Saving Illinois’ Nuclear Plants: We must act NOW!

by Gene Grecheck and Brett Rampal

ANS YMG Chair, Brett Rampal, welcomed summit attendees.

ANS YMG Chair, Brett Rampal, welcomed summit attendees.

If you think someone else is going to stop nuclear plants from closing, it’s time to take off the blinders and take action. That was the message being touted during the #SavetheNukes Summit in Chicago on October 22-24, organized by Environmental Progress with the American Nuclear Society (ANS) Young Members Group (YMG), among others.

The summit was not held in Illinois by coincidence. After success in New York, those who were involved in the passage of the Clean Energy Standard and associated Zero Emissions Credit that saved the Fitzpatrick, Ginna, and Nine Mile Point plants felt invigorated to bring the fight to the next battlefield.

ANS members showed their support in Chicago.

ANS members showed their support in Chicago.

More than 70 nuclear advocates from diverse backgrounds (environmentalists, leaders of nuclear professional groups, nuclear advocacy groups, nuclear professionals, students, etc.) attended, including many ANS members, especially students!

Moving and inspirational are not usually the words used to describe nuclear meetings, but the understanding in the room was that time is short, and we need unity, organization, and fast action to save Exelon’s Clinton and Quad Cities nuclear plants,, which are slated for closure (or as one summit attendee put it, abandonment). Without the Next Generation Energy Plan that must be passed by the Illinois legislature in November  (just three weeks from now), the abandonment of the Clinton and Quad Cities plants would result in the loss of over 20 percent of Illinois’ clean energy and approximately 1,500 jobs!

If it passes with the nuclear component intact, the plants will get the small price support necessary to remain competitive in a market flooded with cheap natural gas and subsidized wind and solar.  “This is just smart energy policy,” said ANS member Lenka Kollar, who was representing the International Youth Nuclear Congress (IYNC) at the summit. “Keeping these valuable assets online is crucial for mitigating climate change and ensuring energy security for the future.”

Gene Grecheck with summit organizer & nuclear advocate Rachel Pritzker on Chicago’s Michigan Avenue.

Gene Grecheck with summit organizer & nuclear advocate Rachel Pritzker on Chicago’s Michigan Avenue.

The summit was intended to motivate everyone in attendance to reach out to their networks of colleagues, friends, and family and get them to take action. After hearing about some lessons learned from other powerful and successful social movements (woman’s suffrage, gay rights, AIDS, etc.), summit attendees universally agreed that drastic and novel action was needed and could help us achieve our goals.

Everyone reading this article needs to take this message to heart and use social media to flood Illinois legislators with messages about the critical importance of both the Clinton and Quad Cities plants in terms of maintaining Illinois’ position as a clean energy leader. It is particularly vital that those who live in Illinois send letters and op-ed pieces to their local newspapers, and blast supportive messages out via their social media. Direct communication from ANS members in Illinois to their legislators is especially important to make the needed legislation possible. Don’t let the legislators only hear from the fossil energy interests and the tired old anti-nuclear arguments.

Marching in front of the ELPC office on Wacker Drive.

Marching in front of the ELPC office on Wacker Drive.

And we also marched!  On October 24, nearly 50 nuclear advocates carried signs through the streets of downtown Chicago to bring attention to need for clean nuclear energy in Illinois. Mothers for Nuclear representatives were on hand to share their fantastic stories and perspectives, which resonated with everyone.

Our passionate band of environmentalists, students, nuclear engineers, authors, and others marched to enthusiastic responses from passersby. As we walked to our first destination in front of the Invenergy office on Wacker Drive, people accepted the flyers we handed out, signaled thumbs up, and cheered us on! Invenergy is a fossil energy company that provides funding to the Environmental Law and Policy Center (ELPC), which has been lobbying against nuclear. We pointed out the irony that a group claiming to be interested in the environment was actually promoting the loss of a quarter of Illinois’ clean energy, and replacement of that energy with natural gas.

We walked on to the sidewalk in front of the ELPC building, where we met a small (3-4 people) band of anti-nuclear activists wearing yellow shirts and carrying signs. They were no match for our large group! The police escorting us told them to keep their distance, which they did, as we were allowed to march in a circle on the sidewalk, and listen to some of our group members speak. People continued to walk by and ask us questions. Some stopped to learn more, while we heard cars honking their support throughout the day as well (despite a Chicago ordinance against honking).

Pronuclear in front of the ELPC office on Wacker Drive.

Pronuclear rally in front of the ELPC office on Wacker Drive.

The contrast between the handful of anti-nuclear activists and our #SaveTheNukes group could not have been more striking.  They talked about fear, terrified about imaginary dangers that they could not describe.  Our group focused on the future:  a future where clean energy is plentiful, and fossil emissions have been eliminated.  A message of hope, not fear.  The path to that future needs nuclear: Keep the operating plants, build new ones, and move forward on advanced technologies to even better address the energy needs of the world.

If you have never considered actively advocating for nuclear energy before, we urge you to do it now. And we do mean NOW. Today. Before we lose two more large sources of clean energy and reverse any efforts to improve our air quality. Thank you for your action! And be sure to tag @ans_org and @ans_YMG on Twitter!


Gene GrecheckGene Grecheck is Immediate Past President of the American Nuclear Society and co-chair of the ANS Special Committee on Nuclear in the States.

 

 

 

Brett Rampal of YMGBrett Rampal is the current Chair of the American Nuclear Society’s Young Members Group (YMG), sits on many ANS national committees, and has been active in nuclear advocacy and awareness for the last 10 years. Brett works for NuScale Power, LLC in Charlotte, NC, as one of the staff core designers.

26 thoughts on “Saving Illinois’ Nuclear Plants: We must act NOW!

