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Duke Energy to Apply for Nuclear Stations Licenses Renewal

Zacks Equity Research

Duke Energy Corporation DUK recently announced intention to submit operating license renewal for its Carolinas based 11 reactors of six nuclear stations. The company will seek approval from the the U.S. Nuclear Regulatory Commission for an additional 20 years. As part of this plan, the company will submit the license renewal application for Oconee Nuclear Station — the largest facility with 2,500-megawatts (MW) capacity — in 2021. Following this, applications for other nuclear stations will be submitted.

Is U.S. Nuclear Industry Booming?

The United States is the world's largest producer of nuclear power, with more than 30% of the world’s nuclear electricity generation. However, nuclear developments suffered a major setback after Mile Island in 1979. Similar accidents took place in the following years, which created turmoil in the nuclear power industry. High risks related to radiation from reactors, accidents, declining natural gas and renewable price eventually led to shut down of many nuclear plants in the nation. In May 2019, a business unit of Entergy Corporation ETR permanently closed its 679-MW Pilgrim Nuclear Power Station. Exelon’s EXC single-reactor Oyster Creek plant in New Jersey was shut in September 2018.

Considering its cheap price and safety feature, electric utility companies started to invest more in gas-fired plants. In 2014, the US Energy Information Administration (EIA) projected that the country will lose 10,800 (Megawatts electric) MWe of nuclear generation by 2020, thanks to lower prices of natural gas and stagnant growth in electricity demand.

A Silver Lining

Despite the aforementioned drawbacks and pause in new construction of plants for more than 30 years, dependence on nuclear power has increased. In 1980, nuclear plants produced 11% of the country's electricity generation, which rose to nearly 20% in 2008, per the World Nuclear Association. Of late, optimistic policy generation from regulatory authorities is boosting the nuclear industry. In March 2017, Connecticut’s Energy & Technology Committee approved a bill supporting the continued operation of Dominion Energy Inc.’s D 2198 MWe Millstone plant in a deregulated market condition. Such developments indicate higher growth prospects for the U.S. nuclear industry.

To this end, it is imperative to mention that Duke Energy provides electric service to 2.6 million residential, commercial and industrial customers in Carolinas. Its six nuclear stations have the capacity to generate 10,755 MW power. Notably, Duke Energy’s nuclear fleet meets half of Carolinas customers' electricity need. Moreover, these power plants provide safe, reliable, clean and cost-effective electricity to customers. The company’s nuclear fleet has marked its 20th consecutive year of 90% fleet capacity factor. This will likely help Duke Energy to witness solid growth in the expanding U.S. nuclear industry.  

Zacks Rank and Price Movement

Duke Energy currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past 12 months, shares of Duke Energy have gained 18.4% compared with the industry’s growth of 14.7%.

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