Is Cheap Gas Killing Nuclear Power?

Courtesy: Exelon

It has not been a good 2013 for nuclear power.

Only six months in, the U.S. nuclear fleet has had one of its worst years ever, arguably worse than 2011, with the impact of the Fukushima Daiichi disaster in Japan. Whatever damage the nuclear industry suffered in public relations that year, no U.S. reactors shut down as they did in Japan and Germany. You would need to go back to 1979 and the Three Mile Island accident to find a larger reversal of fortune.

On January 1, the U.S. nuclear fleet numbered 104 units. That has now fallen to 100, the biggest contraction ever in one year (which is, again, only half over). Granted, two of those plants, Crystal River in Florida and San Onofre in California, were on life support when the year began, and the decisions of their owners, Duke Energy and Southern California Edison, to pull their respective plugs, came as little surprise to industry observers. In both cases, the utilities concluded it made more economic sense to retire the plants rather than repair them.

The fourth shuttered reactor, the Kewaunee plant in Wisconsin, was shut down in May with 20 years left on its operating license after owner Dominion was unable to find a buyer. The announcement blamed market conditions stemming from low natural gas prices, which made the merchant plant a money loser.

And those are only the highlights (or lowlights, if you prefer). Consider what else has happened in just the past two months:

Duke announced in May that it would suspend its plans to add two units to the Shearon Harris nuclear plant in North Carolina, saying the additional capacity was no longer needed under current forecasts.In early June, MidAmerican Energy scuttled plans for a reactor in Iowa that had been envisioned as a lead site for small modular designs, saying it was too soon to proceed when no such designs have been approved.A week later, Exelon cancelled what had been an already deferred 335 MW worth of uprates for four of its reactors, the two-unit Limerick plant in Pennsylvania and two units at LaSalle in Illinois. The reason? “Market conditions,” said the release, again.A week after that, the Tennessee Valley Authority announced that it was once again mothballing its on-again-off-again Bellefonte project in Alabama, saying it needed to focus on getting the also long-delayed Watts Bar Unit 2 completed.

If you plug a search for “natural gas nuclear power” into Google News, you get a cavalcade of headlines like “How Fracking Killed Nuclear Power,” “Thanks to Cheap Natural Gas, America’s Nuclear Renaissance is on Hold,” “Atomic Power’s Green Light or Red Flag,” and “Nuclear Plant Shutdown to Increase California’s Reliance on Natural Gas.”

It’s not hard to see how we got here. In 2008, when the “nuclear renaissance” was in full upswing and utilities filed 12 applications for new plants with the Nuclear Regulatory Commission (NRC), the price of gas for electric power spiked up to $12/MMBtu in June. The shale boom was still over the horizon, and the U.S. Energy Information Administration projected that by 2013, gas prices for electric power would average $6 and the U.S. would be importing 2 Tcf of liquefied natural gas. On paper at least, quite bullish for nuclear.

Obviously, a lot of projections and expectations five years ago were wrong, embarrassingly so in some cases. Gas under $4 changes a lot of economics.

To be sure, most nuclear industry veterans shrug these events off as short-term concerns—not without some justification. Shale or not, gas prices have always been volatile because of the highly elastic nature of the industry. Low prices increase usage but cut production. Shrinking supplies boost prices and production, but cut usage, sending supplies back up and prices back down. And so on. Nuclear, at least in theory, is insulated from these gyrations.

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