In my previous post I discussed nuclear energy. The manner in which nuclear energy is used to generate electricity as well as some pros and cons about its implications. By a fortuitous coincidence, just two days after I posted my thoughts, Mycle Schneider released bold statement regarding nuclear energy: “Every euro invested in nuclear power makes the climate crisis worse.” For those of you that do not know, Mycle Schneider is the editor of the World Nuclear Industry Status Report. You can read the full report here. This post will discuss in detail and provide further insight to the concerns raised by Schneider.
“It (nuclear) is the most expensive form of electricity generation today, but, above all, because it takes a long time to build reactors.” I think that this is an extremely valid point on two fronts. At first, there is the obvious monetary cost to consider. Factoring in both financing, construction, and operating costs over the projected lifetime of a nuclear facility, the World Nuclear association concluded (March 2020) that on average a nuclear power plant will produce electricity at a price of $60 per megawatt hour. For comparison the 2021 Annual Energy Outlook report by the U.S. Energy Information Administration indicated that the levelized cost per megawatt hour of natural gas, on shore wind, and solar ranged between $30 and $40 on average. But we also need to look at the time cost on these projects. A nuclear power plant takes up about five years to construct while, comparatively a wind farm can be completed in eight to ten months. Fighting global warming is a race against the clock and time is a resource that we are running out of far quicker than financials. Choosing our investments for the energy grid, we need to not only weight megawatt output but also our time horizon. A 500% increase in construction time is not an investment we can afford.
“…renewables today have become so cheap that in many cases they are below the basic operating costs of nuclear power plants.” This point is also indicative of a bigger problem facing the nuclear energy industry. Soon it will no longer be profitable/able to compete with cheaper sources of electricity. Figures published by the World Nuclear Industry Status Report show that nuclear energy operating costs are now more expensive than even coal per kilowatt hour produced. Being a credit analyst by profession I see two major pitfalls here for the nuclear industry, also addressed by Schneider. The obvious is that nuclear energy will not be profitable with major government subsidies in the not-too-distant future and an industry cannot depend on the good will of the government to keep it afloat, especially in the current political climate where we face increased radicalization and larger swings in policy. The second is a balance sheet issue for energy companies already invested in nuclear. If a plant were to be decommissioned that would erase assets on the company’s balance sheet, but the liabilities would not simply be decommissioned as well. This would mean that the net worth would plumet while leverage would drastically increase. The implications of this on Wall Street could amount to the equivalent of the 2008 housing collapse for the energy sector.
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