Where's the real bottleneck for natural gas? Distribution.

As a scientist and an unabashed nerd, I love data. Particularly, I love it when ready access to data reveals things that are surprising in the face of conventional wisdom.

An interesting case comes up with this year's colder winter in New England. (Thankfully, I'm located in damp, icy East Tennessee, where even the threat of ice and snow manages to bring civilization to a grinding halt.) In particular, Meredith Angwin noted an interesting press release by ISO-NE (the grid operator for the northeastern United States), ostensibly pointing to record-low wholesale electricity prices, but containing something more interesting buried beneath - a slow but quite noticeable creep of wholesale natural gas prices upward to the range of $6/MMBtu (1 MMBtu = 1 million British Thermal Units).

At first glance, this seemed a bit surprising to me, given that while spot prices for natural gas have nudged a bit upward, they're still hovering well under the $4/MMBtu mark; in other words, they don't seem to be going anywhere fast. What really began to catch my eye however was the cyclic behavior of gas prices in the chart from ISO-NE, something which doesn't show up in spot prices from Henry Hub (which generally sets the market spot price for natural gas in the U.S.) 

Looking to verify the trend, I dug a little further around EIA's website. While unfortunately their data on "citygate" prices are a few months behind, the regular periodicity in the citygate price was likewise not there - instead, taken as an average across the U.S., spot, wholesale, and electricity costs derived from natural gas tend to have a strong correlation. Yet here we see above in the data from ISO-NE that prices clearly are deviating substantially from spot prices - what gives?

It turns out in fact that the culprit is in distribution. A look around EIA's website brought me to this interesting report, which notes that supply bottlenecks in U.S. northeast for natural gas are expected to produce significant variances in energy prices from the rest of the U.S., and in particular from Henry Hub prices.

In essence, despite a relatively abundant supply of natural gas at the wellhead due to the proliferation of wells seeking to exploit unconventional resources, one thing the laws of physics haven't changed for is the capacity of distribution infrastructure - in other words, pipeline capacity. Natural gas doesn't really care where its end destination is - be it for electricity or home heating. Which means a cold winter can easily drive up demand and stress pipeline capacities - precisely what is occurring, according to the EIA report: utilization rates at the Algonquin compressor station have averaged around 86% for the months of November through December 2012.

Basic economics can predict what happens next. Because natural gas is generally shipped across pipelines as a compressed gas, due to frictional losses across the pipeline, it must be repressurized at terminals across the pipeline network. The higher demand for gas goes, the closer to maximum capacity these terminals reach. And, as EIA data helpfully shows, the closer utilization reaches to 100%, the larger prices begin to "spread" from spot prices at Henry Hub.



In other words, while the commodity price of gas may indeed be cheap, the wholesale cost to utilities can be an entirely regional phenomenon. This is especially true in the blustery cold of New England winter, where demand is especially cyclic.

I compiled together citygate prices for natural gas across the Northeast and compared them to U.S. average citygate prices, and the effect is quite clear - states in the Northeast pay on average an appreciable premium on wholesale prices over the U.S. average wholesale, precisely due to these types of bottlenecks, particularly during times of peak demand (i.e., cold winters). Obviously, pipeline capacity has been steadily increasing in response to demand for gas, however the real issue will inevitably be cyclical "spikes" due to competing uses of gas as a heating source.

Why go to all of this trouble to look at trends in gas consumption (especially when I'm not an energy economist by trade)? Namely because it upends some recent "conventional wisdom" about energy; namely, gas prices are still a regional phenomenon.  While there are some places where supply is not as constrained by distribution capacity (or driven by cyclic consumption) and it thus makes perfect sense to look at natural gas a short-term replacement electricity source (particularly for coal), the Northeast is a shining example where this is definitely not the case. Which in turn makes efforts to shut down stable and relatively low-cost (not to mention carbon-free) baseload sources like Vermont Yankee (and Indian Point) all the more insane - despite the claims of proponents to this end, the balance of electricity from these plants would not be made up from renewables but rather almost certainly come from natural gas. To which again, low spot prices for natural gas are in fact a remarkably poor indicator - especially if one considers what adding an additional consumption driver would look like in terms of utilization "bottlenecks" during times of peak demand (i.e., winter).

I still remain unconvinced of the argument that wholesale natural gas prices are set to explode (and so stand by my bet with Rod Adams) - namely because of the fact that an abundance of known, recoverable supplies makes economics of the raw commodity relatively self-correcting. (In other words, as gas prices go up, so too will the number of wells, pushing prices back down to an equilibrium). However, revolutions in the recovery of gas from novel geology hasn't changed the fundamental physics of pipelines - which in turn may be the real constraint to natural gas growth as an electricity source, at least on a regional scale.

