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Greetings from London.
This week in energy, let’s go nuclear for a change.
And let’s start with the Obama administration’s plans for a new
generation of nuclear power. This time around things will be smaller and
ostensibly safer.
This new nuclear generation was given greater impetus on Tuesday when
the administration announced it would fund up to 50% of the cost of a
5-year project to design and commercialize small, modular reactors.
Who’s funding the other 50%? The project, which hopes to be operational
by 2022, will be led by Babcock & Wilcox energy technology company
of Charlotte, in partnership with the Tennessee Valley Authority and
Bechtel International. And of course, we can’t forget Bill Gates, a key
private investor.
What is unique about the project is the small modular reactor design.
They are about one-third the size of existing reactors. The technology
used has already been implemented by the US Navy, but not
commercialized. The administration is keen to point out that this new
nuclear generation represents lower upfront costs, higher safety
standards and greater flexibility—they can be used in small, remote
areas that cannot support traditional reactors.
They are assembled at a factory site and transported, ready to use, to their intended location.
In terms of costs, these small modular reactors have a $250 million
price tag, compared with as much as $9 billion for the typical large
reactors currently built in the US.
What will this new nuclear generation mean for consumers’ utility bills?
Well, no one can say with any certainty just yet. Whether these new
reactors would translate into cheaper electricity prices has not been
definitively demonstrated, though it is of course an ultimate goal.
Low natural gas prices are also a bit of a worry for the nuclear industry as a whole.
While nuclear is experiencing a bit of a revival in the US and coal
languishes in its death throes, globally, coal is enjoying gains. Some
1,200 new coal plants are in the works worldwide—the bulk of them in
China and India—as countries take advantage of cheap coal prices in the
US. But even Europe is importing increasing amounts of coal from the US.
US coal exports have reached a decade high.
For Europe, this is troubling. As the European public puts increasing
pressure on governments to abandon any dreams of fracking shale gas
reserves over environmental concerns, the energy gap is being filled in
by more polluting coal. This is the subject of our special investor
piece today. There is good news—and bad. While the European Parliament
has rejected a fracking ban proposal, this doesn’t mean we’re about to
see a shale gas free-for-all. Hurdles and pitfalls abound.
Another developing trend that has caught our eye is what appears to be
the declining attraction of Canada’s oil sands among US companies. A
recent report put out by Peters & Co. energy investment bank of
Calgary notes that there are some $17 billion in Canadian oil sands
assets up for sale right now. The logic holds that US companies are
trying to get out. The report points out that the $17 billion is the
equivalent of assets sold throughout the past decade.
Finally, amid all the hubbub of the International Energy Agency’s (IEA)
dramatic report about the US overtaking Saudi Arabia as the world’s
largest oil (oops, hydrocarbons) producer, we’ve missed something in
that figure-manipulating report: A largely unnoticed blurb about
California’s energy woes end with the information that the Monterrey
Formation in Southern California has 15.4 billion barrels of recoverable
crude oil. This puts Bakken (North Dakota) to shame. It’s four times
the volume of Bakken.
That's it for the news this week - i hope you enjoy our report below and have a great weekend.
James Stafford
Editor, Oilprice.com
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