Obama’s blind spot on nuclear energy

Wind and solar are not reliable energy sources for base load demand

It is becoming clear the Obama administration and the Democratic majority in Congress have a major blind spot when it comes to nuclear energy. The almost casual defeat of $50 billion additional loan guarantees for nuclear energy in the economic stimulus bill reveals a tepid and almost cold political calculus.

It tells the nuclear industry that the nuclear renaissance that started while President Bush was in office is seen as a political legacy of his administration. Obama’s political advisors seem to have gotten the legacy of GNEP mixed up with the commercial nuclear power industry which wanted little if anything to do with that government program. As politics as usual inside the beltway works out its priorities for energy policies, it is clear nuclear energy isn’t one of them.

While the U.S. fiddles around with fantasies of lighting its cities with solar and wind power, the French, Japanese, U.K., India, China, and Russians are betting the ranch that the only way out of the global warming crisis is to ditch fossil plants and build nuclear energy power stations. Even Arab nations in the Middle East, with oceans of oil under their sands, are getting into the act. The United Arab Emirates has plans for several new nuclear reactors.

At the rate things are going, most of the new reactors in the world will not be built be U.S. firms. In the U.K. French and German firms are the leading candidates to build up to 18 new reactors. In India the Russians inked a massive deal for four new reactors in December. Despite a huge trade mission to India in January, no U.S. firms have signed deals for nuclear reactors with that country due to a host of legal issues over indemnification and protection of intellectual property.

Japan builds its own reactors as part of the momentum of decades of progress in shifting to a uranium based energy infrastructure. Only in China has Westinghouse landed a deal for four AP1000s. However, China also has plans for generating up to 5% of its total energy from nuclear plants and will execute those plans with an indigenous 1200 MW plant based on licensing of vendor designs.

The loss in export earnings and U.S. jobs is going to be significant over the next two decades because the Obama administration has its ear tuned to the siren song of “green technologies. ” Unless political realism, not ideology, infuses the thinking of Congress and the White House, the nuclear industry will have to develop strategies for development based on a realistic appraisal it has no friends inside the beltway.

Smart grid not 100 % smart thinking

The nuclear industry has figured it out. In a significant speech to he National Governors Association this week, Exelon CEO John Rowe said the economic stimulus bill has bad energy policy in it. He warned that government efforts to move the U.S. from fossil fuels could be ineffective wasting billions of tax dollars and creating a political backlash.

“"You need a comprehensive policy that tries to inch forward on all of these things while not placing too big bets on any of them," Rowe (right) said in an interview with Dow Jones NewsWire. "You can waste hundreds of billions of dollars in energy really fast. You can't afford that in this economy. That's my real message."

No new nuclear loan guarantees

Rowe doesn’t think that the Obama Administration will support additional loan guarantees for the nuclear industry. He said, “I don’t really want to use up my few chips in this world pleading for loan guarantees.”

The key reason is that once the economic stimulus spending is done in two years, there will be enormous pressure on the federal government to get the budget deficit under control. The political winds that will be blowing in 2010 will not fill the sails of an expanded nuclear loan guarantees program. Only market mechanisms, driven by tax policies, will make a difference

Carbon cap and trade might be helpful

Rowe, who as CEO of Exelon, runs one of the nation’s largest utilities, thinks that cap and trade or a carbon tax will be the leverage that moves electricity generation firms to build nuclear power plants.

"Because of the recession, it's even more important that we deal with the climate issue in the lowest cost way, and the lowest cost way requires either a cap and trade system or a carbon tax," Rowe said. "In a recession environment it is ever more tempting to do it all with piecemeal solutions, and that's ever more the wrong decision."

No magic pill for energy policy

Rowe is also worried about Al Gore’s10-year vision for smart grids supported by wind energy.

"To the extent the stimulus package deals with transmission, they're mostly looking at how to get transmission built from areas where wind is a little less expensive to the big cities. That's fine, but the wind is already pretty expensive and if you add the cost of that transmission it gets more expensive. There is no magic pill."

OK, so here it is folks. Take Rowe’s advice. There is no magic pill. The reason you need reliable base load energy sources, like nuclear power plants, is that they provide the constant current that keeps a smart grid alive and allows it to have the extra capacity to deliver electricity from highly variable wind or solar sources when available.

The bottom line is the smart grid needs nuclear energy whether anyone in the White House realizes it or not. Right now it looks like they’ve made up their minds to accept the wrong set of answers.

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