Ed

The answer is simple. The real problem is getting investors and / or governments to open their wallets up front to build them. Putting more energy efficiency into products and machinery and retrofitting residential or industrial buildings is also plagued by the same problem.

The other part of this 'thing' for me is found in the comment by Ed Reid. In the old days I quite simply would have stood outside the venue for the big talkathon in Copenhagen this coming december, and passed out some handbills with that message, along perhaps with a little ad hominen. But I don't do that sort of thing any more. And if I did do it I don't know whether I would do it there, because there are going to be some gigantic lies told about wind energy that would turn my delicate stomach - and probably send me racing to the Tivoli for a glass or two of that excellent Danish beer.

You may find this interesting.

http://www.theenergycollective.com/TheEnergyCollective/45911

Ed

A catastropic accident you say. Read the article by Rhodes and Beller. According to them there is the equivalent of a catastropic accidents every year as a result of the use of fossil fuels and the like, only instead of calling them accidents they are called progress.Admittedly, a bad conventional accident could take place at any time, but a little clarity my be useful here. According to what I read, Three Mile Island was a meltdown, but not a catastrophe; and fairly close to Sweden - in Lithuania - was a plant (Ignalina) which must have been one of the most dangerous in the world. I believe that I was the first person to suggest that it should be scrapped and that country should receive some big bucks for doing so - which may have happened.

If you are writing a book I may have some data that might be of interest to you, so feel free to email me.

My online energy presentation also discusses nuclear quite a bit "www.slideshare.net/JohnDroz/energy-presentationkey-presentation". (My email address is there.)

I think we might be seeing a situation where the line from "A Field of Dreams" will apply...

"Build it, and they will come..."

Lots of designs on paper, lots of permits in place, lots of people wanting a positive result. But no plants built - is there anything under actual construction right now?

I think the industry sits back and waits for as much of an "incentive package" as they can get, but there is only talk of such in the halls of Washington. So nothing happens, yet.

I guess that's what happens when you try to save a billion or two on a new plant, in a private market economy...

One thing that I will suggest about the driver behind America's tremendous output and success in WW2, which you cite as monumentally impressive...

It was ALL public spending. The government bought and paid for every bit of output that we could deliver. Who wouldn't bust their behind to sell to so willing a buyer?

Right now, no one is filling the buyer's role ... no one is guaranteeing a market ... no one has the seemingly bottomless pockets to make the machine run.

I don't know the answer to this question, and rather than research it, I will just ask you here: Were the earlier Swedish, French and Japanese nuclear buildouts publicly or privately funded?

To me, such huge projects beg for the security (and typically the accompanying inefficiency) associated with publicly funded projects. Perhaps a workable model in the current time would be public funding for the buildout, and then selling the facilities to the highest bidder AFTER they have been proven to be reliable cash-cows. What do you think?

Regards, RWVesel

USEC's loan guarantee application has been turned down by DOE. That apparently leaves America without a "up to date" domestic nuclear fuel production capability.

The storage site in Nevada for nuclear waste is being closed down.

Politicians routinely deride any thought of reprocessing nuclear fuel.

Influential environmentalists don't want nuclear power because it is "dirty".

Additional nuclear electric power is a fantasy, and will continue to e a fantasy until there is a shortage of electricity. Look at what happened in California as a political policy model.

Wake up!

James Carson, RisQuant Energy

When Sweden constructed those 12 nuclear plants in 13 years, things like that simply didn't happen, What has gone wrong here is that there has been a cultural meltdown, and instead of doing something about it the prime minister and his moronic foreign minister are concerned about what is taking place on the outskirts of Kabul.

About this abundance of generating capacity in the US and Canada, I say great. That's another problem that I don't need to worry my pretty head about, and so I can sleep soundly at night And Richard Vesel, I agree that the key thing where energy is concerned is that it appears BEFORE it is needed, and if those sweethearts on Wall Street will not mobilize the necessary capital, then the government will have to do it. In Sweden the government made the necessary arrangements for the nuclear plants, and then - somehow, I don't know - the private sector took/bought a big slice of the pie. Vattenfall, the largest Swedish utility, is owned privately AND by the government. In the old days complete private ownership would probably have been best, although after deregulation all the crooked tendencies in the management appeared. As for the crooked tendencies in the government, they are just as bad - or worse - than in the private sector, but that is what the voters get for not protecting their interests.

Perhaps YOU should note that the excess capacity we enjoy at this particular instant is due to the recession and generally reduced economic activity. Should we assume that you see this as a long term solution for our energy picture - keep the economy restrained to insure we have enough capacity??? Silly as though that thought may seem, you should consider that even with that "plan" - generation plants will eventually age and have to be taken offline...

Mr. Geigler,

I have to assume you are being facetious in your quoting operating expenses of nuclear to be a mere 2-cents per kwh, right? Sometimes one has to wonder in these forums...or maybe I just have a problem differentiating sarcasm from dumb comments (no personal reference intended).

Prof. Banks,

We do have a past model for public funding of a large power system buildout here in the states - the Tennessee Valley Authority (TVA) - I am sure you know of it. The following is courtesy of Wikipedia:

================================================================ "The Tennessee Valley Authority (TVA) is a federally owned corporation in the United States created by congressional charter in May 1933 to provide navigation, flood control, electricity generation, fertilizer manufacturing, and economic development in the Tennessee Valley, a region particularly impacted by the Great Depression. The TVA was envisioned not only as an electricity provider, but also as a regional economic development agency that would use federal experts and electricity to rapidly modernize the region's economy and society.

The TVA's jurisdiction covers most of Tennessee, parts of Alabama, Mississippi, and Kentucky, and small slices of Georgia, North Carolina, and Virginia. It is a political entity with a territory the size of a major state, and with some state powers (such as eminent domain), but unlike a state, it has no citizenry or elected officials. It was the first large regional planning agency of the federal government and remains the largest. Under the leadership of David Lilienthal ("Mr. TVA"), the Authority became a model for America's governmental efforts to modernize Third World agrarian societies." ================================================================

TVA owns and operates the following generation mix - hydro, coal-fired, nuclear. It is a pretty well run organization at this point, not perfect mind you, as any large utility organization always has its problems.

