From Nuclear to Renewable, U.S. Energy Interest Changes Gears
In the wake of the Fukushima Dai-ichi reactor disaster in Japan, plans for new nuclear power projects are on hold in many countries. Even those currently on-line are subject to temporary shutdowns and expedited safety reevaluations.
Here in Germany – where I am traveling right now – the government has thus far shut down seven of the oldest operating reactors.
Germany is the European nation with the most powerful anti-nuclear political movement. And it may not stop there.
Already, questions are arising over what it will cost if these reactors stay off-line for very long.
Estimates vary. Greenpeace suggests each German household would pay only about 1.5 euros (or $2.18, according to current exchange values). However, the part public/part private German Energy Agency (DENA) has suggested that a closure of the plants would add a full 20% to the nation’s total electricity bills.
German Economy Minister Rainer Brüderle (who is facing a rising Green Party protest) said last week that ending nuclear power would cost the country 1.5 billion euros a year.
Meanwhile, the DENA (which is feeling pressure from the producers) said closing the seven oldest plants alone would cost more than twice that – 3.5 billion euros.
One thing is certain. Nuclear power is in for some tough political times.
Support Is Drying Up Almost Everywhere
The Vienna-based International Atomic Energy Agency (IAEA) reports that 64 new reactors are under construction worldwide, with 443 already in operation.
The nuclear commitment has been greatest in Asia. Throughout the region, government and markets regard nuclear power as an essential element for developing needed energy. Asia is the location for 39 of the new reactor construction projects.
Russia will continue an ambitious expansion, as will China (where 27 reactors are currently under construction, to join the 13 already generating power).
However, U.S. support for new nuclear reactor projects has dried up quickly after the Japanese developments. And some are seeing a parallel to the aftermath of the Three Mile Island meltdown near Harrisburg, Pennsylvania.
That 1979 event decimated nuclear power plant plans in the U.S. for almost three decades.
Now, in the U.S., 104 reactors provide about 20% of the electricity we consume. Both the Obama Administration and the industry had been touting nuclear power as an alternative to increasingly risky and expensive imported crude oil.
But already, the Japanese event is affecting the U.S. nuclear industry.
NRG had been the dominant partner in a consortium that included Toshiba Corp. (OTC:TOSBF), the City of San Antonio, and Tokyo Electric Power Co. (TEPCO; OTC:TKECF) to build two new reactors at the plant to go along with the two already operating, which together produce 2,700 MW of electricity.
From a PR standpoint, it probably did not help that TEPCO was a party to the project… (The Fukushima Dai-ichi plant still under siege in Japan is a TEPCO operation.)
NRG also announced that it would take a first-quarter $481-million pre-tax write down for the funds expended thus far on the project, now five years old.
CEO David Crane probably understated the problem when he said, during an April 19 investor conference call, that the expansion project has “diminished prospects.” Still, the company took great pains to point out that, should circumstances improve, it could renew the South Texas project later.
For now, at least, the market has approved of the move. NRG was up 7% over the three sessions following the announcement of the project closure.
And it remains one of the most diversified alternative/renewable energy producers in the market.
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New Moves into Renewable and Alternative Fuel Sourcing
Nuclear may be slowing down, but elsewhere in the energy sector, things are heating up.
On April 12, Secretary of Energy Steven Chu announced a $1.2 billion loan guarantee for a solar energy project to be built by SunPower Corp. (NasdaqGS:SPWRA) and run by NRG.
Such guarantees serve as a promise by the government to make good on a loan if the company cannot. This typically enables the company to get better interest rates and lower costs for project financing than would otherwise be available. Most importantly, in what is still a weak credit market, the guarantees often make the difference between renewable energy projects getting the finance they need or stalling out in the commercialization phase.
The California Valley Solar Ranch farm is one of the largest DOE loan guarantees offered thus far.
Other big ones have included $1.45 billion to Spanish utility major Abengoa SA (OTC:ABGOY) for a large solar venture in Arizona and $1.6 billion to Oakland, California-based start-up BrightSource Energy Inc. for projects in the Mojave Desert.
While it’s still a private company, BrightSource is a good one to watch.
It has successfully raised $160 million to date, including a $115 million Series C bond issuance. Investors include Google.org (the philanthropic arm of the tech giant), BP Alternative Energy, StatoilHydro Venture, Black River, VantagePoint Venture Partners, Morgan Stanley, DBL Investors, Draper Fisher Jurvetson, and Chevron Technology Ventures.
BrightSource also has heavy support from PG&E Corp. (NYSE:PCG) and Southern California Edison Co. (AMEX:SCE) for a series of high-profile solar projects on both ends of California.
The current moves by U.S. electricity generators like NRG, PG&E, and SCE, therefore, are toward renewable and alternative fuel sourcing, especially given the availability of government loan guarantees and other enticements.
But the renewable/alterative drive will not include a new emphasis on nuclear. Not anytime soon.