A top level summit draws a crowd, but did it accomplish anything?

Sec Chu at Nuclear Summit 20101207The period prior to the start of a new Congress, following a mid-term election, is ideal for interest groups of all persuasions to hold “summits” to get their ideas into the legislative mix.

So it was for the nuclear energy industry which gathered under the umbrella of the Third Way, a think tank, and the Idaho National Laboratory, a Department of Energy nuclear energy R&D center. (photo of Sec. Chu at the meeting by Third Way)

The difference between this conference and many others also taking place this month is the “A list” members of the panelists including White House energy advisor Carol Browner, Energy Secretary Steven Chu, General Electric energy executive Jack Fuller, and Exelon Chief Nuclear Officer Chip Pardee.

What the group wanted to do is to figure out, among other things, is how to re-start the nuclear renaissance in the U.S. It has taken some lumps lately signified by the Constellation Energy Group (NYSE:CEG) walking away from loan guarantee negotiations with the government for the Calvert Cliffs III reactor, a 1,600 MW power station that would have broken ground in 2012.

Also, legislation put forward by the Obama administration to put a price on carbon failed in 2010 leaving the door open to robust investment in new natural gas powered electricity generation. A carbon tax, with a high enough number, would have been an action forcing mechanism to shift investment from fossil to nuclear power plants.

With the price of gas hovering just above $4/MMBtu, publically traded utilities are flocking to this form of capital investment for relatively quick returns compared to the timeframe for bringing new reactors online. At some point in the future, gas prices will go up. Then rate payers will regret not having taken the longer term view by investing in nuclear energy.

Chu’s idea for a clean energy standard

cleanenergy Having lost key cards to play in setting energy policy, the government now wants to propose a new “clean energy” standard that would require half the nation’s electricity be generated from low-or-no carbon sources by 2050. The standard would include nuclear energy in the mix.

Energy Secretary Chu said the mechanism would provide “certainty” that there would be a market for electricity generated by nuclear reactors. He added that the standard should start with a requirement that by 2025, 25% of all electricity generated in the U.S. should come from low-or-no carbon energy sources.

Technical idealism meets business realities

This is a big idea. Proving it will be a tough sell in the world of electricity rates, and calculations of returns on capital assets. It opens the door to all kinds of gamesmanship both at the federal level and with state public utility commissions. Plus, investors in solar and wind energy projects, who are important parts of this administration’s political base, will work the various avenues in Congress to limit or exclude nuclear energy from the mix.

roi graphicThe nuclear energy utilities are not in an enviable position because all of them have multiple bets on fuel types including coal, gas, as well as renewable energy investments. To say these utilities are “conflicted” really means it gives everyone a new headache when it comes to figuring out how to allocate “clean” v. not so clean energy types.

The idea of arm wrestling with the market with a new clean energy standard doesn’t have the same compelling power as a carbon tax, but absent one, it may be all the White House has got to work with for the next two years.

White House energy advisor Carol Browner said a carbon tax “would be hugely beneficial to this industry (nuclear). She discounted any chance of passage of legislation by the incoming Congress, which will be controlled by republicans in the House who oppose it.

Is anyone paying attention?

Secretary Chu deserves credit for trying to come up with a new means of getting past market mechanisms as a basis for building new nuclear reactors. His ideas may be lost in the media mix as the press focused on the lame duck Congress with its focus on tax cuts.

One would think that such a gathering would be catnip for the media. The New York Times reported, in one of its blogs, that the meeting was long on high level talk about the obvious and short on innovative solutions . . .“there were few truly new ideas or even new laments.”

Other media coverage included financial and national wire services and political blogs and trade press. There was no coverage this morning in the Wall Street Journal. The Washington Post used AP’s wire report.

Time to think about the longer term

grossenbacherJohn Grossenbacher, Director of the Idaho lab, (right), who facilitated discussions during the summit, spoke with reporters afterwards. He looked beyond the headlines and praised Sec. Chu for focusing on three key areas.

  • Developing public/private partnerships to build reactors
  • Finding ways to assure financing and certainty in the marketplace for utilities and investors
  • Rebuilding America’s nuclear energy infrastructure to manufacture components

Grossenbacher noted that, “if you just let market forces drive energy policy, you will get natural gas plants being built as long as it is plentiful and cheap, but it may not always be that way.”

He said that the nation needs to look beyond market mechanisms to address two key goals (1) energy security, and (2) environmental stewardship.

However, he said in response to a reporter’s question that the term “clean energy standard is a headline grabber,” even if it’s legislative form is still to be defined by a working group that will convene this winter.

One of the outcomes of the summit will be a series of working groups to develop legislative and regulatory proposals. Their reports are due by mid-2011.

In the area of public/private partnerships, Grossenbacher said the industry must find ways to address risks, and boost certainty for construction of new reactors, in three broad areas – licensing, financing, and technology.

He added that it is “unreasonable” for people to expect that Washington will be able to “develop a grand energy strategy.

He agreed with a statement by GE’s Jack Fuller that for the U.S. to again participate in global nuclear energy markets, the U.S. must first prove the viability of its domestic market with successful construction of new reactors. You can’t export your reactors to other countries if no one is building them at home.

SMRs must prove their economics work

small reactors With regard to small modular reactors, over which there is a lot of buzz including their potential for exports, Grossbacher said that the vendors of these emerging technologies must prove the economic viability of the smaller designs.

“There are reasons people built large reactors and they have to do with economies of scale. We have to see if SMRs built in factory settings will provide the same advantages to utilities.”

Thinking about the next 100 years

Grossenbacher, who had a long, distinguished career in the nuclear navy before taking his civilian post in Idaho in 2005, knows a thing or two about building reactors. He’s been saying for some time that to think usefully about nuclear energy, you have to work on a timeline of 50-100 years. He emphasized this point again in his remarks to reporters.

He’s right. In our society, with its emphasis on instant gratification and political quick fixes, we cannot think about nuclear energy with the paradigm of “add water and microwave” to find a solution. Hopefully, the nuclear summit will develop some legs to take the nation on the long journey to clean energy.