Record US gas prices breathe life into nuclear power

["Sandy Perle" <sandyfl@earthlink.net>]

Record US gas prices breathe life into nuclear power

NEW YORK, Jan 25 (Reuters) - Record high U.S. natural gas prices and 
power blackouts in California this winter have some thinking the 
unthinkable: Tapping nuclear power to meet the country's rapidly 
growing electricity needs. 

While no one is expecting a raft of new nuclear power plants any time 
soon -- none have been built here since 1978 -- the recent spike in 
gas prices has put nuclear power back in play. 

Nearly every power plant being built here is gas-fired, boosting 
competition for already tight fuel supplies. 

"One of the main things holding back nuclear power has been cheap 
natural gas, but with gas prices this high, the nuclear option is 
back on the table. People are running the numbers to see if it makes 
sense," said John Redding at General Electric's <GE.N> GE Nuclear 
Energy division in San Jose, Calif. 

Twenty years ago the nuclear industry was plagued by cost overruns 
and safety concerns. 

Today, under better and safer management practices, nuclear power 
plants produce electricity about 90 percent of the time at a cost of 
1.83 cents per kilowatt hour (KWh), outperforming fossil fuels like 
coal, oil or natural gas. 

"It does not make much sense to have all your energy eggs in one 
basket. We support a balanced approach to energy policy with a mix of 
fuels," said Vaughn Gilbert, public relations manager of British 
Nuclear Fuel's (BNFL) Westinghouse Electric Co. in Pittsburg, Pa. 

Industry experts expect most, if not all, of the nation's 103 nuclear 
plants to extend their operating licenses for 20 years. But some 
utilities are taking a further look at nuclear power, particularly if 
they are able to build at existing sites and use a standardized 
design that could streamline the lengthy licensing process and cut 
construction expenditures. 

"The best place to go (to build) is where you already have sites. 
Those communities are generally supportive and the local work force 
is skilled," Westinghouse's Gilbert said. 

Westinghouse, one of the nation's largest suppliers of nuclear power 
products and services, had a standardized design for a 600 megawatt 
nuclear plant approved by the Nuclear Regulatory Commission (NRC) in 
1999. 

NO GREENHOUSE GAS 

Nuclear plants currently supply about 20 percent of the nation's 
power, with coal still the biggest provider at more than 50 percent. 
Gas comes in third at about 17 percent. 

With stricter environmental laws likely to keep upward pressure on 
fossil fuel operating costs, analysts said nuclear power is likely to 
become increasingly competitive. 

While the advantages of nuclear have always been obvious to some -- 
cheap, stable fuel costs and no greenhouse gas emissions --  
regulatory hurdles that drag out the permitting process and 
environmental concerns over disposing radioactive waste fuel still 
make nuclear a risky option. 

But that may be changing. 

"The biggest hurdle is the uncertainty in the licensing process and 
we're working with the NRC to ensure that the licensing process is 
more efficient. We also hope to get a decision soon on a nuclear 
waste depository," said Marvin Fertel, senior vice president at the 
Nuclear Energy Institute (NEI), a Washington, D.C.-based policy 
organization for the nuclear power industry. 

MAKING A BIG BET ON GAS 

There are some 300,000 megawatts of proposed new power generation 
planned for this decade, almost all fueled by gas because it is 
considered environmentally-friendly and plant construction costs are 
cheaper than other alternatives. 

A new combined cycle gas-fired plant can can be built for $500-600 
per kilowatt and produce electricity at a total cost of 3.5-4.5 cents 
per KWh, assuming gas prices of $3-4 per million British thermal 
units (mmBtu). 

But Henry Hub gas prices last year averaged more than $4 per mmBtu 
and projections for 2001 are in the $5-6 range. 

In contrast, a new standard design nuclear plant can produce power at 
about 4.5 cents per KWh assuming capital costs of about $1,500 per 
kilowatt. 

Some industry experts said power suppliers may be making a big bet on 
the clean-burning fuel that may not pay off, noting current growth 
rates in production and pipeline capacity may not keep up with 
rapidly rising gas demand. 

MIX OF FUELS MAY BE THE ANSWER 

GE Nuclear's Redding said a mix of options, including nuclear may be 
the more practical strategy to meet growing electric demand. 

"I think what recent experience demonstrates is that there is an 
argument for a portfolio of different fuels. I still leave my 
(nuclear) order book at home, but we've had meetings with several 
U.S. utilities that are exploring their options," Redding said. 

New Orleans-based Entergy Corp. <ETR.N> , the nation's third largest 
power producer with more than 30,000 megawatts of generating capacity 
including eight nuclear units, agreed volatile gas prices have put 
nuclear power back in the mix. 

"Certainly high gas prices improve the relative economic picture for 
a nuclear power plant. The volatility of gas prices gives validity to 
the need to have a mix of fuels with nuclear as part of it," said 
Diane Park, manager of communications for Entergy Nuclear Southwest, 
adding new nuclear construction was being looked at, but there were 
no definitive plans yet. 

But some analysts said deep-seated public concerns about safety may 
be a roadblock to new construction. 

"I'm skeptical about the nuclear option. If gas prices stay high, 
utilities are going to look for something else, but it probably will 
be coal first. There's a lot of uncertainty about the public reaction 
to nuclear," said Joe Sannicandro, a director at Massachusetts-based 
consultants Cambridge Energy Research Associates (CERA). 

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