  1. Stephen Maloney

    Brian

    I thought I might add two follow-on points regarding uncertainties natural gas price projections and around LNG exports from the US. The point is to illustrate the ebb-and-flow of global and US markets, with downstream uncertainties in any price forecast more than a year or two out in time.

    As I mentioned, US exports in the Atlantic Basin are attenuated by the price spreads between European terminals (e.g., prices at Zeebrugge or the UK’s NBP). When the spreads narrow, shipping prices cut into and can eliminate the operating margins resulting in a decline or shutoff in US exports. When they widen (e.g., high demand in Europe), the spreads widen and exports look more attractive.

    As supply backs up in the US, prices fall, subject to regional temperatures and pipeline capacity constraints.

    Notwithstanding EIA’s forecasts (or, the World Bank for that matter), there is a lot of debate in energy markets about LNG exports. Those invested in LNG tend to argue for a bright future. But, many terminal operators are not seeing the traffic they expected and are not optimistic the market picking up anytime soon. (see, for example, http://www.naturalgasintel.com/articles/108001-forecasts-undersell-future-of-north-american-lng-say-terminal-backers).
    Most of that uncertainty reflects the lack of overseas demand growth.

    If you are looking for a long-term view of natural gas’s role, EIA’s Annual Outlook and its regular reports provide a reasonable high-level view, though there is a lot of debate regarding their longer term forecasts.

    For a quick summary, you might consider this recent piece by Robert Rapier at Forbes. (http://www.forbes.com/sites/rrapier/2016/10/31/the-long-term-outlook-for-natural-gas/#3b4081e044e2).

    While this short summary focuses on natural gas, you hear the same uncertainties in other fuels.

    It’s tough for company to make projections much further than a few years ahead. That makes for fewer investments in mega-projects and the emergence of smaller plays.

    When they do have to go long (e.g., a multi-year pipeline deal), the prices are heavily indexed.

    For nukes, this means the 8-10 year construction deals are very difficult to fund since few energy investors have much risk appetite for such durations.

    And that’s in a world where capital is priced close to the zero-bound. As interest rates tend to rise, the duration risk goes up very quickly.

  2. Stephen Maloney

    Brian

    Wow – a lot there.

    I’m going to ignore a lot of the personal attacks, of which there are many. And, your attempt to review my resume missed a lot, including, my work for nuclear operators over several decades on valuation, nuclear safety, and major capital decisions.

    Since you don’t know me, but who I am seems important to you, let me help you along a bit.

    I’m a physicist and engineer. My economic training and views are Austrian economics. I guess that makes me far more libertarian than “left-leaning” as you seem to suggest. Leftists tend to believe in subsidies. Crony capitalists are not much different in looking for subsidies and guarantees. I’m no fan of subsidies for anyone, as I think I’ve made clear.

    I make my living as a risk quant. In that line of work, you often find yourself putting hard data in front of people entering a conversation with a lot of preconceived notions about how they want things to work – a deal they want to sell, an investment they want to make.

    I am not a shill for anyone, including oil companies as you persist in claiming without any factual basis.

    You put a lot of time into arguing your position, and I’ll respect your attempt (while I may ignore the rest of what you say).

    But, I think you’re misinformed.

    So, let’s take your points one at a time.

    Market Prices Drive Production Decisions —

    We seem to agree that market prices drive production decisions. So far, so good.

    However, you seem to miss my point.

    Just because a company defaults or is in bankruptcy doesn’t mean it stops producing. In the case of highly-levered oil and gas producers, they keep right on producing while in default and in bankruptcy.

    If the company is forced to liquidate, a better-heeled buyer comes along and buys the distressed asset. Happens every day of the week in every industry. The well never stops pumping – only the name on the sign changes.

    Ironically, the Wall Street Journal published a story just last week about how “zombie producers” continue to over-supply the market and suppress prices (see http://www.wsj.com/articles/bankruptcy-bust-how-zombie-companies-are-killing-the-oil-rally-1477259504)

    Natural Gas Price Volatility —

    In 2007, the US EIA published a report analyzing natural gas price trends to that point (“An Analysis of Natural Gas Prices”). I suggest you look at Page 6 where Figure 2 presents natural gas price volatility. You’ll see the volatility was pretty steady over the years.

    The report covers a number of other interesting things which we could discuss.

    You might also find interesting the 2006 report by the Staff of the US Senate Permanent Subcommittee on Investigations. That particular report has had a lot of rebuttals but it offers a nice summary of the data at the time. And, the dynamics of limited supply against rapidly rising demand in an economy leveraging up on very low interest rates (courtesy of the Federal Reserve).

    Bottom line – price volatility was constant, even as prices ramped up. And, prices ramped up across the board – oil, gas, uranium, wheat, corn, steel, copper, etc., etc., etc.

    Uranium Price Correlation and Post-2007 Trajectories —

    As I said, uranium and natural gas prices rose at comparable rates after the 2001 recession (with a suitable lag in uranium prices), reaching peaks nearly simultaneously in 2007 before both fell are the economy hit the top of the bubble inflated by the Federal Reserve.

    The excess market liquidity in the post-Dot Com period also drove up the prices of a wide range of other commodities (including metals, aggies, and financial instruments) housing, and other assets.

    Uranium prices were part of that ride.

    The excess liquidity was provided by Federal Reserve policies. We can review the interaction of those policies with capital markets over that period, but natural gas price trajectories correlate with uranium during that period.

    I can provide some citations if you need to seem them. You can also find them in the EIA reports of the time – model them yourself.

    In fact, if you go back into the 1990s, you will see those Federal Reserve policies after Black Monday fueled the 1990s boom, which ended with the LTCM and Russian defaults and the Dot Com meltdown in early 2000.

    After the 2007 peak, both natural gas and uranium prices fell in tandem, as reported by the EIA.

