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Morningstar’s Sunny Outlook For Nuclear Power Suddenly Clouds Over

Morningstar analysts broke with the pessimistic consensus on nuclear power this fall when they predicted the industry would not just hold its own against renewables and cheap natural gas, it might even grow up to 5 percent.

But that prediction, which appeared in the October/November issue of Morningstar magazine, has already fallen flat.

“At the time we were developing the forecasts, we were assuming the two new units at the VC Summer (SC) plant would go forward, totaling 2.2 GW of new capacity. But as you probably know, Scana and partner Santee Cooper decided to cancel the project in late July,” said Travis Miller, an equity strategist with Morningstar Research Services LLC.

“The VC Summer plant is key. If indeed it never goes into service, you would have to remove that 2.2 GW from our forecast, thus our base estimate would go from flat to down 2.2 GW. Other than that, the status of the Exelon plants are the primary difference from our high- and low-end estimates.”

Exelon operates five nuclear plants in Illinois and New York that it has threatened to close. Both states passed subsidies to keep the plants open, but those subsidies are being challenged in the courts.

“If courts strike down those subsidies, we expect those plants to close, absent other power market reforms,” Miller said.

In their original forecast, the analysts suggested pessimism about nuclear power was short-sighted and overlooked nuclear’s “more favorable” environmental profile, given political pressure to reduce emissions. They argued that nuclear capacity could grow through uprates—a process in which the Nuclear Regulatory Commission grants permission to operate plants “hotter” than is typically allowed.

Competition from cheap natural gas generation and renewable energy are pinching profits now, but we think a long-term perspective is important… Our forecast for flat or growing U.S. nuclear capacity is more bullish than most forecasts. In particular, we disagree with the U.S. Energy Information Administration’s prediction that nuclear capacity will fall 11% by 2040. We think the U.S. could add as much as 5% net new nuclear capacity by 2040.”

In addition to Exelon and Scana, the analysts profiled the “actionable” stocks of Dominion Energy, Southern Company, and FirstEnergy.

The nuclear technology was born 75 years ago yesterday when a team of physicists led by Enrico Fermi successfully triggered the first manmade nuclear reaction at the University of Chicago.

https://www.forbes.com/sites/jeffmcmahon/2017/12/03/morningstars-sunny-outlook-for-nuclear-power-suddenly-clouds-over/#33945fb5d76e

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December 3, 2017 - Posted by | Uncategorized

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