EXELON’S ROWE SEES ‘DECADE OR TWO’ SLIDE IN U.S. RENAISSANCE
By Steve HedgesJohn Rowe, the chief executive of U.S. nuclear heavyweight Exelon Corporation, has gone public with a blanket conclusion that natural gas prices are going to make building new nuclear power reactors difficult. As long as gas prices stay low, he told Bloomberg in an interview published on Friday, “you can’t economically build a merchant nuclear plant."
The Bloomberg interview highlights Rowe’s bottomline market thesis that — as long as low natural gas prices persist — new U.S. nuclear construction will be postponed by a "decade, maybe two."
Rowe isn’t the first to note that natural gas prices could negatively impact the renewal of nuclear energy in the U.S., which is lagging behind Europe and Asia in the construction of new nuclear power reactors.
What’s striking, though, is that Exelon has 17 nuclear reactors at 10 power stations, which comprise 20% of the U.S. commercial nuclear fleet. Merchant plants, which sell electricity wholesale, are also in a different class than those reactors run by utilities with a dedicated customer base.
Rowe’s take is interesting, but it doesn’t tell the whole story. A recent set of Standard and Poors reports on the cost of nuclear power plant construction found that, in the U.S., the cost of building all plants — coal, gas, wind and nuclear — has risen dramatically. S&P cites an IHS Cambridge Energy Research Associates’ index of costs, and notes that, in the U.S., a power plant that cost $10 billion to build in 2000 would cost $21.5 billion today. Base costs in the U.S., the report states, “have grown 20% faster in the U.S compared with Europe over the past decade.”Why the difference between the U.S. and Europe? When it comes to nuclear, S&P states that, “A steady stream of reactors established a relatively cheap supply chain and skilled labor force in Europe and Asia.”
Not so in the U.S., the report states, where a virtual moratorium on nuclear reactor construction has diminished an important skilled labor pool.
“Amid serious doubts over the future of the U.S. nuclear industry during the 1980s, the pool of nuclear construction managers and specialized workers dried up and remains shallow today,” S&P reports. “Several specialized skills (such as highquality welding) that are unique to the construction of nuclear power plants are now hard to come by in the U.S. We expect some specialists to transfer from France, Japan, and other nations to provide expertise and increase the workforce. However, these countries have substantial building programs of their own and may not be able to export experienced manpower.
“The dearth of experienced nuclear engineers and construction workers is a key factor that also increases costs.”
Rowe’s position aside, perhaps the bigger threat to the Nuclear renaissance in the U.S. isn’t the costs of other forms of energy, but the cost of not doing anything.
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