One of the biggest question marks in the nation's energy and climate policy is the future of nuclear power. In the past, the United States has made a major commitment to it. The U.S. nuclear power industry is the world's largest. The nation's 104 operating plants produce 20 percent of its electricity, making them, by far, the largest source of electricity that does not result in greenhouse gas emissions.
If a cap and a price are imposed on carbon dioxide emissions, these plants could be among the biggest economic winners in the vast economic shifts that would be created by greenhouse gas regulations.
But the future of the industry may still hang precariously on decisions made by the Obama administration, in which multiple issues remain unsettled. While former President George W. Bush joined the industry's chorus proclaiming that a "nuclear renaissance" is under way, President Obama has approached the issue with his lawyer's penchant for nuance, caution and opacity as he listens to conflicting voices within his administration.
"The president needs to show his cards on nuclear energy," said energy consultant Joseph Stanislaw, a Duke University professor. "He cannot keep this industry, which must make investments with a 50-year or longer horizon, in limbo for much longer."
To be sure, the "limbo" he refers to isn't just a policy matter. The industry faces political, legal and technological issues in the disposal of spent nuclear fuel. The economics of nuclear power, including the future costs of new plants, appear to be the biggest current hurdle.
The most-cited evidence for the "renaissance" is that U.S. energy companies have filed 17 applications with the Nuclear Regulatory Commission (NRC) for 26 new reactor operating licenses. On Friday, the first of these fell by the wayside. A Missouri utility, AmerenUE, said it was suspending plans to build its proposed plant because the state Legislature would not allow it to charge consumers for some of the project's costs before the plant's completion. Without that "financial and regulatory certainty," the company said it couldn't proceed.
On the other hand, the industry's political acceptance has improved since the 1990s, when new power plant construction stopped as if dead. A shift in the policy debate to climate change mitigation has helped the industry make its case. The availability of nuclear power reduces U.S. carbon dioxide emissions by 680 million tons a year, says Paul Genoa, policy director for the Nuclear Energy Institute, which represents the industry. "It's a big number -- roughly equivalent to all the CO2 emissions from our passenger [vehicle] fleet," Genoa says.
An industry with a new, international face
The new face of the U.S. nuclear industry that is emerging will have a number of foreign players eager to stake their claim. Virginia officials rolled out the carpet in October for the French energy company Areva and Northrop Grumman Shipbuilding, which plan to build a $363 million manufacturing plant in Newport News to make nuclear reactor components. More than 500 employees would be at work by 2012, the companies said. "This joint venture project is tremendous news for Virginia," said Gov. Tim Kaine (D), whose state holds large uranium deposits.
Today, 40 nuclear plants are under construction in 11 countries, led by China, South Korea, Japan and Russia, according to the World Nuclear Association. "Nuclear energy is going to be used," asserted William Magwood IV, a physicist who directed nuclear programs in the Department of Energy under both former Presidents Clinton and George W. Bush. "People underestimate how quickly this is going to happen." Internationally, more than 100 nuclear reactors are planned and more thans 250 have been proposed.
Climate concerns led Congress to approve $18.5 billion in federal loan guarantees in 2005 to support construction of perhaps a half-dozen new nuclear plants that are meant to demonstrate new, safer and more efficient reactor designs. The guarantees would cover up to 80 percent of project costs. The 2005 Energy Policy Act also provided a limited production tax credit for a few new nuclear facilities. And the Nuclear Regulatory Commission is following a new licensing process designed to speed the review process and prevent recurring environmental challenges.
The first few new plants, aided crucially by the 2005 financial incentives, could be in operation by 2015-17, industry officials say. But the industry's U.S. 'renaissance' could well stop there unless more favorable economic and political conditions appear. "The industry's success in the coming years will turn largely on money, attention to detail, and an ability to earn and retain the trust of all its stakeholders," said Roland Frye Jr., a senior NRC appellate attorney, writing in the Energy Law Journal last year.
Obama's 'agnosticism': maybe, maybe not
Perhaps the most critical issue is whether President Obama will be among those stakeholders. Obama called himself an "agnostic" on the issue during the 2007 presidential primary campaign. "I'm not somebody who says nuclear is off the table no matter what, because there's no perfect energy source," Obama told editors of New Hampshire's Keene Sentinel newspaper.
But then he threw out a barrage of question marks: "Given the importance of reducing carbon emission, nuclear should be in the mix, if we can make it safe, if we know how to store it, if we can make sure it's not vulnerable to terrorist attack, it's not enhancing proliferation. There are a whole set of questions. And they may not be solvable and if they aren't I don't want to invest in it. But if they are solvable, why not?"
Obama raised the industry's hopes by turning the Energy Department over to Steven Chu, a Nobel laureate physicist who says nuclear energy should be "part of the mix. ... It's 70 percent of the carbon-free electricity we produce today."
Last May, a Congressional Budget Office report concluded, "In the long run, carbon dioxide charges would increase the competitiveness of nuclear technology and could make it the least expensive source of new base-load capacity." The CBO, then headed by Peter Orszag -- now Obama's director of the Office of Management and Budget -- said that a cap-and-trade system requiring coal or gas plants to purchase emission rights at $45 per metric ton of carbon dioxide could lead utilities to replace coal plants with nuclear reactors.