Update: Via Twitter, Rod Adams points to an EIA alert from yesterday about natural gas prices and capacity in the Northeast, given the recent cold snap. Current local spot prices at Algonquin and Transco Z 6 NY (a New York-based distribution hub) are around ~$30/MMBtu - almost 10 times the Henry Hub spot price, with utilization factors reported to be at over 85% capacity. As Rod puts it, "Winter happens."

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.

Wishful thinking on natural gas prices

Rod Adams of Atomic Insights has posted a string of arguments in the general thread that natural gas prices are set to explode - or at least, precipitously increase - and that further, the current historic lows in natural gas prices are a mirage, one carefully put into place by gas producers to squeeze out competition, particularly in the electricity sector. In his latest post, "Where is the huge increase in US natural gas supply?" Rod points to EIA data indicating that the "flood" of new natural gas is anything but.

There's just a small problem in this assertion - the data doesn't support Rod's claims. And I say this as someone who obviously would like this to be true. Low natural gas prices have largely put the brakes on new nuclear construction - the latest casualty being Exelon's planned Victoria unit in Texas. Obviously, Exelon has made its position known on whether it will be investing in new nuclear units in an environment where natural gas is currently cheap (it won't), so this comes as a surprise to no one. In fact, the overwhelming majority of new electric generation capacity in the U.S. over the last decade has been natural gas.

Rod makes the claim that the cause of currently low natural gas prices is less due to new supply and more due to slumping demand for energy given the recession. As evidence of this, he points to this chart from the EIA, indicating gross withdrawals of natural gas at U.S. wells.

Rod's argument is that the new supply hitting the market isn't exactly overwhelming - and therefore, when demand picks up, so will prices. The data Rod is using to justify this reasoning is withdrawals at the wellhead - which indicates how much supply is hitting the market. The trend is easier to see on the annual withdrawals basis.

While we don't see an "explosion" in terms of orders of magnitude difference, looking at the data, it's clear that natural gas withdrawals have increased by over 20% since 2005 - hardly insignificant.

But frankly, this is the wrong metric to look at the begin with. If we want to know the real story with natural gas supply, we need to look at proven reserves (i.e., the amount of natural gas we have reasonable certainty of economical recovery from the ground). Again, going to the EIA data, we see the same trend; since 2003, proven U.S. reserves have increased from about 7.5 billion barrels to 9.3 billion in 2011 - a 24% increase. Again, while not mind-blowing, this is not insignificant.

However, we're still missing one last piece of the puzzle - natural gas consumption. This of course is the key to Rod's argument - we've demonstrated that supply has increased, although perhaps not "exploded." But Rod claims that much of what has contributed to temporarily low gas prices has been slumping demand due to a down economy. We can easily evaluate this claim by looking at total consumption data.

On a month-by-month basis, peak consumption (in January) did decline from 2011 to 2012 - by about 5%. This may be partly due to a sluggish economy, but probably more so due to an anomalously warm winter. To get a better feel for total consumption trends however, one should look at the annualized data, "smoothing out" some of these peaks.

On an annual basis, natural gas consumption has been rising - since 2003, net consumption has increased by about 10%. Looking at just the last six years (from a minimum in 2006), gas consumption has grown at a maximum of about 14%.

So now to recap - natural gas supply, in terms of proven reserves, has increased by about 24%, while natural gas consumption has only grown by 14%. Basic economics allows one to predict what happens to price under this circumstance - supply has, in the short-term, outstripped demand. However, while demand has dropped off a little in 2012, supply has been outstripping demand for the last 10 years - this is not a temporary phenomenon.

Now, one can make the argument that eventually demand will catch up with supply - in which case, prices certainly will begin to creep back up. But there is no evidence that proven reserves themselves are declining, which means predictions of the imminent explosion of natural gas prices have, unfortunately for nuclear, little basis in reality.

This gets me back to a recurring point I make many, many times - for nuclear to be viable, reducing capital costs and eliminating the risk premium must be the absolute first priority. (A second, equally important priority would be in establishing a clear price signal on carbon dioxide - very much contrary to the giveaway to natural gas producers which the EPA's current target amounts to.) 

Expecting a deus ex machina spike in natural gas prices to save new nuclear construction simply isn't going to happen in the short-run. It may be true in the long-run - a decade or more away. And certainly any utility looking to hedge against future price volatility in fuels would be smart to invest in nuclear. But there isn't any evidence that a sudden increase in gas prices will come to nuclear's rescue in the near-term, and this is important - not because I don't want to see new nuclear get built, but because nuclear advocates need to be clear-eyed about the reality confronting them. Self-deluding arguments might feel good in the short-run, but they do little to see to it that new nuclear plants actually get built.

