NEI’s Fertel says market dynamics point toward higher electricity costs

Long-term electricity costs are certain to rise because of the need to replace aging infrastructure and certain market dynamics might actually make things worse by concentrating on short-term prices, Nuclear Energy Institute (NEI) President and CEO Marvin Fertel said Feb. 12.

Fertel made the remarks in response to a question during NEI’s annual briefing to Wall Street. (The New York City event was webcast by NEI).

“The cost of electricity today in real terms is probably not much more than it was in 1970,” said the nuclear trade group official.

“We are going to be rebuilding a lot of our infrastructure, and that is going to raise the price,” Fertel said. But power companies don’t want to rebuild everything at once because then there would be a major price shock.

During the past year, NEI has started pushing to monetize the value of nuclear power’s carbon-free baseload energy in forums ranging from Illinois to the PJM Interconnection to the Federal Energy Regulatory Commission (FERC).

Making the markets work efficiently would cause energy prices to go up but it would be less painful in the long run, Fertel said. “If I make the markets work right you are going to have slightly higher energy prices,” Fertel said.

Competitive market officials seem overly concerned about smoothing out day-to-day prices, Fertel said. “But they are not helping their customers in the long-term … We are going to have to replace an awfully lot of electricity,” Fertel said.

If it is assumed that all U.S. nuclear capacity retires when it reaches 60 years of age, then 100 GW of replacement nuclear capacity would have to be built by 2030 to maintain atomic energy at about 20% of the U.S. generation mix. Fertel does expect some reactors to file for a second license renewal that could enable them to operate beyond 60 years.

As much as one-third of today’s coal-fired capacity could retire in the next five to 10 years. In addition, 342 GW of natural gas generation has been brought online since 1995. That represents 75% of all new capacity, Fertel said.

Renewable energy will expand. But without great progress in energy storage, renewables will not be able to truly compensate for baseload power, Fertel said.

As a result, the generation resource options are becoming narrower, Fertel said. Without storage breakthroughs, the United States could see a future where “the sun is free and the electricity is free, but the electricity is only there part-time.”

 

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.