“To everything, there is a season.”
Electricity is deep, deep infrastructure—try living (or making a living) without it. The hardware and the organizations that keep the lights on and your laptop humming are long-lasting and stable. There are 100+-year-old high-voltage transmission lines still in service, delivering power from equally ancient hydroelectric generators. Just as the Roman aqueducts allowed Rome to become the largest city in the world at 0 A.D, and are still delivering water in places, so too has electricity allowed the flourishing of modern technological civilization. For those of us in the electricity business, in our way of thinking, a ten-year planning horizon is “short-term” thinking.
We in the electric business really ask only three things from our customers. First, use our product safely, and don’t electrocute yourselves. Second, pay your just and fair electric bill each month to cover the costs. And lastly, try to stay out of our way as we work to serve you and your neighbors. One of our obligations is to be there for you so you can depend on electricity. Of course, we can’t afford to build for all contingencies (lights may go out during hurricanes, for example), and generally you don’t want to pay for perfection—generally 99.9+% reliability is considered about the right tradeoff of security of supply and capital investment.
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Historically, one challenge for us that has arisen repeatedly has been periods of demand growing faster than we can build. It was a challenge for America during the Roaring 20s, and later during the post-WWII era. It is a reoccurring and sometimes crippling problem in those “rapidly industrializing” economies. Those cases all came from positive economic factors of rapid economic growth and from electric demand growth that historically exceeds the growth in GDP.
The challenge coming up is the collapse of the various politically driven “energy transition” schemes that arose from the over-selling of climate change fears and the attendant idea of “net zero.” The hopes for “renewables” like wind and solar to power current and growing levels of prosperity are finally being dashed on the cold, hard physics of energy. We’ve lost a decade or more in capacity improvements chasing the pipe dreams of the environmentalists.
A return to energy sanity will mean a surge in electric generation construction fueled by coal, natural gas, and uranium. Which specific fuel to use will depend on a careful calculation of economic costs, national security concerns, and environmental impacts. The role the new generators will play in the operation of the total electric system is also critical—“peakers” vs “base load,” for example. We can expect that this need for new and replacement generation capacity will mean a strong upturn in global orders for new nuclear power plants. I’ll argue below that if you expect the best deal on a nuke, it is in your interest to order earlier rather than later.
While we never completely stopped building nuclear power plants in the West, we have seen surges. We’d love the electricity business to be predictable with a stable political regime, proven technologies, gradual but steady load growth, and stable interest rates. Unfortunately, any of those factors can change faster than we can respond while providing the reliable service our customers expect.
While a surge in orders for nuclear power plants is by no means certain, we are seeing definite signs. Even politicians are coming around and saying nice things about nuclear in public. Some big-money outfits like Microsoft and Google are predicting their internal electric demands will outstrip the grid’s capacity to deliver and are proposing to build their own nukes.
A potential nuclear buyer for a large conventional reactor is in a pretty good spot at the moment. Public opinion is coming around, and politicians seem to be loosening the existing regulatory roadblocks. Investors see the prospect of reasonably secure repayment and a fair profit.
Several firms can offer proven designs and have at least basic supply chain arrangements in place. A few orders have been recently completed, and a few more are in the order books. The competition for orders is strong, and international financing options seem to be opening up. The reactor vendors are hot to get orders and can offer decent terms and unimpeded delivery schedules.
But if a surge in demand for new reactors happens, as is a distinct possibility, plant prices will go up, and delivery times will stretch. We’ve seen this market behavior before. In the 1990s, natural gas prices were low, and new designs called combined cycle gas turbines (CCGTs) came on the market to burn that cheap gas. Military jet engine technology made these plants highly efficient in turning that gas into electricity, a technological win-win.
The suppliers of the gas turbines were swamped with orders as a result, and the delivery schedules for additional orders slipped further and further out into the future. Companies with near-term delivery dates were being bought at a premium just for their place on the vendor’s shipment schedule. The manufacturers were reluctant to expand their investments in production capacity, seeing the wave of orders as finite while enjoying the higher prices their products commanded.
For nuclear, as with gas turbines, at current capacity, the world’s vendors can only provide so many units a year before a bottleneck in the supply chain is uncovered and project schedules lengthen as a result. With current levels of supply chain investment, the world can only deliver so many large steam turbines, steel reactor vessels, output transformers, or reactor coolant pumps a year. The ability to make these will also require a proven market and substantial time. And with billions sunk in a project, the interest on that sunk cost due to a delayed completion schedule can be very painful.
Even the existing stock of human capital is thinning as those Baby Boomers who began their careers during the last nuclear surge reach or exceed retirement age. Training the next generation of nuclear experts in design and operation will take time. Knowledge transfer from the older to the newer workers can prevent errors that the last surge from re-occurring.
If I were advising those considering building a new nuclear power plant, I’d tell them that a delay in placing an order will likely prove costly in both time and money.
Joseph Somsel is a degreed nuclear engineer with an MBA and 50+ years in the electricity business.
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