Friday, September 14, 2012

Mixing it up over MOX - a wrapup from Chattanooga

Crowd at the MOX hearingTuesday's meeting in Chattanooga over the draft Supplemental Environmental Impact Statement (SEIS)  over potential plans by TVA to use MOX fuel fabricated from surplus weapons plutonium had no shortage of passion. The meeting drew a packed house of MOX supporters and professional anti-nuclear activists ("professional" in the sense that these individuals clearly make a career out of attending such hearings).

Surprisingly absent however was any evidence of nuclear zombies; while the opponents employed some degree of necromancy in their arguments, no "nuclear zombies" were spotted at the meeting. (To which I wryly observed during the meeting, "All that zombie defense training for nothing...")

For those who missed it, I did a bit of live-blogging at the ANS Nuclear Cafe as well as live-tweeting the meeting (as @sskutnik, under the tag #MOXchat - and #MOXsnark as my snarkiness level progressively increased throughout the meeting...) Meredith Angwin of Yes Vermont Yankee was following the meeting via Twitter and has already posted her thoughts; I've been a bit delayed up until now (such is the life of a professor...), but I wanted to get in my impressions from the meeting.
UTK ANS students

Strong turnout

We had an extremely healthy contingent of students in attending, both from the University of Tennessee (where we had a little over 20 overall) as well as Chattanooga State's local ANS section (as seen in the bright blue and orange shirts in many pictures). A great deal of credit for this goes to Laura Scheele, the Outreach and Public Relations director for ANS national, who coordinated with both the UTK and Chattanooga State sections as well as organizing a welcome hospitality room (always popular with students!)

Also in attendance was Suzy Hobbs-Baker of PopAtomic Studios, who put together some very cool pro-nuclear signs. (One anti-nuclear activist who wandered into the hospitality room as Suzy was putting together some of her signs before the meeting rolled her eyes and said, "You have got to be kidding." Whimsy, it would appear, is lost upon the opposition. Such a lack of whimsy of course did not stop her from helping herself to some cookies courtesy of ANS.)

No zombies, but zombie arguments

As I noted above, there was a surprising absence of zombies at the Chattanooga hearing; we speculated as to whether the budding thespians had caught wind of our plans to organize on the hearing and decided to head off to greener pastures (or at the very least, softer targets).

In a rare, refreshing display of honesty, one housewife-cum-activist (this being pretty much her own self-description: "My husband pays the bills, which allows me to do this full-time"), while reading off of a notecard of pre-prepared talking points, admitted, "I don't really understand this, but I'm going to read it anyway..." There were numerous "technical" (speaking very generously) arguments of dubious merit pertaining to MOX fuel - they could be summarized essentially as follows:

  • MOX fuel burns (thermally) hotter, so it's more dangerous
  • These reactors "weren't designed" for MOX fuel
  • MOX fuel is ill-understood and experimental
  • MOX fuel with weapons-grade plutonium behaves differently than reactor-grade plutonium
  • MOX fuel leads to much more rapid neutron embrittlement of reactor pressure vessels
Some of these arguments I've handled before, but let's go through them again. 

Thermal output

As to the thermal output - indeed plutonium does release somewhat more energy than uranium upon fission. However, the reactors are being run at the same thermal output - which is controlled the same way we control uranium-only cores: with chemical shims (like soluble boron), burnable poison rods, and control rods - all of which keep the total temperature of the reactor the same as before by controlling the rate of fission.

Reactor physics of MOX fuel

The next three arguments essential come under the same umbrella - the myth that MOX fuel is somehow new and ill-understood. MOX fuel itself has been used for decades around the world in countries that reprocess used nuclear fuel, so the idea that it's somehow ill-understood is clearly false on face. 

Beyond this, many of the opponents arguments came from half-complete understandings of how reactors work; it was particularly apparent that they were being fed cherry-picked half-truths to convey a sense of technical credibility to their arguments. For example, opponents argued that MOX fuel makes the reactor more difficult to control. In a limited sense, this is true; plutonium has about 1/3 the fraction of delayed neutrons (~0.2%) as U-235 (~0.64%). 

