U.S. nuclear reactors face uphill challenge, despite lower emissions

(Reuters) – The U.S. nuclear power industry is facing an uphill battle to hang onto its share of the country’s electricity production, with some projecting a worst-case scenario where half of the nation’s 99 nuclear reactors could shut over the next couple of decades.

Nuclear power looked to be on the verge of a renaissance about a decade ago. But a surge in domestic natural gas production, billions of dollars in cost overruns on new projects, Japan’s Fukushima accident in 2011, and multiple plant closures have the industry on its heels again.

The U.S. Department of Energy (DOE) expects nuclear’s percentage of the power mix to drop to 11 percent by 2050 from the current 20 percent, and many reactors to close. A DOE study in August pointed to increased natural gas production as the biggest factor hampering competitiveness in nuclear power.

“Up to half of the currently operational nuclear capacity could be at risk of early retirement in the next decade or two due to low power prices and rising costs,” said Dana Lazarus, senior analyst in North American power at PIRA Energy Group, a unit of S&P Global Platts.

Nuclear providers believe they should be paid more for electricity they sell because the power is cleaner than natural gas and coal and more reliable than wind and solar. But gas and renewable producers oppose higher payments for nuclear, which they see as an expensive subsidy to an uncompetitive industry.

“We’re not seeking a (government) subsidy,” said Joseph Dominguez, head of governmental and regulatory affairs and public policy at top nuclear power producer Exelon (EXC.N). “We’re selling a premium product.”

The greatest threat is in deregulated states like New York, Illinois and Pennsylvania, where providers, known as merchant reactors, compete against gas and renewable power generators. In regulated states, operators recoup expenses through costs passed on to ratepayers.

In the past five years, operators have shut six reactors amid stagnant electricity demand and low natural gas and power prices, and plan to shut another six reactors in deregulated states over the next five years, in part because they cannot compete with gas-fired plants.

Most states in the U.S. Northeast and Midwest are deregulated. Merchant plants receive the same money for energy they sell as gas-fired and renewable plants, which are less expensive to operate.

“There is a lot the federal government could do to assist troubled merchant nuclear…

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