Update: In the spirit of Bryan Caplan of Econlog, Rod has made a wager ($50) with me; that there will be at least one month by end of 2014 in which natural gas prices at Henry Hub will exceed $10/MMBtu (Rod is betting that they will exceed this). I have to say, I respect anyone willing to put their money where their mouth is. I hope I'm wrong, but I doubt I will be.


For reference, here's the historical EIA data on natural gas prices. (For clarification: 1 MMBtu = 1000 Btu; 1000 cubic feet of natural gas contains about 1020 Btu, or 1.02 MMBtu)

Deconstructing anti-nuclear economic myths - a response to Veronique de Rugy

Let me start things off with a disclaimer - I am not an economist. I don't even pretend to be an economist; I'm a nuclear engineer by training (I hold Ph.D. in Nuclear Engineering). That notwithstanding, economics (and specifically, the economics of energy) are a side interest of mine. So it was with mixed interest and trepidation when I read a recent piece by libertarian economist Veronique de Rugy from the upcoming July issue of Reason, entitled "No to Nukes."

Plausibly, de Rugy's animating complaint (given Reason's market-oriented focus) is in the subsidies for new nuclear (specifically, when I followed up with de Rugy on Twitter, she pointed out the issue of loan guarantees, although nowhere does this specifically appear in her piece). The piece itself is nothing new, however - the bulk of it is in fact a retread of a suspiciously-timed nuclear hit piece which appeared literally two weeks after the Fukushima disaster. (One gets the distinct impression that, despite her protestations to the contrary, de Rugy is more than happy to dance on what she perceives to be nuclear's grave, particularly given her timing and choice of targets.) In reality, the piece seems to follow on to a frustrating trend of pro-fossil contrarianism as of late, particularly in libertarian circles (contrarian in the sense of singling out the most economical, carbon-free competitor to fossil fuels for special scorn on economic grounds); although perhaps this contrarian turn owes to the fact that conservative heavyweight think tank Heritage has cornered the market in advocating nuclear energy as a free-market energy source. (Who said hipsterism is limited to fashion and terrible beer?)

de Rugy's piece begins with an overly long introduction detailing to the reader why nuclear power was destined to fail to live up to its promises, including citing public opinion which she describes as having " remained steadfast against the technology ever since [Three Mile Island]" (although someone may want to refer de Rugy to the latest polling data on the subject), along with other issues, such as "[d]isputes over waste disposal [which] have never been resolved" (once again however, these are political rather than technical matters).

Finally we get to the meat of the matter - it would appear that a restart of the nuclear industry is, "[...]not just bad politics. It’s awful economics." Well.

To this end, de Rugy characterizes the recent decision by the NRC to grant Southern Nuclear company a license to build two new AP1000 units at the Vogtle site - the first new units in 30 years, as "[...]an act of desperation by a president who has realized he is running out of other options." Fortunately, contrary to the opinions of a economists with a particular axe to grind, the decision to award Southern Company is not in fact in the hands of the president, nor are operating licenses granted upon individual opinions about economic viability of the project - they are voted on by the commissioners of the NRC on the basis of safety alone. This fundamental misunderstanding of the process is pervasive throughout the rest of the piece.


Much of the piece is particularly scarce on actual sources and utterly devoid of hyperlinks (however, given the fact that the piece is a re-tread of her prior post-Fukushima piece, most of her sources appear to be taken from there). de Rugy cites a 2009 MIT study by Ernest J. Moniz and Mujid S. Kazim as evidence of nuclear's uncompetitive costs; one assumes she is referring to MIT's "Future of Nuclear Power" project which includes cost projects of nuclear compared to other conventional fossil sources under a variety of circumstances. In the 2009 update, it reports the following cost comparison: assuming current cost of capital, coal clocks in at 8.4 ¢/kWh, natural gas at 6.5 ¢/kWh, and nuclear at 8.4 $/kWh. The authors specifically note however that this includes a current "risk premium" to capital costs for nuclear - recalculating capital costs at comparative market rates (absent the "risk premium"), they come up with a number far closer to gas and coal: 6.6 ¢/kWh. Even assuming the risk premium stays, with a carbon capture and storage the cost for coal and gas quickly reaches near-parity with nuclear once more. Such an analysis is also borne out in applying levelized cost of electricity estimates to EIA data, resulting in similar conclusions.

Taking up the example of the French (with their nuclear-heavy energy portfolio), de Rugy asserts that because of the France's (state-subsidized) industry, French consumers pay more for electricity. Specifically, she writes:

But producing nuclear energy in France is not magically cheaper than elsewhere. French citizens are forced to pay inflated costs to support grand government schemes, such as the decision made 30 years ago to go nuclear at any cost after the first oil shock in 1974. 

