The big picture: Many tout carbon-free nuclear energy as a climate solution, but today’s nuclear plants are having a difficult time competing with cheap natural gas and renewables in today’s wholesale electricity markets. New advanced nuclear technologies may reduce costs, but even in the most optimistic scenarios they will not be competitive without a price on carbon.
Though they remain largely untested, advanced technologies could prove cheaper and safer than current reactors:
- Small modular reactors (SMRs) are compact and require less on-site construction.
- Generation IV reactors don’t require elaborate external cooling systems like the ones that failed at Fukushima.
- Liquid-sodium cooled reactors can use spent uranium and plutonium, allowing them to produce power for extended periods without costly refueling.
Yes, but: Thanks to the fracking boom, nuclear technologies will face stiff competition from natural gas combined cycle (NGCC) power plants for decades, as well as from renewables due to their decreasing costs. Unless fossil fuel plants pay a price for climate-damaging carbon emissions, carbon-free technologies like nuclear energy will likely continue to lose market share or require subsidies.
What to watch: The above chart compares the expected range of costs for producing a megawatt hour (MWh) of electricity from advanced nuclear technologies in 2040 to the projected cost of NGCC plants — both with and without a carbon price of roughly $50 per ton of emissions, as used by the Obama administration.
- Without a carbon price, there is no advanced nuclear technology that is projected to be competitive with a NGCC plant.
- However, with a modest carbon price in place, cost projections for all three advanced nuclear technologies suggest they could be competitive with NGCC plants, with SMRs and High-Temperature Generation IV plants particularly close.
The bottom line: The capital investments that increase the odds of innovation depend on market signals. To plan on a nuclear renaissance without a price on carbon is to treat hope as a strategy.
Michael Greenstone is the Milton Friedman Distinguished Service Professor in Economics at the University of Chicago's College and Harris School of Public Policy and director of its Energy Policy Institute.