In his conclusion, he states that:
The goal should be a reliable and cost effective utility network. This is the goal – not a particular type of power plant or a particular set of plans to defend.The problem here is that utility executives do not have any kind of single-minded determination to pursue nuclear power at any cost. In fact, most of the utilities planning new nuclear builds are doing so not because they are stricken with an "irrational exuberance" they need to be disabused of, but because of the need to prepare for a carbon-constrained future. If the prospect of carbon pricing wasn't looming, no one would be pursuing new nuclear plants.
Utility management shouldn’t be too exciting. If an idea starts to look like it could have excessive business risks and costs, it is best to re-assess and find less risky ways to meet the goals. The last generation of utility managers nationwide reached this conclusion about nuclear power. This Paper has shown reasons why these executives were right, even though they had to cancel nuclear plans they themselves, plus a powerful nuclear lobby and a pro-nuclear government, had at one point advanced.
If current-day utility executives and utility regulators will now consider these facts, the nation can proceed to address the energy challenges we face, with far less rancor and risks, and lower costs overall, than if a futile attempt is made at great cost to revive a nuclear industry that has never kept its promises to provide a competitive and viable generation source.
To understand why building new nuclear plants is a prudent decision for a utility to make, we have to think ahead, to what conditions might possibly be like in the 2020s. In light of carbon pricing, old coal plants will either have to limit their operation or shut down entirely. Those that do operate will be expensive (as this is the entire purpose of carbon pricing). Even with license extensions older nuclear plants will be reaching the end of their operational lifetimes. This will open a very important qualitative gap in the generation mix of the utilities thinking about new nuclear builds.
Much like Amory Lovins, Severance makes the erroneous assumption that a kw-hr is a kw-hr, no matter what, and we should simply select the very cheapest generation option and be done with it. But this raises an important question--why do utilities invest in generators that don't have the lowest available lifetime cost? In other words, why did they invest in gas turbines and not coal plants?
The answer, of course, is that utilities have to provide power when and where it is wanted, and demand is not constant. Different technologies vary considerably in their ability to adjust to rapid changes in load. As circumstances have it, only two technologies in widespread use really lend themselves to peak power generation--hydroelectric dams and gas turbines. It is unlikely that many more of the former will ever be built in this country; the latter were the great winner in the energy field in recent decades. But gas has high operating costs, which discourages its use for off-peak generation. Baseload power is produced by coal and nuclear plants, which serve as the foundation of the generating capacity of many utilities. Basically, any policy to address climate change will tear the heart of these utilities' generating fleets, and the new nuclear units are a hedge to avoid this possibility.
Since a carbon-pricing scheme will force the utilities to close their amortized coal plants, they need to plan new baseload capacity to be available to keep providing reliable services. And right now, new nuclear plants are the only available option available for this role. Of course, this claim is disputed by renewable-energy enthusiasts, but the most currently hyped "baseload" renewable option--concentrated solar thermal--will not work in most of the areas considering new nuclear plants, due to want of direct sunlight. These areas generally lack geothermal and wind resources as well, although the latter don't constitute a real "baseload" source in any case. Fanciful proposals to build huge CSP plants in the southwest and transmit the power east of the Mississippi are not realistic alternatives to nuclear reactors for utilities in places like South Carolina. For all the barriers to building a new nuclear plant, they are minuscule compared to the technical and legal barriers facing such a scheme.
It is possible to use natural gas for baseload. Indeed, this is how most electricity in Russia is generated. But the example of Russia neatly illustrates why increased reliance on natural gas is ill-advised. Firstly, electricity in Russia is expensive and in short supply; and secondly, the Russian government is determined to maximize revenue from gas exports, and therefor drive up world prices. For these reasons, the Russians are planning to nearly double the size of their domestic nuclear fleet in the next ten years and are betting the long-term future of their electricity sector on nuclear power.
Of course, no one in their right mind would build generating capacity as expensive as Severance's 30 cent/kw-hr figure. This figure is in "nominal" dollars--essentially, a value from ten years in the future inflated from present dollars, and so would be lower in 2009 terms. But the reason that companies like Progress and FPL are ordering new plants is that they will not cost this much. Part of the reason for this is that Severance has used excessively pessimistic estimates for aspects of the nuclear fuel cycle for mining, milling, enrichment, waste disposal and decommissioning. Another reason the 30-cent figure is an overestimate is because Severance makes the assumption that the massive run-up in nuclear construction cost estimates between 2000 and 2008 will continue until the end of the next decade, nearly doubling construction costs. There is no good reason to believe this, given the recent collapse in commodities prices and the probable near-term global increase in the number of nuclear component vendors. Finally, Severance assumes a 14.5% average cost of capital, but regulated utilities in Florida and South Carolina are expecting to use rate recovery to finance plant construction, resulting in far lower capital costs. So the power generated by these plants will cost nowhere near 30 cents kw-hr. Just how much will depend on the degree of construction cost escalation and the cost of capital, but I expect a final figure in the 11-15 cents kw-hr range.
This is admittedly not cheap, although ten years from now this will probably be fairly competitive in the electrical generation field. I myself, and many readers of this blog, are confident that with a concerted effort we can develop nuclear plants in the next decade with vastly lower capital and operations costs than Gen III+ LWRs. Still, at the moment these utilities have no better options. These nuclear plants are not premised on massive future demand growth; they are are premised upon massive future generation loss. They cannot reasonably expect any technology--be it wind, "clean coal," or, sadly, Gen-IV nuclear--to be available in the next fifteen years to avoid the need for these new units. Right now, the utilities can either order new nuclear plants or risk being left without the ability to provide reliable service in the 2020s. They've chosen the former. And that's just prudent.