Prediction: Coal has fallen. Nuclear is next then Oil.

[nwdiver]

We've witnessed almost a complete collapse of the coal industry. Companies that once commanded Billions in Market Value just 5 year ago have been reduced to Bankrupt shells. Things can change very quickly when inflection points are reached.

Nuclear and Coal share the same base load profile. The one thing nuclear advocates are pushing to save nuclear 'A Carbon Tax' will also promote its poison; Variable Wind and Solar. If their growth continues we could see significant nuclear curtailment in less than 5 years. Plants with a capacity factor of >90% are running razor thin margins. They can't survive even modest curtailment.

As Bloomberg pointed out a few weeks ago... EVs are poised to lower demand enough to cause a permanent collapse in the price of oil by ~2022. As more countries pledge to ban petrol powered cars in the next 15 years and Tesla has accelerated production plans this appears to be almost inevitable.

 

[Pollux]

Should existing plants be subsidized so that their "clean" power remains available while solar and other renewables + batteries become cheap enough to take up the slack?

Who is going to pay to decommission these plants?

How is the long-term waste disposal problem going to be solved and paid for?

IMHO, nuclear has some significant unpriced externalities; it's not clear to me that we have anything like a "true" price of nuclear factored into the sale. Even a carbon fee might not save nuclear were we to truly assess its cost. Maybe your thesis is understated.

Alan

 

[ABCCBA]

@nwdiver What are you suggesting will provide the energy for nighttime usage, bad weather days (cloudiness or no wind) and peaking? Additionally, where will all of the new generation come from to support the exponential electrical load increase from the millions of more BEVs? TIA

 

[nwdiver]

Should existing plants be subsidized so that their "clean" power remains available while solar and other renewables + batteries become cheap enough to take up the slack?

Who is going to pay to decommission these plants?

How is the long-term waste disposal problem going to be solved and paid for?

IMHO, nuclear has some significant unpriced externalities; it's not clear to me that we have anything like a "true" price of nuclear factored into the sale. Even a carbon fee might not save nuclear were we to truly assess its cost. Maybe your thesis is understated.

Alan

Supposedly the prospect of including nuclear generation was considered and rejected as part of the Clean Power Plan. The math didn't pencil out. It's actually cheaper to build wind farms and gas turbines than keep a nuclear plant like Fort Calhoun running. Basically if they can compete then they're worth keeping if not then let them die.

The decommissioning costs for nuclear plants are already covered. Nuclear plants are required by law to set aside funds into a trust as they operate to support decommissioning expenses. This is one of the reasons shutting down an otherwise viable plant can be attractive to an operator. Some nuclear plants have been paying into these funds for >30 years... they are now literally worth more dead than alive. Once Clinton and Quad cities are shutdown Exelon can start drawing down these massive decommissioning funds.

@nwdiver What are you suggesting will provide the energy for nighttime usage, bad weather days (cloudiness or no wind) and peaking? Additionally, where will all of the new generation come from to support the exponential electrical load increase from the millions of more BEVs? TIA

Wind, Demand Response and Storage backed by Natural Gas turbines. We're adding wind and solar generation ~20x faster than we're adding BEV consumption.

 

[adiggs]

@nwdiver What are you suggesting will provide the energy for nighttime usage, bad weather days (cloudiness or no wind) and peaking? Additionally, where will all of the new generation come from to support the exponential electrical load increase from the millions of more BEVs? TIA

I don't take @nwdiver's comment as being a recommendation of how to proceed. Rather a prediction of how the economics of power generation are already working, and how they are going to start working on the nuclear power industry next (to that industry's detriment).

Heck - we might even reasonably conclude that nuclear power having this sort of economic difficulty will increase grid instability and difficulties, but that instability at non-economic rates, is going to fuel the drive to storage and other alternatives. I think the obvious winner here will be natural gas power plants. By winner, I mean that they will gain some degree of delay to their own reckoning with the collapsing price to generate a marginal kwh of electricity.

I don't see enough availability or ability to react to the market by building new or expanding existing capacity, for nuclear to be the one that benefits from collapsing economics for natural gas fired generation (the reverse hypothesis). And the likelihood that the two are perfectly balanced and living in a relationship where they freely substitute seems unlikely - if for no other reason, buyers will want flexibility and natural gas has that in spades, even if it is at times a bit more expensive.

