The other big initiative was an attempt to restart the nuclear industry, referred to somewhat grandiloquently as “the nuclear renaissance.” The idea was to promote a streamlined regulatory process for a small set of standardized designs. These designs, it was hoped, would address the safety concerns that had plagued older systems and reduce the time and cost of construction. In the United States, the big initiatives were the Nuclear Power 2010 program, unveiled in 2002, and the Energy Policy Act of 2005, which authorized $18.5 billion in loan guarantees. All of these initiatives were carried on and extended by the Obama administration, which proposed in January 2010 to triple federal loan guarantees.
For some years, neither of these approaches bore much fruit. Although installations of solar PV grew, the price remained stubbornly high. This was partly because the industry outgrew its low-cost source of polysilicon, taken from offcuts for wafers made for the semiconductor industry. As late as 2009, the average price of modules was above $4.50/watt. Prices began falling thereafter, and by the beginning of 2011 had fallen more than 20 percent.
The unexpectedly rapid fall in prices meant that the subsidies embodied in early feed-in tariff schemes were now absurdly generous. Households and firms rushed to take them up, and governments, in response, scrambled to scale back their generosity. The process, along with rapid growth in installations, produced a boom and bust cycle in the industry of which Solyndra (which failed in 2011) was the most famous, but far from the only, casualty.
Meanwhile, after an initial rush of enthusiasm proposals for new nuclear plants ran into economic reality. When the deadline set under the Nuclear Power 2010 program expired, twenty-six proposals had been received by the Nuclear Regulatory Commission. But by the beginning of 2011, more than half of these had been abandoned, and ground had been broken on only two sites, with a total of four reactors.
The nuclear renaissance was already tottering, but the disaster of Fukushima was the coup de grâce. It’s true, as nuclear advocates have argued, that the plants at Fukushima were old and that a disaster as big as the March tsunami was hard to plan for. No doubt the failures in cooling and containment systems that gave rise to the present crisis can be overcome and reactor designs modified to improve safety.
But safety doesn’t come cheap, and redesigns mean delays. With no prospect of any further increases in subsidies and loan guarantees, it seems likely that most of the proposals for new nuclear-power plants in the United States will be abandoned. And, if only for reasons of diversification and speed of construction, the lost Japanese reactors will probably be replaced by gas-fired plants, with some renewables. Meanwhile the Europeans, who were reconsidering nuclear power, have moved decisively in the other direction. Even China has scaled back its targets for nuclear construction and extended the timescale, effectively halving the proposed rate of construction. Such a modest program will not produce the scale economies and operating experience needed to generate a substantial reduction in the cost of nuclear power over the next two decades.
Meanwhile, the cost of PV has already fallen well below that of nuclear and is set to fall further. The average retail price of solar cells as monitored by the Solarbuzz group fell from $3.50/watt to $2.43/watt over the course of the year, and a decline to prices below $2.00/watt seems inevitable. For large-scale installations, prices below $1.00/watt are now common. In some locations, PV has reached grid parity, the cost at which it is competitive with coal or gas-fired generation. More generally, it is now evident that, given a carbon price of $50/ton, which would raise the price of coal-fired power by 5c/kWh, solar PV will be cost-competitive in most locations.
The declining price of PV has been reflected in rapidly growing installations, totalling about 23 GW in 2011. Although some consolidation is likely in 2012, as firms try to restore profitability, strong growth seems likely to continue for the rest of the decade. Already, by one estimate, total investment in renewables for 2011 exceeded investment in carbon-based electricity generation.