    Today, natural gas occupies a dominant position in the energy mix. As a result, uranium prices are now getting squeezed as is well documented in the trade press. You can also read Naureen Mail (“US Nuclear Plants Squeezed by Cheap Natural Gas, Uranium Costs”, Bloomberg, December 2, 2014) for a nice explanation of contemporary relating uranium prices to natural gas.

    Duke Cole (Reserve Bank of Australia) in a 2015 report, “The Global Uranium Market” reports a weak correlation between uranium prices and oil. But the Cole report does a nice job explaining the market power exercized by the miners in the oligopolist nations dominated by Kazakhstan, Canada, and Australia.

    Unlike natural gas, uranium production cannot respond to demand growth very quickly. As a result, demand-supply imbalances quickly translate to price spikes, in contrast to natural gas markets.

    Several months ago, uranium analyst David Talbot (Dundee Capital Markets) forecast demand increases in the next few years running 6% compounded annual rate through 2020, which is enough, he says, to “kick-start” uranium prices up to and beyond 2007 levels. Morningstar analyst David Wang predicts prices will double within the next two years.

    So, bottom line – yes, a decade ago as fracking expanded, uranium price trajectories lagged but correlated with natural gas.

    No, uranium’s current correlations differ today from a decade ago during the commodity boom.

    As for the future, natural gas prices are softening due to excess supply while uranium prices are trending up.

    Fracking —

    In May, 2016, US EIA reports that 2/3s of current natural gas production comes from fracking (see http://www.eia.gov/todayinenergy/detail.php?id=26112). The technology may have a long history as you observe.

    But as EIA reports, US fracked gas went from less than 5 Bcf in 2000 to some 54 Bcf in 2015.

    Yes, as you observe, fracking was born about the time Rickover was developing the LWR. But, the difference is fracking now dominates natural gas production and anticipates continuing declining production costs, to the benefit of energy customers.

    World Bank Forecasts —

    Well, the World Bank may see a 52% increase in natural gas prices as you claim. I’m unfamiliar with that World Bank study and confess most people in my business don’t think too much of the WB’s forecasts as they are often wrong.

    If things work out as the WB suggest, that would take a US Henry Hub buyer from the suppressed $3/mmBTU to upwards of $5/mmBTU.

    In fact, although I’ve been citing EIA, I also confess to having more confidence in their data than their forecasts.

    I tend to cite EIA because it’s neutral. Sort of like citing an NRC safety study – agree or not, they do frame the issues.

    EIA’s 2016 Annual Energy Outlook expects higher prices in the vicinity of $5/mmBTU. But EIA doesn’t see a replay of 2006-2007 and market balancing for years to come (see Figure ES-6).

    In other words, it doesn’t go up much further.

    The reason is an abundance of natural gas (see Figure Es-7), in contrast to the days when Brian Hunter and Amaranth could deal calendar spreads against limited supply.

    There’s so much gas today that EIA anticipates heavy exports (Figure ES-8). And, that’s the wild card in gas prices.

    Of course, if the US doesn’t export as much as EIA expects, domestic prices will experience price declines. Why wouldn’t the US export as much as EIA suggests?

    Well, global natural gas markets are interrelated. The US would be selling LNG into Europe to compete against pipeline gas from Qatar, Iran, and Russia. The US expects payment in USDs which are and continue to be strong relative to the Euro. Far cheaper to take Russian pipeline gas, if they don’t have enough of their own. European gas demand is down substantially today compared to 8 years ago, and it’s reflected in narrowing price spreads (e.g., US Henry Hub v. UK NBP). As prices converge, you can afford to ship it anywhere.

    My own view is I don’t think the US will export as much LNG as EIA believes. First, there is a lot of supply. Second, there is not a lot of European demand. And, the USD will remain too strong relative to the Euro. Together, those dynamics will substantially choke off traffic in the Atlantic Basin, bottling up gas in the US. If that happens, prices drop, reopening the trade but also pressuring uranium prices.

    That’s my view, a view shared by a lot of others in the market, but, we could be wrong about European supply-demand dynamics and USD strength.

    In any case, for our purposes, I don’t see your forecast that a carbon oligopoly will successfully exercise market power on natural prices as you suggest.

    BTW, EIA doesn’t seem to agree with you that a looming natural gas price increase is in our future.

    Bottom Line —

    You don’t know me, as I already observed.

    You seem curious about my motives in participating in ANS’s outreach efforts to the public. So, let me comment on that.

    ANS used to be society which put a premium on intelligent dialog. With this blog, ANS seems to recognize it needs to stop talking to itself and start engaging people outside its comfort zone.

    I suppose you are surprised that somebody might take ANS up on its outreach – and not as a cheerleader for a Federal subsidy bailed out by everyone else.

    I spent a lot of time at nukes over many years. I worked on design, backfits, overhauls, safety analysis, and rulemakings. I supported nuclear operators in a number of litigations where their business interests were on the line and helped defend individuals in legal proceedings. I think my point of view may be better informed than some others.

    You may not agree with the points I make. And, I may not make them as well you would like – each to his own.

    You may not like that I am occasionally quoted by Bloomberg, CNBC, Reuters, and various newspapers such as the NY Times which you consider “left-leaning”, as if that matters to the discussion.

    But, to be clear, the points you may not understand or agree with are not mine.

    They are the sort of things discussed in the boardrooms of nuclear operators and potential investors in nuclear technology companies.

    And, if this technology is going to have a sustainable future, I suggest its engineers might think about how nuclear power technology can exist in a competitive world – something beyond advocating yet-another government subsidy.

    Have a nice evening.

  3. Brian Mays

    Pardon if I recycle your question back to you but, remind me again why you are here?