Really? Going to the data, the opposite is in fact true: France has one of the lowest retail electricity prices (the 7th lowest in the E.U.); compare this to Germany, which has recently phased out nuclear entirely, which pays the second-highest rate. (Again, these are not hard things to find, but something de Rugy asserts with no evidence and in clear contradiction of the data.) She might try to argue that consumers pay indirectly, but nowhere has evidence been presented to support this, nor is it supported by retail electricity price data.

de Rugy's main thrust here of course is that capital costs for nuclear in the U.S. are little different than those than in nuclear-friendly France, relying on the analysis of the Vermont Law School's Mark Cooper, an individual who isn't exactly private about his own agenda when it comes to nuclear. (Hint: he's not a fan.) Again, one gets the impression the data is being cherry-picked to fit the desired conclusion. de Rugy makes an incomplete comparison here, citing the high "overnight cost" estimates for nuclear capital costs compared to coal and natural gas, while neglecting to inform her readers that this alone is a highly misleading comparison. (To see how this process is properly unpacked, even with natural gas still coming out favorably compared to nuclear, I invite you to see how Dr. James Conca unfolds the data).

To wit: "overnight" cost is a rough estimate of total capital cost (i.e., total money which must be invested to build the plant), assuming the plant "overnight" - i.e., without the borrowing costs (in other words, interest on loans which continues to pile up while plants are being built and not generating revenue), something which particularly dominates nuclear costs. However, a more accurate comparison is the levelized cost of electricity  (LCOE)- something which calculates both the capital cost and operations & maintenance costs (which include fuel - a cost which dominates natural gas economics). The LCOE calculates the "break-even" cost of electricity from a plant given the projected costs over the plant's lifetime, with a reasonable discount rate (for example, the expected return of ~3% on treasury bonds) over the life of the facility. Given that the expected lifetimes of different facilities can vary widely by type (i.e., the current fleet of nuclear plants will almost all be relicensed to operate for a total of 60 years, with some potentially operating up to 80 with facility improvements and upgrades), this makes for a more useful comparison of the actual cost of electricity. Once again, something absent from de Rugy's analysis.

Indeed, taking this out to the logical extension - if nuclear plants were wholly unprofitable to build and operate, why in the world then would operators of the existing fleet of 104 reactors not simply turn each one off tomorrow, much less put a dime into maintenance outages which run up into the millions of dollars? The answer of course is because this is not true; nuclear plants are indeed expensive to build (due to capital costs, including the borrowing costs associated with construction times), but the marginal cost of power from a nuclear unit is tiny - namely because most of the cost is in the cost of capital itself. Nuclear in this sense represents the opposite economics of natural gas, which has a low front-end cost but whose costs are generally dominated by fuel price. (Thus, the levelized cost - something de Rugy does not look at - is extremely dependent upon assumptions of future fuel prices - hence why nuclear is often seen as a hedge against future fossil fuel price increases.)

However, de Rugy comes back with the follow-up that such estimates of nuclear cost come "after taking into account a baked-in taxpayer subsidy that artificially lowers nuclear plants’ operating costs." Looking at the broader picture of historical energy subsidies however, this point doesn't seem to carry the impact de Rugy seems to think it does - from the period of 1950-2010, nuclear has been the recipient of about 9% of total federal energy subsidies, compared to a shocking 44% for oil. (For those following at home, the rest include: Natural gas - 14%, Coal - 12%, Hydro - 11%, Renewables - 9%, Geothermal - 1%). Most of nuclear's subsidy has, contra de Rugy, not been focused on the regulatory side (although the study does point to an approximate regulatory subsidy of $16 billion over the total time period) but R&D, which should surprise few who are conversant with the history of nuclear. (Oil, by contrast, receives the whopping share of its calculated subsidies from tax policy and regulation, while natural gas has almost exclusively benefited from tax policy).

Image: Wikipedia

Notably absent from de Rugy's analysis is how the most important subsidy fossil fuels (especially coal) have come to rely upon, which is treating the atmosphere like an open cesspool. Indeed, looking to the above costs from the MIT study, were we truly dealing with a "level playing field" in the sense that carbon-intensive industries were required to give their waste products the same degree of scrutiny that nuclear already does, the much-ballyhooed "cost difference" largely vanishes. (Again however, discussions of energy subsidies invariably seem to only go one way: like a claymore.)


