Despite a gloomy economic outlook in its service area, the utility’s CEO is bullish on the future of nuclear energy
Utility CEO’s are not known for exuberance, irrational or not, in talking about the future of an energy technology. In fact, with the “prudent investor” paradigm motivating publically traded firms, a clarion call for investment in nuclear energy in the OP ED pages of the Wall Street Journal is a wake up call for everyone.
Jim Rogers, CEO of Duke Energy (NYSE:DUK) (right) writes in the Wall Street Journal on August 4 that the U.S. is still the world’s largest operator of nuclear power with 104 plants. Data from the government’s Energy Information Administration bear him out. In 2008 U.S. reactors generated over 806 million MW of electricity.
What’s more, Rogers says, nuclear plants are engines of job creation. He says they are a platform for future growth.
“Investing in new nuclear power plants, which produce electricity 24 hours a day and seven days a week, can be a major growth engine for our economy. Nuclear plants can be located close to growing demand centers, and next to existing transmission lines. Renewables, which produce power intermittently, must often be sited far from cities and the grid.”
He points to Charlotte, NC, which is the hub of the utility’s service area, as an example. It is home to operations by most of the major reactor vendors and nuclear engineering services firms in the U.S. and nearby Wilmington, NC, hosts GE-Hitachi’s nuclear fuel complex with plans for a commercial uranium enrichment plant.
North Carolina hosts five reactors two of which are operated by Duke power producing 2.2 GWe of electricity. Combined with South Carolina, the two states are a hub for eight new reactors, all Westinghouse AP1000s made in America.
The bad news is the U.S. is still lagging in the drive to use nuclear energy as a carbon-free source of power. With the loss of momentum domestically comes competition from other nations. For instance, China has 11 nuclear reactors, but plans to build 24 more of them. Only four of China’s new reactors are being built with American know-how.
Rogers closes his WSJ essay with a clear signal about what the U.S. must do next.
“When it comes to creating thousands of 21st century jobs—energy jobs on which we can rebuild the middle class—nuclear power clearly has the edge. We can and must grow our lead.”
Is exuberance enough?
Not everyone in the nuclear utility industry agrees with Rogers. John Rowe, CEO of Chicago-based Exelon (NYSE:EXC), (right) has an entirely different take on things. He feels at this time, and until cost per Kw comes down, natural gas plants may be more economical to build, and provide a faster return on assets, than nuclear energy.
Rowe tells the Chicago Tribune on August 5 that he realizes that “touting” the advantages of gas over nuclear “is like the Vatican coming out for birth control.”
Still, he tells the newspaper the numbers argue for delaying new investments in nuclear energy projects. And Exelon has put its money somewhere else. It is deferring its investment in a twin reactor nuclear power station in Victoria. TX.
Instead, Exelon and other nuclear utilities are getting more power from the nuclear reactors they already own. It is called “up-rating” and it increases the power of reactors as well as the efficiency of turbines. According to the Department of Energy, the nation’s supply of electricity from nuclear reactors may grow by as much as 20% over the next two decades just from up-rates.
If you build it will they come?
Up-rates require growth in demand for electricity, but the current recession is moving in the opposite direction. According to a report from the Bloomberg Wire Service August 4, profits at nuclear utilities are dropping as people tighten their belts.
Bloomberg reported that Duke Energy led U.S. utility owners in reporting declines in second-quarter earnings after the recession drained demand for electricity to run factories. Other nuclear utilities aren’t doing much better.
- Duke’s quarterly profit dropped 21% to $276 million, according to a company statement.
- Entergy (NYSE:ETR) said its net income fell 16% to $226.8 million.
- PPL Corp. (NYSE:PPL) posted a loss and suffered the biggest share decline in its history. At market close Aug 5, the stock traded at $29.33 down from $33.98 Aug 3. The 52-week high was $45.53.
- Progress Energy (NYSE:PGN) also reported declines in earnings.
What does Roger think of this trend in declining earnings among nuclear utilities? He told Bloomberg,
“Demand seems to be flattening out, and we don’t expect to see a strong rebound for probably another year and a half. I think the recovery will be pretty anemic, and it might be as late as 2011 before we see a full rebound.”
Recovery at a snail’s pace?
“What I think we have experienced is a balance-sheet recession, and particularly given how hard hit the banks have been, I think recovery will be very slow,” Rogers said.
So it follows that Roger’s enthusiastic faith in the future of nuclear energy transcends the current dismal economic climate. Others take an even longer view.
In a speech to the American Nuclear Society in June, John Grossenbacher, Director of the Idaho National Laboratory (INL), a nuclear R&D center, told the meeting that thinking about nuclear energy requires a perspective that spans 100 years.
“The resources are there, and in my opinion, they will get used in the future,” So let’s do it in a way that 50 and 100 years away, we’re happy with the outcomes.”
Maybe Rogers is one of those leaders who can see that far and this is what justifies his confidence in the future of nuclear energy to address the problem of global warming.
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