    Stephen – Why am I here? You’re really asking me that? Well, for starters, I am a member of the American Nuclear Society and have been for about 16 years.

    Do you really think that it is unusual for someone to follow the blog of a professional society that he or she is a member of?! I’ve been following this blog and commenting here long before you showed up.

    “shill for the oil companies”? That’s pretty funny. Not the least bit factually correct which makes that comment very close to slanderous. But, admittedly, still funny albeit in a childish way.

    You started with the snarky questions. I was merely following suit — goose … gander.

    Aren’t you Stephen Maloney, a utilities management consultant, a (former?) senior risk consultant at Moody’s Analytics “with a background in LNG risk analysis,” a partner at Azuolas Risk Advisors, and a “longtime energy risk analyst in oil, natural gas, liquefied natural gas and electric power”?

    Aren’t you Stephen Maloney, coauthor of The Future of Nuclear Power in the United States, published by the Federation of American Scientists (formerly the “Federation of Atomic Scientists”), a left-leaning group? That I find quite ironic since you conclude that the key to successfully financing new nuclear power plants is “low corporate tax and capital gains rates, a strong currency, and stable growth” — the stuff championed by fiscal conservatives.

    Yes, I know that you’re a former Navy nuke and that you’ve done work for nuclear companies. But it seems like you’ve been doing work in recent years consulting for oil/natural-gas companies, associating with left-leaning groups, and offering up quotes for articles critical of nuclear power in such media outlets as the New York Times. Add in the comments that you have made here in recent months (which most people have ignored), and the way I see it, John Tucker is right — you’re just here to do some concern trolling.

    If you want to sue me for libel, go ahead … I dare you.

    If I read your points correctly, you seem to think that once smaller energy producers go bankrupt due to excess capacity, the natural gas and oil in the ground won’t be lifted again. That’s not quite how it works.

    No, you don’t understand correctly. Just like you don’t understand how thermal efficiency translates into economic costs, you’re confused about the total reserves of a natural resource and the rate at which it can be accessed, exploited, and sold.

    The price of natural gas (and oil, for that matter) depends on the rate at which it can be produced (i.e., pulled out of the ground). In fact, natural gas is even more sensitive to the rate of production than oil, since it is a hand-to-mouth kind of commodity. It is difficult to store for any prolonged period of time, it can be moved by pipelines if the pipelines are available. If pipelines cannot be used it must be converted to LNG, which has its own costs and limitations. Basically, natural gas is cheap when many people are producing it and it can be brought quickly to market.

    Look at the current situation. At least 67 U.S. oil and natural gas companies filed for bankruptcy in 2015, according to consulting firm Gavin/Solmonese. Half of U.S. shale oil producers could go bankrupt before the crude market reaches equilibrium.

    Now, please provide me with an example of a commodity market in which the price goes down as the number of producers decreases. This is ECON 101, for goodness sake!

    Market prices drive the production decision.

    Exactly. This is my entire point. Production is going to go down, because of currently low prices driving producers out of business, which will result in prices going up.

    The volatility in natural gas prices you refer to came about in the run-up to the Panic of 2008.

    Really? So the Panic of 2008 explains the volatility of natural gas prices in the early 2000’s? You’re saying that it explains the peaks in natural gas wellhead prices in in January 2001, March 2003, and October 2005?

    If you look at uranium prices during that period, you’ll observe they experienced the same volatility because the markets are correlated.

    The uranium spot price peaked in the middle of 2007. Are you saying that the “Panic of 2008″ was responsible for that to? Just how stupid do you think we are?

    One upshot from the natural gas price spike some 10 years ago was that it fueled (pardon the expression) the development of new technologies in oil and gas development. Think of those technologies as analogous to distributed generation.

    Are you talking about hydraulic fracking? Fracking has been around since 1947. It was being used commercially in the 1950’s. It’s an even older technology than the production of electricity from the energy released by fission.

    That means it will be increasingly difficult to lift energy prices in the years to come and gas-fired generation will be priced lower than today.

    Back in July, the World Bank forecast that US natural gas prices will be 52% higher in 2018 (just two years from now) than what they predict for the average for 2016. (That is, an average of $2.30 per MMBtu in 2016, $3.50 per MMBtu in 2018.)

    This is just over the span to two years. In case you didn’t notice, this discussion was about shutting down assets that could last an additional 20 years or more. Why flush these assets down the toilet, simply because there is a temporary glut in the natural gas market?

    From the perspective of the natural gas companies, this strategy makes perfect sense. As “survival of the fittest” drives the small-timers out of the market, the large gas companies will consolidate their holdings. Then, they will drive up the price of the gas by controlling their production. With the low-margin-cost producers (coal and nuclear) out of the way, finally, they’ll be able to charge what they want, because … what choice does the consumer have? Wind? Solar? Don’t make me laugh.

    Nukes are increasingly uncompetitive [sic].

    Thanks for finally explaining why you are here. That has been the theme of everything you have posted on this forum. You’re just not very good at making your case or hiding your motives, and I don’t think anyone hear is buying your nonsense. Shooting holes in your arguments is like shooting fish in a barrel. Maybe you should stick to providing quotes for the New York Times and writing for left-leaning organizations.

  4. Stephen Maloney

    Alan Medsker

    Let’s begin by agreeing where we can.

    Nobody disputes the notion of advocating a scientific approach to matters of science. I would expect ANS to advocate scientific methods in matters of science as much as its sister societies, like APS, AMS, etc.

    But the question on the table is not about science.

    It’s whether the State should coerce people to subsidize the stockholders of nuclear operating companies and ensure they meet their target rate of return in consideration for their role in the great climate crusade.

    These are not matters of science. These are matters involving the proper role of government, not to mention simple fiscal policy.