No doubt though de Rugy is invoking the issue of nuclear liability insurance of course (known under the moniker of the "Price-Anderson Act", passed in 1957). What is not noted is the exact taxpayer liability to date under Price-Anderson - which is exactly $0. Again, contrary to the claims of nuclear opponents like de Rugy who dress up their objections in economist's language, nuclear is not "uninsurable" on the private market - in fact, each nuclear unit is required to carry an individual liability of $375 million; following the exhaustion of the individual commercial policy, each operator-licensee is required to kick in up to another $111.9 million (pro-rated), producing what amounts to a collective cross-insurance arrangement of $11.975 billion. One can dispute whether such a sum is "sufficient," but the idea that the industry is utterly absolved of tort liability is clearly at odds with the the current reality.

When I pressed de Rugy over what particular subsidies she was complaining about and why her complaint so specifically singled out nuclear (looking at her publication history, there is nary an article devoted to the issue of energy subsidies for other sectors), she responded by pointing me to an analysis she did on the market-distorting effects of loan guarantees. (This after I pointed out that I was in favor of removing all subsidies - but it would seem, like many in the punditry business, the conclusion comes first).

Frankly, I won't get into all of the analysis - because once again, I am not out to defend loan guarantees or any other form of energy subsidy. However, one thing that did jump out at me once more was the use of extremely cherry-picked data in her report - the few items that do mention nuclear (most of the piece pertained to loan guarantees for solar - which incidentally, was not required to pay the credit subsidy fee which nuclear was) are, shall we say, "factually challenged." de Rugy rolls out the several-times-over debunked trope of the 50 percent default rate with nuclear loan guarantees - based on poorly-documented projections over a program which was never passed. While de Rugy immediately pointing out that the CBO revised this number (without specifying how much), the supporting evidence she gives to this revision doesn't even pertain to civilian nuclear power - rather, the study she points to is a comparative economic analysis of nuclear power for naval propulsion.

The only other nuclear-specific studies de Rugy cites in this study come from Peter Bradford - a well-known anti-nuclear activist with the Nonproliferation Policy Education Center (simply google "Bradford" and "nuclear" if you don't believe me) - along with Henry Sokolski (also affiliated with the same). The extremely selective use of sources known to have a hostile agenda to nuclear (that is, when the sources even accurately refer to de Rugy's claims) again strongly implies a rushed, cherry-picking approach that implies a "conclusion-first, evidence later" approach that is all too familiar with established punditry. Indeed, it might make for impressive-looking studies (and good sound bites), but it hardly suffices for serious scholarly work. Indeed, if the evidence is as strong as she claims it to be, it would behoove her case greatly to find such evidence from more objective and less clearly agenda-driven sources.

Of course, all of this is the problem: even rather sloppy studies like this, particularly when attached to someone with a Ph.D. in economics, sound plausible and require the time and energy to deconstructing their myriad of errors and misplaced assumptions - something which amounts to a non-trivial task for one when most of their day is typically occupied by honest employment, alas.

Minding the (partisan) gap: partisan divisions in support for nuclear

Via NEI's twitter feed comes this story of a new Gallup poll on energy and environmental issues similar to that released by Pew which I dissected a few weeks ago.

Image via Gallup

For the most part, the trends are indeed quite similar - especially in the respect that public opinion on the issue of nuclear energy appears to be quite "sticky," consistently polling at a slight majority of Americans favoring its continued use (and even expansion). Unsurprisingly, support for the expanded use of nuclear energy is riven by partisan divides, with much broader numbers of Republicans favoring its expansion over Democrats.

Indeed, this partisan fissure is consistent with Pew's prior polling, with Democrats and Democratic-leaning voters strongly favoring measures including more stringent environmental regulations and more funding for alternative sources such as wind and solar, with much weaker support for the development of new nuclear or fossil fuel exploration. (Interestingly, support for new nuclear among Democrats is weaker than that of opening up federal lands for oil exploration.)

The Republican side naturally shows the inverse, with Republicans generally favoring policies to expand energy supplies (with the relative strength of support for opening up additional land for oil exploration as Democrats show for conservation and regulatory measures). A notable difference in this poll is much stronger support among Republicans for expanding nuclear energy, being the second-favorite choice among Republicans and Republican-leaners at 64% of respondents favoring, compared to 54% in the similar Pew poll.

	% in favor
	National Adults	Republicans	Democrats
Setting higher emissions and pollution standards for business and industry	70	54	85
Spending more government money on developing solar and wind power	69	51	84
Spending government money to develop alternate sources of fuel for automobiles	66	51	81
Imposing mandatory controls on carbon dioxide emissions/other greenhouse gases	65	50	82
Opening up land owned by the federal government for oil exploration	65	84	49
More strongly enforcing federal environmental regulations	64	47	80
Setting higher auto emissions standards for automobiles	62	49	76
Expanding the use of nuclear energy	52	64	41

Getting back to the issue of "stickiness" in public opinion, while support for expanding nuclear has been steadily growing among Republicans since the early 2000s, among Democrats support appears to be stuck around 40%, after briefly spiking around 2006 (incidentally, around the time of Al Gore's most famous work, An Inconvenient Truth was released).