[Aside: In reactor theory, neutrons come in two forms - "delayed neutrons," which come from fission products or decay products (on the order of a few milliseconds to a few minutes after fission), and "prompt neutrons," which are the neutrons released at fission. Reactors are typically run as "delayed critical" - meaning that the delayed neutrons are the component which keeps the chain reaction going; the reactor is in fact subcritical (not self-sustaining) from prompt neutrons alone. The existence of delayed neutrons is what allows for a reactor to be safely controlled, namely by allowing for smooth, easily controlled changes in reactor power.]

Here's the problem with the opponents' argument; nobody is proposing to run a full core solely upon plutonium fuel. Rather, the TVA proposal would, at a maximum be looking at a 40% core of MOX fuel, ramping up from an initial loading of around 4%. Further, there is of course an ongoing trend with nuclear opponents, that somehow there is a completely non-existence of an engineering discipline. A key issue to stress here is that before any fuel assembly is loaded into a reactor, an inordinate amount of engineering work is done to know just how the fuel will behave to ensure it will be done safely. No one is simply doing engineering by the seat of their pants, contrary to the beliefs of some.

Once the argument that MOX fuel is somehow "experimental" is knocked down, opponents quickly come back with a new variant - that somehow plutonium of weapons-grade variety (i.e., with a Pu-239 content over 90%) behaves substantially differently than that of reactor grade origin (where Pu-239 is about 55-70%, with about 20-25% Pu-240).

Pu composition by reactor type

With plutonium, odd-numbered species (Pu-239, Pu-241) are "fissile," meaning they will fission with thermal neutrons (i.e., the kind which exist in a light-water reactor). Even-numbered plutonium species will not; they typically absorb neutrons to become odd-numbered plutonium species (e.g., Pu-240 will become Pu-241), meaning these species have a net negative reactive worth (i.e., they parasitically absorb neutrons).

However, once again - these are things which are well-understood from an engineering perspective; the amount of plutonium in the MOX rod is determined by how much "reactive worth" is necessary. One of the students who spoke (and was later quoted by the Times-Free Press) has actually studied this exact issue (differences between weapons-grade and reactor grade plutonium for reactor fuel) and found minimal differences in reactor behavior. In other words, this is most certainly not some "experimental" fuel never tried before - all of this is well-understood physics.

Everyone's a reactor engineer...

The same goes for whether reactors are "designed" for MOX fuel; reactors are designed to remove efficiently remove heat from fuel rods and contain radioactivity. Reactor cores are designed to distribute fuel assemblies such that the rate of fission (and subsequently reactor power) is as evenly distributed as possible, with minimal peaking. Thus, the argument that somehow reactors are not "designed" for MOX-loaded cores run at the licensed and designed reactor power is utter nonsense, based upon a total misunderstanding of how reactors are designed and operated.

Finally, one of the most bizarre and self-contradictory arguments was the idea that MOX fuel will uniquely lead to accelerated materials issues with reactor pressure vessels - i.e., neutron embrittlement. Again, an argument based upon a half-truth. The average number of neutrons released in fission by plutonium is again higher than uranium (a quantity known as "nu-bar"; nu-bar for Pu-239 is about 2.98, compared to 2.6 for U-235, about a 15% difference). However, the actual quantity of interest - the neutron flux (i.e., the number of neutrons actually flying around in the reactor) is directly proportional to the rate of fission - itself proportional to the reactor power. In other words, if the reactor power is held constant, all other things being equal the neutron flux will also be about the same. (There are some minor differences here, getting deeper into the technical details, but the end result is that the net difference in neutron flux basically ends up being a wash.) In other words, the argument that somehow plutonium-based fuels will somehow uniquely lead to accelerated neutron embrittlement is utterly bogus - completely notwithstanding the fact that NRC regulations require regular sampling of reactor pressure vessel materials (a "coupon" is taken from the vessel itself and tested for properties of embrittlement).