    So, if ANS wants to preserve its integrity, it might be well served to be very careful about advocating policies that principally benefit stockholders and crony capitalists.

    Unless, of course, ANS is more interested in continuing the donations from said cronies for championing their cause.

    In that case, ANS risks becoming just another hack, pushing an agenda under the guise of “science”. ANS is no longer about science.

    For a moment while reading your post, I was encouraged that, in one breath, you acknowledge that unintended consequences makes predicting market behavior a fool’s errand – forgive me if I put words in your mouth, but I suspect I’m not far from your thought.

    Reading that, I thought for a moment you might acknowledge that unintended consequences could also undermine whatever forecast “benefits” (GHG-wise) from nukes becoming foot-soldiers in the climate crusade.

    We’ve already seen with the Affordable Care Act that policy makers have a hard time accurately forecasting human response to their attempts to “bend the cost curve” on Medicaid (not unlike “bending the GHG concentration curve”).

    Of course, after failing the simpler Medicaid modeling problem, we should, nevertheless, believe we can do a better job on the much “simpler problem” of modeling global climate response to a few more nukes in the generation portfolio.

    In fairness, neither bending the GHG curve or bending the Medicaid cost curves are easy problems.

    People responsible for capital and market decisions take a great deal of time (and employ a lot of mathematics – thanks for the job, by the way) to simulate the wide range of potential outcomes from potential capital decisions.

    As you are probably aware, such models are quite rational in attempting to value a capital decision. And, can be very predictive under certain conditions. But, often not much better as you go out more than a few months.

    At best, dispersion effects reduce the time horizon for somewhat accurate models of liquid markets to well under 18 months. Anything beyond that faces increasingly hefty risk premiums because, quite simply, they’re all over the place.

    Like the health insurance claims for ACA. Or, the benefits promised by reducing GHG, perhaps, since none of those models have ever been validated before attempted as “uncontrolled experiments”.

    You seem keen on running just such an “uncontrolled experiment” in global climate engineering based on such models, recognizing you have no clue about how things might work out, if at all

    In the medical field, “uncontrolled experiments” could kill a lot of people and there are laws against doing “something” simply because people feel the need to “do something”. Policy making can be no less deadly since it’s practiced on a much larger and long scale.

    Such is where the scientific method, captured in the long-standing Hippocratic Oath to do no harm should come into play.

    And, that’s about where you lost me.

    Because, with but a mere curtsy towards protection of life, liberty, and property, and a dutiful bow to forecasting limits, you seem “all-in” to enslave people to your preferred cause – something involving “a clean energy grid” – because people are not wise enough to know better.

    Really? You are wiser and know better for my family? Or some other family?

    You also seem to conclude there are “not a lot of choices right now”.

    How does anyone come to that conclusion when you just said we can’t anticipate unintended consequences? How do you know your “clean energy grid” isn’t the worst possible policy?

    So, to your question, “make sense”, I have to say, no, not at all.

    And, even if you did, it’s not your decision. Nor is it anyone in government to decide, according to our constitution, which enumerates the specific elements of the “job description” for government.

    Thanks for sharing your opinion.

  5. Stephen Maloney

    Wow – “shill for the oil companies”? That’s pretty funny. Not the least bit factually correct which makes that comment very close to slanderous. But, admittedly, still funny albeit in a childish way.

    Well, to your points.

    If I read your points correctly, you seem to think that once smaller energy producers go bankrupt due to excess capacity, the natural gas and oil in the ground won’t be lifted again. That’s not quite how it works.

    Companies come and go in every industry – some well capitalized, some over-leveraged. In good times, they all tend to thrive. In bad times, the over-leveraged tend to default more frequently. In the case of small producers, they continue pumping to cover their interest payments whether in default or bankruptcy or not.

    But, the resource remains. It gets lifted when it’s economic and it remains as reserves when it’s not.

    Market prices drive the production decision. In the short term, market imbalances might pop a price spike and the US swing capacity kicks back into the world market. In the long term, technological development relentless drives prices downward.

    The volatility in natural gas prices you refer to came about in the run-up to the Panic of 2008. If you look at uranium prices during that period, you’ll observe they experienced the same volatility because the markets are correlated.

    There are a lot of reasons for the commodity booms and busts we see in real estate, commodities, and assets of all kinds – most of those have to do with Federal Reserve policies which I’ll spare you – unless, of course, you want to discuss that as well.

    One upshot from the natural gas price spike some 10 years ago was that it fueled (pardon the expression) the development of new technologies in oil and gas development. Think of those technologies as analogous to distributed generation.

    As energy prices collapsed (while uranium prices remain elevated), the major oil companies (and offshore producing nations like Saudi Arabia) lost pricing power and saw their valuations drop with them.

    We now live in a period with much lower marginal cost to produce oil and natural gas than we did 10 years ago.

    And, as marginal costs drop, market prices tend to stabilize since demand-supply imbalances can be corrected more quickly today than in the past. That’s one of the reasons we are seeing natural gas and oil prices remaining range-bound today in the $40-$50/barrel range.

    But, marginal production costs are still dropping, despite the range-bound pricing.

    As the US EIA reports, average well drilling and completion costs in 2015 are between 25% and 30% below their level in 2012. EIA foresees a continued downward trajectory in costs and increasing process efficiencies that will further drive down costs measured in terms of dollars per barrel of oil-equivalent ($/boe) by 7% to 22% over the next few years, depending on location.

    That means it will be increasingly difficult to lift energy prices in the years to come and gas-fired generation will be priced lower than today.

    With nukes, you face fixed costs that you are stuck with for the life of the plant. Same with the operating budget. You can cut staff only so far.

    The fuel costs are less than 10% of the annual budget. So, sure you might be “safe” from volatility but if you can’t bid a nuke into a competitive market and make a buck, you are losing money at the market clearing price.