I personally think that model would work again, and I offer the following mechanism. Sell TVA (or parts of it) to the private sector, and use the proceeds ONLY to fund a new set of TVA-owned nuclear units. Build those between now and 2020, and sell off at least some of that new capacity for a profit (presumably). On a more distributed scale, a Federal Green Power Authority with a New Energy charter, and a specificied CO2-free generation mix, might be the right thing to do now... It would show a clear commitment by the administration to the US, backing its verbal commitments with action, and give the world a clear signal that this country IS taking action on both the energy and CO2 mitigation fronts.

We wouldn't necessarily have to privatize TVA assets to fund the program, but it would keep the neo-con public-program-funding critics a little quieter.

Regards, RWVesel

As an aside, good ol' Wendell Lewis Willkie probably would be tickled by your plan to sell TVA to the private sector. Don't believe he qualifies as a neo-con, though. He checked out 65 years ago.

The US has been awash in excess generation for several years, LONG pre-dating the recession (since 2004-05) and the surplus will persist long after it has ended. You don't seem to be aware that, from 1998 through 2004-05, the US built an enormous amount of new generation capacity, most of it natgas fired. Further, I am not sure that there is firm evidence that the recession has actually lessened power demand. Yes, demand is down this year, but we have also had a particularly mild summer in the east and midwest.

Please examine the document (link below) entitled '2008 Long-Term Reliability Assessment'. This is the annual document that grownups reference. Table 13c on page 70 (pdf page 75) shows the 2012 Summer Margins. The far right column shows the NERC standard while the second to right shows the expected 'Total Potential Resources Margin%'. There is exactly ONE sub-region that is expected to be in deficit, the region around Las Vegas. Ten years ago, most of the US was in deficit three years out. The 2017 table reflects similar expectations.

http://www.nerc.com/files/LTRA2008v1_2.pdf

James Carson, RisQuant Energy

1) NIMBY lawsuits 2) BANANA* lawsuits 3) EPA lawsuits 4) Sierra Club lawsuits 5) Everybody else lawsuits 6) Nowhere to store spent fuel (included in lawsuits above) 7) Lack of equipment (virtually EVERYTHING will need to be imported) 8) Lack of funding 9) Lack of insurance 10) Lack of worker expertise 11) Lack of management expertise 12) Lack of political backing and will 13) Lack of vision

Since we're playing a game of grownup poker, I see your NERC reference, and raise you one back...

http://www.nerc.com/page.php?cid=4|53|57

"While these figures indicate some improvement in capacity margins over the 2006 forecasts, certain areas will still need additional supplyside or demand-side resources in the near-term to ensure adequate margins."

Additionally, are we currently adding a net 10% per year to our capacity? The trail of projects that *I* happen to follow says not, and it hasn't been happening since 2008, when many projects were delayed or cancelled.

Regards, Mr. Snappy

Argue with NERC, then, about the growth rates. I am merely citing the experts.

We can only hope that some of these projects are 'delayed or canceled', since we do not need them and are already saturated with capacity. Keep in mind, however, that any project that is expected to be onstream in 2012 is already well on its way.

Jeff: I would add, "Lack of need".

Today's WSJ article should be both illuminating and timely to this discussion. A relevant quote from said article: The falloff in demand represents a reversal of what has been one of the steadiest trends in business. For decades, the utility sector could rely on a gradual increase in electricity demand. In 45 of the past 58 years, year-over-year growth exceeded 2%. In fact, there only have been five years since 1950 in which electricity demand has dropped in absolute terms. But this year is shaping up to have the sharpest falloff in more than half a century, and coming on top of declines in 2008, could be the first period of consecutive annual declines since at least 1950.

The obvious reasons are the recession and the 3 fold reduction in natural gas prices, which as noted by Mr. Carson above are a large part of the new capacity mix.

I used to live adjacent to the little community of Perry, Ohio, where First Energy has one of what should have been two large BWR units. Perry has enjoyed a remarkable gain in community standard of living due to the tax revenues coming from the plant - even AFTER the state of Ohio usurped part of that revenue and said the rest of the state should benefit from it, too. Downwind and downstream of the plant, less than two miles, is a delightful park and beach on the shores of Lake Erie, where my family and I have recreated many times. In the eight years I lived in the area, I heard not one single compaint from any local citizen about the nuke that was literally in their backyard.

A really good PR campaign on the part of industry would surely find SOME communities who would invite a facility to be located there ... or we could simply co-locate new facilities on property not used by original projects. Those were presumably located well in the past, and Perry 2, for example, could yet come to be. I had some past connection to the WPPS program, and formerly sat on a standards committee of the ANS (in the early 80's). Even then, as the industry was entering its comatose phase, we were still trying to reduce costs by creating equipment safety qualification standards that could be reused for equipment at multiple sites, rather than require each site to have its own specific equipment qualification standards. That alone would have cut many percent out of the cost of building a new unit.

I hope to see some spiffy new units online, before I leave the energy business and retire to some tropical island ... ;-)

RWV

As Ronald Cooke indicates, Washington appears to be full of bad ideas, but I'm not sure any longer how far they are going to get. There are some very smart people in or associated with the US government now, and I wonder if they are really and truly prepared to let politically correct dummies ruin the country's energy future. Steve Forbes is NOT my favorite human being, but unless I am mistaken he once suggested that regardless of what Mr Obama said, he is actually in favor of nuclear, and will support the introduction of more capacity when he thinks that the political backgound is right..

More nuclear - what does that mean? I can't answer that, but I can say that it doesn't mean a reactor on every street corner. The smart people seem to accept that the right energy solution is diversity, and at the heart of this diversity some extra nuclear capacity probably makes economic sense. The issue then reduces to when that capacity should be constructed, and I wouldn't be surprised to find out that the correct answer is as soon as possible.

Much of the capacity currently relying on " duct tape and bailing wire" could rapidly disappear if the Administration decides to impose a "command and control" approach to mercury emissions reductions. Most of the older, smaller coal plants would probably not be economic sites for 90% mercury reduction systems.

That capacity could also disappear, rather than be converted to natural gas firing, if the fuel switch triggered NSPS.

That could have some very interesting implications for future capacity planning.

Ed

I reiterate my disagreement that there is any evidence yet that the falloff in demand has much to do with the recession. That may well be the case, but we need to consider that mild weather may have been the overwhelming factor. Also, I suspect that some of that falloff may not be due to reductions in demand per capita, but rather that immigration flow has slowed.