Given the need to develop new domestic sources of energy and the general drive to phase out dirtier sources like coal, it provokes a nagging question - why such a stark partisan divide over one of the largest clean energy sources in the U.S. by share of electricity (around 20%)? Indeed, it's one thing to expect broad divisions overall (given the relative weight individuals assign to factors such as economics, waste management, safety, and so forth). And indeed, some of the split will be driven by familiarity with energy sources overall (i.e., the feasibility, not to mention practicality of providing electricity from intermittent sources at the caprice of nature). An of course, splits along other lines are perhaps more obvious manifestations of priorities - take the split over fossil exploration. But what explains nuclear?

One explanation (which I will cover in a follow-on post) is the influence of cultural factors - specifically, cultural factors which influence risk perception. There is an entire field of study devoted to this, such as the Cultural Cognition Project at the Yale Law School. Ultimately what it boils down to is that how individuals perceive risk and respond to new information is dramatically influenced by their value systems. And, perhaps unsurprisingly, the same patterns of values which tend to divide liberals and conservatives also tend to divide across issues such as the perceived risk of nuclear energy production (along with related issues, such as nuclear waste management).

However, this can cut both ways as well, a matter which should be of key interest to those committed to action on global climate change. A teaser for next time - one particularly interesting finding is those of value persuasions typically found in conservatives that if expanded use of nuclear energy is presented as a necessary solution to global climate change, these individuals become more open to evidence of the risks of climate change, as compared to greater regulatory control over industrial activity - precisely due to the issues of concordance of values. Food for thought.

Support for nuclear: Broad but shallow?

Coming just upon the heels of a recent post about public opinion on energy sources, I couldn't help but also notice this poll by Gallup which NEI points to, indicating a relatively constant support for nuclear following Fukushima. The takeaway? Despite a small uptick in opposition to nuclear following the events at Fukushima (from 38% to 40%), public support for nuclear is still high, sitting at 57% in favor or strongly in favor of nuclear energy. While Republicans (and Republican-leaners) more strongly favored nuclear energy (65% supporting vs. 34% opposed) compared to Democrats (and associated leaners - 50% support / 45% opposed), support across the Gallup poll appears to generally be broad across parties.

The starkest reported differences in opinion were between men and women - 74% of men vs. 42% for women.  Tellingly, a nearly parallel trend occurs for the perceived safety of nuclear (with 72% of men believing nuclear is safe compared to 43% of women).

Given the somewhat less sunny projections from the recent Pew poll, how does one square the difference?

Digging into the Gallup data, one observes that strong support and opposition have both historically ranged around 23% and 21%, respectively; the bulk of support and opposition has been in the more moderated "somewhat support" (33%) and "somewhat oppose" (19%). How has this changed in the events following Fukushima? Overall, not much - overall support remains constant at 57%, although one observes some erosion in self-identified "strong" support. Meanwhile, strong opposition has hardened (growing from 18% to 24% in the last polling period). 

One might square this against the Pew data in the sense that Pew specifically asked about the expansion of nuclear energy (particularly in comparison to other energy sources), while Gallup simply gauged overall public support. If one takes both trends as true, it paints a picture of public opinion over nuclear as stuck in neutral - a public which overall supports nuclear energy but is divided about its expansion in light of other perceived alternatives. 

Meanwhile, going back to the Gallup results, overall public perception of nuclear safety is relatively unchanged (57% responding that U.S. nuclear plants are safe, while 40% respond that they feel U.S. nuclear plants are unsafe). While the continued (accurate!) perception of the safety of the U.S. nuclear industry is encouraging, it speaks to the need for further outreach efforts, as well as perhaps the unique perception of nuclear compared to other sources (i.e., where constant, elevated risk - such as hazards presented by sources such as coal - is tolerated much more readily than low-frequency, highly dramatic events, even if the ultimate public health consequences are minuscule).

Given the above, clearly nuclear is not in danger of a German-style phaseout. Yet the obvious challenge for public support of nuclear - beyond simply tolerating it, but in expanding it - is in making the case to the public that nuclear is both safe and essential - the latter of which comes down to arguments both over economics and the environment.

