Ravengate
Partners - Stock market, economic and political commentary by Patricia Chadwick

President Obama’s support of nuclear power generation in the U.S. should be welcome news not only to the utility industry but to the nation as a whole. Despite its carbon free emissions, nuclear energy has been a dirty term for the last thirty years, since the Three Mile Island accident in 1979.

Hopefully President Obama will be able to break that spell. In his State of the Union message less than a month ago, he spoke of the need to build “a new generation of safe, clean nuclear power plants in this country”.

And the President has backed up that proclamation with the announcement yesterday of $8 billion in federal loan guarantees for Southern Company’s two new nuclear reactors. That action was key because the capital needed up front to build new nuclear power plants in this country has become so prohibitive that without Federal loan guarantees, there would be little incentive for the private sector to take the risk.

Thank you, Mr. Obama for lending credibility to your stated support for clean nuclear power generation.

But ultimately, the nuclear power industry will need to be able to produce and deliver nuclear energy without Government support. That should happen if enough plants are approved to create a viable vendor industry – supplying turbines, reactor parts, pumps, generators and on and on. I believe that can happen.

Let’s remember also that in a nuclear power plant, the upfront capital costs relative to the operating costs are far higher than in a coal fired plant. So once a nuclear plant is up and running, the marginal costs are small and very predictable.

In the interest of full disclosure, I should point out that I sit on the board of a publicly held utility company which does not own any nuclear facilities.

To quote Lewis Carroll (or perhaps the Walrus), “The time has come… To talk of many things.” It appears that finally after a hiatus of more than thirty years, we are able again to talk of nuclear energy.

For those who fear another Three Mile Island or worse, another Chernobyl, it may help to look to France as an example of a country that embraced nuclear power as the solution to the energy crisis way back in 1973 after the first oil crisis. Today nearly 80% of the country’s electricity is generated from its 59 nuclear plants and they continue to build new plants. And rather than being reliant on foreign oil, the country exports nearly 20% of its electric generation.

The French have addressed the issue of nuclear waste by recycling. They create new fuel rods from unused uranium, thus greatly extending the life of the rods and ultimately generating far less waste.

For thirty years, nuclear energy has been the ‘third rail’ of the utility industry – basically untouchable. It was one of those issues that was so fraught with emotion that Washington didn’t want to go near it. Democrats, in particular, railed against it, while Republicans gave it lip service.

Today President Obama has dared to touch that third rail. That is leadership and he is to be congratulated. Years from now, the American public will look back on his leadership in this matter and be grateful.