    Rather than market risk, the risk with nukes (besides the catastrophic loss in a core damage event) is in construction costs and interest rate risk associated with the bond duration.

    Typically, you see construction costs double to quadruple over the design and construction period.

    If you can’t build a nuke at zero-bound interest rates, what makes you think you can build a nuke as interest rates rise?

    And, those risks happen at the worst time – when the plant is under construction and not generating revenue to offset the rising costs. Further, you don’t even know whether your nuke will ever make money when it comes on line in 10 years or so since you don’t know the competing price of gas generation.

    Nukes are increasingly uncompetitive. With generating capacity utilization averaging 600 basis points below the 40-year average and growing at 0.7% per year, those economics make it increasingly difficult for nuclear operators to survive.

    You may think I’m trying to sell you “foolishness” when I’m not trying to sell you anything. The numbers speak for themselves which is why nuclear operators are walking away from their core competencies – running nukes – because the numbers just don’t add up.

    To your question (“why are you here again?”) – well, I thought ANS was a technical society providing a forum for sharing information and advancements in technology, and engaging the public and policymakers through communication outreach.

    Pardon if I recycle your question back to you but, remind me again why you are here?

  6. Brian Mays

    Let’s pretend you are a born-again climate crusader and discovered a new purpose to your aging nuclear technology to offset GHG emissions from natural-gas fired capacity.

    Stephen – Let’s pretend you are not a shill for the oil companies. (I know better, because I know your history, but just for the sake of argument … ;-) )

    But, we know that natural-gas fired combustion turbines are thermodynamically more efficient than your LWR technology. Put another way, they are cheaper to build and cheaper to operate.

    No, no, no! That does not follow. Look, I could claim that dilithim crystals (from StarTrek) are thermodynamically more efficient than anything. That doesn’t matter, because unless you can obtain the dilithium and unless you can obtain it at a cost that is competitive with other sources of thermal energy, it is not going to be cheaper to operate.

    Historically, heat provided by fission has been far cheaper than heat from burning natural gas, so even with the difference in the efficiency of converting heat to electricity, fission has been more competitive and cheaper overall. Currently, there is a glut of natural gas in the market, due to the wide implementation of fracking in recent years, which has driven the price way down. Once the small companies go out of business (because they can’t recover their costs), the market will readjust and the price will go back up. In addition, the difference in price of natural gas on the US market and on the international market (which is substantial) will mean that LNG facilities will be built to exploit buy-low/sell-high. This also means that the price of natural gas will be going up.

    Another uncertainty is whether more stringent environmental regulations will be imposed by the government (which is more probable if more Democrats are elected), which will increase the price of natural gas.

    Meanwhile, the price of uranium has been solid as a rock, compared to the volatility of natural gas.

    You want to talk about risk? Letting dependable nuclear plants close and exposing yourself to the price fluctuations of a commodity with a history of high volatility is simply foolish when it comes to risk. It’s like selling off all of your blue-chip stocks and filling your portfolio with junk bonds.

    Yet, that’s exactly the type of foolishness that you’re trying to sell to us. Sorry, but I doubt that you’re going to get many takers here. So why are you here again?

  7. Stephen Maloney

    Dr. Rossin

    Nice to see you weigh in. It’s been a long time since we worked together on various nuclear safety issues. I hope you are well.

    It’s wrong and sad to see the government pick winners and losers. And, our bankrupt Federal government really can’t afford to underwrite any technology when the bill falls to hardworking people who are often struggling to make a living.

    As we know, the “Edison” plants you mention were built at a time when fuel choices were limited, demand growing at a rapid pace, and the risk of running a nuke not well understood. Easy to get 30 year mortgage bonds. Energy markets were all regulated. Rate of return regulation ruled baseload capacity decisions.

    In today’s market, utility capacity utilization is running at 79.1% – well below the 1972-2015 average of 85%. On a year-over-year basis, utilization grew a mere 0.7%.

    In short, there is substantial excess generating capacity. No need for new capacity, and a real imperative to rationalize excess capacity.

    There is also an abundance of natural gas supply. Chicago Citygate prices are in the range of $3/mmBTU.

    Generating companies like Exelon Corporation cannot afford to operate nukes to their target rate of return without offsetting their risks. They certainly cannot afford nor do they have a rational basis to embark on a 10+year project to build a nuke and compete against natural gas. There isn’t a market for 30-year bonds without paying exorbitant rates.

    All the best

  8. Stephen Maloney

    John Tucker

    You mentioned “people have said the same thing and you refuse to address it.” Not sure what you are saying.

    As for “greater efficiency on a risk-adjusted basis”, let me try to simplify the comment for you.

    Let’s pretend you are a born-again climate crusader and discovered a new purpose to your aging nuclear technology – to offset GHG emissions from natural-gas fired capacity.

    But, we know that natural-gas fired combustion turbines are thermodynamically more efficient than your LWR technology. Put another way, they are cheaper to build and cheaper to operate.

    If you are worried about the risk of climate change, you would have to adjust the efficiency of natural gas by the risk of global warming. That’s the concept of risk-adjusted.

    More generally, risk-adjusted reflects the notion that a valuation needs to be adjusted for risk. The adjustment depends on your risk appetite. In cost-benefit calculations, it’s common to take a median or mean value and we see that viewpoint reflected in PRA estimates.

    But, a more appropriate approach to risk is to use high-confidence estimates (90% or better). Even higher estimates are used when the consequences are particularly severe.

    One of the problems nuclear technology faces is a nuclear operator can’t get an adequate rate of return on her nuclear investment unless she has a lot of guarantees. First, she needs financing for upwards of a decade. Long-tenored debt like that expects a high return and a guarantee of repayment. That means you need a long-term power supply agreement which is difficult to price competitively.

