Just a few years ago, the US nuclear renaissance seemed at hand. It probably shouldn’t have been. Cost overruns from Finland to France to the US were already becoming manifest, government guarantees were in doubt, and shale gas drillers were beginning to punch holes into the ground with abandon.
Even without Fukushima, the verdict on large centralized US nukes is probably in, for the following reasons:
1) They take too long: In the ten years it can take to build a nuclear plant, the world can change considerably (look at what has happened with natural gas prices and the costs of solar since some of these investments were first proposed). The energy world is changing very quickly, which poses a significant risk for thirty to forty year investments.
2) They are among the most expensive and capital-intensive investments in the world; they cost many billions of dollars, and they are too frequently prone to crippling multi-billion dollar cost overruns and delays. In May 2008, the US Congressional Budget Office found that the actual cost of building 75 of America’s earlier nuclear plants involved an average 207% overrun, soaring from $938 to $2,959 per kilowatt.
Last August, Exelon abandoned plans to construct two facilities in Texas, blaming low natural gas prices. Two months later, Dominion Resources announced that it would shut down its existing Kewaunee station in Wisconsin as a consequence of low gas prices and a lack of buyers. The latter move was particularly eye-opening: building a nuclear plant is supposed to be the expensive part, while operation is expected to be relatively cheap.
So it appears that the nuclear renaissance may be largely over before it started. And yet, many projects have not yet been canceled, with utilities and ratepayers accepting ever more risk in order to rescue sunk costs. In many cases, these costs have soared or will soar into the billions. As risk management expert Russell Walker of the Kellogg School of Management is quoted as saying in the Tampa Bay Times “When the stakes get higher, it gets harder for organizations to walk away…this happens a lot. It’s the same problem a gambler has: If I play a little longer, it’ll come around.”
Read more at New Centralized Nuclear Plants: Still an Investment Worth Making?