| Recently, nuclear energy has experienced a renaissance. The demand for energy is projected to rise 20% by the year 2020 and 40% by 2030. This demand increase is due in part to declining construction and operating costs of nuclear power plants and rising costs of fossil fuel energy sources. In this paper, the relationship between nuclear energy production and energy costs is analyzed. Using data from the Department of Energy's Energy Information Administration, the effect of changes in states' energy production on their overall energy costs is estimated. In order to isolate the effect of each energy source on energy costs, a multivariate regression including nuclear power, coal, natural gas, oil, and renewable energy is used. Operating costs and consumer energy prices were chosen as proxies for energy costs. Specifications are estimated including state effects, year effects, and state-specific time trends. Estimates suggest that a substantial portion of operating costs is attributable to factors specific to select states. These states, Texas, California, and Louisiana, increase the impact of all energy sources on operating costs and strongly impact the effect of nuclear power, natural gas, and crude oil on these costs. The evidence for the impact of state-specific factors on energy prices is considerably weaker and for some sources of energy, in the opposite direction of the effect on operating costs. Although results indicate that low operating costs in select states have not necessarily translated into lower consumer prices, they do offer a guideline for policies to target states that operate power plants (nuclear and other energy sources) relatively cost-effectively. |
