White House Chronicle

News Analysis With a Sense of Humor

Nuclear Teetering on the Economic Precipice

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This will be a bleak Christmas for the small Vermont community of Vernon. It is losing its economic mainstay. The owner of its proud, midsize nuclear plant, which has sustained the community for 42 years, Entergy, is closing the plant. Next year the only people working at the plant will be those shuttering it, taking out its fuel, securing it and beginning the process of turning it into a kind of tomb, a burial place for the hopes of a small town.

What may be a tragedy for Vernon may also be a harbinger of a larger, multilayered tragedy for the United States.

Nuclear – Big Green – is one of the most potent tools we have in our battle to clean the air and arrest or ameliorate climate change over time. I've named it Big Green because that is what it is: Nuclear power plants produce huge quantities of absolutely carbon-free electricity.

But many nuclear plants are in danger of being closed. Next year, for the first time in decades, there will be fewer than 100 making electricity. The principal culprit: cheap natural gas.

In today’s market, nuclear is not always the lowest-cost producer. Electricity was deregulated in much of the country in the 1990s, and today electricity is sold at the lowest cost, unless it is designated as “renewable” — effectively wind and solar, whose use is often mandated by a “renewable portfolio standard,” which varies from state to state.

Nuclear falls into the crevasse, which bedevils so much planning in markets, that favors the short term over the long term.

Today’s nuclear power plants operate with extraordinary efficiency, day in day out for decades, for 60 or more years with license extensions and with outages only for refueling. They were built for a market where long-lived, fixed-cost supplies were rolled in with those of variable cost. Social utility was a factor.

For 20 years nuclear might be the cheapest electricity. Then for another 20 years, coal or some other fuel might win the price war. But that old paradigm is shattered and nuclear, in some markets, is no longer the cheapest fuel — and it may be quite few years before it is again.

Markets are great equalizers, but they're also cruel exterminators. Nuclear power plants need to run full-out all the time. They can’t be revved up for peak load in the afternoon and idled in the night. Nuclear plants make power 24/7.

Nowadays, solar makes power at given times of day and wind, by its very nature, varies in its ability to make power. Natural gas is cheap and for now abundant, and its turbines can follow electric demand. It will probably have a price edge for 20 years until supply tightens. The American Petroleum Institute won't give a calculation of future supply, saying that the supply depends on future technology and government regulation.

Natural gas burns cleaner than coal, and is favored over coal for that reason. But it still pumps greenhouse gases into the atmosphere, though just about half of the assault on the atmosphere of coal.

The fate of nuclear depends on whether the supporters of Big Green can convince politicians that it has enough social value to mitigate its temporary price disadvantage against gas.

China and India are very mindful of the environmental superiority of nuclear. China has 22 power plants operating, 26 under construction, and more about to start construction. If there is validity to the recent agreement between Chinese President Xi Jinping and President Barack Obama, it is because China is worried about its own choking pollution and a fear of climate change on its long coastline, as well as its ever-increasing need for electricity.

Five nuclear power plants, if you count Vermont Yankee, will have closed this year, and five more are under construction in Tennessee, South Carolina and Georgia. After that the new plant pipeline is empty, but the number of plants in danger is growing. Even the mighty Exelon, the largest nuclear operator, is talking about closing three plants, and pessimists say as many as 15 plants could go in the next few years.

I'd note that the decisions now being made on nuclear closures are being made on economic grounds, not any of the controversies that have attended nuclear over the years. 

Current and temporary market conditions are dictating environmental and energy policy. Money is more important than climate, for now. — For the Hearst-New York Times Syndicate

Europe and Its Slippery Energy Slope

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BRATISLAVA, Slovakia — Europe, at present the world's largest market and largest economic bloc, is decline and living standards are in danger. That was the sober message at an energy conference here, delivered by a battery of speakers from across eastern Europe.
 
The narrative is that energy is what is dragging Europe down – not low birthrates and pervasive social-safety networks, but increasing dependence on expensive energy imports and hopelessly tangled markets.
 
Although delegates gathered to discuss the particular problems of eastern Europe, many had comments about the energy dependence across Europe; its labyrinthine regulations in nearly all 28 countries, its inability to form capital for large projects like nuclear, and governments intruding into the market.
 
The result is a patchwork of contradictions, counterproductive regulations, political fiats and multiple objectives that leave Europeans paying more for energy than they need to and failing to develop indigenous sources, such as their own shale gas deposits in Ukraine and Poland. It also leaves countries dependent on capricious and expensive gas from Russia, unsure of whether they can build needed electric generating plant in the future and poorly interconnected, sometimes by both gas pipelines and electric lines.
 
Good intentions have also had their impact. The European Commission has pushed renewable energy and subsidized these at the cost of others. The result is imperfect markets and, more important, imperfectly engineered systems.
 
Germany and other countries are dealing with what is called “loop flow” – when the renewables aren't performing, either because the wind has dropped or the sun has set, fossil fuels plant has to be activated. This means that renewable systems are often shadowed by old-fashioned gas and coal generation that has to be built, but which isn't counted toward the cost of the renewable generation.
 
With increasing use of wind, which is the most advanced renewable, the problem of loop flow is increased, pushing up the price of electricity. Germany is badly affected and the problem is getting worse because it heavily committed to wind after abandoning nuclear, following the Fukusima-Daiichi accident in Japan.
 
Frank Umbach, associate director of the European Center for Energy and Resource Security at King's College, London, said energy costs in Germany are now driving manufacturing out of the country and to the United States.
 
