Between a rock and a hard place: How will US nuclear power compete with cheap shale gas?


Publish date: February 19, 2013

Written by: Charles Digges

A recent decision by US giant Duke Energy to shutter instead of repair the Crystal River nuclear plant in Florida could signal the shutdown of other older reactors as low shale gas prices undercut the cost of atomic energy plants, making investment in their upkeep bad economics.

Several energy analysts postulate many more aged reactors could follow, unable to compete with cheaper natural gas installations.

But the environmental questions this entails are many: How will spreading shale gas recovery affect the environment? Where will orphaned US coal supplies go?

“What we are experiencing is that the coal mining industry is ramping up exports to Europe and even Asia,” said Bellona advisor Svend Søyland. “Several new export terminals are on the drawing board.”

From the touchy nuclear angle, can the US Government afford a raft of reactor decommissionings? And where will the 64,500 tons of spent nuclear fuel the US has already accrued be stored long-term – a question no country on earth has been able to answer? 

Environmentally, many will enthusiastically greet nuclear shutdowns, despite the unresolved challenge of a permanent repository for nuclear waste.

But that enthusiasm is somewhat dampened when the booming shale gas industry is the alternative. The methane leaks at these gas sources are not yet properly assessed and the oil and gas industry thus far have been allowed to operate them with weak regulation decided on a state by state basis.

These methane leaks could outweigh the climate benefit of naural gas. Methane is a very potent greenhouse gas that is far more effective than CO2 at trapping heat. The same mass of methane would trap 72 times more heat than carbon dioxide over 20 years.

Shale gas a transitional energy source at best

“The US shale gas revolution on one hand is good because it replaces coal power and old nuclear plants,” said Nils Bøhmer, Bellona’s general manager and nuclear physicist. “But it should also put a big emphasis on methane emissions associated with the production of Shale Gas.”

Bøhmer said Germany was managing a total phase out by 2022 of nuclear power by concentrating on the development of renewable energy sources.

“Shale gas cannot be an end goal in itself,” said Bøhmer. “The US must focus on the development of renewable energy lest it find itself far behind the rest of the world should shale gas demand spike, making it a no longer economically viable alternative.”

Bellona Advisor Keither Whiriskey added that, “Rapidly increasing demand for shale gas will quickly erode present cost advantage.”

Repair costs versus gas plant construction

At Crystal River’s reactor, which has been and undergoing repairs since 2009, Duke Energy produced a report saying it was pointless to undertake a $3 billion, 8-year repair job to seal cracks in the reactor’s containment building. By comparison, the report said it would take about $1 billion and three years to build a similar-sized gas fired plant.

Extend or extinguish?

As more and more US reactors reach their 40-year-lifespans – with many of these operating on extension – the question of shutdown versus undertaking costly and potentially unsafe upgrades becomes even more difficult.

The average cost of building a nuclear power plant averages between $4 billion and $10 billion – owing to inevitable delays, new technological developments and regulatory compliance, said Bellona’s general manager and nuclear physicist Nils Bøhmer. Finland’s Olkiluoto 3 European Pressurized Reactor is a case in point.

Yet, Whiriskey noted that, “when we take into consideration older plants, the costs are long sunk.”

But he also added that these profits don’t take into account decommissioning costs – which may make the US Government wary of endorsing too many shutdowns.

This in itself could lead to a dicey situation.

The US Nuclear Regulatory Commission (NRC) typically licenses reactors for 40 years of use. If reactors are still operation at the end of that cycle, the NRC can extend their operations for more 20 years – an often-dangerous practice.

At the moment, over half of US reactors have operated for 30 to 39 years. The NRC has handed out 62 extensions, and 20 are pending, according to data from the Nuclear Energy Institute.

So, where do you spend the money – on costly upgrades to reactors that cannot be guaranteed as sound, or on cheap gas, which cannot be guaranteed to be climate friendly unless combined with extensive deployment of carbon capture and storage technology?

Gas also eclipsing coal

When gas prices sagged in 2012, power companies saw the advantage of avoiding upgrades to old coal fired plants to make them compliant with stricter federal regulations that allowed the US Environmental Protection Agency to police CO2 a pollutant.

Since 2009, utilities have said they will shut down more than 40,000 MW of coal-fired capacity. The growing cost of electricity produced by nuclear power plants means they are likely next.

Plants that could be on the chopping block

Though most utilities contacted refused to comment on the future of their nuclear fleets, UBS energy analyst Julien Dumoulin-Smith ticked off a number of plants whose futures are grim, he told Reuters.

Dominion Resources has already announced will close its Kewaunee reactor in Wisconsin next year as shale gas eclipses it.

Dumoulin-Smith said to anticipate the aged and controversial Vermont Yankee, Illinois’ Clinton plant and  New York’s Ginna plant to lose the battle against shale gas.

The total capacity of those four units, plus Kewaunee and Crystal River, is about 4,500 MW, or 4 percent of the nation’s 20 percent nuclear capacity.

Additionally, California’s San Onofre nuclear station – where both reactors have been shut since January 2012 – may not be worth the repairs.

New nuclear reactors under construction at existing plants in Georgia, South Carolina and Tennessee, would off-set the energy loss from these older plants – but for how much and, given the stutter-step nuclear construction habit, when?

Advantages and disadvantages of shale gas reliance

Shale gas and hydraulic fracturing, or “fracking,” will doubtless be one of the hottest environmental debates of President Barack Obama’s second term.

In the eyes of many environmentalists, the young technology developed by Halliburton early in the century, is dangerous to underground water, releases methane – the most harmful of the greenhouse gases – and creates seismically dangerous conditions.

Søyland also said that land owners where fracking occurs see short term financial benefits by reaping millions in royalties.  Unfortunately, local authorities are not prepared to put in place substantial oversight and regulation. Few, if any, are setting aside tax income to meet the social and environmental challenges caused by this new gold rush.  

Fracking also readies the US coal supply for export to Europe and particularly Southeast Asia as more gas powered facilities pop up in the US. This, said Søyland, simply displaces US CO2 emissions.

”The US can proudly point to CO2 reductions that it has just sent around the world to be emitted elsewhere,” he said. “This is of no help to the global climate.”

Svend Søyland contributed to this report.