Natural gas and nuclear power need to share the lead in power generation for the future

Reuters

Dominion Virginia Power's North Anna Power Station in Mineral, Virginia, August 23, 2011.

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  • Recent advances in drilling technologies have unleashed a boom in domestic natural gas production. @Mark_J_Perry

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  • Policymakers are increasingly looking to natural gas as the locomotive of economic growth. @Mark_J_Perry

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  • Natural gas has many virtues as a fuel: Its carbon content is less than 1/2 that of coal & it emits no mercury.

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  • If we hope to maintain security of our energy supply, we must expand the use of other sources, including nuclear power.

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  • Natural gas and nuclear power need to share the lead in power generation for the future.

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Recent advances in drilling technologies have unleashed a boom in domestic natural gas production. The United States may have more than 100 years' worth of gas reserves, and perhaps much more, including large untapped resources in Michigan.

Policy makers are increasingly looking to natural gas as the locomotive of economic growth. A striking example is the increasing use of gas in electricity production. For the last several years, natural gas has accounted for more than 80% of new electric generating capacity in the United States. It now provides 32% of total electricity generation, up from 25% just two years ago, and its share could reach 50% by 2030.

Natural gas, of course, has many virtues as a fuel. Its carbon content is less than half that of coal and it emits no mercury or other toxic particulates.

But natural gas is needed for much more than electricity generation. In addition to residential and commercial heating, gas accounts for the bulk of the fuel used by the petrochemical industry. Manufacturing relies on the availability of cheap gas, and its use in transportation is increasing. Additionally, gas producers are gearing up to export some of the gas to markets in Europe and Asia, where gas costs up to five times more than it does in the United States. A dozen or more U.S. companies have applied for licenses to export liquefied natural gas from terminals, mainly on the Gulf of Mexico.

"If we hope to maintain the security of our energy supply, we will need to expand the use of other energy sources, including nuclear power, which is also environmentally attractive and affordable." -Mark J. PerryBecause of its multiple uses and rising popularity, the demand for natural gas is starting to increase, and its price could rise significantly. That is a real possibility, and would be consistent with its long history of price volatility. If we hope to maintain the security of our energy supply, we will need to expand the use of other energy sources, including nuclear power, which is also environmentally attractive and affordable.

Although the capital cost of building a nuclear plant is high, the average price of nuclear-generated electricity is lower than power produced from natural gas. In 2011, the production cost of nuclear power was 2.19 cents per kilowatt-hour, compared to 4.51 cents for natural gas and 3.23 cents for coal.

Today about 20% of America’s electricity comes from nuclear power. But demand for electricity is growing steadily and that trend will continue in the future. Without building new nuclear plants, pressure will build to use even more natural gas for electricity generation, making less available for manufacturing and transportation.

As an important part of America’s energy future, building a new generation of nuclear plants using advanced technologies should be considered by policy makers. To be sure, increasing the use of nuclear power certainly has its challenges. Electricity companies must cooperate to facilitate the investments that are essential for new construction.

Several other key ingredients are needed: recognition that the potential for long-term profits exists due to nuclear power’s lower fuel costs; a shift in the mindset to allow for the application of innovative technologies such as small modular reactors that can be built in a factory for a fraction of the cost of large power plants; and an awareness that nuclear power can produce a huge amount of clean energy for economic growth in the United States and worldwide.

Because they are both critically important economic drivers, natural gas and nuclear power need to share the lead in power generation for the future. Both are cleaner and more secure than the fuels they have replaced, and fostering their use is in our national and economic interest.

Mark J. Perry is a professor of economics at the Flint campus of The University of Michigan and a scholar at The American Enterprise Institute.

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About the Author

 

Mark J.
Perry
  • Mark J. Perry is concurrently a scholar at AEI and a professor of economics and finance at the University of Michigan's Flint campus. He is best known as the creator and editor of the popular economics blog Carpe Diem. At AEI, Perry writes about economic and financial issues for American.com and the AEIdeas blog.

    Follow Mark Perry on Twitter.


  • Phone: 202.419.5207
    Email: mark.perry@aei.org

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