Retired Exelon CEO John Rowe
Nuclear power is no longer an economically viable source of new energy in the United States, the freshly-retired CEO of Exelon, America’s largest producer of nuclear power, said in Chicago Thursday.
And it won’t become economically viable, he said, for the forseeable future.
“Let me state unequivocably that I’ve never met a nuclear plant I didn’t like,” said John Rowe, who retired 17 days ago as chairman and CEO of Exelon Corporation, which operates 22 nuclear power plants, more than any other utility in the United States.
“Having said that, let me also state unequivocably that new ones don’t make any sense right now.”
Speaking to about 5o people at the University of Chicago‘s Harris School of Public Policy, Rowe presented a series of slides comparing the economic viability of various energy portfolios, including the “King Coal” scenario favored by Republicans, the “Big Wind” scenario favored by Democrats, and a “Playing Favorites” scenario that shuffles and selects from various energy sources.
All were trumped by a portfolio that relies heavily on America’s sudden abundance of natural gas, which has flooded the market since the boom in hydraulic fracturing of shale gas. Natural gas futures dropped to a 10-year low today—$2.15 for 1,000 cubic feet—on abundant supply, the Associated Press reported.
“I’m the nuclear guy,” Rowe said. “And you won’t get better results with nuclear. It just isn’t economic, and it’s not economic within a foreseeable time frame.”
Nuclear power remains a favorite of the Obama Administration, particularly in the form of small and modular new reactors. But Rowe’s pessimism about nuclear power reinforces statements made by other nuclear experts since the Fukushima nuclear accident in Japan.
However, Rowe did not touch upon the political vulnerability of nuclear power since the Fukushima accident. His argument was economic and, he added, paints a picture that Exelon itself does not savor.
Former ComEd CEO Tom Ayers built Exelon’s reactor fleet because, Rowe said, he thought they were best for the environment. But Ayers was suffering from Alzheimer’s Disease by the time the reactors broke even on their initial cost. He died in 2007.
“I’m not fond of investments that don’t pay off before I’m incapable of comprehending it,” said Rowe, who took over as chairman and CEO of Exelon in 2003.
Rowe also served on the president’s Blue Ribbon Commission on America’s Nuclear Future.
Comments
Fascinating. And honest. I heard Amory Lovins of the Rocky Mountain Institute speak at a cleantech conference in San Francisco yesterday. He noted that even with the promise of federal loan guarantees, no private dollars have been raised for any of the 34 planned new nuclear plants. Business and investors appear to agree with John Rowe.
As of today, there are 2 plants with construction licenses, of which 0 have loan guarantees. So Lovins is dividing 0 by 0, and claiming the result is significant.
Do you have the slides or the numbers (cost per megawatt) he raised? The nonsensical economics of nuclear have been an issue for a while, but to have such a high level exec speak of it is tremendous.
He didn’t offer a slide for nuclear. But he did quote some numbers, which you’ll find in this related post:
Fracking Gas Is Writing America’s Energy Policy
He puts nuclear with wind at roughly double the current cost, per 1,000 BTU, of gas.
That statement is ambiguous, since BTUs of gas can’t be directly compared to MWhs of electricity. Even efficient combined cycle gas plants have an electrical efficiency of slightly over 50%. Furthermore, gas plants can be easily controlled, while nuclear plants should constantly run on maximum power and solar and wind are subject to weather. And in cold climates gas plants can provide district or industrial heat in CHP mode, making comparison even more complex.
Hi Jeff!
Maybe Mr. Rowe isn’t aware of this:
“Japanese Breakthrough Will Make Wind Power Cheaper Than Nuclear”
http://www.mnn.com/green-tech/research-innovations/blogs/japanese-breakthrough-will-make-wind-power-cheaper-than-nuclea
It takes a lot of guts for a nuclear guy to admit such a change in economics. I wish the leaders in the small country of Finland would have the same courage. The construction of the 1600MW reactor in Olkiluoto was supposed to start the rennaissance of nuclear in 2003, but both budget and schedule have have doubled since. Commissioning is now projected to 2014, but that figure has been postponed on a regular basis.
