To zoom, or not to zoom

Zooming? I thought it was the latest dance craze to hit town. Forgive me – we were in New Orleans and everyone was always talking about what a great party town it is. I was therefore temporarily on a different wavelength. What Entergy’s president Don Hintz was talking about, was how to be successful in a changing market.

Speaking at this year’s Power-Gen International in New Orleans, Hintz explained: “We must all become masters of the art of ‘zooming’. It’s all about stretching your limits without threatening your foundation. It’s doing the same thing as usual but doing it differently.”

Hintz was serious – not a hip sway or knee dip in sight. He was trying to present the case that nuclear “had a bright future” in a deregulated competitive environment.

I am not so sure. Here is the present: only four units have begun operation in the US this decade and many of the 103 units are nearing the end of their regulatory life. No licences have been granted to build new ones.

Hintz sees the challenge as how to deliver competitive power to its customer and add shareholder value while doing business as usual.

There are three fundamental characteristics, according to Hintz, that power generators need to be successful in today’s power business. One is a deep understanding of their chosen market. Another is a thorough understanding of the skills and capabilities needed to execute the new business strategy in a different environment.

But perhaps the most important, certainly from the nuclear standpoint, is the need to capture value all along the merchant plant chain – from engineering a plant to power marketing the output.

“The margin in each area may be smaller individually than what we’ve seen in the past, but when packaged together as a whole, all across the value chain, the overall returns are likely to be much greater than the old way of doing our business,” said Hintz. And herein lies the heart of Entergy’s plan.

As the US deregulates, there is evidence that utilities with two or three nuclear plants are being forced to divest them. Ultimately the nation’s nuclear industry will move to a few national nuclear companies that can achieve much higher levels of efficiency in operation. Entergy plans to make expansion of its nuclear fleet a key part of its growth strategy. Hintz cited this as a perfect example of zooming – doing the same thing but doing it differently to meet customer needs and add shareholder value.

There could be mileage in Entergy’s nuclear growth strategy. With nuclear plants being sold so cheap in the US that even I might consider buying one; aggregated nuclear capacity could be cost effective. But what is the future of an industry where no new capacity is being built? And what about factoring in the costs of decommissioning and the problems of waste disposal?

Outside of Asia, most governments seem to be running from nuclear faster than Ben Johnson. Germany and Sweden are to close their nuclear plant at some point in the not too distant future. And it is no secret that ABB has been trying to dispose of its nuclear operation, while Siemens and Framatome have agreed to combine their nuclear operations – it seems there is not enough of the nuclear pie to go around anymore.

On a questionnaire we recently sent out, one reader in his reply said he would like to see PEi be more pro-nuclear. Personally I have no preference, except to say that it makes sense to attempt to maintain a healthy fuel mix – nuclear included.

However, today’s developed electricity markets are ruled by market forces. Fuel mix only becomes a factor when taking into account the environment. And only politicians, through taxes or subsidies,can do anything to advance the prospects of one fuel over another.

One thing Hintz was right in saying is that: “a competitive world has two possibilities – you can lose; or if you want to win you can zoom.”

Well good luck with the zooming. The visit to New Orleans with the many late nights and early morning talk of zooming has left me exhausted.

It’s time to zoom off to the Caribbean for a well-deserved vacation.

Junior Isles,
Managing Editor

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