...or an economist

Not surprisingly, many armchair economists were also present among the opponents, with several pointing out the fact that the disposal of surplus plutonium in MOX fuel costs more than vitrification and disposal in a geologic repository (in this case, likely WIPP in New Mexico) in glass logs. A response to this - repeatedly brought up by myself and others present is that fissioning the plutonium is the only way it can ultimately be permanently destroyed. (This perhaps most brilliantly summarized by Dr. Howard Hall, who noted that "as a chemist, the most difficult thing for me to do is to put an atom back together after it's been fissioned.") Opponents also neglect a few key issues as well - the first and most important of which is that we have a standing agreement with Russia to destroy this plutonium in MOX fuel, namely because of Russian concerns about future retrievability in glass log form. (While the plutonium is rendered far more inaccessible in glass log form compared to its original metal pit form, it is clearly not impossible even with present technology to recover; by contrast, plutonium fissioned in MOX fuel is both destroyed, with the remaining material both contaminated with "nuisance" species like Pu-240 and Pu-242 as well as being trapped in a form which would need to be processed, while being protected by a lethal radiation field.)

Additionally neglected is the fact that the DOE has already made the decision to go the MOX route and has already invested considerable resources in making this happen, meaning any savings argument is moot; the meeting at this point involves TVA's decision to accept the MOX fuel for reactors. (Topical limitations did not stop MOX opponents from airing a laundry list of complaints against nuclear energy writ large, particularly with respect to TVA.) However, even assuming abandoning the MOX program was under consideration (neglecting technical concerns and focusing strictly upon the economic argument being presented), given the funds already committed to the MOX fabrication facility, we are well past the point where vitrification (a technically inferior solution) would even save money on the balance.

Of course, economics was not always the strong suit of opponents; a particularly amusing moment of the evening was when one opponent began his speech indicating how he hadn't paid an electric bill in over two years thanks to his home solar panels, then proceeded to preface an argument against the relative economics of MOX by saying, "As a TVA ratepayer..." It was quite clear that the meaning of "ratepayer" wasn't quite understood.

The importance of being nice

One of the most surprising things to me about the overall tone of the meeting was the general air of civility in the affair. Perhaps my expectations had been set too low on the basis of some of the zombie theatrics of Greenpeace types at prior TVA hearings (not to mention some of the horror stories Meredith Angwin has reported in connection to Vermont Yankee meetings), but overall MOX proponents and opponents alike were polite and respectful of one another. (This did not prevent the odd condescending remark from the protestors - one of the more personally enraging ones went along the lines of, "I'm glad to see all the students here tonight - but we don't need cheerleaders for MOX here, we need solutions." As if the years of hard work students put into their degree programs is irrelevant.)

One thing I stressed to students beforehand was the sage advice I took to heart from Meredith: be nice. (And if you can, bring friends.) More importantly, I tried to stress the importance of being courteous and respectful even in the face of opponents who at times took a hostile, dismissive, or even condescending tone. (At several occasions in the evening Angwin was referred to as our "patron saint" of pro-nuclear activism...) [Edit: Meredith notes that her frequent co-blogger / co-activist Howard Shaffer is even more active; I would happily amend to note the two as "co-patron saints" of nuclear activism...]

A particularly interesting facet of the meeting was in how one could readily identify MOX opponents before they even got to their arguments - solely by their tone of voice. In nearly every case, opponents would grow progressively louder as they spoke, some nearly shouting by the end (despite the presence of a microphone and room small enough that none of this was necessary).

That being said, each side respectfully allowed the other to speak - there were no disruptions or booing; generally speaking, there was even polite applause for each speaker despite whose side they represented. (An interesting finish to the story; when we wrapped up and headed out to dinner afterwards, the opponents ended up at the same restaurant, sitting at a table right next to us. While there was some mildly belligerent exchanges between one opponent and one of our students, generally speaking both sides were again polite and respectful to one another.)

Showing up matters

Lest anyone doubt the impact of knowledgable people simply showing up at meetings like this, I offer the following exercise in compare & contrast: Take a look at the coverage of the MOX hearing in Chattanooga (attended by an overwhelming number of ANS local section members from the University of Tennessee and Chattanooga State) versus the hearing on Thursday in Decatur, Alabama (near the Brown's Ferry reactor, one of the proposed TVA sites for burning MOX fuel). (For further contrast, have a look at the before and after reporting of the Chattanooga meeting as well).

The distinction in coverage when knowledgable nuclear advocates are present could not be more clear; in their absence, a small caravan of nuclear opponents traveling from meeting to meeting are allowed to speak unopposed as the singular voice of "the public." (Take a look at the articles and see if you can't spot some repeated names, for example.) There is little question in the Decatur coverage whether a contingent of the public exists who supports the program (apparently, they don't) - instead, opponents have been allowed to freely carry the day, completely unchecked.

