term proximity to nuclear power plants of modern design. To the extent these safety concerns are mitigated and/or resolved via public debate, this would be favorable to the nuclear power industry. In a post 9/11 world, many have also voiced concerns over the ability to protect nuclear power plants from terrorist attacks, hence, the need for passive fail safe designs.

Public Opinion Is Split Over Nuclear Power

The Not-In-My-Backyard (NIMBY) Effect explains the idea that people generally support the use of nuclear power, as long as the generator isn't near where they live. Public opinion is still split over whether nuclear is a safe and viable option:

  • From 2005 to 2008, the number of people that support the use of nuclear energy in the EU increased from 37% to 44%, while the number of detractors fell from 55% to 45%.[27]
  • 80% of Americans believe nuclear power will be an important source of power in the future.[28]
  • Contradictorily, in 2007, 50% of Americans were in favor of expanding the use of nuclear energy, while 46% were against.[29]

Cost of fossil fuels, especially coal and natural gas

Nuclear energy is similar to renewable energy in that its viability is driven largely by the cost of its competitors. The fortunes of nuclear are therefore inverse to the fortunes of coal and natural gas (though the increase in demand for energy around the world will likely lift all boats in the near term). A carbon tax of $25-$50 per ton, however, would make nuclear power competitive with coal.[30]

Government regulations

Because of the concerns outlined above, nuclear energy, even more than its fossil fuel brethren, is subject to a web of government regulations, permits, and policies. As a result, the economic viability of nuclear, and the very feasibility of commissioning new plants, is heavily dependent on government regulations. Witness, for example, the back-and-forth in the UK regarding new nuclear power plants.

Since the 1979 accident at Three Mile Island, there have been ZERO new nuclear power plants built in the U.S. But now that folks have finally figured out there's an energy crisis, are nuclear power plants about to start popping up in our backyards? Not exactly, at least according to a recent ChangeWave survey of 473 energy industry professionals. The survey done in March 2008, showed that political resistance to Nuclear energy is one of the biggest barriers to Nuclear Energy

 Image: Nuclear tech alert.jpg

Companies who stand to benefit

 Uranium prices over time
Uranium prices over time

Exelon is the largest nuclear power plant operator in the U.S., and owns a portion of 17 plants around the country, concentrated in Pennsylvania and Illinois. It has benefited and will continue to benefit from a cost advantage in electricity generation as a result of the low cost of nuclear generation relative to generation from natural gas or coal at today’s market prices. The relative attractiveness of Electric utilities is often determined by the degree to which government regulators allow them to charge fair market prices for their electricity— for example, Exelon’s recent planned rate increase in Chicago was drastically reduced by the Illinois regulator.

Entergy, based in New Orleans, is the second largest nuclear operator in the country. Entergy benefits from the same trends as Exelon, as well as the development capital flooding into the region as a result of Hurricane Katrina, though it remains exposed to another particularly vicious hurricane season.

Additional publicly listed nuclear power plant operators include Duke Energy Corporation (DUK), Dominion Resources, FPL Group, Constellation Energy Group, NRG Energy, Scana, and Southern Company. Four of these companies - NRG, Scana, Southern, and Constellation - are expected to be the beneficiaries of the Department of Energy's June 2009 announcement that it will offer $18.5 billion in loan guarantees on new nuclear projects.[31]

Cameco, which controls 17% of the world market for uranium, the main fuel for nuclear energy, will benefit tremendously from a boom in nuclear energy. Recently, prices for uranium have taken off as investors have realized that nuclear energy can fill the “renewable energy gap” and that enriched uranium, especially from secure sites Canada and other developed nations, will be required to fuel that nuclear energy.

General Electric, the leading provider of nuclear reactors (currently owns ~20% of market worldwide), will benefit from a boom in nuclear energy, as it continues to supply, maintain, and retool nuclear reactors at newly commissioned or re-commissioned plant. Of course, as a massive conglomerate, the nuclear business comprises a small portion of GE’s total revenues and profits.

Toshiba placed a $5.4 billion bet on nuclear energy by purchasing a majority 51% stake in Westinghouse in early 2006. The acquisition allows the company to offer pressurized water nuclear reactors, a more advanced technology it did not previously have, to complement its legacy boiling water reactors. Westinghouse had been the main contractor for 60% of pressurized water reactor plants in North America and signs seem to point to the U.S. building approximately 200 new nuclear plants over the next 20 years.

Areva is a French public multinational industrial conglomerate that deals in energy, especially nuclear power. They are currently building their first EPR-reactor in Finland.

Companies who stand to lose

Suzlon - Though it’s unlikely in the near term, wind energy companies and suppliers, of which Suzlon is one of the largest, actually compete with nuclear power plants. Wind especially is a direct competitor to nuclear, as a result of the low carbon footprint and relatively high capital costs of both technologies. General Electric has hedged its bets here, offering both large-scale wind turbines and nuclear reactors.

Kinder Morgan - Another company that is at least indirectly competing with nuclear energy is Kinder Morgan, which controls vast natural gas pipeline assets throughout North America. These assets, custom built to transport natural gas cost effectively, would be in less demand, should nuclear energy significantly displace natural gas as a producer of electricity in the U.S.

References

  1. 1.0 1.1 1.2 1.3 1.4 1.5 European Nuclear Society: Nuclear power plants, world-wide
  2. Nuclear Power in the USA, World Nuclear Association, Accessed on January 5, 2010
  3. Montana Environmental Information Center
  4. Suzlon FY 07-08 Annual Report, Management Discussion and Analysis, p. 5
  5. Energy Information Administration
  6. Nuclear Power Generation, US Industry Report" IBISWorld, August 2008
  7. SeekingAlpha: Nuclear Power Poised for a Turnaround
  8. SeekingAlpha: Nuclear Power Poised for a Turnaround
  9. Blogging Stocks - China, India see nuclear energy as essential to electricity plan
  10. World Nuclear Association - Nuclear Power in China
  11. Wald, Matthew, "U.S. Supports New Nuclear Reactors in Georgia," nytimes.com, February 16, 2010
  12. Sheppard, Kate, "Obama's Nuclear Giveaway," MotherJones.com, February 4, 2010
  13. SeekingAlpha: Profiting from Peaceful Uranium Use
  14. StockInterview.com - U.S. Government May Sell ‘Very Small’ Amount of Uranium in 2007
  15. Mining Weekly - South Africa seen as pivotal source of uranium supply
  16. Mineweb - Uranium prices fall again as credit crunch bites
  17. UxC - Ux Price Indicators
  18. Mineweb - Uranium prices fall again as credit crunch bites
  19. 19.0 19.1 TradeTech - World Uranium Production & Requirements, Accessed on January 5, 2010
  20. About Uranium: World Market
  21. 21.0 21.1 CNN: "Nuclear power's white-hot metal"
  22. Uranium Demand Could Outstrip Supply For Three Years Straight (CCJ)
  23. Barron's: Saying Yes to Nukes with Cameco
  24. Bloomberg: Cameco Will Open Office in India as Uranium Demand May Triple
  25. China's uranium demand for nuclear power to rise 4-6 times by 2020
  26. First Solar Corporate Overview, March 1, 2010
  27. The Economist: "The critical issue of safety"
  28. The Economist: "The critical issue of safety"
  29. The Economist: "The critical issue of safety"
  30. WSJ: "The Case For and Against Nuclear Power"
  31. Wall Street Journal: U.S. Chooses Four Utilities to Revive Nuclear Industry
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