Why Investors Should Forget About Nuclear Power
ALERT! Breaking News from Exelon Corp. (NYSE: EXC)
They say Hollywood is to blame.
They say producers played it “fast and loose” with the technical details.
But even if that were the case, it doesn’t change the fact that the 1986 Chernobyl disaster was caused by human error that resulted in nearly 20,000 cases of confirmed thyroid cancer with no real accurate tally of deaths connected to the accident.
To put that in perspective, that’s more than twice the population of Park City, Utah.
Lackluster safety protocols and flawed reactor designs, which were not uncommon under communist practices that oftentimes didn’t include accuracy and precision, led to this disaster. And while I maintain that it is not the splitting of isotopes that’s the problem, but rather the inability of humans to responsibly operate nuclear power plants in an economically feasible manner, nuclear power has been a very effective form of baseload power for decades. But at least in the U.S., those days are coming to an end.
The bottom line is that nuclear power is simply not economically sustainable.
This, dear reader, is why Exelon recently announced that it would be retiring the Three Mile Island nuclear power facility 15 years early.
It has nothing to do with Hollywood, and it has nothing to do with the Three Mile Island emergency that scared the crap out of us all back in 1979.
Plain and simple...
It’s All About the Money
There is one main reason nuclear power no longer has a future in the U.S.
And I’ll tell you about it in just a moment.
But first, let’s dispel this myth that nuclear power is cheap, as it’s never been able to survive without massive subsidies.
As reported by UCS, the nuclear industry is only able to portray itself as a low-cost power supplier today because of past government subsidies and write-offs.
First, the industry received massive subsidies at its inception, reducing both the capital costs it needed to recover from ratepayers (the “legacy” subsidies that underwrote reactor construction through the 1980s) and its operating costs (through ongoing subsidies to inputs, waste management, and accident risks).
Second, the industry wrote down tens of billions of dollars in capital costs after its first generation of reactors experienced large cost overruns, cancellations, and plant abandonments, further reducing the industry’s capital-recovery requirements.
Finally, when industry restructuring revealed that nuclear power costs were still too high to be competitive, so-called stranded costs were shifted to utility ratepayers, allowing the reactors to continue operating.
These legacy subsidies are estimated to exceed $0.07 per kilowatt-hour — an amount equal to about 140% of the average wholesale price of power from 1960 to 2008, making the subsidies more valuable than the power produced by nuclear plants over that period.
Without these subsidies, the industry would have faced a very different market reality — one in which many reactors would never have been built and utilities that did build reactors would have been forced to charge consumers even higher rates.
But there’s no point crying over spilled milk... even though you, as a taxpayer, ponied up that “milk.”
The Future of Nuclear Power in the U.S.
No matter how you slice it, nuclear simply can no longer compete in today’s energy economy.
If you look at the levelized cost of nuclear power compared to other energy sources, it’s incredibly high.
The minimum cost per megawatt-hour to build a new nuclear power plant is $112. For natural gas, it’s about $40. This ain’t rocket science, folks.
Throw renewable energy into the mix, and you get $46 for utility-scale solar and $30 for wind.
Of course, solar and wind need storage, so this isn’t really an accurate comparison. Although even with the integration of cheaper battery storage and new energy intelligence technology, eventually solar and wind’s intermittency issues will become irrelevant, thereby making continued investment in nuclear even harder to justify.
Understand, I don’t write these words to criticize the nuclear industry. They are merely observations of truth.
But this doesn’t mean nuclear power will go gently into that good night.
Our analysts have traveled the world over, dedicated to finding the best and most profitable investments in the global energy markets. All you have to do to join our Energy and Capital investment community is sign up for the daily newsletter below.
Even Bad Ideas Can Prosper
All over the world, new nuclear power plants are being planned and built. But the reality is, in most of those countries — particularly where water is in short supply (and will continue to get worse) — building nuclear plants instead of embracing things like solar, distributed generation, and battery storage is, for lack of a better word, stupid. And make no mistake; there will be more accidents, too. Not that any of that matters.
Sadly, few decisions based around energy policy are made in an effort to provide long-term, sustainable solutions for the common good. They are instead made based on bureaucratic buffoonery and a certain level of greed that pays no mind to how it leads to taxpayer theft or fouls up the planet.
Although it should be noted that no form of energy production exists without environmental risks and huge burdens to taxpayers. Even renewables must battle with issues such as reliance on subsidies and negative environmental impacts.
But when it comes to nuclear, this is just one industry that’s reaching the end of its rope.
The truth is, kids that are being born today in the U.S. will rely very little on nuclear energy by the time they’re 21, and they'll be driving around in electric cars, pulling their electricity from roof-mounted solar panels and massive grids that will be heavily weighted in solar and wind.
It is likely by the time those kids turn 21, less than 10% of all electricity in the U.S. will come from nuclear power. And their kids will only know about it from reading history books.
As an energy investor, I base my investment decisions on long-term projections, recalibrating every five years or so.
Over the past five years, I’ve unloaded any exposure I had to the U.S. nuclear power industry. Over the next five years, I will seek to prioritize my natural gas exposure, while continuing to build my exposure to renewable energy and storage technologies.
The bottom line is that if you want to make money in the energy game, you have to play the long game, while ensuring that you are nimble enough to make moves based on the rise of new energy technologies and the demise of antiquated ones.
I’ve been doing this for nearly 20 years now, with great success. And I see no reason for this success to be altered in the next 20.
You know how this is going to play out over the next 20 years, too. It’s not hard to figure out. So invest accordingly.
To a new way of life and a new generation of wealth...
@JeffSiegel on Twitter
Jeff is the founder and managing editor of Green Chip Stocks, a private investment community that capitalizes on opportunities in alternative energy, organic food markets, legal cannabis, and socially responsible investing. He has been a featured guest on Fox, CNBC, and Bloomberg Asia, and is the author of the best-selling book, Investing in Renewable Energy: Making Money on Green Chip Stocks. For more on Jeff, go to his editor's page.
Energy Demand will Increase 58% Over the Next 25 Years
After getting your report, you’ll begin receiving the Energy and Capital e-Letter, delivered to your inbox daily.