Long-term outlook for nuclear generation depends on lifetime of existing capacity
Note: Results from the cases labeled high and low natural gas price cases are from the AEO 2013 Low Oil and Gas Resource and High Oil and Gas Resource cases, respectively.
Nuclear power plays an important role in U.S. electricity, with 101 gigawatts (GW) of capacity accounting for 19% of electricity generation in 2012. The AEO 2013 examines this role, including capacity expansion and the long-term operation of existing plants, in a number of side cases. Projected reliance on nuclear power in 2040 varies across cases, providing between 10% and 20% of projected total electricity generation with total capacity between 63 GW and 133 GW (see chart above). Key drivers include changes in the price of natural gas as well as the possible future operation of existing nuclear power plants beyond the 60-year period for which most units are currently licensed.
With high nuclear power plant construction costs, low natural gas prices, and slow growth in demand for electricity, market conditions for building new nuclear plants are challenging. However, the operating costs of nuclear power plants are relatively low. As a result, where nuclear capacity is available, it is operated as baseload 24 hours a day, 7 days a week. Therefore, nuclear generation is primarily a function of available capacity.
In the AEO2013 Reference case, new construction and uprates add 19 GW of nuclear capacity between now and 2040, compared with 215 GW of new natural gas capacity and 104 GW of new renewable capacity. By 2020, completion of the Watts Bar (Tennessee), Virgil C. Summer (South Carolina), and Vogtle (Georgia) projects will add 5.5 GW of new capacity. These projects are currently under construction. Overall generation from nuclear power grows by 14.3% from 2011 through 2040 (see chart below). However, the share of nuclear in the overall electricity generation mix declines as growth in nuclear generation is outpaced by the increases in generation from natural gas and renewables. The nuclear share of total generation is 17% by 2040. In addition to the announced construction projects, future closures include Kewaunee Power Plant (Wisconsin), announced in 2012, and Crystal River (Florida), announced in 2013.
The projected path of natural gas prices is a key driver in the decision to build new nuclear capacity. In the AEO 2013 Reference case, an additional 5.5 GW of economically driven nuclear capacity is projected to be operational after 2035 in order to meet growing demand for electricity. In a side case in which the projected price of natural gas delivered to the electric power sector in 2040 is 26% higher than in the Reference case (see chart below), an additional 26 GW of nuclear power capacity will be built through 2040. However, when the projected price of natural gas delivered to the electric power sector in 2040 is 39% lower than in the Reference case, no nuclear power plants will be built beyond those that have already reported to EIA.
New commercial nuclear power plants are licensed by the Nuclear Regulatory Commission (NRC) for 40 years. Nuclear power plants may retire at any time, or they may choose to renew their operating licenses. Operating licenses may be renewed at 20-year intervals with NRC approval. NRC regulations do not limit the number of license renewals a nuclear power plant may be granted. Nearly 90% of currently operating nuclear reactors either have received or have applied for a renewal, and all first started operating between the 1960s and 1990.
By 2030, the renewed operating licenses for nuclear power plants will begin to expire. Nuclear power plant owners make the decision about seeking operating license renewals, and typically these decisions are based on both economics and the ability to meet NRC requirements. The AEO2013 Reference case assumes that the operating lives of most of the existing U.S. nuclear power plants will be extended at least through 2040 but includes the retirement of any plants that have reported to EIA that they will retire early. The 7.1 GW of retirements projected by 2040 in the Reference case represent about 7% of current fleet capacity.
In the Low Nuclear case, generation from nuclear power in 2040 is 44% lower than in the Reference case, because of the loss of 45.4 GW of nuclear capacity that is retired after 60 years of operation. The loss of generation is made up primarily by increased generation from natural gas, which has a market share 17% higher than in the Reference case in 2040.
For details of the complete analysis, see the full Issues in Focus article.