In spite of all the nuclear plans shelved globally, the illusion of cheap nuclear still prevails in Finland. Another 2 large projects are opened for tender, and a third in the pipeline. For a small nation of 5 million, blind faith in old economics could prove expensive.
Henrihorn, Mr. Rowe’s comments are applicable to the United States, only because of an unprecedented supply of domestic natural gas that has driven prices down here. Although Finland might eventually be able to import liquefied natural gas from the United States, or maybe the cost of natural gas imports from Russia may be a little lower, this still doesn’t mean that nuclear is not a great source of energy for Finland. Like France, Finland has had much success with nuclear energy so far, despite the contruction delays for the unit they are currently building.
Michael Stuart,
you are correct with respect to gas prices. My concern on the nuclear debate in nuclear-promoting countries like Finland and France, is that any bad news on nuclear economics is routinely dismissed, saying ‘that could never happen to us’.
Fukushima did not have much impact on attitudes towards nuclear safety, nor have recently scrapped projects in the UK or Bulgaria caused any doubts on economic feasibility. France and Finland have much lower estimates on LCOE for nuclear than other countries, although their recent experience in Flamanville and Olkiluoto have shown prior calculations to be too optimistic. The need for taxpayer involvement is vehemently denied, while the USA and UK admit that no new plants will be built without government support, and AREVA has made significant losses in both countries, to the expense of the taxpayer.
I have no doubt that gas is cheaper than nuclear – at the moment – but given the widespread financial crisis that seems to have touched most of Europe, combined with France deriving between 70 and 80% of it’s electricity from nuclear, it has to go for something that France still has the lowest wholesale price of electricity in the EU. Where are they hiding these exorbitant costs?
Yes, I know there are lots of other economic factors involved, but all things considered, I believe that the capacity factors of nuclear, coupled with their 60 year initial license, makes nuclear power plants akin to installing LED lighting in a house. You wouldn’t go out and buy a bunch of them all at once. They’re expensive. But they run cheaply for a very long time, thereby paying for themselves in the long run.
Henrihorn,
While at lunch just now, my brain started working a little better and I realized that I had left out an important piece of information:
Having been to Finland and spoken to many of the people there, including citizens, nuclear workers, and policy-makers, Finland’s choice of nuclear is both pragmatic and personal for them. One of the major factors behind their decision was to become less reliant on Russia. I can tell you from first-hand experience that the decision is much less based on “the illusion of cheap nuclear” than breaking their dependence on energy from Russia. What other choices for baseload power are available to the Finnish?
Remember every nuclear reactor is a huge target, I believe that any use of nuclear from now on would be too risky since NO Country can afford a Trillion Dollar Eco-Disaster like Fukushima.
Germany will lead the Planet toward a non Nuclear future because it will be SAFE and RISK-Free unlike current nuclear are.
Benefits of Solar (of all flavors):
✔ Less costly to build
✔ ZERO RISK OF A MELTDOWN
✔ No Trillion Dollar Eco-Disasters
✔ Faster to construct
✔ CLEAN from start to finsh.
✔ No radiation worries or leaks
✔ No foreign dependency
✔ Prices dropping yearly
✔ Creates green jobs
✔ No nuclear cleanup expenses
Michael Stuart,
Glad to hear you visited the place, I really hope you enjoyed. Having studied and worked on nuclear technology in Finland I can say from first hand experience that any number of domestic NPPs will never end the import of cheap electricity from Russia. In terms of price, nothing can beat good old communist nuclear power.
Energy dependence is one of the issues frequently raised by the nuclear industry, but ending Russian electricity imports was never explicitly promised. Only in 2010 was it admitted, that additional generation capacity in Finland will not contribute towards lower imports from the east, but higher exports to the east and south. That is why E.On from Germany is now actively involved in building nuclear in Finland, to bypass the democratic decision to phase down nuclear in Germany.
