By Paul Brown, Climate News Network
This piece first appeared at Climate News Network.
LONDON—Nuclear power is fighting for its life in the US because the price of natural gas has plunged so low that it is struggling to compete.
This bleak assessment appears in the magazine Nuclear Energy Insider at a time when gas industry experts say that the price of gas may fall even lower in the US as more efficient ways to extract it from shale come on stream.
Although the Nuclear Energy Insider is supportive of the nuclear industry, the magazine says: “Nuclear is seen as yesterday’s power source, while natural gas is the energy of the here and now due to its low cost and domestic extraction.”
This is because it is cheaper to produce power from natural gas than nuclear even with a carbon tax, according to a recent study – although it points out that, in the long term, the price of gas may change.
The magazine describes how some nuclear plants have managed to reduce running costs, and therefore the price of electricity, by refueling more often and increasing efficiency. However, as a result of the Fukushima nuclear power plant accident that followed the March 2011 earthquake in Japan, there is limited scope for cutting costs because of safety and regulatory concerns.
Other ways of cutting costs include integrating nuclear stations with other power plants, and so sharing IT and management functions.
However, David Hess, director of capacity optimisation at the World Nuclear Association, says that while there is always scope for some improvements, “the fact is that US plants are very efficient now”.
In some US markets, which are highly regulated, nuclear power is protected, and the extra cost of producing electricity is passed on to consumers in their bills. In other states, where there are unregulated markets and where generators compete merely on price, “operators may be massively exposed”, the magazine says.
The US has the largest number of nuclear reactors of any country in the world, with 104 operating in the 65 commercial nuclear power plants in 31 states. They produce around 20% of American electricity, so the future role of nuclear will make a significant difference to US greenhouse gas emissions.
Recently, US emissions have gone down because many electricity producers have switched from coal power plants to cheaper gas. Using gas reduces by about a third the amount of carbon dioxide produced for the same amount of electric power.
However, turning off nuclear stations because they are no longer economic would have the opposite effect, and would cause a massive and politically embarrassing rise in US emissions. Some nuclear plants will certainly be unable to compete if gas prices continue to fall.
Steven Mueller, president and chief executive officer of Southwestern Energy, predicting that gas prices would continue to go down, said the cost of a well to produce gas by fracking has dropped by 14% in the last five years.
Speaking to the Oil & Gas Journal, Mueller said industry was still in the early stages of learning the best and cheapest way to exploit this resource. With unconventional gas the US “has a national treasure with long-term, low-price implications.” He did not believe that gas would be a short-term energy resource to be replaced by renewables.
The boom in American gas supplies is changing the world’s energy markets. Cheap coal no longer needed for America’s own electricity production is now exported to European power stations, and tanker supplies of Middle East gas once destined for the US have been diverted to Europe.
Whatever happens, the long hoped-for nuclear revival in the US now looks a remote possibility. If old nuclear power stations whose capital cost has long been written off cannot compete with gas, then new nuclear build has no chance.
The last holdouts for new nuclear stations still seem to be countries in other parts of the world with high energy prices and a reliance on imported fuel. Most of Europe has plumped for renewables as a better long-term bet, but the UK is still hoping to do a deal with French, Chinese and Japanese companies to build new nuclear stations.
The British Government has been in negotiation for more than a year with the French giant EDF to build two reactors, costing £14 billion, at Hinkley Point in Somerset. EDF, owned by the French Government, is demanding guaranteed electricity price subsidies for 35 years in order to take the risk on new build.
The price EDF is demanding would be double the existing price of electricity in the UK, and might not go down well with consumers who will have to foot the bill. Another stumbling block is that the subsidies will breach EU rules on competition and will be resisted by environment groups, and possibly by countries such as Germany that are phasing out nuclear in favour of renewables. An announcement on a deal is expected within days.
Free Grunge Textures - www.freestock.ca