Rebecca Smith asked an interesting question in a recent Wall Street Journal article titled Can Gas Undo Nuclear Power? She describes how financial analysts are wondering whether or not certain nuclear plants are at risk of being shuttered as being uneconomical in an era of cheap natural gas.

It is a legitimate question for people who have a shallow understanding of the way that markets work. However, people who understand a little more and think about the long game might want to ask the question in a different way – Should gas be purposely enabled to undo nuclear power? It might even be useful to ask a related question – What can nuclear energy fans do to change the game and encourage owners to keep their plants running?

I was happy to note that the Nuclear Energy Institute’s Richard Myers responded to Ms. Smith’s article in a reasonably forceful manner with a post that was published both on the NEI Nuclear Notes blog and as a comment on the Wall Street Journal article.

Making long term energy decisions based on today’s North American natural gas prices is a bit like swinging a hockey stick under the assumption that pucks don’t move, even when they are placed on slick ice. The Great One (Wayne Gretzky) would remind anyone guided by that false notion that skating to where the puck is going to be in five years is likely to be more rewarding than swinging your stick at the place where the puck was reported to be last month. Here is an important graph to keep in mind when asking if nuclear energy can compete with natural gas.

US Electricity Production Costs 1995-2011

It is also worth keeping this graph of prices for natural gas sold to electricity producers near the top of your decision support material.

US Electric Power Natural Gas Price

Everyone who is interested in energy decisions should either know or learn that it takes roughly 5 years from the time that a combined license is issued for a new nuclear plant until that plant enters commercial operation. The license application process requires an additional 42-48 months with a steady investment in both personnel and money in order to keep it moving on that schedule. It is therefore short-sighted to make any decisions about whether or not to pursue a nuclear power project based on today’s market prices. Take any point on the above graph, draw the local slope and see how close it comes to predicting the price of natural gas nine years later.

Companies that are building nuclear plants today are benefitting from the low prices that their future competitors are offering and from our rather sluggish economy. The material and labor inputs to the construction process are cheaper in times of low energy prices, low inflation and and low interest costs.

There is no doubt that companies that are operating smaller, individually located nuclear units and selling electricity in competitive wholesale markets are not big fans of low electricity prices enabled by low gas prices. Their stress, however, is not solely due to low fuel prices for their competitors. Electricity customers at the retail end of the business are not necessarily obtaining much benefit from temporarily low wholesale market prices. Some items that neither Rebecca nor Richard directly mentioned are just as important as low natural gas prices.

For example, every nuclear power plant in the US that is maintaining an operating license must pay an annual fee to the US Nuclear Regulatory Commission for the regulatory services associated with that license. The fee is a flat rate that does not vary depending on the power output of the reactor, so a plant that generates 1,200 MWe pays exactly the same $4.7 million per year as a plant that only produces 600 MWe.

Every nuclear power site in the US is required to provide the same, often excessive, level of security; sites with only one small reactor thus have higher costs per unit of marketable electricity. There is financial uncertainty associated with additional costs that are going to be imposed by the Nuclear Regulatory Commission in a cosmetic response action to Fukushima; even landlocked plants in Nebraska or Illinois may be forced to show that they can withstand natural disasters on the level of a 9.0 earthquake and a 45 foot high tsunami.

The high cost of repairs at a nuclear plant are not driven only by the factors that Rebecca Smith mentioned in the below quote:

Nuclear plants also spend heavily on security and other safeguards, and their equipment costs are higher than those for other kinds of generating plants because they handle radioactive material and operate at extreme temperatures.

The temperatures at nuclear plants are less extreme than those experienced by their fossil fuel competitors. The radioactive material has proven itself to be less hazardous than the explosive and flammable hydrocarbons fueling natural gas and coal fired power stations. Nuclear equipment costs, especially for the single unit facilities are more driven by the “one of a kind” nature of the technology. They are also increased by the unique, often obsolete quality assurance rules imposed by licensing commitments and the high cost of getting the NRC to change its mind once a rule has been written.

Did you know, for example, that many of the units in our existing fleet are still imposing ANSI 45.2-1977 (Quality Assurance Program Requirements for Nuclear Facilities) on their suppliers? That standard was written while I was in high school and published the year I graduated. I’ve been a grandfather for three years. It is extraordinarily expensive to find and qualify suppliers willing to meet a standard that is not even available in a reasonably high quality, searchable format. When I ask colleagues why they have not updated to more modern or more universal quality assurance standards, they describe the minimum of 2-3 years worth of delays and requests for additional information associated with any license change and the subsequent cost of updating all of their existing documentation.

There should be no question that higher natural gas prices are the inevitable result of shutting operating nuclear plants, exporting liquified natural gas, and reducing drilling. It is no secret for anyone who listens to earnings calls for natural gas production companies that they are hurting and doing everything in their power to push prices to more profitable levels.

If you are in a business that is enjoying low natural gas prices or if you are a consumer who owns a home that uses gas for heating, you should consider joining forces with the owners of any of your local nuclear power plants. Help them advocate for changes that will reduce the externally imposed costs of keeping them running so that they can help keep the energy supply abundant and favorable to consumers. Please understand that the issue is not like mothballing a coal plant; if a nuclear plant owner gives up the plant operating license in order to save the $4.7 million per year in fees to the federal regulator it can take many years to recover that license. There is only one instance that I know of where a shuttered plant was brought back to life, and I am not even sure that plant gave up its operating license.

Frequent advertisers in the Wall Street Journal like Shell, Chevron, BP and ExxonMobil might not be very happy if their efforts to expand the use of natural gas do not result in bullish profits. I say tough noogies; they are not looking out for consumer interests or the interests of those who would prefer to leave the earth’s atmosphere to their descendants in a cleaner condition than it was when they were born.

The post appeared first on Atomic Insights

Editor's Note: We changed the original title of this article from Should customers allow natural gas to push nuclear out of market? for editorial purposes.