Without trying to belabor the point too much: showing up matters. Reporters have no technical basis to evaluate the questionable claims of nuclear opponents (which really, the MOX opponents unabashedly represented); nor do reporters have any reason to seek out the existence of an opposing view when it is absent from public forums such as these. By contrast, when knowledgable individuals show up to these meetings, particularly in large numbers, their presence simply cannot be ignored - even if their numbers may be underreported. (The Chattanooga Times-Free Press reporter indicated about a dozen students were present; by my count, we had about two dozen from the University of Tennessee alone in two vans, not even counting the over two dozen from Chattanooga State.)

Final thoughts

Something to stress here in all of this - and again, something I made sure to emphasize with the students coming on their own time despite busy class schedules - is that in addition to the simple importance of speaking out at events like this (something I feel is an ethical obligation of nuclear professionals), one of the most important aspects here is to have fun. Outreach events like this can be stressful, especially with opponents ready to label students as simple shills or puppets of the "nuclear corporatocracy" to use one opponent's terms. Some of this came from having some fun with opponents' catchphrases - "Don't fall into the MOX pit!" and "Are you cheerleading or finding solutions here?" were repeated more than once in humorous fashion afterwards.

Events like this fulfill a vital part of the role of organizations like ANS to inform the public such that decisions are made on the basis of facts and not simply demagoguery, but that also doesn't mean that they can't also be a fun way for students and professionals to get together to share their passion for technology they see as vitally important for society's future.

Monday, September 10, 2012

Wading into the "nuclear zombie" horde

Tomorrow evening, the NNSA will be hosting a public meeting concerning its Supplemental Environmental Impact Statement on the disposition of surplus weapons-grade plutonium (WGPu) as mixed-oxide ("MOX") fuel for consumption in power reactors.

This is not a new policy - the decision to dispose of the surplus weapons material was put into place during negotiations with the Russians which took place during the Clinton Administration. The goal was quite simple: with the Cold War at an end, both countries had far greater stocks of weapons material than reasonably necessary for defense, and disposing of this material was determined to be a national security priority. In particular, both the U.S. and the Russians have agreed to dispose of 34 metric tons (about 75,000 pounds) of surplus bomb material.

Such an agreement is similar in form to the "Megatons to Megawatts" program now winding down, in which surplus highly-enriched uranium (HEU) formerly for weapons was down-blended into low-enriched uranium (LEU) for reactor fuel and permanently destroyed.

Scrambled eggs / plutonium
The NNSA proposal works along the same lines - take what is currently a weapons-grade asset and blend it down (in this case, convert the plutonium into an oxide powder and blend it to about a 4% mixture with uranium) and then burn it in reactors. The advantage to this approach is relatively straightforward: by burning the plutonium in reactors, the plutonium isotopic makeup becomes "scrambled" - basically rendering it useless for weapons, even if it were ever recovered from the spent MOX fuel. Further, the irradiated fuel adds a second physical barrier to theft and diversion - namely that now this material is now trapped inside a highly radioactive fuel rod. (The treaty agreement likewise forbids the two countries from reprocessing the spent MOX fuel for several decades.)

So who would object to what sounds like a sensible application of the "swords to plowshares" concept?


Specifically, "nuclear zombies." Greenpeace and other anti-nuclear activists, in continuing their slow decline into generalized misanthropy over any stated concern for the environment, have come out in force against the NNSA proposal, going so far as to set up shop in Chattanooga. Their particular M.O. in this has been a series of "nuclear zombie" theatrics - starting with a TVA hearing on completing the mothballed reactor project at Watts Barr Unit 2. The anti-nuclear critics leaped upon the construction restart as reviving a "zombie" reactor build (once dead, now undead - yes, clever there folks) and have been working with the meme since.

In keeping with the theme, I'll be leading a contingent of trained nuclear engineering students zombie hunters  from the University of Tennessee down to the public meeting tomorrow both as a show of support and more importantly as a resource in trained experts who can sort the facts from the theatrics.