In 2000 the illusion of cheap nuclear power in Finland was based on a study by one pro-nuclear university professor, who assumed a plant price of 1760€/kW and did not consider the risks of delays, litigation or technical difficulties. So politicians allowed the notorious OL3 project to start in 2001, backed by promises on profitability, completion by 2009 and minimum 50% domestic labor.
Now, 11 years later, as the true cost of construction has doubled, domestic labor is about 30%, lost production stands at 3b€ and projected commissioning at 2014, lawsuits of 2b€ are on the table and the automation system still doesn’t meet safety regulator requirements, that study seems quite naive. Fortunately the French taxpayers will pick up most of the bill, this time.
In 2008, that ‘official’ Finnish estimate for overnight price was at 2750€/kW, with a 20% safety margin (Moody’s estimate was about 4000€/kW), and still no allowance for risks. Well, the politicians believed, again, so since 2010 two new projects are underway.
With all the problems already experienced, and similar difficulties reported around the world, do you really think it is ‘pragmatic’ to start 2 huge new construction projects in a small country, amidst this economic crisis, putting a total bet of about 15b€ on a risky technology that many advanced nations are quickly abandoning?
The “long run” may prove illusory.
All of the Canadian nukes needed costly retubing at around the 25-year mark. Since the work was being done on a radioactive device, the retubing often cost more than the original reactor.
Three-Mile Island only operated for 3 months before it effectiv ely destroyed itself . . .
I forgot the name of the New England reactor which was dismantled after about 5 years of operation – probably because it was far cheapert to buy hydroelectricity from Hydro Quebec’s huge development on the shores of James Bay.
A great many nuclear reactors will have to struggle on to their full 60-year lives to balance the short lives of thise which didn’t make it. That’s probably why private money is not flowing to nuclear – the profit is decades away, and only if the machinery actually continues to run!
Michael Stuart,
I realise I did not respond to your question. ‘Base load’ implies that both electricity production and consumption are always constant, but that is true only for nuclear power feeding the process industry. So I avoid that terminology. In every other combination, especially distributed generation the situation is more dynamic, both demand and supply flex. Furthermore, in the case of oil the dependence on Russia is even more severe, but in national debate that is not taken as seriously.
Why would a country of 5 million need 7 nuclear reactors, 3 of which exceed 1.5GW? That is the world record. Finland has one of the highest per capita electricity consumption (17MWh/a) in the world, and about 60% goes to the heavy industry, mostly pulp/paper and steel. Of course, the industry claims growth and demands more capacity. The truth, however, is that both paper and steel industries suffer from global oversupply and will not grow as envisaged.
Paper is simply a bad product. As electronic communication replaces paper, global demand drops, tropical pulp is cheaper and Chinese competition kicks in, paper production in Finland (90% of which is exported) will decline. So will electricity consumption. The industry is already experiencing transformation to lower energy intensity, with bioenergy production seen as a potential solution. The market leader, UPM, owns lots of energy generation capacity and actually made more profit selling surplus electricity than selling paper products.
Steel is a bulk product and highly susceptible to global recessions. Energy prices are not the only problem for this industry, since the steel plants also have enormous CO2 emissions, making them the first to suffer when combating climate change. Furthermore, the main markets are increasingly far away. Some stainless steels have 60% of production costs going to electricity bills, so it is natural for them to make a high risk investment that might result in low-unit-cost stable electricity supply. Perhaps tax breaks, other subsidies and focusing on specialised steels will help, but I doubt the long-term prospects of growth.
Residential consumption has also been high. Building codes have not been as strict as in Scandinavian countries, and direct electric heating is popular. That will change with new efficiency codes. Electricity prices are among the lowest in Europe, and if prices rise heat pumps, wood pellets and district heating will displace direct electric heating.
It is possible to decouple economic growth and energy consumption, like Sweden and Germany have proven. In Finland the energy-intensive industries have much influence, and high energy consumption is still seen as a positive sign. Education is a matter of pride, so I would like to see domestic innovation in technologies that benefit all the world, not only those rich countries that are privileged to go nuclear.