 

[RubberToe]

Fortune 500 just came out, 500 largest companies in the U.S. by revenue...

2: Exxon-Mobile stays at #2, revenue down 35.6% from 2014, profit down 50.3% from 2014, total return -12.6%
14: Chevron was #3 in 2014, revenue down 35.7% from 2014, profit down 76.2% from 2014, total return -16.0%

It won't take much longer at this pace until investors start losing confidence in the oil companies. I'll grant you the declining oil price was largely responsible for this. My favorite quote is from Calpers pension fund spokesman Joe Deanda concerning the funds $5 billion energy related losses: "We're a long-term investor and don't focus too much on any single year's performance. It won't change our long-term investment strategy".

I wonder what they consider "long term"? Do they think that the human race will be burning up oil at the current rate in 20 years, 40 years? These guys better start studying up on what the concept of disruption is before they are dead broke and looking to California taxpayers to bail them out from their short sighted investment strategy.

CalPERS, CalSTRS took big losses on energy investments, report says

 

[neroden]

As Bloomberg pointed out a few weeks ago... EVs are poised to lower demand enough to cause a permanent collapse in the price of oil by ~2022.

My estimates say that that final collapse might be as late as 2030. This is because the supply of oil will be decreasing at the same time as the demand is decreasing. We should see a fast drop in supply over the next couple of years as the fracked stuff wears out, and then a slower supply drop as old fields decline. I think demand doesn't start dropping *faster than supply* until we're at ~60 million BEVs + PHEVs per year. I think it takes a while to ramp up EV production so that the majority of new cars & trucks are EVs. I'm not really sure how fast but a simple exponential model doesn't get us there until 2030.

If the oil companies are dumb enough to drill for new supply, of course, then the price will crash sooner.

Oil companies are already bad investments. I don't think the oil price will go into terminal decline (causing a permanent collapse in oil company earnings) until 2030. But with only 14 years of earnings ahead of them, you can't justify a P/E ratio of 30 which ExxonMobil has, or even a P/E ratio of 15; you can do better by holding cash.

 

[neroden]

@nwdiver What are you suggesting will provide the energy for nighttime usage, bad weather days (cloudiness or no wind) and peaking?

Batteries, hydro, and transmission from places with better (windier / sunnier) weather. There are so many natgas plants which already exist that they'll probably be kept for emergency peaks.

Additionally, where will all of the new generation come from to support the exponential electrical load increase from the millions of more BEVs? TIA

If we replace the entire US fleet of road vehicles with BEVs, it only increases the electrical load by about 10%. They're *that much more efficient than ICEs*.

 

[Pollux]

Supposedly the prospect of including nuclear generation was considered and rejected as part of the Clean Power Plan. The math didn't pencil out. It's actually cheaper to build wind farms and gas turbines than keep a nuclear plant like Fort Calhoun running. Basically if they can compete then they're worth keeping if not then let them die.

Thanks for the info!

The decommissioning costs for nuclear plants are already covered. Nuclear plants are required by law to set aside funds into a trust as they operate to support decommissioning expenses. This is one of the reasons shutting down an otherwise viable plant can be attractive to an operator. Some nuclear plants have been paying into these funds for >30 years... they are now literally worth more dead than alive. Once Clinton and Quad cities are shutdown Exelon can start drawing down these massive decommissioning funds.

Interesting. Is there some kind of guarantee that the trust(s) contain enough funds to completely cover all decommissioning costs? Is it possible for decommissioning cost to exceed what's in the trust fund and, if so, who's on the hook for that?

And... what about all that waste? Does the decommissioning trust make provision for attacking that problem in some way?

Thanks,
Alan

 

[Topher]

We're a long-term investor and don't focus too much on any single year's performance.

Translation: We are idiots, that missed a downturn.

If it makes sense to hold on to a stock when it is going down, it makes more sense to sell it before, and buy more when it is cheap for the trip back up.

 

[Topher]

And... what about all that waste? Does the decommissioning trust make provision for attacking that problem in some way?

Sure. They put it in containers where the plant was.

Oh, did you mean a *safe* way of attacking the problem?

Thank you kindly.

 

[AUSinator]

Solar and wind is already cheaper than nuclear and with out the risks. Nuclear are not bomb/missile safe and generate a lot of atomic waste. No country in the world should have anything todo with nuclear. Coal is very dirty but still the cheapest form of energy in most countries. Good news is that in the next few years solar/battery will be more affordable than coal making coal not competitive anymore. When you look what's happening with the price of solar nothing will soon be able to compete with solar.

