Wednesday, February 2, 2011

Nuclear Reluctance

About a year ago President Obama offered $55 billion to encourage the construction of a new generation of nuclear energy reactors. A year later, little progress has been made.

"One of the big problems with nuclear power is the enormous upfront cost. These reactors are extremely expensive to build. While the returns may be very great, they're also very slow. It can sometimes take decades to recoup initial costs. Since many investors have a short attention span, they don't like to wait that long for their investment to pay off.

The costs are also sometimes volatile. So you've got a situation where investors finally agree to endure a project with a long time-horizon for break-even, and then the costs go up. It's pretty easy to see why they would be unhappy.

But that's not all: at this time, other forms of energy are relatively cheap. Natural gas is plentiful and inexpensive. So it's hard for energy companies to sell a future source of nuclear energy when present sources are doing the trick for cheap."

But what happens when the price of fossil fuels continues to go up? Expensive wind and solar projects also need to be part of an energy plan.

It's interesting that nuclear energy is more environmentally friendly than burning the fossil fuels of coal, oil, and gas. But a new nuclear reactor hasn't been built in the U.S. since 1974 and the accident at Three Mile Island in 1979 discouraged their consideration ever since. It appears that a nuclear renaissance in power generation in the U.S. is still in the distant horizon.

From reports by The Atlantic and NYT.