Nuclear Energy Scenarios

Normally these articles are intended to highlight some sector of the clean energy industry while providing bullish evidence and possible investment outlets.

And while that’s still the aim of this site, I wanted to take a step in the other direction today and take a look at some bearish energy themes.

Nuclear Energy Scenarios

Nuclear energy is an industry that’s tough to get a read on because its fate is highly tied to political and societal will.

To be fair, I think nuclear capacity in the States will eventually increase. It may just take longer than some think. And that means generating an investment profit will take longer, too.

It doesn’t take a rocket scientist to figure out that nuclear energy is a contentious issue. Having non-profits for and against it is a dead give-away.

It’s the gun control debate of the energy industry.

And covering all the nuances of the debate is material for a book, not an article. So I won’t try to cover them all here.

Instead, I want to tell you about recent nuclear talk coming from the top down and look at the best investment I see in the sector.

No New Nuclear

That’s the word according to Jon Wellinghoff, chairman of the Federal Energy Regulatory Commission.

The exact quote: “We may not need any, ever.”

Those are strong words for a man in such a front-facing position.

His assertion is based on the fact that we may not need as much electricity going forward as once thought because of efficiency. Efficiency, coupled with the increased use of renewables and the deployment of the smart grid will alleviate the need for new coal or nuclear plants in his opinion.

Pardon the block quote, but I think it sums up his position nicely:

I think baseload capacity is going to become an anachronism. Baseload capacity really used to only mean in an economic dispatch, which you dispatch first, what would be the cheapest thing to do. Well, ultimately wind’s going to be the cheapest thing to do, so you’ll dispatch that first.

People talk about, ‘Oh, we need baseload.’ It’s like people saying we need more computing power, we need mainframes. We don’t need mainframes, we have distributed computing.

What you have to do, is you have to be able to shape it. And if you can shape wind and you can effectively get capacity available for you for all your loads.

So if you can shape your renewables, you don’t need fossil fuel or nuclear plants to run all the time. And, in fact, most plants running all the time in your system are an impediment because they’re very inflexible. You can’t ramp up and ramp down a nuclear plant. And if you have instead the ability to ramp up and ramp down loads in ways that can shape the entire system, then the old concept of baseload becomes an anachronism.

No Nuclear Renaissance

Perhaps a nuclear renaissance fair, though.

The entire situation is a bit contrived.

There won’t be a non-nuclear future like Wellinghoff envisions. There will be some, but we’re not turning into France anytime soon.

You see, even if renewables can come online like Wellinghoff assumes, that will still take time. And so will building out renewable transmission and the smart grid.

While that happens, electricity demand will still be on the rise, so nuclear will have to be used in the intermediary.

That’s the first uncertain: time frames.

The longer the renewable ramp-up takes, the more nuclear will have to be used.

The second uncertain is climate change. You see, coal would be much cheaper to meet incremental demand than nuclear. But coal comes with another cost: emissions.

Congress is debating legislation concerning these emissions right now. If cap-and-trade legislation passes, we could see any future coal supply be shifted to nuclear.

If, as has happened in the past, cap-and-trade fails, then coal will effectively receive another free pass and nuclear would see no real advancement.

The picture is still very muddled. But I’ll say this:

You only have to own one stock to play any future nuclear activity.

Energy Solutions (NSYE: ES) is one of the few companies making advancement in the treatment of nuclear waste. And waste is an issue that has to be improved if the use of nuclear energy is to expand. . . no matter which site of the debate you’re on.

Apparently, others agree:

I think this stock could see $15 in the event of a nuclear renaissance–or a renaissance fair.

But you’ll have to stay tuned to current policy debates, energy demand projections, and the speed with which renewables are deployed.

Like I said, I think nuclear will have to be used going forward, so getting a bit of exposure may not be a bad idea.

To green energy and green profits.

–Chris
Clean Energy Sector