In Japan, there is a fierce debate below the surface over whether to attempt restart of nuclear power plants after they finish their initial 40-year license terms. Kansai Electric (KEPCO) is the Japanese utility most reliant on nuclear, traditionally, and it has recently announced an intention to seek a license extension for 2 plants that will soon reach the end of their initial 40 years.
What about in the U.S.? Well, not so long ago there was talk of a nuclear revival. New smaller, cheaper and safer plants would allow nuclear power to play a key role in helping the U.S. meet its greenhouse gas emission reduction targets. But the nuclear industry is shrinking again. Why?
Pure economics. The nuclear industry has a long history of cost overruns. The massive investments required place a huge financial lever on any hiccups or surprises, and these are very complex, complicated operations.
The New York Times reports that Vermont Yankee, a 42-year old plant, will shut down at the end of this year (next week). Vermont Yankee recently had its license extended until 2032 -- 60 years from start. And there is nothing "wrong" at the plant. There are not massive earthquakes, nor tsunami, in Vermont.
It simply cannot compete with cheap natural gas-fired electricity generation.
Will we ever get to the next generation of small, cheap nuclear reactors with lots of "passive safety" features that make them, literally, accident proof? Maybe. But the odds do not look so good in the near future, with oil and gas prices now lower globally than at any time since the short dip after the 2008 financial crisis, and the price drops being driven by factors that seem sustainable, at least over the next few years.
Wednesday, December 24, 2014
E.On Spin Off -- An Important Crossroads
This month began with some exciting news for renewables in Germany.
E.On, one of the largest utilities in Europe, announced a corporate split. The company will divide into (1) traditional generation (coal, nuclear, natural gas), and (2) the rest of the company -- including renewables and both electric and gas distribution. E.On's announcement was lauded by investors and analysts. No doubt the investors are focused on E.On's 5.2 billion Euro of write-downs this year, mostly for the now "risky" generating assets, and are delighted to see a separation into a "good" business of stable, low risk cash flows and a "bad" business of risky, mostly fossil fuel generation.
Interestingly, it is the traditional generation business that is seen as extremely risky. As renewables cut into demand, who is to say whether a new coal plant will ever pay back its cost? As nuclear is regulated out of existence in Germany, it will become a pure decommissioning operation. E.On and other utilities say that their traditional business models no longer work.
How long before Japan gets to this point? Will the "internal" separations of generation and distribution businesses now being mapped out for Japan get anywhere close to this? ... when the businesses remain under holding companies? How long will these changes be held at bay?
Why are there plans being announced for massive investments into coal-fired generation in Japan? Yes, the economics are different in Japan than Europe, but as these plans go forward it will put enormous pressure on regulators over future decades to sustain traditional business models.
E.On, one of the largest utilities in Europe, announced a corporate split. The company will divide into (1) traditional generation (coal, nuclear, natural gas), and (2) the rest of the company -- including renewables and both electric and gas distribution. E.On's announcement was lauded by investors and analysts. No doubt the investors are focused on E.On's 5.2 billion Euro of write-downs this year, mostly for the now "risky" generating assets, and are delighted to see a separation into a "good" business of stable, low risk cash flows and a "bad" business of risky, mostly fossil fuel generation.
Interestingly, it is the traditional generation business that is seen as extremely risky. As renewables cut into demand, who is to say whether a new coal plant will ever pay back its cost? As nuclear is regulated out of existence in Germany, it will become a pure decommissioning operation. E.On and other utilities say that their traditional business models no longer work.
How long before Japan gets to this point? Will the "internal" separations of generation and distribution businesses now being mapped out for Japan get anywhere close to this? ... when the businesses remain under holding companies? How long will these changes be held at bay?
Why are there plans being announced for massive investments into coal-fired generation in Japan? Yes, the economics are different in Japan than Europe, but as these plans go forward it will put enormous pressure on regulators over future decades to sustain traditional business models.
Fukushima Decommissioning reaches important milestone
Over 3.5 years after the Fukushima accident, one of the most worrying problems has now been resolved, as TEPCO has completed removal of fuel rods from the pool in Reactor Building No. 4. These 1500 rods contained a far greater volume of nuclear material than the reactors themselves, and experts had cited a risk that, if the pool lost its water, the rods might melt or explode, spewing waste that would make the original accident look, well, rather small.
The decommissioning and related efforts will continue for decades (or even centuries), and lingering effects will need to be managed for millenia. But at least we can stop worrying that the next earthquake or typhoon will trigger this particular disaster.
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