As for SO2 and NOX, we have made great progress over the past thirty years. While electricity consumption has risen by 80%, absolute pollution has dropped by over 40%. As to the Congressional crap shoot on carbon, who knows?

Banks: I quite agree that getting rid of bad ideas is a good idea. Let's start with the notion that there is any general shortage of generation in the US. I disagree that there is any particular urgent need to add generation. Transmission is another matter.

What are your thoughts on Iran's nuclear electricity generation facilities?

The idea for building WPPSS in the first place was that the aluminum industry, attracted to the northwest because of cheap electrical power rates, would be the perfect built-in customer. The problem was Alcoa, and Kaiser had no interest in the kinds of rates that a factor of 10 cost overrun was going to deliver. WPPSS was considered a quasi-government entity, something like Fannie Mae. The difference is, it WAS allowed to fail. My fear is that if we WERE to build nukes again in this country it would be another boondoggle, with otherwise smart people deciding to defraud the government and "work" at jobs they can never be fired from, indefinitely. So perhaps Mr. Cooper was right, given incompetent management and political meddling, it is entirely possible IN THIS COUNTRY that nuclear plants will cost $10K per kwh of capacity.

Of course, your argument that it might not make ECONOMIC sense to build a nuclear facility if you can satisfy your electricity requirements with a new transmission line can't be dismissed. The decision makers in Florida do not seem to have bought this option however, since they have given permission for the first reactor to be constructed in their state in 33 years..

Maybe that reactor will eventually be built, and maybe not, but it could be that the folks in Florida are right - despite all the sun that is available - and you are wrong. It might also be so that they feel that there is not as much natural gas in the U.S. as you believe, and so they don't want their fortunes tied to a resource that might be very expensive in 20 or 30 years, assuming that the alternative to nuclear is gas..

Bill Payne, years ago I heard a sensible economic argument for constructing nuclear installations in the Middle East, to include Iran, although I don't remember the details, and I am not certain whether that argument would be applicable now. However the issue at the present time is not economics but some applied game theory, and unless I am mistaken the Strangeloves at Israel's Rand Corporation - or Bland Corporation, as it was called in the film - would have a problem approving the presence of facilities for the large scale enriching of uranium in e.g. Iran. Of course, Iranians are some of the most intelligent people in the world, and some of them know a lot more game theory than I do, but whether their logic would have any effect on the movers-and-shakers in their country is uncertain.

To my way of thinking the only solution that makes any sense here is for the US to become heavily engaged, where by the US I mean the present government, and not a government like that of George W. and Condoleeza, whom I see as responsible for spoiling the opportunity to get the North Koreans to act reasonably in nuclear matters, just as I hold Bill Clinton responsible for the war in Iraq. And if you think about it, financially and socially that war is the equivalent of the worst single nuclear disaster imaginable.

And Jeff, incompetence seems to be the real thing these days in a lot of countries, and not just the Big PX. But what can you expect? The first law of nature - the one in which self preservation is mentioned - seems to be going out of fashion. For example, I still haven't figured out why so many elderly Swedes decided that their money should be sent to Brussels instead of the hospitals that will cure their ailments, and which they are constantly bitching about now.

I have to agree with professor Banks here too.

Imagine what will happen if eventually there are 100 million Plug-In-Hybrid Electric Vehicles on American roads as is predicted by some. Most will be pluggable to recharge at any time and at any place there is a standard 120VAC outlet. So don't fool yourself, they will be recharging at random times during the day all day long, not just overnight when excess capacity exists.

An electric vehicle charger is typically going to draw hundreds of watts, say for argument's sake on average a kilowatt each, times say 10% of 100 million vehicles charging at any given time. That's 10 Gigawatts of continuous extra demand spread out across the whole country, which BTW can/will be higher at some times when more than 10% are recharging. For example some utility people are afraid that when many commuters return home from work in late afternoon during peak demand hours, they will need to charge up in order to use their vehicles again later that evening. The resulting spike in peak demand could be very substantial.

My numbers are obviously not based on any hard data but the total extra demand on the grid can easily be somewhere in the Gigawatts. So the excess capacities in most places in America today won’t last very long Mr. Carson. And if you think Americans won't want to buy PHEVs because they love their gasoline cars performances much better, just wait for the next oil price hikes that send gasoline prices into the stratosphere again and watch how fast Americans change their car buying habits.

As for Bob's 100mm electric vehicles, where are they? We could chase our tails for months arguing hypotheticals.

Kenneth: Your point is well taken wrt Waxman-Markey. It may be a game changer, or it may be sound and fury without consequence. We do not know since the bill has not passed.

"As for Bob's 100mm electric vehicles, where are they?" the answer is... coming to a dealership near you and soon.

(does a General Comment outrank a Private Remark?)

A recession plus a moderate winter and summer have temporarily cut our energy demand. This is a happy conicidence for some, and provides a one year reprieve to let us consider further how to refine our response to what we know with almost certainty what will be in our future energy needs picture. I think it is a mistake to let one or two year blips or tips in demand overshadow long-term prognistication and planning. Knee-jerk responses to crisis are always WAY more expensive then well-reasoned and executed solutions. Having a general capacity margin of at least 15% is typically the accepted value for maintaining a reliable grid. To me, this means 15% capacity on an upper 1-sigma demand day, not in the mean, or down in the dirt.

This 2008 article may be a bit "over the top", but does contain substantial information on the need for new & replacement capacity...much of it coming direclty from NERC itself:

http://www.nextgenenergy.org/Portals/NextGen/studies/Nextgen_Lights_Out_Study.pdf

============================================================ Rick Sergel, President of the North American Electric Reliability Corp., the agency that oversees the nation’s power grid, said, “We’re to the point where we need every possible resource: renewables, demand response and energy efficiency, nuclear, clean coal — you name it, we need it. And we especially need the transmission lines that will bring the power generated by these new resources to consumers.” ============================================================

Regarding all those plug-in hybrids - These are ideally suitable for recharging by on site solar arrays at malls and other large sites. I do take issue with those planners who see the PIH's as some sort of reserve for leveling out daily demand peaks. I see that charging demand from these vehicles coming twice in a day ... once after the morning commute, where charging demand will coincide with normal peak demands, and after the evening commute, adding to end of day demand between 6-10PM. Smart chargers at home could manage the latter, but the mid-day recharging has got to be compensated for in another way, otherwise they will be merely adding to the local demand.