    So, one way to offset the risk is to lobby your state regulator to coerce ratepayers to cover the construction costs and buy the generated power for decades to come.

    Another is to force the plant into the supply mix, just as wind operators have done – again, another vehicle for coercing people to pay for something they didn’t freely choose.

    But when you subsidize risk-taking, people tend to engage in risky behavior. In the case of banks, they behaved as if they had the government at their back subsidizing their losses. And, the government did bail them out making the stockholders whole for the losses.

    Nuclear operators currently enjoy government subsidies in the form of capping contingent claims associated with third-party damages from an accident. The 20-yr renewal of Price-Anderson caps in the Energy Policy Act of 2005 lapses in a decade. Will be interesting to see whether nuclear operators continue operating if it’s not renewed.

    Of course, adjusting your analysis for risk doesn’t stop there. Consider the cost of, say, one Fukushima at some frequency or a range of smaller events (see, for example, https://www.sciencedaily.com/releases/2016/09/160919113044.htm) You would have to adjust your nuclear benefits by the costs associated with those events. Over $500 billion from Fukushima alone – money that, if you are a climate crusader, could be used elsewhere to offset GHG.

    I think we both agree about corporate welfare – it’s morally wrong to coerce money from people to benefit nuclear operators – or crony capitalists running wind farms and solar projects. Those subsidies include coerciing people to pay for high cost wind and solar and providing government loan guarantees.

    And, frankly, it violates the constitution though that hasn’t stopped some lawmakers to date.

    I hope I addressed your question about risk-adjusted.

  9. Stephen Maloney

    Edward Klevans

    I was wondering when somebody would drag out the climate change crusade.

    Let’s pretend, for a moment, people hear the arguments for cutting CO2 production and decide they don’t want to pay for it. They would rather buy cheap energy for their own reasons.

    And, to be clear, I’m throwing in the crony capitalists with their wind and solar subsidies and government loan guarantees – this isn’t about nuclear.

    I presume you would like to dictate that they subsidize the nuclear operators, anyway.

    And, if, as I presume, you are comfortable dictating what people can and cannot do — in the name of climate change, of course — why stop there?

    Why should nuclear operators profit on that subsidy? After all, as a climate crusader, wouldn’t it be “fair” that the nuclear operators forego their profits as much as households must sacrifice in the name of the planet?

    That is, if you and nuclear operators are both serious about climate change.

  10. Stephen Maloney

    C. D. Carson:

    Regarding wind and solar, I think I already made the point that forcibly raiding household wallets for nuclear is as bad as forcibly raiding household wallets for wind or solar.

    Maybe nuclear is valuable as you suggest, or what some authors of a report may conclude. But valuable to whom? Stockholders for nuclear operators? And, under what assumptions?

    For consumers, it comes down to which energy is least cost which is enhanced when households are not forcibly subsidizing a technology (wind, solar, nuclear, and anyone else for that matter).

    Rather than deciding what’s best for households, the fact is the government has no constitutional authority deciding winners and losers. Of course, that doesn’t stop governments from rewarding cronies forcibly bailing out bankers or nuclear operators to the benefit of their stockholders.

    You might think the word “market” an evasive term. Perhaps it might be less evasive when you find yourself without the liberty to choose for yourself.

  11. Paul Cardelli

    Firs a quick disclaimer, I work for a carbon free energy generation company with hydro, Solar, Wind, and Nuclear. The last one is needed for the base load power. You don’t close a nuclear plant for short term lose, as it protects the energy market from expensive energy in the longrun, especially during the past energy crisis, which is why Washington state has some of the cheapest power in the country.

    The only reason Wind and Solar barely viable is because of its subsidies by tax payers. Solar and Wind cost twice as much as nuclear when you remove these. So when we are asking for the same treatment as our other non carbon sources, we are not taking nearly as much that is going into renewables. We are also protecting the energy production for the future, which makes helps wind and solar when the sun is not shining and the wind is not blowing. By the way I also have solar on my home, and it is only working 30% of the time with a capacity factor of 17%, Nuclear runs at 98 to 100% capacity. It takes me 2 weeks to generate 1/1000 of what our nuclear power plant produces in one day.

  12. Brian Mays

    … nuclear power is the only baseload electricity generation that doesn’t emit CO2.

    No. There’s hydroelectric.

  13. Dr. A. David Rossin

    Both parents were born in Chicago in the 1890’s. I lived in Chicago and suburbs 26 years.. A Charter ANS member, it is painful to see subsidized energy sources which could be run best with reliable nuclear baseload and backup teamed with Edison’s fleet of reliable, clean nuclear power plants.
    – – Dave

  14. John T Tucker

    Several people have said the same thing and you refuse to address it. “greater efficiency on a risk-adjusted basis” – lol. The nineties are calling too. They want their “Corporate Welfare” oversimplifications back. What a mess of concern trolling.

  15. Edward Klevans

    Stephen, unless you are a science denier who doesn’t believe in climate change produced by human beings, the real issue is that nuclear power is the only baseload electricity generation that doesn’t emit CO2. If the EPA’s Clean Energy Program is implemented it will cost the consumers of Illinois a lot of money in taxes to make up for closed nuclear power plants than to keep them operating. This is the real issue, so leveling the playing field to compensate for the huge subsidies to renewables for exactly the same purpose is very reasonable and will likely end up saving the consumers real money. The issue here go beyond simple corporate welfare if you want to be serious about the climate change issue.

