Given recent significant challenges to the economics of the nuclear generation industry, it makes sense that development of new nuclear generation is extremely limited. However, that does not mean that utilities are not keeping their options open for future nuclear development. Combined Operating Licenses (COLs) issued by the NRC provide power companies the option to defer potential nuclear plant development into the future. The COLs provide an “option value” to utilities as they make bets on the future energy market.
Utilities view these options as adding value to their customers, but quantifying that value is difficult given how long it takes to build a plant and the uncertainty of what the market may look like when the plant is operational. As long as natural gas prices stay low, beginning development of new nuclear generation will not make economic sense; however, natural gas markets have proven to be unpredictable, and an increase in the price of natural gas in the future could change the economic case for new nuclear generation. In addition, new legislation forcing reductions in carbon emissions could make nuclear more attractive. If resiliency becomes more valued in situations such as a natural gas shortage or lack of energy movement via transmission in high renewable areas, those utilities that have already been issued COLs will be rewarded.
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Additional Contributing Author: Frank Nelms
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