Utilities are Betting on Nuclear Energy's Chances

The almost-retired John Rowe has been making a lot of headlines lately. It’s not just for Exelon’s merger with Constellation that is now this country’s combined nuclear energy powerhouse. It’s because the King of Nuclear is saying he is unsure that the fuel source will expand in the United States.

When the former chief executive of Exelon Corp. says something like that, it gets people’s attention — the kind of people who are just as huge in the global energy sector and who think differently. That’s okay with Rowe. He’s never been one to shy away from controversy. And it’s okay with him because in his heart-of-hearts, he wants the nuclear sector to grow and prosper.

“As someone who loves nuclear, it is a large speculation,” says Rowe. “It is 30 years before it breaks even. I think the combination of low natural gas prices and Fukushima will set a real nuclear renaissance back by several decades.”

Wow. Rowe, who spoke at the EnergyBiz Leadership Forum, goes on to say that wind and solar will become better and cheaper and that along with natural gas, may obviate the need for new nuclear power. Still, the country should fund the research and development so that it can maintain its nuclear know-now — just in case.

Japan, of course, suffered a massive earthquake and tsunami more than a year ago — one that took out the Fukushima nuclear units there. In that case, the backup power failed, allowing the spent fuel rods to become exposed and to cause a meltdown in the reactor’s core. Radiation then escaped.

At the same time, economic forces have been sweeping the world where new drilling techniques are allowing access to shale gas formations deep underground. The unconventional natural gas is now both plentiful and cheap. And the combined cycle plants used to generate electricity from such natural gas are efficient and less trouble to get permitted.

Nuclear energy, however, will remain prominent, say professionals who are acknowledging the current market fundamentals. This nation’s generation fleet is getting old and will need to be replaced. And all those units can’t be supplanted by natural gas, which has a history of volatility.

Nuclear power, by comparison, is relatively emissions free and over 30 years, is extremely cost efficient. While the upfront capital costs are huge, the uranium used to fuel them is abundant while the plants operate at least 90 percent capacity — more than any other generation form.

“Nothing has changed,” says Jacques Besnainou, chief executive of Areva North America, in an interview with this writer, referring to Japan’s crisis. “This event will make nuclear safer. We bet on the U.S. 10 years ago and we think it is still a good bet. Fukushima will not delay the renaissance.”

Any delays in nuclear construction will be a function of the economic downturn and its effect on energy demand — not the circumstances tied to Japan, the executive said. The way to move ahead, he adds, is to get government assistance to build the first few modern nuclear facilities by 2020. That would demonstrate that those plants are safe. Beyond that, such strategy would also help to create a steady supply stream for parts and fuel.

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