Umbach said that as Britain de-industrialized 15 years ago, Germany was beginning to go the same way. He said Britain had been able to sustain itself through financial services and other service sector jobs, but that was not a prospect for Germany, the industrial mainstay of the European Union. Now Britain, with its new nuclear policy, is trying to re-industrialize, he said.
 
Umbach urged that Europe get serious about shale gas and even burning coal. His argument was that there are environment safeguards available and that more are being developed, such as the new less environmentally assaulting techniques in hydraulic fracturing (fracking) used to extract tightly bound natural gas from shale formations.
 
Several speakers said the region has to face the reality that it is no longer able to generate the capital it needs for liquefied natural gas terminals, nuclear power plants and unconventional gas recovery in Ukraine, Poland and in the Black Sea offshore Romania and Bulgaria.
 
Many countries, particularly in eastern Europe, still balk at foreign ownership of their energy infrastructure and have actively driven away investment. Poland, for example, has frightened off shale gas developers from the United States by insisting that as the resource is developed, 50 percent of the developing company must be ceded to the state. The companies left.
 
In other places, the Czech Republic, for example, landowners have no claim to the resource under their land; that remains the property of the government and, therefore, they are hostile to any development on their property, whether it is for oil, gas or minerals.
The United Kingdom, by contrast, declared a spokesman for its energy ministry, Hergen Haye, is open for business. That means if the Americans, the Chinese of the Middle Easterners want to “buy into” Britain's new nuclear undertaking, “they are welcome.”
 
Europe's sad energy situation was summed up by Iana Dreyer of the EU Institute for Security Studies. She said Europe is still the largest trading bloc in the world, the largest economic machine and the largest market, but that it is slipping. By 2030, she calculated, Europe will have slipped to No. 3, behind the China and the United States, unless it can untangle its energy Gordian knot.
 
Europeans here cite the United States as the way to go in energy. It makes a body feel good. — For the Hearst-New York Times Syndicate

New Oil Discoveries Threaten Obama’s Energy Strategies

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“When an irresistible force such as you

“Meets and old immovable object like me

“You can bet just as sure as you live

“Something’s got to give …”

— Johnny Mercer

When Johnny Mercer penned those words, he was speaking of love not politics, and not the politics of energy. But he could have been.

In energy, there are two great forces that collide: public policy and the market. Despite the love affair of recent decades with markets, neither is always right.

Consider the struggle between old energy –market-tested and with a mature infrastructure — and new, alternative energy.

Public policy, under Republicans and Democrats, has sought to discourage the nation’s ever-greater dependence on imported oil (about 60 percent). But the market has sung a siren song, tempting us to more oil consumption.

Back in the 1970s, when we imported only 30 percent of our oil, the country was frightened into making great efforts in research and development to find alternatives to oil. Most of those concentrated on oil substitution and new ways of making electricity. None of the new ideas penetrated the market in any serious way, with the possible exception of wind, and that took many years to gain general acceptance and to overcome institutional and technical issues.

The Big Enchilada, oil, proved to be recalcitrant. President Jimmy Carter wanted to make it from coal; a nascent ethanol industry was tentatively testing the forbearance of government in seeking tax breaks and subsidies.

The search for a way out began after the Arab oil embargo of 1973-74, and reached a zenith with the Iranian Revolution of 1979. Many well-intentioned programs were undertaken, concentrating primarily on coal — coal as a gas, coal as a fluid and the improved combustion of coal.

But it was then, as it is now, a wild time for new entrants. Dozens of projects were funded including magneto-hydrodynamics, in situ coal gasification, garbage to electricity, battery research, cryogenic transmission research and energy storage in fly wheels.

Some, if not a majority, of the projects were pure science fiction.

The energy establishment favored not so much the new as the duplicative. Its members leaned to coal, oil shale, more oil and gas leasing and more nuclear. The old Mobil Oil Company paid a whopping $212 million for a Colorado oil shale lease without regard to how it could be worked.

Across the Southwest, banks lent to every energy project that came through the door. Natural gas got short shrift because it was wrongly thought to be a depleted resource.

Then in the mid-1980s, Saudi Arabia opened its oil spigot all the way (10 million barrels a day) and the market annihilated expensive energy from new sources. With gasoline cheap again, SUVs hit the roads in giant numbers; a string of Southwest banks collapsed; and the energy debate turned not to changing consumption but to deregulation, facilitating profligate use across the board.

The market spoke and it shouted down concerns about national security or technological substitution. Public policy surrendered to the market. Despite fine speeches from secretaries of energy on the danger of exporting our security and our money, the market continued its advocacy of excess.

The George W. Bush administration identified our vulnerability in oil and identified a looming crisis in electricity. But it faltered when it came to government coercion of markets; for example, getting more nuclear plants built.

Bush himself fell for the temptations of ethanol from corn and the possibility of switch grass. Now these are under threat from new discoveries of oil off Brazil and far greater estimates of oil production from Iraq. In fact, Iraq is being touted as a rival to Saudi Arabia with Brazil right behind it.

The Obama administration is hell-bent on getting off old energy. It loves “alternatives” and it’s committed to doing something about global warming.

But in research, money does not equal results. While the Department of Energy is chock full of money for new energy research and development, cheap natural gas and new potential oil from unexpected quarters may do to Obama’s new energy hopes what it did to Carter’s: undermine and expose them to ridicule.

Public policy may again be pushed around by the irresistible force of the market, even if it is not serving the national interest.