As always though with zombies, it's important to remember the most important rule of dealing with zombies: Always remember the double-tap. As we prepare for the charge into the zombie horde, it's thus useful to put down a few of the "living dead" arguments out there which seemingly seem to lumber on from beyond the grave. As a good companion piece, I also highly recommend Dan Yurman's full frontal assault on the zombie horde.

Zombie argument #1: MOX fuel is unsafe

Several countries, including France and Japan, already use MOX fuel in their reactors. This plutonium comes from recycling the plutonium that is built up in uranium fuel as reactors are operated. (Thus, to emphasize: plutonium in reactors is not a foreign concept - in the course of regular operations, plutonium is built up and burned within the fuel. In fact, near the end of a fuel bundle's lifetime, much of the energy produced from fission comes from the fissioning of plutonium itself, in addition to the depleting fissile uranium in the fuel).

Plutonium fuel does burn a bit "hotter" (fission releases a nominally larger amount of energy for plutonium compared to uranium), but as Yurman points out in the above article, this is relatively similar to how a wood-burning stove works. Certain woods burn hotter (think hardwoods); but control of the reactor power and temperature is governed by many devices beyond the fuel, including burnable poisons and control rods which regulate the reaction rate. The goal of MOX fuel is essentially to use it as a replacement for ordinary uranium fuel - meaning the reactors are to run at the same power level as before. This is a well-understood concept.

Further, the MOX fuel would not compose more than a fraction of the core loading. Yurman points out that TVA's initial plan (if they decide to participate in the MOX fuel program) would likely involve starting out with a loading of about 8 assemblies in the reactor; pressurized water reactors typically will have around 193 assemblies, meaning MOX will start off making up around 4% of the core, with an eventual ramp-up to around 40%.

Zombie argument #2: MOX is an inferior way to dispose of plutonium

Of the more sophisticated "zombie arguments out there, one that seems to arise again and again is the idea that disposing of plutonium in MOX fuel - be it from civilian reprocessing or from disposal of surplus weapons materials - is an inefficient and expensive way to deal with the problem. Instead, they say, we should dispose of the material in glass logs ("vitrification") and then bury the glass logs in a deep geologic repository. Such approach has been vocally promoted by the now-current chairwoman of the NRC, Dr. Allison MacFarlane. (Have the zombies gotten to her too, do you suppose?)

In particular, some critics have pointed out the formerly proposed "two track" approach first sketched out by scientists and engineers with the Department of Energy at Savannah River, where the conversion of weapons material will take place. There are of course two problems with this - the first being that this approach was originally proposed because of identified problems in handling about 9 metric tons of the plutonium, as it was contaminated and deemed potentially unsuitable. (The remaining 25 metric tons were to be converted into MOX). However, as those problems were overcome, the decision was made to proceed exclusively on the MOX track, thus saving money by not creating two separate facilities.

From a strictly technical standpoint, disposal of surplus plutonium in MOX fuel is the preferred pathway of numerous technical and scientific organizations, including the National Academy of Sciences, the American Nuclear Society, as well as numerous academic organizations, including the Harvard Project on Managing the Atom. (It's rare when I agree with the last party, so you know there's something going on when that one happens).

Second, and perhaps more important, is the fact that there is significant diplomatic pressure from the Russians to convert and burn the material as MOX fuel rather than to vitrify it, as they are concerned that the vitrified material encased in glass logs may one day be recoverable. By contrast, once the MOX fuel has been irradiated, not only is the material far more difficult to handle, but the plutonium content itself becomes contaminated with "unfavorable" species of plutonium which render the material unusable for weapons use. Thus, the MOX route represents a more permanent disposal pathway.

Finally, a factor which should not be neglected, is that MOX fuel represents a viable way to extract a useful resource - energy - out of what was formerly simply an implement of mass destruction. One can quibble that the economic costs of the MOX route do not necessarily outweigh the economic value of the electricity produced, but regardless the material would have to be converted into a form suitable for disposal - be it for conversion into glass logs or into reactor fuel. In this regard, it is useful to look at this from a marginal cost perspective - i.e., the benefit of electricity should not be weighed against the full cost of the MOX fabrication facility but against the marginal difference in the cost of the MOX facility versus vitrification. In this regard, MOX begins to look like a much better deal, even if it doesn't break even. (Lacking for immediately accessible numbers, this is difficult to quantify).