 

[Adm]

It is interesting to see that oil and gas companies are tipping their toes in renewables lately. Will it be enough to stay afloat and cover their "soonish" to be stranded assets?

 

[nwdiver]

It is interesting to see that oil and gas companies are tipping their toes in renewables lately. Will it be enough to stay afloat and cover their "soonish" to be stranded assets?

Of course... Kodak did fine

 

[Pollux]

Actually, I was asking sincerely: do these decommissioning trusts make provision in any way for dealing with waste?

Thanks,
Alan

 

[nwdiver]

Actually, I was asking sincerely: do these decommissioning trusts make provision in any way for dealing with waste?

Thanks,
Alan

>90% of the time yes. Exelon has >$6B in their decommissioning trust and they are permitted to conservatively invest that money to it also earns interest.

Nuclear plants actually paid to have Yucca Mountain built. Since that never opened they are now suing DOE for their money back. IMO waste really isn't an issue. There's really nothing wrong with dry cask storage. The fuel is safe, concrete only gets stronger as it ages and it would take so long to break into a cask that the only security you would really require is surveillance.

 

[Skotty]

Scientists can easily deal with the problems of nuclear power, including dealing with the waste. Problem is, these decisions have not been left up to scientists. This has doomed the nuclear industry.

Itermittency is a very serious problem that most green supporters ignore or underestimate. In the end, it may work out okay though, due to Tesla Motors and what they have started with Tesla Energy and the Gigafactory. Ultimately, Tesla Energy may end up being far more important than Tesla Motors.

 

[nwdiver]

Itermittency is a very serious problem that most green supporters ignore or underestimate.

Demand intermittency is far greater than supply intermittency from wind and solar... load following plants like gas turbines were able to cope with demand changes they'll have no problem coping will wind and solar especially if you add demand response and storage to the mix to even things out.

Fully Charged released a new video today about how Britain is weaning itself off coal.

 

[neroden]

Interesting. Is there some kind of guarantee that the trust(s) contain enough funds to completely cover all decommissioning costs?

Nope. Furthermore, the companies involved have been arranging to extract money from the decommissioning funds for other purposes. This is done during the NRC-approved "SAFSTOR" period of letting the reactor rot for 60 years before decommissioning it. Safety advocates disapprove of SAFSTOR.

Is it possible for decommissioning cost to exceed what's in the trust fund and, if so, who's on the hook for that?

Yes, it's certainly possible for it to exceed what's in the trust fund, particularly if the nuclear power company has been extracting money from the trust fund, or if the company invests the trust fund badly. (They have an incentive to invest it recklessly because they get any extra which is left over.) In that case, the company is supposed to be on the hook... but by then they will probably have declared bankruptcy or otherwise disappeared. The result will be that state and federal taxpayers are on the hook.

If the decommissoning fund is (a) overseen by a reputable third party, not the nuclear power company which has a conflict of interest, and (b) decommissioning is started immediately upon closure, then the decommissioning funds will almost certainly have enough money to decommission most of the plants. (Plants with a history of leaks such as Nine Mile Point 1 or meltdowns such as Three Mile Island may be much more expensive.)

And... what about all that waste? Does the decommissioning trust make provision for attacking that problem in some way?

Nope. The low-level waste has to be disposed of "contemporaneously" so it's accounted for. But the spent fuel rods... well, the federal government promised some time ago that the government would take care of all of them, so the nuclear power companies are holding the government to that promise and refusing to pay for them.

That alone -- the fact that the federal government is responsible for dealing with all the spent fuel rods and has no plan to do so -- should cause the federal government to stop authorizing the refuelling of nuclear power plants. But the NRC is a corrupt lapdog of the industry.

The best thing to do with the existing stuff is dry cask storage, above ground, with a roof. This is what the Scottish government decided to to with their legacy nuclear waste.

It's not a good idea to generate more of this waste, though. The casks alone probably use more valuable minerals than an electric car, and cost about $1 million each. It's a horrible waste of minerals.

 

[SageBrush]

Norway is building a GW wind farm for 1.1 B Euros, estimated to produce 3.4 Twh a year.
If my arithmetic is right, that works out to a production cost of around 1.2 Euro penny per kWh lifetime.

Damn