By Corbin Hiar

The natural gas boom effectively ended the nation's "nuclear renaissance" before it began. But with the U.S. EPA pushing to cut carbon dioxide emissions produced by the electric utility sector, one ratings company thinks the nuclear industry could be set for something of a revival.

"Standard & Poor's Ratings Services believes that tighter rules on carbon emissions will lead to some increased interest in nuclear plant construction," the agency said in a June 5 report. S&P noted that nuclear power plants provide about 20% of the electricity consumed in the U.S. and are the nation's largest source of carbon-free electricity.

Until very recently, forecasting that more utilities will consider the "nuclear option," as S&P put it, could have been seen as a bold move. Operators of six nuclear reactors have either shut down or announced retirement plans for their facilities since 2012, in several cases citing adverse market conditions.

Among them is Entergy Corp.'s Vermont Yankee, a 620-MW facility built in 1972 under different ownership and licensed by the U.S. Nuclear Regulatory Commission to operate through 2032. It is slated to close later this year due to what the company in August 2013 called "sustained low natural gas prices and wholesale energy prices."

But as concerns about carbon dioxide, or CO2, emissions produced by the energy sector have grown, a number of high-profile voices have called for government officials to prop up the nation's existing nuclear fleet. The Exelon Corp.-funded Nuclear Matters campaign, for instance, is backed by former EPA Administrator Carol Browner, who recently admitted that she opposed nuclear power until she began to focus on the threats posed by climate change.

The EPA in its so-called Clean Power Plan, a proposal that would require carbon emissions from existing power plants to be reduced by 30% below 2005 levels by 2030, came to the nuclear industry's defense. Policies that "discourage premature retirement of nuclear capacity could be useful elements of CO2 reduction strategies and are consistent with current industry behavior," according to its draft guidelines.

One of four "best system of emission reduction," or approaches, that the EPA laid out in the proposed rule for states said that carbon cuts "supported by retaining in operation 6% of each state's historical nuclear capacity should be factored into the state goals for the respective states." That number is based on the 5.7 GW of the nuclear fleet that the U.S. Energy Information Agency warned was at risk of retirement in its most recent Annual Energy Outlook.

The nuclear industry is ready to step up. Following the EPA's June 2 announcement of the proposed rule, Nuclear Energy Institute Vice President Richard Myers said in a statement, "For any strategy for reducing greenhouse gas emissions, one thing is abundantly clear for every state in the nation — with nuclear energy it is feasible to meet the administration's goals, and without it there is no chance at all."

While the Clean Power Plan and growing support for nuclear as a climate-friendly energy source may increase interest in it, new reactors still face serious competition from cheap natural gas, S&P noted. "With natural gas prices at historical lows, we believe natural-gas plant construction will still be the main option for utilities looking to build additional generation," the report said. But the S&P noted that utilities value fuel diversity. And in some parts of the country — such as the Southeast, where renewables are less viable — new nuclear power could be the best low-carbon option.

The experience gained from building new, easier to operate Westinghouse Electric AP1000 reactors at the Vogtle and V.C. Summer plants could also reduce the credit risk associated with nuclear plant construction, according to the report. The 7% to 10% of added costs incurred by the plants' owners so far is "mainly due to the Nuclear Regulatory Commission's request for a design modification to ensure the structure's ability to withstand the impact of a commercial airline," S&P said.

The report also downplayed the potential for new safety regulations to prevent a nuclear revival. U.S. regulators are still implementing the lessons learned from the 2011 Fukushima nuclear disaster in Japan, but S&P "doesn't expect any of the changes resulting from the review to be dramatic or costly."

The Vogtle plant is owned by Southern Co. subsidiary Georgia Power Co., Oglethorpe Power Corp., the Municipal Electric Authority of Georgia and the city of Dalton, Ga. V.C. Summer is owned by SCANA Corp. subsidiary South Carolina Electric & Gas Co. and the South Carolina Public Service Authority, known as Santee Cooper. All co-owners of these new plants under construction have S&P credit ratings of A or above with the exception of SCE&G, which has a BBB+ rating, though in this case, S&P did not address the ratings of the parent companies. Dalton's municipal utility is not rated.