Zombie Argument #3: Nobody wants MOX

A relatively specious argument which can be relatively swiftly put down. First, TVA has expressed interest - hence why these hearings are taking place in the first place. In addition to TVA, Duke Energy has also expressed potential interest in purchasing the converted MOX fuel from the Savannah River Site.

Most of the reason U.S. utilities have been reluctant to purchase MOX fuel for reactors up until now comes down to cost - pound for pound, MOX fuel does cost more, and utilities receive no credit back toward fees paid into the nuclear waste fund for any net reduction in waste sent to an (eventual) repository. (The Megatons to Megawatts program, by contrast, produced a fuel which is the same exact form as used in current reactors - hence, it was cheaper and easier).

However, because the NNSA plan is explicitly designed to dispose of surplus weapons material, it is being done with a subsidy to offset this cost. (Again, to emphasize: what is being paid for is to ensure a final disposition of the plutonium.)

Closing thoughts

Like with ordinary zombies, I'm not even really sure we can expect the level of sophisticated arguments that I've deconstructed above so much as a slow grope for brains. (Yes, cheap shot, I know.) I say this only because I remain unconvinced that "nuclear zombie" demonstrations, which Greenpeace and other anti-nuclear organizations have invested considerable resources into, have anything to do with setting the tone for well-reasoned, thoughtful consideration of alternatives.

Ash with his boomstick
If you need to find me at the meeting tomorrow, I'll be the guy with the
. (Note: No one's bringing any weapons. Please don't sue.)
Regardless, I will be there tomorrow, braving the zombie horde. If you're anywhere around the Chattanooga area tomorrow, do consider joining us. One of the key points I have continued to emphasize with my students is the need to simply show up - not only such that groups interested more in theatrics than in debate don't simply carry the day by default, but also such that we can be there as a resource - answering questions from the non-zombified public and putting to (final) rest some of the more putrified misinformation.

The hearing will be at the Chattanooga Convention Center (1150 Carter Street
Chattanooga, TN). Open house starts at 5:30, followed by a technical presentation by the NNSA at 6:30 and public comments following up 8:00.

Tuesday, September 4, 2012

A cost-free way to open up nuclear investment

Late last week, the Atomic Safety and Licensing Board (ASLB) rejected a license application for the proposed Calvert Cliffs Unit 3 (an AREVA EPR) build in Southern Maryland. The reason? It was against the law.

Specifically, when the build was originally proposed, it was to be a 50/50 joint ownership stake by Constellation Energy and Electricite de France (EDF, the state-owned French utility giant). However, in November 2010, Constellation sold its 50% stake in the reactor to EDF, making it the sole potential owner of the unit.

According to Federal law (10 CFR 50.38), foreign investors are ineligible to apply for a license to operate a nuclear facility in the U.S. While Unistar was still the nominal applicant, the ASLB determined that the venture was solely owned by EDF and thus EDF was the effective applicant - and thus, ineligible. (The lawsuit, incidentally, was filed by the anti-nuclear activist group NIRS, indicating that anti-nuclear groups will not hesitate use every tool at their disposal to block or shut down any nuclear power facility - and to hell with the cost to the environment as a result.)

If this seems entirely backward in a world of global production and investment, that's because it is. The current regulation is an artifact of the Atomic Energy Act of 1954, which first authorized private ownership of nuclear facilities. (Prior to this - per the Atomic Energy Act of 1946, all nuclear technology was considered a state secret, during the short time in which the U.S. enjoyed a monopoly on the technology.)

Is there any real compelling reason for restrictions on foreign ownership and investment in nuclear facilities to exist at a time when the U.S. holding a monopoly on the technology has long since passed? Issues of safety here of course are irrelevant - the facilities would be licensed and regulated by the NRC, just as any other nuclear facility is now. About the only salient objection is the political one - i.e., the implications of a foreign entity maintaining controlling ownership in key infrastructure. (Although it's hard to see anyone getting particularly upset about the reverse - U.S. entities owning a controlling stake in infrastructure in other nations.)

For those who have a bit of a longer memory, the controversy should ring familiar - i.e., it's the same arguments which were played out during the Dubai Ports World deal, in which DP World, a UAE-based company, would take over management contracts for six U.S. ports already under foreign management.

