Ten years ago, any self-respecting U.S. utility executive might have been drawn and quartered for publicly promoting a nuclear power revival. How times have changed. Today, more than half of America's nuclear plants have outsourced their operations to specialty firms, and the prospect of a nuclear renaissance in the U.S. (see
Cover Story) is brighter than it has been since 1979—when the core of Three Mile Island Unit 2 partially melted down, pulling the plug on orders for new reactors.
The consolidation of nuclear plant operations will continue because it has raised the reliability and lowered the cost of service to end users. Firms such as Entergy Nuclear and Exelon Nuclear have become very adept at squeezing the last drop of performance and profit from nuclear assets, even graybeard plants. Over the past few years, the capacity factor of the U.S. nuclear fleet has hovered around 90%, with the production cost of most plants below 2 cents/kWh.
The efficiency gains of fleetwide operations also have simplified utility resource planning. Since 1990, gains in capacity factor alone have matched the cumulative capacity of at least a dozen typical-size plants, making their construction unnecessary. Separately, over 4,800 MW of reactor uprates—the equivalent of another four new units—have been approved by the U.S. Nuclear Regulatory Commission (NRC), and another 2,400 MW are pending.
Rich get richer
A realistic appraisal of near-term U.S. electricity demand growth indicates limited opportunities for profiting from nuclear power projects in this country. There are few utilities whose balance sheet can cover the $2 billion to $3 billion price tag of a new plant. And there are even fewer multinational engineering, procurement, and construction (EPC) firms with the talent and access to skilled labor necessary to build a single reactor—much less the dozen projects that have been announced in the U.S. alone.
I believe the new nuclear market will be carved up by the EPC firms and reactor vendors faster than Barry Bonds turns on a fat pitch. The early birds will catch the worms, and the late entrants will leave the table hungry. For the sake of argument, let's assume that the market is 25 new projects over the next 15 years—worth perhaps $60 billion to $70 billion in the U.S. alone and possibly twice that worldwide. The early birds will bulk up and become even more formidable competitors. Come in second too many times and you'll be out of business.
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