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Released August 14, 2017 | SUGAR LAND
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Researched by Industrial Info Resources (Sugar Land, Texas)--Two recent developments indicate the severity of the challenges facing the U.S. nuclear power sector: Construction has been halted on SCANA Corporation's (NYSE:SCG) 2,200-megawatt (MW) addition to the Virgil C. Summer Power Station, and Georgia Power, a subsidiary of Southern Company (NYSE:SO), has announced that completion of the two-unit, 2,234-MW addition at the Alvin W. Vogtle Nuclear Power Station could cost as much as $25 billion.
This article is the first of a two-part series on the state of the U.S. nuclear power industry.
The nuclear sector has faced at least three major challenges for more than a decade. First, nuclear construction and operational costs have been rising: In mid-2002, operational costs were roughly $26 to $29 per megawatt-hour (MW/h) of generation. In 2005, these costs jumped sharply by about $8 to $10 per MW/h; they have since stayed in that range, averaging about $36 to $41 dollars per MW/h.
Many factors play into these higher costs: the number of units an operator has; the number of nuclear power plants in its fleet; the fuel costs, capital costs, and operational and maintenance budget that is factored into each MW/h of generation. But in the same time frame, prices in the wholesale market for nuclear generation have come down, from about $45 to $80 per MW/h in 2004-2005, to about $30 to $42 per MW/h in 2016-2017. These prices are not expected to change for at least four to five years, indicating a true loss in profits for the nuclear generation sector.
A second factor would be the rapidly growing role of natural gas. In 2006-2007, natural gas prices stood at between $8 and $10 per MMBtu; by 2008-2009, following a pickup in production, prices had plummeted to between $2 and $4 per MMBtu, resulting in a surge in demand. Natural gas also is more competitive than nuclear in its operational costs, which range from $19 to $28 per MW/h.
The nuclear sector's third major challenge is one shared by every fuel sector: almost a decade of flat demand in the U.S. for electricity. Following the fallout from the 2008 economic crisis, the U.S. has seen only a slow recovery in commercial and industrial construction, although the Oil & Gas and Chemical Processing industries have seen recent booms. The Industrial Manufacturing and Alternative Fuels industries have been among the slowest to recover.
Coupled with the push for more energy efficiency, smarter technology and the development of distributive generation assets, the U.S. demand for electricity has growth only .05% to 1.5% per year over the past decade. Recent case studies by the U.S. Energy Information Administration (EIA) have shown that the country probably will not see an increase in demand above 5% through 2040.
Other factors include the Obama administration's support for renewable energy. The production tax credit for wind-generated power, for instance, resulted in a difference of as much as $32 per MWh with nuclear. This likely will stay in place, in some form, until after 2020. The whirlwind of concerns following Japan's Fukushima disaster in 2011, as well as mechanical failures that led to the closures of the San Onofre and Crystal River 3 plants in the U.S., also have contributed to the challenging environment for nuclear generation.
But even with the closure of about 5 gigawatts of nuclear generation since 2013--and the possibility of twice as much being closed by 2025--there is hope for the sector. Facilities like the James A. Fitzpatrick, Robert E. Ginna, Clinton and Quadcities nuclear power stations have been saved by revised legislation in Illinois and New York.
This legislation classified nuclear generation as a "clean" fuel type, putting it back in the mix for the two states. Similar measures are being considered in Ohio, New Jersey, Pennsylvania and Connecticut that would keep plants open and operational for years to come.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
This article is the first of a two-part series on the state of the U.S. nuclear power industry.
The nuclear sector has faced at least three major challenges for more than a decade. First, nuclear construction and operational costs have been rising: In mid-2002, operational costs were roughly $26 to $29 per megawatt-hour (MW/h) of generation. In 2005, these costs jumped sharply by about $8 to $10 per MW/h; they have since stayed in that range, averaging about $36 to $41 dollars per MW/h.
Many factors play into these higher costs: the number of units an operator has; the number of nuclear power plants in its fleet; the fuel costs, capital costs, and operational and maintenance budget that is factored into each MW/h of generation. But in the same time frame, prices in the wholesale market for nuclear generation have come down, from about $45 to $80 per MW/h in 2004-2005, to about $30 to $42 per MW/h in 2016-2017. These prices are not expected to change for at least four to five years, indicating a true loss in profits for the nuclear generation sector.
A second factor would be the rapidly growing role of natural gas. In 2006-2007, natural gas prices stood at between $8 and $10 per MMBtu; by 2008-2009, following a pickup in production, prices had plummeted to between $2 and $4 per MMBtu, resulting in a surge in demand. Natural gas also is more competitive than nuclear in its operational costs, which range from $19 to $28 per MW/h.
The nuclear sector's third major challenge is one shared by every fuel sector: almost a decade of flat demand in the U.S. for electricity. Following the fallout from the 2008 economic crisis, the U.S. has seen only a slow recovery in commercial and industrial construction, although the Oil & Gas and Chemical Processing industries have seen recent booms. The Industrial Manufacturing and Alternative Fuels industries have been among the slowest to recover.
Coupled with the push for more energy efficiency, smarter technology and the development of distributive generation assets, the U.S. demand for electricity has growth only .05% to 1.5% per year over the past decade. Recent case studies by the U.S. Energy Information Administration (EIA) have shown that the country probably will not see an increase in demand above 5% through 2040.
Other factors include the Obama administration's support for renewable energy. The production tax credit for wind-generated power, for instance, resulted in a difference of as much as $32 per MWh with nuclear. This likely will stay in place, in some form, until after 2020. The whirlwind of concerns following Japan's Fukushima disaster in 2011, as well as mechanical failures that led to the closures of the San Onofre and Crystal River 3 plants in the U.S., also have contributed to the challenging environment for nuclear generation.
But even with the closure of about 5 gigawatts of nuclear generation since 2013--and the possibility of twice as much being closed by 2025--there is hope for the sector. Facilities like the James A. Fitzpatrick, Robert E. Ginna, Clinton and Quadcities nuclear power stations have been saved by revised legislation in Illinois and New York.
This legislation classified nuclear generation as a "clean" fuel type, putting it back in the mix for the two states. Similar measures are being considered in Ohio, New Jersey, Pennsylvania and Connecticut that would keep plants open and operational for years to come.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
