While oil and natural gas prices may be very low today, in the medium- and long-term it’s likely that fossil fuels will be significantly more expensive. For that reason, it’s important that alternative energy sources continue to be developed. The Department of Energy appears to share that view as the government recently announced that it was selecting two companies, X-energy and Southern Company to work on advanced nuclear reactor designs.
Nuclear power is not popular these days with either environmentalists or investors, but it is necessary. Nuclear power provides roughly 20 percent of the electricity produced in the U.S. and over 60 percent of the carbon-free electricity. For all of the excitement around solar and wind, nuclear power is still a bigger energy generation source than either alternative. That’s not likely to change anytime soon either.
Nuclear power has structural advantages including a consistency that is lacking in many renewable alternatives. Unfortunately, the sheer power of nuclear makes many environmentalists nervous, and the cost of constructing safe modern plants is so prohibitive that it scares many investors. Related: Does Buffett See A Bottom In Oil Prices
The DOE’s new project with X-energy and Southern Energy aim to address these issues. X-energy is working as part of a team with BWX Technology (part of the old Babcock & Wilcox), Oregon State University, and Oak Ridge National Lab among others to build new smaller reactors that are would be effective in densely populated areas.
Small nuclear reactors have become a popular area of late, but they have yet to be truly adopted en masse by the market. Small reactors are receiving attention in the U.S. and abroad in part because they can theoretically be produced at lower cost in factories and then shipped to power stations for use. Because the reactors are smaller, they should also be less dangerous in the event of an accident. Related: Is This The Bottom? Balance In Oil Markets Closer Than Many Think
Nonetheless, it will likely still take at least a decade and hundreds of millions in funding to help new small reactor designs enter the market. The DOE is certainly working towards that goal though. History suggests the task of building an effective small reactor won’t be easy, and many previous efforts have been made with little success. On the other hand, many past efforts had been made to develop a reusable rocket, and until SpaceX recently showed success in the area, many considered it fruitless. The point being that innovation only has to happen once successfully before it can be built upon and repeated.
Southern Company, the second firm receiving a grant from the DOE will be partnering with TerraPower, Vanderbilt, and the Oak Ridge National Lab among others to develop and build a Molten Chloride Fast Reactor (MCFR). MCFR as a class or Molten Salt Reactor (MSR) have been researched for a while at ORNL, but they never really got enough development to be commercially viable before. The basic concept has a lot of advantages over conventional reactors though. In particular, MSR’s are much safer and operate at a lower pressure with fewer components that can create problems. The typical design does not require fuel rod manufacturing, and perhaps most importantly MSRs can be effectively turned on and off either for maintenance issues, safety reasons, or simply as power needs fluctuate. Related:Oil Sold for -$0.50 per Barrel. A Negative Price!
That last point is an issue for both conventional nuclear plants and many other types of power which is what necessitates the construction of expensive gas peaker plants. MCFR’s have the potential then to fill an important role in the renewable energy landscape over and above the simple generation of power.
Both of the DOE’s concepts remain purely at the early development stage for now, and the DOE grants are relatively small in comparison to the eventual funding needs for building new reactors. Nonetheless, it is encouraging that even as oil prices are so cheap, industry veterans are remembering that new R&D needs to take place at all times since you never know what tomorrow will bring.
By Michael McDonald of Oilprice.com
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