On the Nuclear Middle Age Dilemma

Credit Suisse highlights a couple main themes in their presentation. First, the current nuclear fleet is operating under capacity. Second, costs for nuclear operation have been rising. And third, the current fleet of nuclear power plants is aging and replacement construction is not keeping pace.

The graphs I found the most interesting were on slides 12 and 17. Slide 12 shows cash margins for regulated utilities, and nearly a third of them operate at a loss for at least some power prices. The least cost effective, Monticello and San Onofre, operate at a loss for every power price, and this loss can be over $15/MWh at certain times. (In comparison, the most profitable can make up to $17/MWh and has a positive cash margin at any price, so there are still some profits to be made). With financial situations such as this, it is not surprising that plants are being powered off at times or permanently closed, and it seems unlikely that many new plants will come into operation. I was wondering what the trend is with newer plants. Do most face regulated markets, or are the new ones mostly merchant operations?

Slide 17 shows the age and capacity of the US nuclear plant fleet. The majority were built in the 1960s-80s, and only one was constructed after 1990 (note the graph ends in 2000). As the slide points out, most of the oldest plants are the smallest and standalone. I would be interested to hear more detail as to what the implications of this are, and how the economics of small standalone plants compares to that of larger and/or grouped plants. — A. D.

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