Taking a Second Look at a Curious Claim

Last week the California Energy Circuit published an article on the economics of ongoing operation and maintainence at the state's two nuclear power plants titled: Juice: Corrosive Investments. It's important to look at any sort of article like this with a jaundiced eye, because as we've seen before, it's easy to manipulate data to get the result that you want.

In particular, the authors are concerned about the cost of replacing the steam generators at both California nuclear power plants: Diablo Canyon and San Onofre. The California Public Service Commission has already approved this in the case of Diablo Canyon:

We are very worried about spending scarce resources on risky investments. We're pretty darn sure that it will become a bad deal for utility bottom lines in the long run. We certainly don't want more bankrupt utilities to pile on top of a cringing state economy.

That's quite a statement to make, as the replacement of steam generators has become a pretty common occurence at American nuclear plants. In fact, replacing steam generators is probably more common and economical than many people think.

Just this fall, 5 out of the 23 nuclear units that went into refueling outages replaced steam generators. And due to the replacements, nuclear units will be able to perform more efficiently and generate more electricity. More often than not a utility will spend money on uprating existing nuclear units than adding more natural gas-fired and coal capacity.

Let us throw out a number. A rather large number. It's $37.5 billion.

What could California do with that much money? That's over $1,000 per person in this state of 36 million people. Let's buy everyone a roof over their heads. One with at least one photovoltaic panel on top of it. We'd have enough left over to invest a few billion dollars in energy efficiency measures in businesses, hospitals, schools and homes. Imagine the energy and pollution reductions we'd reap.

We ought to take a closer look at exactly what benefit you could derive from just one photovoltaic panel. In essence, it's enough electricity to warm up your shower. You won’t “reap” any pollution reductions because California will then have to rely more on natural gas to make up for the cloudy days and absent nuke plants. California already relies on natural gas for almost 50% of its electricity.

I'm also bothered that the authors have once again set up a "straw man" when it comes to nuclear energy and renewables: That if you choose one, you can't have the other. Why not both? Again, there are some clear indications that solar can play an essential role in peak power production during the summer months when electricity demand is highest. Especially in the Southwest.

By promoting energy diversity, rather than depending too much on one source of electrical generation -- as California and the rest of the U.S. has with natural gas-fired electric capacity -- you can't be held hostage to price volatility.

We don't doubt that financiers will come up with the first $1.4 billion for replacing steam generators. But when the utilities start coming back to the well for the next $250 million and another $250 million, Wall Street might just start to look at ratepayers' ability to pay back the loans. Looking at the timing of this borrowing - it will come after this winter's walloping energy prices - consumers will be more than unhappy. There will be pressure to put price caps on utility bills and Wall Street won't like that. Yes, "It's the economy stupid."

Ironically, the third sentence from the above paragraph boosts the economic case for nuclear energy. We all know our heating bills are expected to be high this winter--primarily due to demand pressure on natural gas markets.

But why don’t you ever hear about nuclear prices being high? You don't, because nuclear energy's distinct advantage is its low cost of operations once plants get up and running. We call this "forward price stability," and without it, retail electricity rates in California and around the country would be a lot higher.

As our CEO, Skip Bowman, said in a speech before Town Hall Los Angeles back in September, California shouldn't just go ahead with the planned work at Diablo Canyon and San Onofre, they also ought to seriously consider lifting the moritorium on new nuclear plant construction in the state. If they are serious about reducing air emissions and freeing the state from volatility in natural gas markets, they can’t leave nuclear out of the equation.

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