  16. C.D. Carson

    Stephan Maloney, how about you take a gander at this OECD report, which lays out just how much more valuable than intermittent wind & solar generation reliable nuclear power is.

    http://www.oecd-ilibrary.org/nuclear-energy/nuclear-energy-and-renewables_9789264188617-en

    For myself, I regard electricity supply as a crucial public service, & therefore a valid object of public policy, which should not be — for purely ideological reasons, or to fatten the pocketbooks of well-placed traders — subjected to the vagaries of “the market”. Truth to tell, “market” is an evasive term in this context!

  17. Stephen Maloney

    John – assuming your questions are directed at me, you certainly make a good point about how governments at the Federal and state have intervened in markets to the disadvantage of individual liberty and choice. Whether I’m 100 years too late as you suggest or 100 years too early, economic history teaches that unsustainable markets eventually become unsustainable.

    To be clear, defenders of corporate welfare (nuclear operator edition) may successfully force the government to raise prices on Illinois households (who ultimately pay for all goods and services), even as household incomes in real terms have been flatlined for decades. But, customers don’t like seeing their costs go up and not get comparable value in return. You may also notice that Illinois households have been running away from Illinois to avoid its high cost structure (both direct taxes and indirect taxes imposed by corporate welfare).

    If I follow the logic, it sounds like the “nuclear party” has been reduced to signing petitions, carrying signs, and demanding welfare go towards nuclear corporations, not unlike bank bailouts. Rather than selling itself as “too cheap to meter”, nuclear technology is just another parasite justified by a fairness argument something like “well, the wind energy corporations get their subsidies so it’s only fair we get a piece of the customer’s wallet, too”.

    Pathetic. And, a bit sad, too.

    It just seems that if nuclear power is to be truly sustainable (and not simply pretending to be as part of some climate crusade), then it should be truly sustainable: that means profitable on a risk-adjusted basis.

    I don’t hear much from the nuclear community about driving nuclear technology towards even greater efficiency on a risk-adjusted basis. What proposals I see all begin with getting some government grant to develop a pilot that may work – or may not – all the while ensuring stockholders don’t put their own capital at risk.

    If that’s, indeed, the case, this technology is truly hopeless and only a matter of time before it runs out of other people’s money.

  18. John T Tucker

    Is it fair for the government of the American people to promote unfettered cross border transmission and outsource electricity production and energy jobs to Canada ? How about that AND raw gas resources to Mexico ? Thats whats occurring now.

    You are about 100 years too late to become critical of energy subsidies, clean energy and environmental regulation and/or tax breaks. Thats not going away. Its silly to even complain about it here in discussion of Nuclear Energy.

  19. Alan Medsker

    Stephen, I can’t speak for the ANS as a whole, but I can tell you that advocating a scientific approach, with attention to the math and to statistics, is just trying to push a rational view. It can certainly be viewed as advocating for a particular approach or technology, but this is the ANS after all, so at least some of that should be expected.

    Regarding subsidies, you are certainly correct in that they almost always have unintended consequences, especially when they are not well thought out. Nobody can predict the future, but we should at least try to anticipate as many situations as possible before legislating things like that.

    I am usually all for consumer choice, and I would certainly like for there to be a true choice that was not just an accounting trick, if it included all clean technologies (including nuclear). However, I really feel that decisions like how are we going to build and support a clean energy grid should not just be up to the consumer, who often cares about little other than cost. And the costs for REs are usually not complete when presented (storage, backup, etc.).

    But I think there are probably a lot of people here that would be fine with eliminating all subsidies (with perhaps adding a carbon fee or tax as many of us are very concerned about AGW). Unfortunately, that is not one of our choices right now, and as you know, shutting down a nuke is forever, almost certainly. So, let’s get the NGEP passed so we don’t have NPP closure hanging over our head (and a million cars’ worth of emissions appearing overnight as a result). Then we can work on more policy, preferably at the national level (at least eventually), and make that better.

    Make sense?

  20. Stephen Maloney

    Gene – if the playing field isn’t level, why pile on subsidies? Why not cut them all?

    And why can’t consumers decide what to buy on their own? I have yet to see any longterm forecast accurately price and predict supply more than in the short term. Thus, any energy policy imposed on consumers is likely to be dead-wrong.

  21. Stephen Maloney

    Brian – sure, equally valid questions about corporate subsidies and “renewables”. Spot on.

    As for whether ANS members care what I ask, frankly, I don’t know nor do I care.

    I remember a time when ANS was a scientific society which valued analysis and discussion. Back then, it didn’t engage in advocacy for a particular technology nor was it into seeking subsidies.

    But if no one can answer why corporate welfare paid for by people who are work for a living is right and fair, I don’t see how ANS’s former image can survive for very long.

    Or, how long those subsidies and corporate welfare some people demand will last.

  22. Gene Grecheck

    Stephen, because that competition is not on a level playing field. Wind and solar, for example, are so heavily subsidized (by all of us taxpayers) that they can often push their electricity into the market a negative prices, that is, they can afford to pay the market to take their electricity. They can only do that because their subsidy is greater than that payment. Subsidization of intermittent electricity sources then results in the need for heavy reliance on backup power to be available when the sun is not shining or the wind is not blowing. That backup is usually natural gas fired: meaning that once again we are relying on power sources that pollute the air and add CO2 to the atmosphere. Every time a nuclear plant shuts down, emissions go up….negating years of efforts to reduce emissions.

    There are many implications of energy choices; they must all be considered, and not just focus on short term prices.

  23. Brian Mays

    Stephen – Why don’t you ask the same thing about so-called “renewable energy”?

    Why don’t you ask the same thing about the “corporate welfare” in the form of government subsidies and government edicts (i.e., RPS’s), without which there would be no wind and solar power in the US?

    Why don’t you ask why nobody here cares about any of your comments?

  24. Stephen Maloney

    If nuclear plants cannot compete anymore with other energy sources of which there is an abundance, why is it fair and right to force people to pay corporate welfare and prop up an uncompetitive and aging technology?