By 2020, I don't see 100mm PIH here in North America, but I can easily believe 30-50mm. Regular hybrids have been around for ten years, and don't have that kind of market penetration yet, but I feel the performance of the Tesla and upcoming Volt will start us down a vigorous PIH market path. I just warn people to be very skeptical about this concept of "rolling storage" to back up the grid. I think it's a bad model front to back.

Base loaded nuclear, augmented by a good, distributed mix of other sources, is the smart longterm way to go. It was true in the 70's, and even more true now. Managing nuclear issues in third world areas is going to be a lot easier if we promote technology which does not create weaponizable byproducts, and promote oversight, processes and procedures which manages the waste properly... in parallel with our efforts to promote stable and rational governments in those same places.

Regards, RWVesel

Way back in school I had an economics class where the teacher used utilities as the perfect example of marginal production. He had the stats that showed power consumption went up steadily about 1.5% per year. He also showed how expensive new production was, so utilities would do all kinds of back-flips to avoid having to expend all their capital to add another 10-15% capacity, just to meet that 1.5% growth. I've never seen Banks' textbook, but I would hope it has nice charts and graphs that illustrate this point.

Just like all MIN/MAX equations, the interesting stuff happens at the edges, either a Min or a Max. How comfortable can a utility be sitting at 101% capacity versus 110%? As long as the grid is strong and you can buy excess power from that utility down the road, you're probably fine. But what happens when THAT utility is at 101% too? If 100 utilities are at 101% some fine mathematician can add all those 1's together and say we've got 100% additional capacity in the system. His numbers are right but his reality is wrong. Utilities need reserves for a reason. Or should we run them like banks, on "borrowed" power? We've all seen how THAT worked out.

You might want to keep the difference between power and energy a bit more distinct. $10K per kilowatt-hour is a mite high.

http://www.marklines.com/en/numproduct/index.jsp

RichardV: My point is based on the authoritative analysis of long term capacity performed by NERC, not on any "happy coincidence" of economy and weather. Why are you being obtuse?

JeffP: I am well aware of the "old coal plants" running all over the country. I am ALSO well aware that many of them have already been refurbished or repowered and most of the rest have been scheduled. Very few are scheduled for decommission.

As for your old econ classes, there is nothing relevant that what you were taught concerning utilities prior to 2000. As for your final paragraph, you are a decade out of date. Your point is a non sequitur. In most of the US, utilities do not directly supply the power they sell to consumers. All energy flows through large, regional ISO/RTOs based on security constrained economic dispatch.

Electric vehicle manufacturing costs are gradually coming down and performances are gradually going up. Combine this trend with the looming pain in consumers' wallets as soon as the next oil price spike boosts gasoline to well over $4 US a gallon, and with the sizeable direct consumer tax subsidies that the feds are offering on all electric vehicle purchases, then watch how fast consumers can/will change their buying habits - much faster than you can imagine. Witness how quickly gasoline vehicle sales plummeted by the millions in the US during the year merely as a result of the recession and last year's oil price spike.

Toyota ALONE is shooting for 1mm hybrid electric sales next year.

As for Toyota alone doubling or tripling the industry's electric car sales in one year, I ... let's just say I am skeptical. I suspect that natgas vehicles are more likely to supplant gasoline.

The UN says we have less than ten years to avoid irreversible climate change. (A little hard to build thousands of nuclear plants in that time.)

A think tank in the UK warns us about imminent $200 oil.

The head Wave Theory guy says oil is going to go down to $4 to $10 a barrel.

Hooray, shale has solved our natural gas problem for a hundred years.

Oops, fraccing of shales may not be as easy as advertised. (Couple days later.)

The Volt will get 340 mpg and is on schedule.

We still have problems with the Volt. (One day later.)

China says they make very little CO2 per person. Therefore others must reduce their emissions by so agreeing in Copenhagen.

China announces they will increase their coal production 30% in the next 6 years. (This INCEASE world would raise world coal use by about 5%)

Indian Industry says they cannot be productive when they are only getting power 5 or 6 hours a day. (They are the number 3 coal user, need many more coal burners.)

Nancy Pelosi tells us natural gas is a good substitute for fossil fuels.

The production of Canadian tar sand oil is not really so dirty after all.

The coal industry in the UK will revive and prosper by making gas in situ far underground.

Seems to be resolved: We must have a smart grid, and quickly, to increase energy use efficiency.

Is a smart grid worth the its cost in developed countries? (EnergyPulse)

So what will those worthies tell us to do from Copenhagen?

If, as they claim, they are going to increase coal production by 30% in six years that means they are going to add 0.839 billion tons per year. 0.839 billion tons is 11.8% of 2007 world production. I suggest there is no way the rest of the world can reduce CO2 to offset what china is increasing, much less to even dream of decreasing world CO2 emissions.

I have no idea how accurate the data are, but I did not want to let stand without caution what I posted above.

That doesn't sound to me like a country with excess generating capacity.

IIt seems like only yesterday the population of the US reached 200 million, and now it's 300 million; but they say that it is going to 400 million. I would suppose that this jump will not take place all at once, but gradually, and assuming that these new Americans are not going to live in pup tents or their cars, their places of residence will have to be heated. That means new generating capacity.

And thank you Don. Your observation about the output of coal in China goes into the first paragraph of a section on coal in my new book.

China apparently has some secret new technology, since they consume 39.5% of world but produce only ~20% of global CO2 emissions. Someone call Waxman and Markey and let them know.

Fred,

The cancellation of the nine coal plants is more a reflection of a country with excess environmental activists and plaintiffs' lawyers than of a country with excess generating capacity.

Before you write the first paragraph of the section on coal in your new book, check out the inconsistency I noted to Don above. If you can "out" the secret new technology, it could make your new book a NYT non-fiction best seller. :-)

Ed

You misunderstood the thrust of my post. I'm all in favor of nuclear, done right. The previous posts were leaning towards government involvement in construction, and at least in THIS country, that scares the hell out of me. I've dug around a bit and found this more-balanced history of WPPSS. Interestingly, and an aside, the WPPSS bond failure that took 13 years to wend its way through the courts prompted some smart guys to figure out a way to INSURE these kinds of activities, which directly led to AIG FP (Financial Products), which directly and indirectly led to our current economic meltdown.

