Thursday, April 30, 2009

Why Not to Bet on Nuclear

By Jeff Siegel

In an effort to offer their own solution to our energy woes, some in Washington are declaring that if we're really committed to lowering electric bills and having clean air, then the U.S. should build 100 more nuclear power plants rather than spend billions in subsidies for renewable energy.

Following this announcement, I received a number of e-mails from folks who wanted to know my thoughts on this. After all, I am an advocate of clean energy generation, and many consider nuclear to fall into this category, as nuclear power plants don't carry the same carbon burden as coal-fired power plants.

Nuclear, however, does carry an environmental burden of uranium mining and of course, nuclear waste. So no, nuclear is not clean. But that's not my purpose for writing this today.

If you're a supporter of nuclear energy, my environmental take on this is not going to sway you. And that's fine. But for investors who continue to believe nuclear is the answer - well, they're going to be sorely disappointed. Because no matter how bad the bureaucrats in Washington want it (on both sides of the aisle), 100 new nuclear power plants will never happen in the U.S. Here's why...

Peak Uranium?

First there is the issue of uranium depletion. As my colleague, Chris Nelder, wrote in the book, Investing in Renewable Energy...

<>"The best ores of uranium have been mined, leaving mainly low-quality ores left to exploit. To the casual observer, this might seem at first like a ridiculous statement. Uranium is a very common element, found in about the same abundance as tin worldwide, in everything from granite to seawater. Almost all - 99.3 percent - of the uranium found on Earth is uranium-238, an isotope of uranium containing 238 protons per atom. The remaining uranium - 0.7 percent - is uranium-235, and that's what is used as fuel for our 'light water' nuclear reactors."

Nelder also hightlighted a 2006 study that was conducted by the Energy Watch Group. This particular report, "Uranium Resources and Nuclear Energy," suggested that under best-case estimates, uranium production could peak before 2050. And that's based on today's rate of use, and doesn't include an additional 100 nuclear power plants.

Even the president and CEO of Cameco Corporation, Gerald Grandey, told reporters at a 2007 press conference that he expects demand to grow at 3 percent annually for the next decade, but doesn't see uranium mining being able to keep pace with demand.

Waste Not, Want Not

There's also the issue of waste disposal.

Certainly by now you've heard about the Yucca Mountain Repository. This is where all of our spent nuclear fuel and waste is supposed to be stored.

Last year, it turned out that the Yucca Mountain repository would cost $96.2 billion (in 2007 dollars), with 80 percent of that cost falling on the ratepayers.

While these bureaucrats sit there and make the claim that we should build all these nuclear power plants instead of spending billions in subsidies for renewable energy, they conveniently forget the $77 billion that ratepayers may already have to shell out just to store 77,000 tons of spent nuclear fuel and high-level radioactive waste, that technically still doesn't have a home. Certainly this is a not a cost that consumers or investors should ignore.

And we haven't even gotten to the construction costs on these things.

A 2008 report from the Congressional Budget Office found that on construction costs, you're looking at $144.6 billion (in 1990 dollars) for 75 nuclear power plants. That's $235.3 billion today. And according to the Federal Energy Regulatory Commission, the estimated cost on a 1,000 megawatt reactor could run as high as $7.5 billion!

The typical budget for a 20 MW geothermal project constructed by geothermal developer, Ormat Technologies (NYSE:ORA), is around $70 million. Or $3.5 billion for 1,000 megawatts.

Of course, with that geothermal power plant, you also have the added benefit of no waste disposal costs, no uranium costs, and no billion-dollar decommissioning costs. And geothermal power plants, by the way, also have a capacity factor around 90 percent - or about the same as a nuclear power plant.

Bottom line: 100 nuclear power plants is nothing more than a political pissing contest. For the sake of long-term, sustainable growth - nuclear offers little more than high-priced energy, a wealth of environmental headaches, and fat campaign contributions in Washington.

And it sure as hell won't help consumers with electricity costs either.

No comments: