Nuclear versus Natural Gas: which is the better investment?
Rezwan Razani - July 30, 2013
“In this corner, we have a nuclear power plant. In the other corner, we have a natural-gas plant. After 10 rounds, which one of these magnificent champions will be left standing?”
The analysis comes a report by Energy Path Corporation. Per Canon:
A private consultancy called Energy Path Corporation recently published a report – entitled “Will Low Natural Gas Prices Eliminate the Nuclear Option in the US?” – comparing the costs and investment risk of these two types of power plants. It is a highly relevant exercise, given that there is a genuine debate as to which energy source is cheaper or less risky, especially in the US where gas is presumed to be abundant.
Note: Links to the original report requested. If you have the link, please let us know in the comment section below.
Nuclear is Lower Risk
Nuclear energy wins, of course. For many reasons.
The overwhelming majority of the investment (potential cost volatility) in a nuclear plant takes place in the actual decision to build. After that event, the actual investment risk is almost completely dispersed – with the cost range dropping down to $4/MWh for the next 60 years. And the capital costs of nuclear plants are now well understood and the cost risks are managed by entering into contracts between investors and suppliers before the capital is ever committed.
On the other hand, with the gas plant, though the capital costs are comparatively low, nearly all of the investment risk takes place after the plant is built. So, in other words, once the gas plant is built, utility customers are more or less stuck with it, even if natural gas prices skyrocket, which is highly likely once cheap supplies are depleted, or even if carbon taxes are applied by governments, which is also highly likely, because natural gas plants emit CO2. (Nuclear plants do not emit anything, so they would not be subject to such taxes.)
Living in the Now
Unfortunately, most decisions are made for the short term, even by utility companies.
So, knowing that the lifetime investment risk is far lower for the nuclear plant, what could possibly be the reason for a utility company executive to make the investment decision for a gas plant over a nuclear plant? The answer is very simple. The capital cost for the gas plant is lower, and gas prices are currently low, and environmental compliance costs are currently low, but by the time fuel costs and environmental compliance costs shoot up, those utility executives know that they will be long gone. The enormous risk that they have taken is passed on to their successors, and worst of all, to their customers, who must then face brown-outs, or skyrocketing electricity bills, or both. - See more at InvestorIntel.com
Release the Fracktivists
This article shows the clear economic incentive for nuclear energy proponents to collaborate with fracktivists, as fracktivists are at the front lines of pushing for higher environmental compliance costs for natural gas. All the more reason to unite and conquer fossil fuels.
Also, no doubt there are other reports out there, some of which concur, and some that come to a different conclusion. More links, analysis and discussion welcome in comments section below!