A few years ago Ontario mandated to be completely rid of all coal plants by 2014 or so for the sake of the environment, and the impact their emissions have on respiratory illnesses and bumping up health care costs. And even if this didn’t happen, Ontario recognizes the need for much more generation down the road and was planning to add some new large central nuclear, but this has all been put on hold indefinitely. Aside from pulling teeth to get government or investors to open their wallets to build large central nuclear, the recent demand decline has given them another reason to do delay and do nothing for now.

Ontario however is still pushing forward with building some new NG plants plus a heavily subsidized push to build new solar and winds farms, while the rest of the generation shortfall is expected to be partially met by throwing public money at consumers and businesses to achieve large conservation and efficiency gains.

James, you're deluding yourself if you believe in the whole McKinsey: MarkCo, DisCo, GenCo and TransCo model. That was SUPPOSED to happen 10 years ago, but the reality hasn't quite worked out that way. Yes, billions in shareholder wealth has disappeared and utilities stopped being the safe bet for widows and orphans to invest in, but reality still has a way of coming around and biting those "smartest guys in the room" in their less smart bodily appendages. That whole "energy trading" dream scenario went out the window with Enron. If you have reliable power today, thank your local utility. If that utility is part of a bigger consortium, so be it, it is still a local utility the rest is just stock market.

As to your second paragraph, the disaggregation of the wholesale power sector has happened, and continues to move forward, not backward, despite Enron. Since Enron imploded, New England implemented their day ahead market (2003), Midwest ISO implemented both real time and day ahead markets (2005). California ISO implemented both in 2009. SPP implemented a balancing market in 2007. ERCOT, NYISO and PJM markets predated ENRON. You are deluding yourself if you think it hasn't or won't.

Your point that "the rest is just stock market" is nonsense. ISOs are large, sophisticated operating companies, not "consortiums". I don't know what McKinsey had in mind, but I do know what has happened. Fyi, there is more power trading today than when Enron was at its height. Unfortunately, the banking crisis has adversely affected the sector.

Here's where the delusion comes in. Do you believe setting a price and having economic penalties for not delivering power has much to do with PRODUCING power? Think of it another way, so-called speculators can play in this market just like the oil markets, but it is just numbers on paper to them, they have nothing to do with production or delivery. When the stinky stuff hits the proverbial spinning object, those players aren't going to be helping matters, and let's not forget the real time nature of electric power. They might just take their lumps and head off to another poker table, but meantime power isn't getting produced where it is needed and customers are sitting in the dark. Ask any engineer on this form how much "slack" they like to have in their designs, 1%, 10%, 50%? If you're comfortable with a system that is operating with a 2% buffer or less, enjoy.

I believe in REAL markets trading REAL goods, not imaginary markets trading imaginary products. THAT is what has gotten the world into the financial mess it is in today. Dig deep into "synthetic derivatives" as I have and you'll know exactly what I mean. The further removed from reality a market becomes, the more dangerous it becomes.

PGE and FPL execute an on peak deal for 50MW for September 2009 for a particular locational marginal pricing location (aka LMP), say SP15. (I presume without checking that the SP15 has been defined by CAISO as a zone.) This particular deal is not exchange traded on ICE, it is bilateral under a standing ISDA agreement with a power and credit annex. This is about as vanilla as it gets.

PGE sells and FPL buys at some price, say today's ICE closing price of $33.95. This is a FINANCIAL deal only that then settles on either the real time price or the day ahead price as specified in the contract. Settlement means that after the month concludes, the accountants tote up the settlements hour by hour and determine who made money and who lost on the particular deal, and money is transferred. These prices are determined and published by CAISO hour by hour throughout the month.

Whether some PGE generator actually delivers energy into its buss during those on peak hours depends entirely on whether they are dispatched by CAISO. The physical power never flows from PGE to FPL. PGE sells the physical to CAISO and FPL buys the physical from CAISO. Any trade they do is a financial trade that uses the ISO published prices for settlement.

As for trading "real goods" in real markets, there is nothing different in principle between how power trades and how wheat or gold has traded for centuries. Commodity trading has long been based on standardized contracts. In addition to being a playwright, William Shakespeare was, himself, a wheat trader who well understood this.

In fact, the power markets today are more grounded in "reality" than what you described because the ISOs are very concerned with the physical flows and constraints of the transmission system. Their dispatch models work very well and have substantially improved efficiency.

The arguments you have made about derivatives markets have been made since they began. Are they perfect? Of course not. Nevertheless, to deny that they are useful and, on balance, contribute substantially to economic efficiency, is sheer ignorance. True, engineers know a thing or two, but so do economists.

But nobody is going to convince me that derivatives and 'models' have made the electric markets in e.g. Scandinavia more efficient. How 'models' got into this I don't know, and neither does anybody else. I remember asking a brilliant student who went to the US, and stayed there , what he thought of NORDPOOL - the Nordic electricity exchange. "Just a scam," he said.

Maybe things are better elsewhere, but before his boss told him what a horrible person I am, a very smart man in this country told me that the electric exchanges he had visited were little better than criminal enterprises.

Certainly agree that the "...more-balanced history of WPPSS..." reflects what was experienced 35 years ago. Those of us working on an HTGR at Ft. St. Vrain near Platteville, CO at the time discovered that FOAK meant encountering and dealing with much of what was experienced at WPPSS and then some. The 1995 decision to demolish unit 5 leftovers at Satsop is interesting. The 2000 Grays Harbor Community Development Corporation photo in the less-prejudiced history shows substantial remaining structure. Was there an attitude adjustment? Understand that such occurred at TVA's Bellefonte site.

Yes, it is a very fluid system, but no this isn't one big lake (as McKinsey would have us believe) with lots of inflowing and outflowing streams. I admit lots of money can be made, but again, it is just another form of gambling. Here is an oversimplified but approachable description of synthetic derivatives. MUCH of the power contracts bought and sold today can be considered synthetic, and while they have a hedging component, they produce misleading statistics, stats I believe that have mislead you.