EDF as Philip J. Fry: Shut up and take my money
Meanwhile, an issue to consider is the fact that bringing together capital to complete a construction bid like Calvert Cliffs 3 is no mean feat (particularly in an economy where investors seem all too skittish about long-term investments in energy infrastructure). Given the difficulty then, it seems positively insane for any political leadership to turn away large investments in long-term energy infrastructure (especially non-emitting baseload like nuclear, which has a long expected operational lifetime).

Setting aside the politics of free trade for a moment, if Republicans have any seriousness behind their twin rhetoric of advocating for expanded use of nuclear energy and in relying on the free market to sort out our energy mix, then this one should be a no-brainer: let companies like EDF put up the investment and apply for a license. The same is true for Democrats as well - if they're serious about both jobs (nuclear construction has them in spades) and especially about creating clean energy sources for the future, investors like EDF should be welcomed with open arms, not turned away at the door.

Again, the best part of this? This costs nothing. Investors like EDF wish to voluntarily invest their money in a vital public good (carbon-free electricity) - all that needs to happen is for leaders to be willing to say, "Oui."

Saturday, September 1, 2012

Does declining gas exploration indicate a price "explosion" or just a new equilibrium?

A few interesting points came out of the follow-up discussion on my prior post, in which I argued that, contra Rod Adams, natural gas prices are not set to "explode" anytime soon.

Meredith Angwin of Yes Vermont Yankee made a keen observation that over the last year, the number of new natural gas exploratory wells is collapsing. Why is this happening? Namely because of the cratering current price of natural gas.

In fact, a very interesting thing appears to be happening right now with shale / unconventional natural gas recovery boom - the industry appears to be a victim of its own success. Or rather, drillers have been sinking new wells without regard to price (again, see the sharp boom in new wells up until about October 2008, where new wells peaked). As a result, proven reserves have fairly substantially increased - and in particular, known reserves of "dry gas" (i.e., nearly pure methane, the most commercially valuable component of natural gas) have in fact "exploded" - nearly doubling over the last decade.

Meanwhile, neglected in these considerations is that shale fracturing wells in particular aren't cheap to drill; as a result, anomalously low natural gas prices means that some drillers have been losing their shirts over the same much-publicized "boom" in natural gas production. 

This is where we get back to the discussion of natural gas prices overall. What appears to be occurring is a basic disequilibrium; a disruptive event in supply (i.e., introduction of large new resources) prompted a rush to invest/explore this resource, which in turn created a significant rise in supply over the short term, rapidly dropping the price to a point where the market price is below the profitable price of recovery.

Thus, as far as exploration goes, we seem to be observing is basic mineral economics: exploration follows price. When price drops (i.e., we had an over-abundance of exploration), exploration drops. As prices rise to the point where new wells achieve a net profit, it's a relatively safe prediction that exploration will again begin to rise. What is essence is developing are two constraints on natural gas price - a "floor" on prices (i.e., below which it is not economically viable to recover gas from new wells) and a "ceiling" (driven by the large increases in known supply). My colleague Alan observed this some time ago when he speculated as to whether we are seeing the end of natural gas price volatility (at least for now).

So, will natural gas prices rise? Probably - but given the very large amounts of known reserves, price acts as a strong signal to start drilling again. Given the large known new reserves, this will inherently push back against any significant rises in price - as it gets more profitable to drill new wells, new producers will inevitably get into the game, particularly because we know the gas is out there. The real question is, "At what price does this happen?" I'm not an expert in gas recovery, so I don't know - but like Meredith, I suspect it will be around $5-6/MMBtu. A columnist at Forbes suggests it may be $8/MMBtu. Either way, I remain deeply suspicious at this point of the idea of prices "exploding" (and hence my bet with Rod) - what instead appears to be happening is the search for a new price equilibrium.

A final addendum - as commenter Robert pointed out, all of this really applies to the U.S. - something worth emphasizing. Other places, where either fossil resources like coal and natural gas are less abundant (i.e., South Korea and Japan) or where there these resources are more valuable as exports (i.e., UAE) have a completely different picture for the relative economics of nuclear versus natural gas. In particular, it is likely far easier to make the economic case for nuclear in these places - meaning even if new builds for nuclear may be slowed or delayed in the U.S. for the time being, the same is not true abroad.