Slowing demand growth gives me a deja vu feeling

One of the myths of the first Atomic Age was that safety fears following Three Mile Island halted new development. A more careful reading of history shows that the new development had already stopped well before April of 1979; the first major wave of order cancellations happened soon after the Arab Oil Embargo of 1973 sent oil prices skyrocketing. The rapid increase in energy prices slowed down the growth in electricity demand so much that many utilities were faced with more capacity than they needed with more in the pipeline.

Some utilities were particularly hard hit. Public Service Electric and Gas of New Jersey supplied a number of large refineries and petrochemical plants which together represented nearly half of the company’s baseload demand. When crude oil shipments into the US slowed down during the embargo, those refineries had less raw material and slowed their production and electricity use. Instead of growing at 7% per year, PSEG’s demand actually fell.

PSEG had three large nuclear plants on order, one a GE BWR at Hope Creek and two of Westinghouse’s new factory-built Offshore Power Systems. Hope Creek construction was much farther along; Westinghouse had just started the factory up to build the Offshore Power Systems plants, so they could be cancelled at a much lower cost.

The reason I am pointing this out now is that it is a good time for the nuclear industry to be aware of the risks and to take action to keep the momentum going even if there is a slowdown in electricity growth. Utility executives must not oversell the idea that the reactors are needed to meet “inevitable” demand growth.

Remember, even without any new demand for electricity, there are about 1.2 Billion tons of coal being consumed each year in rapidly aging power plants. There are also a number of states, including Florida and Texas where a major portion of the electrical supply comes from burning natural gas with unpredictable but generally rising fuel costs. (Today’s price at Henry Hub is about $11.00 per million BTU; in 2000 that same amount of gas cost less than $3.00.)

In the Monday, May 19, 2008 issue of the Tampa Tribune, you can find an article worth reading on the subject titled Demand cools as new nuclear reactors are planned. If meeting demand growth is the selling point to the PUC’s, nuclear power projects might be a difficult sell.