Don, I Google-mapped Satsop, WA and looking at the satellite photos it appears the cooling towers are still standing (they weren't finished) and some buildings in the neighborhood seem to still stand. Maybe Energy Northwest decided they had better uses for their money than tearing down derelict buildings. It is a shame they weren't properly mothballed, or in a pinch they could be finished, but the same old quality issues remain, so perhaps tearing them down or using them in future issues of Mythbusters is the best bet.

JeffP: Yes, I have traded electricity. I have been involved since 1998. Currently, I make my living modeling power market forward curves in MISO, NY-ISO, ISO-NE & PJM out thirty-six months. As of today, I have added ERCOT to the list. Thirty-seven markets and growing. In addition to prices, I also model volatilities and power/natgas delta sensitivities.

As for the power market not being "one big lake", I am quite well aware of that. I never implied that it was. ***rolling eyes*** That is what "security constrained dispatch" means. I couldn't care less what McKinsey said.

Power trading is no more "gambling" than trading in any other commodity. In fact, US power trading has the highest proportion of hedging activity of any commodity that I am aware of, and therefore the lowest level of speculative activity. Nevertheless, we could use more speculative activity to improve liquidity and transparency.

As for "synthetic derivatives", I am a subject matter expert as they pertain to power trading. I do not need links to an "oversimplified but approachable description". ALL power trading contracts in ISO regions are "synthetic derivatives" by your definition since they cash settle on an index and there is never any physical delivery. Nevertheless, they are essential for hedging.

Your comment "stats I believe have mislead you" is needlessly patronizing. Nevertheless, to take it seriously... you seem to be laboring under a misconception about what I do. I don't study forward trading, per se. I analyze terminal LMPs (day ahead settlements for the most part) to estimate a fair value for forward trades. My work applies to trading decisions, capital planning, position marking and anything else where you might want a forward price curve for power.

James Carson, RisQuant Energy

“China’s carbon emissions will start falling by 2050, its top climate change policymaker said, the first time the world’s largest emitter has given such a time-frame.” From Financial Times, 8/14/09

Who among us says the emperor is not wearing clothes? Who among us believe Copenhagen (Kyoto II) can be effective? Who is not in denial?

Let me note again that the power trading in Europe is probably still a scam, but I would never use that description for most of the other trading. I can also mention that I don't understand what point you are trying to make when cash settlement is referred to as 'synthetic derivatives'. But, for pedagogical reasons, I appreciate your mentioning of cash settlement, because that option is not given the attention that it should be given in the academic literature.

Don, I'm not in denial about Copenhagen, and neither should you be. In fact if it was summer, Copenhagen might be the right place to be. I came out of the train station there about a century ago, with my tennis racket in my hand, and 'somebody' walked up to me and said TENNIS ANYONE. That kind of thing doesn't happen in every city.

With the bond defaults on the WNP 5 and 4 units, WPPSS could not borrow any more money to complete the WNP 1 and 3 plants.

Curriously enough, a combined-cycle plant was also built at the WNP 3/5 site but was never completed.

... the WNP 3/5 site must contain an Indian burial ground.

The link to synthetic derivatives wasn't for your edification, but the others reading this thread who might want to educate themselves on the subject. Because of clumsy deregulation efforts in this country we have a hodgepodge of fixed retail with variable wholesale prices, which is what caused bankruptcy for PG&E and other California utilities. Because electrical energy is already an artificial environment, and can't be like other commodities such as wheat, there really can't be a "free market" in electrical energy trading, hence I don't wear my free market cheerleader hat when talking about it.

I've read your website now, and better understand your business. You are spot on when you talk about opaque markets, nothing better describes energy trading today. More people might want to get involved, but it makes FOREX look like child's play by comparison.

Columbia Generating Station, WPPSS 2 in its previous life, is a GE BWR-MARK2. Its construction permit was issued on 3/19/73. As Jeff's second history link essay points out , the unit was subject to all of the usual suspects that FOAK plants like the FSV HTGR were exposed to. As a result, its operating license made the scene on 4/13/84 and commissioned operation commenced on 12/13/84. Licensed operation was scheduled to expire on 12/20/2023. I do not know if the "Northwest distaste for nuclear power" has precluded an operating license extension for the unit.

JeffP: Your friend set up an energy trading company in 1994? Where?

The source of the problem with Enron was that the CFTC was not regulating their activities. Having worked with them before, I think they would have ended a lot of Enron's abuses early. The provision of the 1992 EPACT pulling the CFTC away from energy regulation was one of the more brainless acts of congress.

As for me desiring capacity shortages, where did that come from? I have looked at the available resources, and NERC estimates of what will be needed, and wonder about the fuss. Show me where I ever said that a 2% capacity margin was desirable. Also, I make a fair amount of my revenue forecasting merchant prices for new capacity.

Finally, we already have extensive free markets in electrical energy trading in the US, so I don't understand your point. You are quite right that power markets are perhaps the most difficult to analyze. There are many factors at play, and power markets violate certain assumptions that are made by conventional analytic tools. The most important of those would be the arbitrage assumption. Still, difficult is not intractable.

I was quite aware of their wind turbines; I heard them while sleeping on a cruise ship.

Speaking of 2050, you say that the Chinese plan to stop emitting by then. Well thank you, now I can breathe easy.

Fred

A little teaser for all to consider:

Q: What is in the best financial interests of any commodity traders, and their "advisors"?

A: Constrained supply, and demand which approaches or exceeds that supply...

Happy debating, gentlemen! RWVesel

Nevertheless, the vagaries of wind and carbon limits will keep me busy for years.

Jim NERC has been around for awhile. NERC is overseen by FERC. I wouldn't think of them as a "corporation" in the traditional sense of the word, closer to EPRI, without the research. ;)

The caveat in the NERC chart is that they are basing their projection on information submitted to them. Now we only have to hope they have complete info and the little surveys that showed up weren't filled out by college interns. ;)

The EIA is a government agency that collects and publishes data and forecasts. To my knowledge, they don't regulate anything beyond that. FERC is the federal agency that regulates energy. FERC and NERC work closely together. Jeff is only partially correct that FERC oversees NERC for certain limited purposes, but they are mostly independent.