Not all energy is fungible - and it matters

Via the NYT Green blog comes a new survey by the Pew Center indicating that a smaller majority of Americans now prefer further federal funding of research into alternative energy technologies (specifically, wind, solar, and hydrogen) as a priority over additional exploration of oil and gas supplies. If the comparison seems to be a bit of a misnomer, then you've already caught on to the idea that not all energy, as we have it now, is fungible. Generally speaking, unless you are one of the very fortunate Americans who can afford an electric vehicle (with extremely generous taxpayer support at that), what is being posed is a false dichotomy. All the windmills and solar panels in the world do extremely little to curb demand for oil (and to a lesser extent, natural gas, which may also stand in as a transportation fuel).

Being generous to the poll, one can suppose some confusion arises over the fact that natural gas has been largely responsible for electricity capacity additions within the last decade in the U.S. Still then, one wonders why nuclear energy is excluded from the choice provided.

Public support of expanded nuclear energy production (adapted from Pew)

Digging deeper into the survey, nuclear does show up; what it reveals further highlights the dichotomy illustrated above. Despite rising energy prices overall (both at the pump and in the retail electricity sector), public support clearly shows a disconnect when it comes to fossil fuel exploration versus electricity production. In general, nuclear energy is still recovering in terms of public opinion one year later following the Great Tōhoku Earthquake and tsunami and resulting nuclear crisis at Fukushima.

Public support for off-shore oil drilling, from Pew

What is perhaps revealing is to contrast this to the trend in public opinion on offshore oil drilling following the Deepwater Horizon blowout and massive spill in the Gulf of Mexico - something much closer to home. Unlike nuclear energy, public opinion has generally settled back into its prior setting (enjoying broad majority support) within less than two years, with large majorities favoring expanded offshore oil drilling. While favorable opinion on nuclear expansion appears to recovering, it is still unlikely to achieve the broad support that offshore oil exploration has - again, despite the very visible risks of the latter.

Perhaps also noteworthy is the relative "stickiness" of public opinion - one observes that following a high-profile event (e.g., Deep Water Horizon or Fukushima), public opinion eventually gravitates back to its historical average, implying relatively firmly entrenched opinion with a handful of the public being swayed by major events.

Public support for increased federal funding for alternative
energy research, from Pew

For comparison, Pew also evaluated public opinion of increased financing for alternative energy sources, including solar, wind, and hydrogen. Interestingly, public support for such increased financing has been on a slow decline; thus, in spite of the lede in the New York Times blog that this is somehow a newly emerging phenomenon compared to conventional sources, it is a process which appears to have been dragging on for some time. Indeed, the trend appears to have begun well before high-profile events such as the Solyndra bankruptcy and resulting scandal; while public support slowly continues to drop afterwards, the decline began well before this and continues steadily afterwards. It is difficult to speculate what one may take away from this other than the fact that if the Republican nomination fight is any sign, Americans are notoriously fickle, constantly in search of an appealing hypothetical alternative which simply does not exist.

Weekly average retail gasoline prices (all grades), via EIA

Why the quicker"snap back" in public opinion (or faster-acting amnesia, if you prefer) for oil and gas exploration, in particular? A likely culprit is the higher visibility of rising fuel prices (directly connected with the price of oil); particularly strong is the correlation between public support for oil and gas exploration and the price at the pump. 

Average retail electricity prices, from EIA

Retail prices for electricity have also been on the rise, but such a rise has been much more of a slow creep; with the average rising slowly over a matter of months rather than weeks. Plausibly, electricity consumption is perhaps seen as something consumers can exert some degree of influence over, be it through conservation or efficiency improvements, while demand for gasoline is relatively fixed (at least with respect to workplace commuting).

Meanwhile, yet another interesting artifact comes out of the Pew poll: a breakdown of support for various energy policies by self-identified party, with some of the highlights as follows:

	% in favor
	Rep	Dem	Ind
Allowing more oil & gas drilling in U.S. waters	89	50	64
Giving tax cuts for oil & gas exploration	61	38	42
Promoting the increased use of nuclear power	54	37	45
Requiring better fuel efficiency for vehicles	67	88	77
Spending more on mass transit	52	74	67
More federal funding for alt. energy research	52	81	70

What the above data puts to lie is the myth that members of either major political party are interested in an "all-of-the-above" energy strategy, something frequently invoked as a toll to political correctness (by countless nuclear advocates included) but not reflecting anyone's actual opinions. Indeed, among self-identified Republicans, while a much larger number favor nuclear energy expansion compared to Democrats, it is still a far less popular option than most scenarios involving either the development of additional fossil fuel resources or extension of existing supplies (i.e., fuel efficiency mandates). With respect to Democrats, overwhelming majorities seem to place their faith in measures such as conservation (including vehicle efficiency) and alternative energy research, particularly compared to the use of nuclear energy (again, issues of numeracy be damned). Only self-described independents might be considered to favor an "all of the above" strategy, although their support of such is divided at best.

