Primer: Nuclear

What is it and how does it work?

Nuclear power is used to produce electricity, and like fossil-fuel power plants that burn coal, oil and natural gas, nuclear reactors produce electricity by boiling water into steam, which turns turbines.

Nuclear plants, however, do not burn anything. Instead, they use uranium fuel, consisting of solid ceramic pellets, in a process known as fission. This is the controlled splitting of uranium atoms, which release heat, and neutrons, which strike other atoms, splitting them and triggering a chain reaction.

The process takes place in tubes holding the uranium fuel. These, in turn, are inserted into control rods, which are surrounded by water. The heat produced by fission turns this water into steam, which powers a turbine to spin a generator to create electricity. The rods can be withdrawn or inserted to varying degrees to slow or accelerate the reaction.

Past Performance, Future Prospects

Nuclear power may indeed be poised for a renaissance as many in the industry hope, but there have been false promises in the past. President Richard Nixon predicted the US would have 1,000 reactors by 2000; just 130 ever opened, and only 104 remain in service.

The industry, which came to life in the 1970s, had more than its share of problems, from cost overruns to safety failures,  forcefully demonstrated by the partial meltdown of the reactor core at the Three Mile Island plant near Harrisburg, Pa., in 1979.

That incident harmed virtually nothing except the industry, energizing a powerful anti-nuclear movement that has embedded strong residual public skepticism about "nukes".

Now it seems that the industry’s wheel of fortune has changed. Surging electricity demand, high natural gas prices and concerns about global warming are making people reconsider nuclear power.

Even some prominent environmentalists are now hailing the once-reviled nuclear power as the low-carbon Holy Grail for an energy hungry world. (Some who worked in the industry during the tumultuous times, however, are not so enamored by the prospects.)

“If we are to meet the growing electricity needs in this country and also address global climate change, nuclear energy has a crucial role to play,” says Patrick Moore, cofounder of Greenpeace, which was formed in part to oppose nuclear power.

Even in its diminished status, nuclear power supplies 20 percent of America's electricity. That's almost as much as natural gas, the second largest source of electricity after coal, which supplies half. 

But while gas prices have soared recently, nuclear production costs have declined by a third in the last decade; nukes now produce electricity for 1.76 cents per kilowatt-hour, compared to 2.47 cents for coal or 6.78 cents for natural gas.

Little wonder perhaps why nuclear's new promise was underscored by billions of dollars in subsidies for the industry in the Energy Policy Act of 2005. Still, there are formidable obstacles to the industry achieving anything approaching a renaissance. Questions remain about how to safely store radioactive waste on a permanent basis and how to prevent accidents or terrorist attacks.

How secure are uranium supplies and where are they sourced?

A report by International Atomic Energy Agency (IAEA) found that supplies from 43 uranium-producing countries could adequately meet the needs of existing and future nuclear plants worldwide for the foreseeable future. The price of uranium has increased significantly since 2000, spurring uranium exploration and mining.

The US uses 53 million pounds of uranium oxide each year and sources just 10 percent domestically. The biggest foreign suppliers included Canada, Russia and Australia, while Namibia, Uzbekistan and Kazakhstan are also major exporters.

A U.S.-Russian program  — “Megatons to Megawatts” — recycles highly enriched uranium fuel from former Soviet nuclear warheads into low-enriched fuel for nuclear power plants, supplying 10 percent of US needs.

Where is nuclear power being used and what's next for the industry?

There are 439 nuclear reactors generating electricity in 30 countries, supplying 15 percent of the world's total. Sixteen countries rely on nukes for at least one-quarter of their electricity. France is by far the leader with almost 77 percent, followed by Lithuania (64 percent). Belgium, Switzerland, Sweden, Hungary and South Korea are also big users. There are 35 new plants under construction in 14 countries. (See map.)

In the US, more than three dozen new reactors have been proposed by companies, or consortia. Soaring US electricity demand — projected to grow one percent annually through 2030 — would require roughly 260 new 1,000 megawatt plants. The US nuclear industry is hoping to have four to eight new plants on-line by 2016, followed by a second, larger build-up of next-generation facilities.

The Energy Policy Act of 2005 included federal loan guarantees (for up to 80 percent in the event of default), production tax credits (1.8 cents per kilowatt hour) for the first 6,000 megawatts (or $ 6 billion) of advanced reactors, and federal risk insurance against unforeseen regulatory delays — a provision specially included for the nuclear industry but not renewable energy.

The bill also authorizes nearly $3 billion in research, including a new demonstration hydrogen reactor. There are other important regulatory streamlining measures to help fast track projects.

Who are likely to be the major players?

There is a long, complex nuclear industry supply chain involving many companies that are clearly gearing up for a new wave of US construction (after renewed interest in Asia). Company involvement ranges from mining and enriching uranium to designing, building and operating plants.

Foreign firms, particularly from Japan and France, are hoping to play a role in building up the US nuclear industry. This includes France’s Areva and Alstom , as well as Mitusi , Mitsubishi and Hitachi, through its global nuclear alliance with General Electric .

Other leading US companies in this space are Westinghouse (owned by The Shaw Group) , Bechtel, Babcock & Wilcox, owned by McDermott International and about two dozen utilities, led by Exelon , which has the largest nuclear fleet. (17 reactors, supplying approximately 20 percent of the US industry’s power capacity.)

In the midst of rising component costs, ensuring adequate cost certainty and public risk sharing, is one of several key challenges the industry will have to finesse moving forward.

© 2009 CNBC.com