NERC functions through divisions, WECC for the western Interconnect (western US and western Canada). ERCOT governs Texas and also operates the RTO. Midwest Reliability, NPCC, Reliability First, SERC & SPP are the suborganizations in the Eastern Quebec Interconnects. Incidentally, NERC governs ERCOT, however, FERC does not.

JeffP: Yes, NERC does rely on their members to submit quality information. However, the consequences for willful deception are pretty serious. They have severe penalties that can impose "instant death", for example, by de-certifying a utility as a control area, and they are not bound by the niceties of due process.

I well recall an incident in 1999 when ECAR (a former NERC region) threatened the death penalty to a large utility if they ever leaned on the ties again. Final sentence of the letter from ECAR: "If you fail to comply with this request and/or continue to disregard NERC and ECAR operating policies and procedures, *****’s authorization to operate as a Control Area will be considered for revocation." That would have meant instant bankruptcy. NERC is not an organization to mess with.

Volatilities in the power markets vary widely. I partition volatility into two parts, by time. While "forward", this would be the period before delivery, all of the power markets I follow move in tandem with the fuel markets, mostly natural gas. They move, however, at considerably different speeds, typically ranging from .50 to 1.5, centering on .80. So, in general, if natgas volatility is 40%, forward power volatility will usually be 30-35%.

The other partition is the delivery period. Once the timeline gets into the weather forecast range, weather takes over as the volatility driver. Delivered volatilities are a de-annualized 10-20%. Delivered volatility differs from usual volatility in that it does not dissipate just because time passes. When a year out, they look "small" relative to natgas. However, when two weeks forward, they look huge.

So, when deep in the forward period, say four months out, I measure and report both volatilities, using them for different purposes. They can be combined using conventional portfolio techniques.

On several occasions, I have tried to measure daily volatility. The conventional way to measure historical vol in stocks or derivatives is to take STDEV(LN(P1/P0))xSQRT(#intervals/year) where P1/P0 is the price on one day divided by the previous day's price. The rest is Excel notation. Most stocks are 20-35%, while natural gas has been 60% for spot month over the long term. Day ahead power markets are over 300% while real time markets are 500% and UP. There is powerful mean reversion, however, which those other markets do not exhibit.

People here either can't or won'tt do the simple math to see that at $20/ton, it essentially doubles the fuel cost to burn coal (on average), and at $150/ton, it makes it go up by tenfold. (Remember that, on average, burning a ton of coal produces about 1.5 tons of CO2 ... more as the quality of the coal goes up, less as the quality goes down).

Now compare that to the cost of a nuclear solution. It is an economic "no brainer" decision. Short term nuclear CAPEX needs are dwarfed by long-term coal+CCS OPEX needs.

How can we possibly convince ANYONE if they won't do the math?!?

Professor? What does your experience tell you about converting the powers that be?

Regards, RWVesel

Incidentally, your figures about coal will go into the first chapter of my new book tomorrow. How much of that can I use, and what about your name?

The lower value isn't so disruptive, but the higher value clearly is. So I guess it depends how much this sequestering will actually cost. The above cited range is too broad to figure out what might happen.

It's not (that) disruptive because obviously the price of coal is only a small part of the total cost of electricity production in a coal-fired plant. The same argument is tried with nuclear power when pundits argue the price of nuclear fuel may rise 50% or 100%. Even if that happens, the price of nuclear power does not rise that much.

If you are saying that CO2 issues threaten to make coal less competitive, I would say that I agree with you.

Gee, thanks for the gratuitous insult. What do you mean by "marginal cost of coal production" and "marginal cost of coal"? It sounds like you are referring to mining of coal, but that can't be the case. Do you mean electricity production from coal? If so, please clarify.

Just looking at my electric bill, it looks like my electricity costs 6.5 cents per kwh. Add the delivery and other surcharges, and I come to about 11-12 cents. Are you saying a 1.2 cent increase in "marginal cost of coal" (whatever you mean by that) will increase my bill to 18 cents per kwh? If so, then who gets the other 4.8 cents, and how do I sign up?

Again, as I stated earlier, if you are saying that CO2 issues threaten to make coal less competitive, I would say that I agree with you.

So here is your lesson: Wholesale power prices are set in real time by the marginal cost of the highest cost unit dispatched. When coal has the highest cost on the margin, then coal is setting the marginal price. During the vast majority of off peak hours, coal is on the margin. During the vast majority of on peak hours, natgas is on the margin. That is why on peak hours are more expensive than off peak. Average costs are irrelevant to short term power prices. They only play a part when making long term capital investment decisions. The question then becomes, are the gross margins enough to justify this capital expenditure?

In ISO regions, the markets are set up such that this really bites hard. That is the principal reason why we have them, in fact. However, even in bilateral regions (SERC, Pacific Northwest & Mountain West, the same principle applies, it's just not as efficient.

So, if you increase the marginal cost of producing power by 70% in offpeak hours, you will increase the price of power during those hours by no more than 70%. I picked "over 50%" because I know that well over 80% of the marginal cost of a coal burner is fuel, but that that also varies a lot and so I took a conservative number.

Let's carry the implications of your "not so disruptive" lower bound. The off peak part of the energy portion of your energy bill will increase by my rough estimate of 55%. The on peak portion will also increase, but how much will depend on where you are. Most of the US would see on peak energy increase by ... 25%, give or take a lot. The overall increase in cost of your energy would be something like 35%. That means your bill would likely rise by about .35x$0.065 or roughly 2.5-3c. If your overall bill is now 11c, then your power bill will rise by 25%. BEST CASE. And this is only if none of these generators are retired. This is "not so disruptive"?

Let's consider what happens when part of the coal fleet is then retired. This will happen in pretty much every region of the country, depending on how much coal they use to generate electricity. More where I live, btw. By deleting this resource, you change which unit is now on the margin at any given time in EVERY HOUR. In many hours, that will mean moving from efficient CCGT natgas setting the price, to OCGT natgas setting the price. During relatively high load periods, that will might mean a lot more movement from OCGT natgas to ... OCGT fuel oil. Do you have any idea what that will do to the cost of energy on your bill???

Given that the topic of this thread is about nuclear, impose this "not so disruptive" cost on coal, and you will see a massive move to replace them with nuclear. To which I ask (again), what about the waste?

