5 February 2013

The Wall Street Journal (US): The Real Deterrent to Nuclear Power

The Wall Street Journal

HEARD ON THE STREET
Updated February 5, 2013, 12:40 p.m. ET

By LIAM DENNING

Long before they consume even a pound of uranium, nuclear-power plants burn through copious quantities of cash. That handicap was laid bare, once again, on both sides of the Atlantic this week.

On Tuesday, Duke Energy said it would decommission its Crystal River nuclear-power plant in Florida rather than pay a repair bill estimated last October at more than $3 billion. The day before, Centrica pulled out of a new nuclear project in the U.K., writing off £200 million ($315 million) in the process.

Unlike a gas-fired plant, the bulk of a nuclear-power station’s costs relate to construction and maintenance. A megawatt of new nuclear capacity can cost five times as much, and take five times longer to build, than a gas-fired one. Little wonder Duke is considering building a new gas-fired plant to replace Crystal River.

Gas aside, the central problem is that, even in today’s zero-interest-rate world, the economics of sinking billions of dollars into a new nuclear plant years before it generates a cent of revenue still don’t seem to add up for most companies. Big upfront cash outflows combined with uncertainty over future inflows—and the risk of accidents—don’t win many fans among investors or credit-rating firms.

The World Nuclear Industry Status Report 2012, published last July, found that of 59 reactors listed as “under construction,” 13 had been classified that way for 10 years or more.

Not coincidentally, 44 are being built in the BRICs: Brazil, Russia, India and China. Those markets are characterized by varying degrees of fuel-price subsidies and heavy state involvement in infrastructure. In other words, new nuclear works best in countries where consumers and financiers are shielded from its full costs—hardly the best basis for the industry’s ever-elusive renaissance.

Write to Liam Denning at liam.denning@wsj.com