Atomic change and nuclear fission was first developed from 1895 to 1945 but uranium was discovered in 1789 but at the time going any further into the nuclear study was not possible. The first nuclear reactor that produced electricity was the Experimental Breeder reactor in Idaho, USA in December of 1951. President Eisenhower proposed an “Atoms for Peace” program, which pushed for a large amount of research towards electricity generation from nuclear power and this is what pushed for civil nuclear energy development in the United States.
Nuclear energy is considered a fossil fuel because it needs uranium to create the nuclear energy, nuclear energy itself after being created is a renewable energy source. Nuclear energy is also more efficient and cleaner than other fossil fuels. After analyzing the market for nuclear energy, I decided the best market structure would be monopoly. Reason being is that there are very high barriers for entry and exit in this market and there is one firm that dominates a market in a given area.
A big barrier for the nuclear power is the sunk cost investments, sunk cost investments are investments that cannot be recovered if the firm exits the market. Some of these sunk costs include equipment, training special employees to operate the equipment, and building a brand. If a new firm entered the market in an area it would have to have a sure plan to beat out the power source that is already there. Regulations in the market also make a high barrier for trying to get land permits and government control on prices. Nuclear energy has a lot of pros and cons but is also very uncertain, with time other resources become available and sometimes cheaper such as natural gas, coal, wind and solar.
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This also changes the price at any given time. Even though there are multiple reactors in the united states, a company will not put another reactor in a given area where one already is. Which creates a monopoly in that region. Even though nuclear energy is a monopoly, it cannot set the price and it does not maximize the profit at this time. The nuclear power plants are being devalued by 75 percent (180 million to 49 million) which hurts the company on taxes also. The nuclear power company cannot set a price that would be profitable because they are being undercut by cheap natural gas and highly subsidized renewable resources.
Deregulation is killing the nuclear market even though nuclear energy is the most reliable and efficient right now. The nuclear energy market is very competitive with other power sources such as coal, natural gas and renewable resources. With deregulation, it is becoming even more competitive because there is a lot of overhead when running a nuclear power plant. It takes a large crew, expensive material and equipment. With natural gas, it takes a small crew and less equipment and lesser expensive material.
When natural gas is removed from the earth it is not taxed with how much they pull out but nuclear has uranium which is highly taxed which in return is covered by the consumer leading to higher electric bills. Marketing for this industry is very big, considering that everyone pays electric bills if you own a home or rent. People want the cheapest, safest, and cleanest electric they can get. If the firm markets to the people along with the government why they have the cleanest, cheapest, and safest electricity they can have people on their side. A big advertising strategy they are using right now in Ohio is trying to get people informed as to why nuclear energy should stay and the impacts it will have if they leave the market from being shut down.
Price wars are something most markets face at some point and nuclear energy isn’t excluded from that. In Lazard’s 2017 levelized cost of energy analysis nuclear is now $148 for every MWh (Mega Watt Hour) and gas is down to $60 per MWh. Coal is 102 MWh and wind and solar are both roughly $50 per MWh. Many factors go into considering profit for the power plant, at first deregulation was thought to bring in a lot of extra profit to the plants. With deregulation, you can supply your own customers with power from the plant and also sell the excess that’s made to the regional grid to make a high profit. This only works though when nuclear energy is in demand. With nuclear energy, not being in demand its unable to sell to the regional grid because it cannot beat natural gas price. If the nuclear power plants can hold out for the long run it will be profitable in years coming.
With nuclear power, it runs almost 24/7 year-round not affected by most weather. Unlike other energy sources they cannot run 24/7 or withstand weather such as bitter cold, no wind, no sun and eventually run out such as natural gas. The five Competitive Forces Model helped me understand my market better because it shows an outline of things a firm will encounter entering or maintaining its place in a market. The three biggest forces from the model for my market would be competitive rivalry, threat of new entrants, and threat of substitute products and services.
The reason I chose these is because nuclear powers biggest rival is natural gas and in the past couple years natural gas firms have been in all three of those categories. When doing research for this essay I used the force model to help narrow down my search and focus what was important for this essay. Threat of new entrants is the main model I’m going to focus on simply because nuclear energy is being forced out simply because of the price of natural gas and other energy sources.
This is important because all other energy resource prices are unpredictable and sometimes drastically change like recently with natural gas prices. Unlike other energy sources, nuclear cost is predictable and stable for years at a time because they refuel every 2 years and buy it all at once. At the moment in the United Sates there is very little support to operate nuclear power plants by the government. Nuclear plants are excluded from most state and federal subsidies for clean energy, which is why solar and wind have also stayed afloat during this time of low natural gas prices.
Deregulation in Ohio is failing the nuclear power industry but was originally thought to be good for the plants. Nuclear energy owners are trying to push for regulations to come back because that would help level the playing field for all the energy sources. In Ohio governor John Kasich will not approve a bailout for the nuclear power plants and says they will have to find a way to stay aloft without government help. A firm who runs the two plants in Ohio wants the state of Ohio to sign off on a rate increase for its customers to help save the plants.