I am aware of how the power markets work, including how everyone is paid at the highest marginal cost. 14 cents would still be less than what much of the Northern East Coast has to pay for electricity today.

For the third time, If you are saying that CO2 issues threaten to make coal less competitive, I would say that I agree with you. I'd rather not pay higher electricity prices either, but that doesn't mean (by itself) that CO2 emissions should be ignored.

FWIW, I don't think $20 per ton for CCS is very feasible. It's probably going to be much higher than that. So we really aren't even in disagreement.

The best fate for nuclear waste is to burn it up in 4th generation reactors. Probably an easier sell than trying to re-start Yucca Mountain.

As for G4 reactors, they are more than a decade away, at best. CO2 sequestration is much more immediate.

First: Storage and processing of nuclear "waste" is a problem already solved technically, by France and Japan, true?

Massive sequestration (gigatons per year) of CO2, at dozens to hundreds of facilities, involving completely new transportation and sequestration infrastructure, as well as advancing "immature" technologies, when compared to one or two nuclear waste reprocessing facilities, using current, and yet still advanceable technologies, seems like a no-brainer decision (technically, at least).

Second: The cost of CCS amplifies the fuel-cost portion of the cost of generating power, in at least a simple picture. Currently, coal costs for a MWh of electricity costs as little as $7, for some western mine mouth operations, to more than $30 for some eastern hard coal burning plants. Now add the cost of CCS per ton, at a more realistic one ton per MWH. Best case - $27 fuel + exhaust cost per MWH - worst case $155 fuel + exhaust cost per MWH. "Nominally" call it $90 as a SWAG.

Now add in the front-end capital investment and buildout needed to put this so-called solution in place...of at least $5B per net GW new or replacement capacity.

For those who crank the investment numbers for the major utilities, I wonder what they would candidly say to such scenarios? If they had no political background to deal with, what would they choose based on "the numbers"?

I think, technically AND economically, nuclear beats Coal plus CCS hands-down.

One thing I saw at Coal-Gen as new, compared to last year. A couple of companies with literature on modular nuclear units...at a coal-based show. I think these equipment manufacturers have already come to the conclusion that there is a limitied future in one direction. B&W has a 125MWe product, and NuScale a 40MWe design...how many other players are there in this space?

Regards, RWVesel

PS - Yes, Fred, of course - but perhaps we should tie down the numbers with some explicit calculations, to complete the picture?

William Ernest Schenewerk, Ph.D. says: President Obama has run smack into the choices that has plagued energy policy for 3 decades: Do coal, do nukes, or do without. The greenies ruin their image if they do nukes, so the default choice is do coal. Organized labor prefers coal over nukes because coal plants can only store 45 days worth of fuel. The residual "renewable energy" policy is a result of an anything-but-nukes energy policy. Just producing the steel required to deploy "renewable energy" on a World scale will trash the atmosphere. Biofuels have given us record corn and sugar prices. Energy policy lurches away from choices that gain enemies and toward choices that have so far offended the least number of people. So far pipeline natural gas has gained the least number of enemies. At least as long as pipeline natural gas is not being replaced by LNG, it is rougly 1/3 better than coal. Most of the energy used to deliver LNG occurs offshore and remains unknown.

Here's another even more interesting link where this apparently German PhD opines. Review Journal Does anyone else find it interesting the government co-opted a $23B fund that ratepayers have been contributing to for decades?

Regarding the $23B. "Nuclear utility advocates have argued that the $23 billion that ratepayers put into the Nuclear Waste Fund for building a repository and hauling spent fuel to Yucca Mountain should be returned if Yucca Mountain won't be licensed. " -- I don't see any logic in that argument. The money belongs with whomever is legally responsible for eventually disposing of the waste. At now accoring to many utility lawsuits, that's the government. End of discussion.

I didn't make the statement BTW, just said I found it interesting.

As to your second point, the gov't mandated the collection of the fees to solve the problem and in the meantime the utilities have had to spend money to deal with the waste themselves AND have a fund they can't access to deal with moving it. Let's say, as JamesC implies that the government is ultimately responsible for the waste. Do you really believe that? I can see lawsuits ad infinitum but I don't see a solution. Perhaps as many suspect, this is merely a ruse to keep more nuclear from being built. Good luck with your CO2 levels without them.

This begs the question are all our politicians and regulators that ignorant or are they all being duped simultaneously ? I doubt it very much. I suggest they are all depending on another solution - reducing total energy consumption and more importantly consumption growth. The question is how are they going to do this without imposing draconian economic measures.

The pathway of total reduced consumption (TRC) goals is being pursued perhaps most aggressively here in Ontario where our government is attempting to foster a public culture of energy conservation. Through its provincial power authority agency that administers all new generation contracts, it has also mandated fostering enormous TRC targets by 2020. If met they will avoid building gigawatts of new generation, and even allow them to retire our existing coal generation without replacing all of it at once.

It is being implemented by throwing public money into wide-ranging consumer and commercial rebates for purchasing energy efficient products and upgrading building efficiencies. Homeowners and businesses can receive large grants to upgrade buildings or industrial processes. Companies receive rate incentives to enroll in active demand response programs through our local utility companies.

Other measures include setting new commercial standards in energy efficiencies for lighting to residential appliances to heating and air conditioning, and others. They are being set to have increasing efficiency levels over time, and any products that don't eventually meet them over time by defined deadlines will be banned from sale here. Incandescent light bulbs have been the first on their hit lists, and now widescreen televisions are being sucked into it too.

The latter is also placing huge new demands on manufacturing industries to develop new more efficient products. Recognizing this Ontario is also pumping substantially more public money into university and commercial research and development efforts to help them.

The plan is working in Ontario but they have a long way to go yet to meet their TRC targets, and from what I have seen over the past year on this website forum, these ideas are also starting to catch on in the US, Australia, and in Europe.

---------- Steel -- Concrete --- Other Metals

Coal ---- 1500 --- 5500 --------------- 30

Wind --- 8000 --- 35000 ----------- 1000

LWR --- 2500 --- 15000 --------------125

I'd estimate it fair to assume the Wind steel usage has dropped in half since 1983 so 1,500 for coal vs. 4,000 for wind or 2,500 for nuclear. Not THAT much different.

D. Walters