NEW YORK (Reuters Breakingviews) -Nuclear power received what seem like two plum gifts for 2023. High energy prices and the desire to decarbonize have spurred renewed interest in the technology that provides about 10% of the world’s electricity supply. Yet a surging supply of green power is likely to limit any renaissance.
There are 425 active reactors worldwide, according to the World Nuclear Association, about the same as three decades ago. Plants have opened in places like China and closed in Western countries.
Nuclear plants are expensive to build, and their complexity often causes projects to go way over budget. Plant Vogtle in the state of Georgia will be America’s first since the 1990s when finished in 2023. The $30 billion price tag is twice the initial estimate. Reactor opening delays in Finland and China show difficulties transcend borders.
The cost of a new nuclear power station is around $168 per megawatt hour according to Lazard. An efficient gas plant costs about a third as much, and solar and wind about one-fifth as much. So there’s little incentive to build. Running existing nuclear plants makes sense. A depreciated plant costs around $29 per MWh, reckons Lazard. And power is available rain or shine, day or night.
This reliability is the big reason there are 55 plants under construction, despite the cost, as wind and solar power currently need backup. Yet that appeal is limited. Over the past decade, green power production, excluding hydropower, has grown 15% annually worldwide according to BP’s Statistical Review of World Energy. Nuclear production was unchanged. China has 22 nuclear reactors under construction, but built renewables about twice as fast.
The price discrepancy keeps widening as wind and solar get cheaper, while nuclear hasn’t budged. Moreover, the cost of storing power in batteries is plummeting. NextEra Energy, America’s biggest deployer of green energy, estimates that by the late 2020s, wind and solar tied to batteries will be about as reliable as other sources during peak hours, but for roughly half the cost of depreciated nuclear or gas plants, and about one-seventh that of a new, small nuclear plant.
Shareholders may yet get some juice from nuclear players like $10 billion uranium producer and wannabe reactor servicer Cameco. But wind and solar power’s burgeoning advantages have $172 billion NextEra and its rivals looking more plugged in.
Follow @rob_cyran on Twitter
(This is a Breakingviews prediction for 2023. To see more of our predictions, click here.)
Vogtle 3 and 4 will be the first new nuclear reactors built in the United States in more than three decades. The reactors in Georgia should produce power commercially in 2023 and are owned by a consortium of utilities including Georgia Power, Oglethorpe Power and others.
The two reactors were initially scheduled to enter operation in 2016 and 2017.
(Editing by Antony Currie, Thomas Shum and Amanda Gomez)
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.