Patrick Hughes, Senior Director, Government Relations and Strategic Initiatives, NEMA
Nuclear power has been in the news recently with the bankruptcy announcement of the Westinghouse Electricity Company threatening the limited number of nuclear reactors currently under development in the United States. This post will examine a few of the trends in the U.S. nuclear industry to help explain how we got to this point and where the industry may be heading.
Snapshot of the U.S. Nuclear Industry
The bulk of the United States’ 99 nuclear reactors were built in the 1970s and 1980s. Initially licensed for 40 years, nuclear plants require periodic recertification. Of the 99 reactors, 74 have received 20-year operating extensions, and some of those will eventually apply for subsequent license renewals to allow them to extend their operating life past 60 years.
Nuclear reactors have generated about 19–20% of U.S. electricity since the late 1980s. No new large nuclear facility has been built in the United States since 1996 (Watts Bar Nuclear Generating Station in Tennessee), although existing plants have added reactors as recently as 2016 (Watts Bar Unit 2, which was the first new reactor to begin operating in 20 years).
There are currently four reactors under development in South Carolina and Georgia at two existing sites. Both are facing construction delays and combined cost overruns of around $17 billion, and the recent Westinghouse bankruptcy could mean further delays or even abandonment of the projects. Five reactors have shut down over the past five years, and the Nuclear Energy Institute notes that an additional 15–20 reactors are at risk of closing for economic reasons.
Causes of Nuclear’s Woes
Nuclear power plants have very high up-front capital costs (a study by the University of Chicago estimates that building a large nuclear reactor costs about $11.7 billion dollars, as compared to $3–$5.5 billion for a small reactor, $2.4 billion for a coal plant, and $1.1 billion for a natural gas-fueled plant), although once built the electricity generated has a relatively low marginal cost per watt-hour.
In order to recover the capital expenditure, advanced nuclear power plants need to sell their power through power purchase agreements (PPAs) or in wholesale electricity markets. PPAs offer long-term price certainty and are common in the South, where all of the reactors currently under development are located. However, in parts of the country like the Midwest and Northeast where nuclear competes in markets with other forms of electricity generation, nuclear plants have been stressed to the point of closure by low-cost wind and natural gas.
In the Midwest, for example, the price of electricity in wholesale markets often drops close to or below $0, indicating an overabundance of electricity supply that is good for consumers but results in lost revenue for nuclear generators. New York and Illinois have both offered nuclear facilities in their states additional subsidies to keep delivering zero-carbon electricity despite the challenges posed by wholesale electricity markets (although these incentives are currently being challenged in court and have drawn complaints to the Federal Energy Regulatory Commission).
The primary reason nuclear is struggling is that the price of natural gas has dropped by about 80%, from over $12/MMBtu in 2008 to less than $3/MMBtu in 2016, due to increased production facilitated by hydraulic fracturing. Also contributing to nuclear’s woes is the fact that wind, solar, energy storage, and energy-efficient products like LED lighting have all come down in price dramatically over the past decade. Since 2008, onshore wind costs have fallen by 41%, distributed solar by 54%, utility-scale solar by 64%, electricity-storing batteries by 73%, and LED light bulbs by 94%.
|U.S. Capacity-Weighted Average Levelized Cost of Electricity|
|Plant Type||Total System LCOE ($/MWh)|
|Natural gas combined cycle||$56.40|
|Natural gas combustion turbine||$105.40|
|Small modular reactor nuclear||$61.00|
Nuclear advocates emphasize the carbon-free aspect of nuclear power, and under the Obama Administration’s Clean Power Plan, some were optimistic about the future of nuclear power. However, on March 28, 2017, President Trump signed an executive order beginning the process of unwinding the Clean Power Plan. It is highly unlikely that the Trump administration or Congress will propose a price on carbon in the near term. While not the coup de grâce for nuclear, this is yet another economic punch to an industry on the ropes.
Small Modular Reactors Offer Potential Opportunity
Citing the economic problems facing large nuclear facilities, some hope that small modular reactors (SMRs) may be the solution. SMRs are generally defined as nuclear reactors with a capacity below 300 megawatts. On March 15, 2017, the U.S. Nuclear Regulatory Commission (NRC) accepted the first application to review the design of an SMR; however, the NRC review process is expected to take nearly four years. Developers of SMRs promise designs that can be manufactured in factories and shipped to the installation sites, reducing costs. SMR proponents note that they have learned how to improve safety and cost from the large nuclear industry, as well as from nuclear-fueled ships and submarines.
Even if SMR developers are able to deliver on the expected cost savings and safety enhancements, they will still face the same economic pressure facing large nuclear reactors today. With an expected best-case scenario levelized cost of electricity of $61/megawatt-hour, SMRs will be less expensive than large-scale nuclear power but more expensive than the most frequently built forms of electricity generation capacity: natural gas, wind, and solar.
Storing Nuclear Waste Remains an Unresolved Challenge
Leaving aside the economic challenges in operating and building nuclear power in the United States, long-term storage of spent nuclear fuel remains an unresolved issue. Congress passed the Nuclear Waste Policy Act of 1982 to establish a geologic repository for spent nuclear fuel, and selected Yucca Mountain in Nevada in 1987. Today, there is still no permanent storage site for the more than 74,000 metric tons of nuclear waste from power generation, naval applications, and nuclear weapons stored in temporary facilities. Yucca Mountain would have a capacity of 70,000 metric tons.
President Trump included funding for Yucca Mountain in his proposed budget, and on March 27, 2017, Energy Secretary Rick Perry visited the site. This indicates that the project has support from the Trump administration, despite opposition from members of Congress and local policymakers.
Future of U.S. Nuclear Industry Uncertain
When taking into account the economic problems facing nuclear facilities and the dramatic cost reductions for electricity-generating resources like natural gas, wind, and solar, the outlook for the U.S. nuclear industry appears bleak. A price on carbon emissions would help the industry, but the likelihood of that happening during the Trump administration is very low (and the price on carbon would also bolster nuclear’s low- and no-carbon competitors).
If nuclear is to continue to provide a significant share of the United States’ electricity, it will need economic subsidies from states (like Illinois and New York), the federal government, and electricity ratepayers. Technology advancements like small modular reactors may incrementally improve the relative economic situation of nuclear, but they are not likely to usher in a “nuclear renaissance” as some have hoped for.
Adding to all of this the fact that the long-term nuclear storage issue remains unresolved, there is little wonder that when asked about South Korean electric company Kepco’s decision to decline to purchase the now-bankrupt Westinghouse, Suh Kyun-ryul, professor of atomic engineering at Seoul National University, said, “Global interest in building new reactors is decreasing, especially in advanced countries, and we don’t know how much further losses Westinghouse would incur. Korea is hungry for more overseas work but it already has its own competitive technology. There are few incentives for Kepco to buy Westinghouse, given the huge financial risks involved.”
 All data from https://www.eia.gov/outlooks/aeo/pdf/electricity_generation.pdf unless otherwise noted