In other words, despite the popularity of declaring favor for an "all-of-the-above" energy strategy, such a mantra is typically invoked simply as a cover-all in order to push forward an individual's energy priorities without having to engage in inconvenient discussions like practicality, cost, or environmental impacts. And again - this is something which occurs across the board - a token statement given which if the above is any indication, few actually believe (at least with any fervor).

What is perhaps most evident from the above is sharp evidence for the hypothesis that in the political conversation over energy, Americans are talking past one another. Again - given the fact that very little oil is burned directly to produce electricity, most of the conversation on fossil fuels comes down to energy for transportation, with natural gas coming along for the ride in the sense that it may conceivably occupy both sectors. Meanwhile, absent dramatic advances in battery technology, renewables show nearly zero intersection with the transportation sector.

Meanwhile, the lesson in this for advocates of nuclear, both looking at the historic trend in public opinion of oil drilling compared to nuclear energy as well as divisions among party lines is that in order for nuclear to command strong majorities of public support, the issue of ever-rising electricity prices (rising in tandem with global demand for overall energy resources, including coal and natural gas) must be continuously hammered, along with nuclear energy's role in providing affordable, base load electricity. The issue of electricity prices can and does motivate groups - and indeed, sometimes in the wrong way. An example would be the AARP's opposition to Iowa's recent legislative action toward allowing construction-in-progress financing of small modular reactors. The reason? Concerns over electricity prices for those living on fixed incomes. Again, despite the fact that the conclusion is logically perverse in this case, the connection is quite clear.

So what does all of this come down to? Ultimately, it reinforces the issue of fungibility in energy. For nuclear to enjoy the same resilience as fossil fuel sources with public opinion, it must also share the same perception of indispensability. Right now, nuclear is viewed as a fungible energy source - again, one can refer back to the way in which both Republicans and Democrats appear to be making a mental substitution (natural gas or renewables, respectively), thus making nuclear expansion appear to be an "optional" energy strategy for a resource (and carbon)-constrained energy future. Until advocates drive home the essential nature of nuclear energy production with respect to both future energy prices and the environment (i.e., demonstrating that nuclear energy is not so easily substituted without unacceptable economic and environmental trade-offs), it is likely support for nuclear will languish at its historic value near 50%, with sharp and persistent divisions among partisan lines.

Fun with energy generation statistics

The prior post made me want to verify trends in energy generation and prices, so I took a a glance at the resources available over at the Energy Information Administration. Two interesting pieces of data they have available are average consumer electricity costs and total installed capacity by source. I graphed these trends for 1990-2009 (the range data was available for).

Two trends are apparent - first, nearly all the new capacity installed in the last decade has been natural gas. Likewise, one notices a precipitous rise in electricity costs nearly around the same time (e.g., around 2003). Obviously, this would seem to indicate two things - first, supply and demand is alive and well in energy production markets (i.e., utilities have rushed to capture rising energy prices by quickly installing natural gas capacity, which can be rolled out relatively fast and with low up-front cost). Second, claims of "cheap natural gas" have yet to reflect themselves in retail electricity prices. Perhaps this trend will only bear out in more recent years (2009-2011), however the idea that electricity prices will dramatically lower seems to strain belief, particularly given global trends. In this sense, the business case for nuclear seems it will only become easier to make, cheap natural gas or no.

A second piece of data is an overall analysis of historical electricity prices, courtesy of the Edison Electric Institute (thanks to Alan for locating this for me). This data, going back to 1930, analyzes retail electric prices normalized to the consumer price index (CPI), a common measure of inflation; the historical numbers in this case were normalized to 2005 prices.

Notice what happens with electricity prices in real dollars - they slowly declined until around 1970 (i.e., the oil crisis), where they continued to climb, although more slowly in the 80's (even declining slightly in the 90's). One problem with this data of course is that it stops around 2005 - right around when electricity prices began to rise precipitously once more.

Finally, let's look at the last piece of the puzzle, which ultimately has determined decisions on whether to expand capacity: electricity demand. I plotted out EIA data for residential electricity sales versus electric price:

Demand is relatively flat from 1990-1992 and begins to take off afterwards (i.e., corresponding to economic growth) and then plateaus again around 2004 (recession). Unfortunately, data was not available prior to 1990, but a similar trend in flat-lining demand is what occurred during the 1980's, which is ultimately (in addition to the changing regulatory environment) which brought nuclear expansion (along with most other electric capacity expansion) to a grinding halt. As demand began to pick back up during the 1990's, the gap was filled almost entirely by new natural gas (and, incidentally, electricity prices came along for the ride.)