Nuclear power can bring long-term stability to the stressed electric grid

Global warming notwithstanding, 2013-2014 will likely go down as America’s coldest winter in decades.   As of the second week in January, 187 million people were dealing with subfreezing weather, and record low temperatures were being recorded in many eastern and southern communities.

Not surprisingly, the electric power grid is being tested as never before with some utilities asking customers to dial back their thermostats and to avoid using appliances during hours of peak demand.  Even so, a few power companies have had to impose rolling blackouts and brownouts as they bump against their generating capacity.

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The current cold wave should remind us that integrity of the power grid depends on a diverse portfolio of generating options that, in turn, can serve as a hedge against price volatility or supply disruptions.   But this diversity may be at risk.  America is becoming overly dependent on the use of natural gas for power generation, with new gas-fired plants accounting for 75 percent of all capacity additions since 1995.  Meanwhile, the contribution of coal and nuclear plants to the electric grid has been shrinking.

Because no currently operating coal plant can meet the proposed EPA standards for greenhouse gas emissions from new plants, we’re unlikely to see additions to the coal fleet.  And the GHG standards for existing power plants that will be forthcoming later this year will further accelerate the demise of coal for power generation.  What’s more, four nuclear reactors were shut down last year and Entergy recently announced it will close its Vermont Yankee plant by the end of 2014. 

To make matters worse, merchant power generators in deregulated states are not investing adequately in new base-load capacity.  Because natural gas sets the price for electricity at the margin, and prices are projected to remain below $5 per MCF for the foreseeable future, merchant generators are worried they’ll not be able to recover their capital costs in a deregulated market.  In addition, the huge growth of wind generation capacity in response to federal tax incentives and state renewable portfolio standards has further dampened the prospects for capital cost recovery by merchant power generators.

Investing in nuclear energy remains the best strategy for ensuring long-term diversity and reliability of the power grid.  Despite recent plant closures, nuclear power isn’t going away.  Five new plants will come on line by 2018 while 14 other applications are pending before the Nuclear Regulatory Commission.

The value proposition for nuclear energy is stronger than ever.  Nuclear plants operate around the clock safely and reliably, thereby providing stability to the power grid.  They also provide forward price stability and are not subject to the price volatility associated with gas-fired plants.  Nuclear operations support large numbers of high-paying jobs and add mightily to the tax base of host communities.  Finally, nuclear power is environmentally benign:  no particulates, no sulphur dioxide, and no greenhouse gas emissions.  Just steam.

Because households and industries continue to use electricity more efficiently, the demand for power is projected to grow slowly in the years ahead.  Still, until large-scale battery technology develops to the point where electrons produced by wind and solar can be stored in large quantities, which may take 50 years, we’ll continue to need a diverse portfolio of base-load power plants.  With coal going away, and natural gas currently overrepresented, nuclear power can provide the much-needed diversity and stability to America’s electric power grid.

Weinstein is associate director of the Maguire Energy Institute in the Cox School of Business at Southern Methodist University in Dallas and a fellow with the George W. Bush Institute.