But in January -- without a protest from the administration -- Rep. Henry Waxman (D-Calif.), chairman of the House Energy and Commerce Committee, cut $60 billion from the stimulus bill that could have benefited nuclear development. Then the administration trimmed funding for the long-delayed federal nuclear waste repository project at Yucca Mountain, Nev.
In a 4,900-word Earth Day speech focused on renewable energy, Obama mentioned nuclear energy twice. Meanwhile, Obama's chairman of the Federal Energy Regulatory Commission, Jon Wellinghoff, said that he did not believe the United States would need to build new nuclear plants in the future. "First of all, they're too expensive," Wellinghoff told reporters.
While nuclear power has considerable support in Congress, its opponents are led by Senate Majority Leader Harry Reid (D-Nev.) and House Speaker Nancy Pelosi (D-Calif.). A pro-nuclear stance by Obama would also risk a backlash from key members of his party and from some environmental groups, some of which have spent years building membership and raising donations based on their anti-nuclear stance.
Among some environmental groups, anti-nuclear is a tradition
More than 300 environmental and social action groups signed a statement in December calling on world climate policy negotiators to reject nuclear power as a solution. The Sierra Club, Public Citizen, Friends of the Earth International and Greenpeace headed the list.
"The nuclear power folks should just let the carbon policies happen," said David Hawkins, director of climate programs at the Natural Resources Defense Council. "They will be beneficiaries. The value of their resource is increased. The environmental community understands that."
"What the environmental community will fight is additional federal subsidies after all that has been given to this industry. It's more efficient to put future dollars into renewable energy and energy efficiency," Hawkins added in an interview.
Public opinion surveys show gains. A Gallup Poll this year reported that 59 percent of Americans favor expanding nuclear power, compared to just 49 percent who took that position in a 2001 poll. In many rural communities where nuclear plants have been running for decades, their value as employers and taxpayers ranks much higher. Gallup polling also indicates, however, that the nuclear option is much less popular among Democrats than Republicans.
It is a far cry from the tides of protest that confronted nuclear power projects a generation ago. While safety issues are still debated by nuclear power advocates and opponents, the newest arguments against new nuclear projects are based on their costs compared to other future energy sources.
Two years ago, many U.S. companies pegged nuclear construction costs in the range of $2 billion to $3 billion for 1,000 megawatts of generating capacity. Now the price has shot upward.
Constellation Energy, which is partnering with France's EDF power group to build Calvert Cliffs Unit 3 in Calvert County, Md., estimated last year that the project's costs could rise to $6 billion per 1,000 megawatts because of the plant's added security and safety features. At that top price, the proposed 1,600-megawatt Unit 3 plant could cost $9.6 billion.
NEI President Marvin Fertel and others in the industry argue that the Obama administration and Congress should establish a federal energy bank with a multibillion-dollar revolving loan fund to help finance nuclear projects, patterned after U.S.-backed institutions that support American exporters.
"Everywhere else in the world where entities are pursuing advanced new nuclear plants, it is all governments. Only here in the U.S. do we try to make private companies build these plants," said George Vanderheyden, president of Unistar Nuclear Energy LLP, the joint venture between Constellation Energy Nuclear Group and EDF Development, in the complex financial structure behind Calvert Cliffs Unit 3.
Amid the promise, a risk that lingers
With power plant construction costs on the rise, U.S. nuclear developers are looking hard for foreign financial support. Vanderheyden said the Calvert Cliffs partners hope to get backing from France's export financing agency to bring a federal loan commitment from 80 percent of the project's cost to 50 percent.
"All of us [in the industry] are working to increase the amount of equity in the projects by coming up with innovative financial structures that generally involve export financing agencies. So the literal ask is coming down to much, much less than 80 percent." U.S. companies are also seeking help from Japan's export agency.
Predictions of whether nuclear power can compete with wind, coal or other energy sources are a guessing game clouded by critical uncertainties. Analysts try to compare the total costs for each fuel, including costs for construction, financing, operations and maintenance.
A Lazard Ltd. study last year reported low and high price ranges for major electric power options. The high price for nuclear power came in at 12.6 cents per kilowatt-hour, compared to 13.5 cents for coal with carbon dioxide capture. The high price for wind energy was 15 cents, but that was reduced to 9 cents when the federal tax subsidy for renewable energy was factored in. A continuation of federal loan guarantees could bring nuclear power down to about 8 cents, the study said.
Nuclear power's "Faustian bargain," as nuclear engineer Alvin Martin Weinberg put it years ago, links its bounteous energy capacity with the threat of radiation. That risk hovers over the nuclear option still, the industry's opponents, promoters and regulators agree.
While the older generation of U.S. nuclear plants now runs at 90 percent efficiency and has a relatively good safety record, utility executives are aware that the industry retains a unique fragility. They've seen it all crash before. As David Crane, CEO of NRG Energy, briefed investment analysts last year about the company's plans to build new nuclear plants in Texas, he spoke of that risk. "So what worries me is I'm going to wake up someday and something is going to happen in some nuclear plant in Russia or something. And it's going to sour the American public on the nuclear renaissance."