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The Death Knell for Nuclear Power in the U.S.

March 11th marked the one year anniversary of the Fukushima Daiichi nuclear disaster in Japan, the world’s worst nuclear crisis since Chernobyl in 1986.  Fukushima is a poignant reminder of the dangers associated with nuclear power. Some might wonder whether the disaster killed the prospect for the growth of nuclear power in the United States.  In reality, nuclear power in the U.S. was in trouble long before a magnitude 9.0 earthquake and tsunami damaged several of Japan’s reactors.

Nuclear power is an attractive way to generate electricity because, unlike electricity generated from coal and natural gas, nuclear power is virtually free of greenhouse gas emissions.   Despite this, the nuclear power landscape during the 1980s and 1990s was bleak.  As recently as five years ago, however, when natural gas prices were at a historic high, there was considerable renewed enthusiasm for nuclear power in the U.S. In 2008 alone, 16 applications were made for new nuclear power plants.

But this renewed enthusiasm was short-lived.  Since 2009, only one additional application has been made and many previously proposed nuclear projects have been cancelled or put on hold.  This was the nuclear landscape in the U.S. even before Fukushima and is likely to continue to be the landscape long after Fukushima.  Why?  Mainly because of the challenging economics of nuclear power.

Even before Fukushima, nuclear power plants were hugely expensive to construct.  The sheer scale of a reactor means that most components must be specially designed and built.   With design and construction highly tailored to each individual project site, there is little room to spread costs across different projects.  In addition, construction costs have increased dramatically over time.

In addition to construction costs, financing costs are a large component of the total cost of a new nuclear power plant.  Nuclear power plants take an enormously long time to build, an average of 14 years for nuclear power plants ordered during the 1970s.  Such long lead times mean that financing costs become a significant component of the project’s total cost.  In addition, the cost of capital is typically well above the risk-free rate due to the big risks that the project won’t be completed and/or will be delayed due to regulatory hurdles at both the federal and state levels.

Researchers at EI @ Haas and elsewhere have developed careful calculations of the long-run average cost to produce a kilowatt of electricity from different technologies.  Nuclear power is at least 40% more expensive than electricity generated from fossil fuels.  And the gap widens dramatically when price forecasts for relatively low natural gas prices are taken into account.  Global availability of natural gas has increased due to new harvesting technologies such as horizontal drilling and hydraulic fracturing, posing a continued challenge for the viability of nuclear power in the U.S.

Another important factor for the economics of nuclear power is federal energy policy.  The prospects of a federal cap on carbon emissions stalled in the U.S. Senate in 2009, causing another blow to the economic viability of new nuclear plants.   A substantial tax on carbon dioxide of $25 per ton or more would narrow significantly the gap in long-run average cost between nuclear and coal, though the gap between nuclear and natural gas would remain large.

With or without Fukushima, the growth of nuclear power has stalled in the U.S. despite its potential to reduce greenhouse gas emissions.  For now, power producers continue to improve operating efficiencies at existing nuclear reactors and new nuclear technologies, such as small-scale modular nuclear reactors, are under development.   Fukushima reminded all of us of the devastating effects of a nuclear accident, but for the foreseeable future, economic conditions alone will make it difficult for nuclear power to break new ground in the U.S.


3 thoughts on “The Death Knell for Nuclear Power in the U.S. Leave a comment

  1. The careful calculations can be found here:

    Massachusetts Institute of Technology, 2009, “Update of the MIT 2003 Future of Nuclear Power, An Interdisciplinary MIT Study,” MIT Energy Initiative, Massachusetts Institute of Technology (

    And here:

    Lucas Davis, “Prospects for Nuclear Power,” Journal of Economic Perspectives, 2012, 26(1), 49-66 (

  2. While this is consistent with my own views of the lack of viability of nuclear power, I’d like to see the “careful calculations” – do you have a reference for them? The tough part of those kinds of calculations is evaluating (and valuing) the externalities. In the case of nuclear power, its things like not having an approved and politically viable means of waste storage/disposal (one could make a similar argument regarding ‘proper’ disposal of wastes from coal – solid, liquid and gas-phase). A tougher – and potentially intractable – issue, at least in terms of understanding the economics, is trying to assign a value to the competence of a utility in terms of its ability to own/operate a nuke. Not all electrical power utilities are capable of competently running a nuke – and the historical landscape is littered with examples. And then there are the costs of plant and operational security – quite different for nukes I’d guess.

    On the other hand, I suspect we don’t fully know how to assess the risks and (external) economic costs associated with enhanced extraction techniques like ‘fracking. How also does one realistically take into account – and correctly assign – the myriad of economic impacts (almost all external) accrued by disasters like the BP blowout in the Gulf.

    Finally, the US Senate couldn’t muster the political will to get rid of some of the subsidies to oil/gas companies last week – though not likely to change the economics that much. But maybe they will someday. Of course, nuclear power is heavily subsidized as well – so there are all sorts of tilted playing fields.

  3. I read this oped suggesting that Nuclear may not be the way to go. The author cites many reasons such as nuclear is high in cost, less credits, an accident, long lead time, and other valid reasons. I have a different opinion though. I feel that nuclear should be expanded. The long lead time is an advantage as it allows projects to be established for the 2030 to 2070 era and beyond. Currently gas for power generation requires 20 to 25 Bcf/d of gas supply (almost a third of the industries portfolio). By 2020, we believe gas for power generation will jump by almost 10 Bcf/d. Further, assuming the USA starts to mothball coal fired power plants once the plant reaches a 45 year life, then gas demand could jump by an incremental 30 Bcf/d. If that were to occur, the power sector may require 60 Bcf/d by 2020. A simple supply / demand analysis suggests that this could be a very large stretch for the gas industry to get to. Thus putting all your eggs in one basket, may reduce the flexibility in portfolio planning at a later date.

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