by Amanda Chu • 7 December 2023
Good morning and welcome back to Energy Source, coming to you from New York.
Crude prices fell to multi-month lows yesterday as record US oil production helps to keep prices down. West Texas Intermediate, the US benchmark, slid below $70 for the first time since July. Brent crude, the international benchmark, slipped to the lowest since June, my colleagues Myles McCormick and Jamie Smyth report.
In Dubai, the UN climate talks are in full swing. After a blizzard of lofty commitments, countries are now in the thick of negotiations to reach a final agreement on how to get the world on track to 1.5C. As our Moral Money colleagues wrote yesterday, the COP28 battle lines have become clear, with the option for a fossil fuel phaseout still on the table.
Meanwhile, ExxonMobil announced yesterday that it will increase its capital expenditures over the next four years to boost oil and gas production and spending on low-carbon projects. The announcement comes days after chief executive Darren Woods told the FT that the UN climate talks have focused on renewable energy for too long.
Woods’ participation at COP28 marks the first time an Exxon chief executive has attended the event. Oil and gas representatives showed up in force this year at COP, outnumbering most of the national delegations in attendance, my colleague Kenza Bryan reports.
Today’s newsletter looks at the prospect of nuclear power in the fight against climate change. While global excitement for the fuel is growing, two new reports this week have injected some realism into the expectations for the low-carbon energy source. Plus, we have a new documentary on how US President Joe Biden’s landmark climate law changed the world. New numbers from Rhodium Group today show investment in the US in clean energy and transport is up 42 per cent year over year.
Thanks for reading,
With five days left at COP28, the jury is still out on whether this year’s UN climate talks will achieve real progress to address climate change.
But one thing is clear: the spotlight is on nuclear power. The low-carbon fuel has received an unprecedented amount of attention at this year’s gathering, with nearly two dozen countries including the US, UK, and United Arab Emirates signing a declaration over the weekend to triple nuclear energy by mid-century.
Whether the world can deliver on these nuclear promises is questionable — the sector is notorious for high construction costs and lengthy project timelines, not to mention hazardous waste. Despite the hype around the fuel in recent years, global nuclear power generation declined 4 per cent year over year in 2022 to its lowest level in four decades, according to a new World Nuclear Industry report, calling the COP28 target “highly unrealistic”.
“Nuclear energy is riding a new wave of popularity, and is seen by many policy planners and energy experts as part of the solution to reducing carbon emissions . . . However, given its long lead times and exorbitant costs the prospect of this happening is virtually zero,” wrote Stephanie Cooke, an opinion columnist for Energy Intelligence, in the report’s forward.
A report released today by Columbia University’s Center on Global Energy Policy also warned about the uncertain economics of nuclear in the US, arguing if the country does not get its nuclear costs under control, the fuel will play a “marginal role” in the country’s energy transition.
The CGEP report looked at studies on US reactor construction and found average construction times exceeded 10 years. Price tags also ranged widely from $3,000 to $6,200/kW. If future costs trend much higher, nuclear power is “unlikely” to play much of a role in the US power sector.
Cost for construction in China and India, meanwhile, are more than 40 per cent cheaper, according to data from the International Energy Agency.
“This may be a make-or-break period for whether nuclear energy expands into a significant player in terms of helping to meet US decarbonisation goals,” wrote the CGEP researchers. “Some other countries have done a better job managing reactor construction and . . . appear able to deploy reactors at lower cost.”
The US is the global leader in nuclear power, generating nearly a third of the world’s production, according to the World Nuclear Association. But recently, countries such as China and Russia are catching up. The countries are among the top 10 when it comes to reactor capacity under construction, making the race to deploy nuclear power not only a matter of decarbonisation but also geopolitics.
The IEA expects China to surpass the US to become the leading nuclear producer before 2030. Nuclear power plays a “significant” role in the IEA’s net zero pathway, with capacity expected to double by 2050.
Stronger decarbonisation policies with clear support for nuclear will help bolster the fuel’s role in the US energy transition, said CGEP. Biden’s signature climate law, the Inflation Reduction Act, included a 30 per cent tax credit to help offset the price of deploying nuclear power.
While attention has been focused on small modular reactors to drive down construction costs and timelines for nuclear, prospects for SMRs remain “questionable” and are unlikely to be scaled before 2030, said the World Nuclear Industry. NuScale Power, a US developer, shelved its SMR project in Idaho after costs ballooned 75 per cent. No SMRs are currently in construction in the western world.
“If this effort doesn’t succeed, when is there going to be another effort in the future?” said Matt Bowen, one of the authors of the CGEP report. “In terms of nuclear being able to play a role in contributing to decarbonisation efforts, we’re sort of running out of runway.”