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America’s nuclear lobby waking up to the industry’s monumental failure?

Nuclear’s Fork in the Road Atomic Insights, August 19, 2017 By Jim Little
Would you be willing to continue investing in an established business with flat revenues, increasing costs while competing against an agile field of competitors who enjoy a market advantage of lower costs, quicker deployment schedules and the support of government subsidies and favorable public opinion? Should you stay the course and focus on addressing those challenges or divest? This is the stark choice facing the nuclear power industry today……

Will nuclear generation continue or decline? Will the nuclear industry turn its attention away from new plant builds and extended-life operation activities and rather focus on decommissioning as evidenced by the plethora of recent conferences focused on decommissioning as the new market opportunity?…..

With revenues remaining flat, cost increases are significantly squeezing the profit margins of these operations. The financial outlook for nuclear utilities is bleak in an investment environment which rewards growth in revenues and profits. A number of utilities with nuclear units in merchant markets have recently announced decisions to decommission those units which are no longer able to sustain profitability. Utilities with units in regulated markets are likewise feeling similar financial pressures.

This situation was recently described to me by one nuclear utility executive: “From a shareholder perspective, how can I justify a recommendation to continue to invest in a facility when facing a forecast of declining returns while there may be other more profitable uses of capital?” So, should the default decision be to retire that unit and fund those efforts through its decommissioning fund; i.e. a “Nuclear 401(k)”?There are no easy choices. While the logic may seem straightforward, abandoning even a single unit could have cascading effects and far reaching implications. This same executive explained his concerns further: “How does one retain and attract talent going forward when there is a signal that nuclear may not enjoy full support going forward?” The inability to offset talent loss due to retirements in the workforce can affect performance on the remaining operations, increase costs, and further accelerate the departure away from nuclear. With a downturn in the industry there are other outcomes such as the reluctance of students to enter the nuclear field, university decisions to pursue other programs of study, research budgets reduced and grant applications no longer being sought. There are a number of other issues; the loss of existing, stable baseload generation and economic impacts such as those being experienced in host communities such as Zion, Illinois, and Vernon, Vermont. From a national policy perspective, it directly impacts the largest source of carbon-free generation in the United States, currently 63% of the nation’s total carbon-free generation.

Lastly, for the industry, the departure from nuclear is likely irreversible once made in the U.S. as the current talent and knowledge base is the result of over 50 years of investment and development. The situation may best be described by Stephen Wright, a comedian who is a master of the art of irony: “I live in a house halfway down a dead end street. It’s one way.”……..

August 21, 2017 - Posted by | business and costs, USA

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