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Outlook for nuclear challenging
The long-term outlook of nuclear operators and the history of reliance returns and improving electricity output from the U.S. nuclear power fleet has also underpinned continued interest from lenders and investors in the sector, even as they remain wary of long-term generation investments in actively traded "merchant" energy markets in the US, Kass said.
"Building new nuclear in merchant markets will be very challenging until the operators of those markets find a way to monetize grid stability," which constantly-operating nuclear baseload generation can contribute to, Kass said.
For now, financing for nuclear units in areas where public utility commissioners are open to including the cost of new plants in the rate base remains favorable, Kass said, pointing out that at least one bond offering in 2011 had been oversubscribed.
Beyond the two projects preparing for approval and the start of construction, the U.S. nuclear industry faces headwinds for new construction, and NEI's Fertel pointed out that most of the significant capital expenditure by the nuclear business in 2011 had been in existing units. A weak national economy that has weighed on electricity prices and demand combined with extremely low natural gas prices have limited the appeal of new nuclear units even in areas where regulators and investors are enthusiastic about additions.
The economy could turn in the next 2-3 years to the point that power prices show strong enough recovery to justify widespread new additions, Kass said, with an anticipated rush in building a couple of years beyond that, though she cautioned that economic forecasting is "anybody's guess" amid continued volatility across markets. The natural gas price impact was also site and situation-specific, but some energy companies have said they could make new nuclear attractive even at the historically low price of $4.00 per thousand Btu â€“ a price still roughly twice that garnered in recent trading. At a $7-8 natural gas price, new nuclear is a "no-brainer," said Kass.
Watch Kass discuss the economics of the nuclear business in a video interview with AOL Energy here.
Overall, the U.S. nuclear industry turned in a strong year in 2011, down only slightly in terms of total power produced after a record 2010 despite multiple challenges that included an East Coast earthquake and widespread flooding, as well as public perception problems and increased regulatory oversight following the accident at the Fukushima nuclear plant in Japan after a March earthquake there.
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