Nuclear Industry Eyes a Smaller Renaissance
Corrected on 02/25/08: An earlier version of this article incorrectly reported that $18 billion in loan guarantees were in the energy bill passed last December. The $18.5 billion in loan guarantees were part of the omnibus federal budget bill.
Although 17 companies are preparing license applications for as many as 31 new nuclear power plants, don't expect the "nuclear renaissance," if it happens—at least the first phase of it—to be nearly this big.
The Nuclear Energy Institute, the industry's policy organization, today told a gathering of more than 100 Wall Street analysts that it expects the big group of contenders to winnow itself down for the first wave of new construction. NEI projects that four to eight new power plants will move ahead and be operational by about 2016.
NEI officials estimate the plants to cost $3,200 to $3,500 per kilowatt of capacity—more than double the $1,400 to $1,500 per kilowatt the industry was talking about in 2003, according to some old Nuclear Energy Institute testimony I found. That means each new plant is likely to cost about $5 billion in today's money and $6 billion to $7 billion by the time of completion.
At the top of the nuclear industry's agenda, and that of the Wall Street banks that would finance the plants, is for the federal government to provide loan guarantees for these megaprojects. In the report accompanying the huge federal budget bill Congress passed in December, lawmakers specified that the industry should receive $18.5 billion in loan guarantees. But the industry says that to finance eight plants and put them into service by 2016, it would need double that amount.
After the session, I had a chance to talk with John Rowe, chief executive of Exelon, the nation's largest nuclear utility, which is weighing two potential new plants in Texas. Here are some of his thoughts on the electricity business and on the federal government's role in spurring a new wave of nuclear power plants.
What's the greatest challenge you're facing?
The electricity business is a great business because everybody wants your product. It's a tough and hard business because no one wants the things that make or deliver it. And that's the fundamental challenge. There aren't any easy solutions out there. And it's human nature to want to believe there is a free lunch, even though we know there isn't.
So the greatest risk in nuclear is that people won't address the very hard problems associated with it, because they want to believe there's a free lunch somewhere else. They want to believe that [natural] gas will always be cheap. They want to believe that solar will go from 40 cents to 4 cents a kilowatt-hour. They want to believe that wind is cheap when it isn't, and they don't like having the windmills near them either.
Now, when you go down from 50,000 feet to 10,000 feet, I think the single biggest challenge is whether the federal loan program will be fully funded in the next administration.
Why should the federal government take on this risk?
It's very simple. We need this low-carbon energy source, and there are no companies in the industry big enough to take on all this risk themselves. We can't do it as a pure business venture for the first group without the ice being broken. The federal government subsidizes solar. It subsidizes wind. This is a place where the nuclear industry needs this help, if it's going to meet what I believe to be a public imperative. But it isn't that we're entitled to it as businesses. This is not a claim of economic right. This is a claim of what's good public policy.
Tags: Wall Street | energy | nuclear power
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Need to read FPL's Petition
The testimony from FP&L which Paul Gunter cites is based on FP&L's "Petition to Determine Need for Turkey Point." Here's what page 11 of the Petition states:
"FPL’s analysis shows that for all of the scenarios evaluated (eight of nine), the addition of new nuclear capacity is economically superior versus the corresponding addition of new CC units required to provide the same power output, yielding large direct economic benefits to customers as well as effectively addressing the criteria of section 403.519(4)(b). In fact, in the only scenario in which nuclear is not clearly superior, the natural gas prices are significantly lower than they are today and there are zero future economic compliance costs for CO2 emissions. Of all the scenarios evaluated, FPL believes these two to be the most unlikely. Moreover, even in these two unlikely scenarios, the results of the analysis show nuclear to be competitive or only slightly disadvantaged economically, while retaining the non-quantified advantages of fuel diversity, fuel supply reliability, and energy independence. Based on all the information available today, it is clearly desirable to take the steps and make the expenditures necessary to retain the option of new nuclear capacity coming on line in 2018."
It is interesting how the high construction costs of nuclear are still estimated to be the most economical choice. Here's the link: http://www.psc.state.fl.us/library/filings/07/09443-07/09443-07.pdf
For a critique of the study Michael Mariotte references, check out this link: http://neinuclearnotes.blogspot.com/2007/08/is-carbon-free-and-nuclear-free-future.html
And those nuke cost just keeps going up
If you look at the October 16, 2007 direct testimony of Florida Power & Light in the Public Service Commission case to show need for more nukes in the Sunshine State, the end cost projections now range from $5000 to $8000+ per kilowatt for a Westinghouse AP1000 or a GE Advanced Boiling Water Reactor. That's as much as $12 billion per unit and they haven't so much as put a shovel in the ground.
The document is posted on the Florida Public Service Commission website:
http://www.psc.state.fl.us/dockets/cms/docketFilings2.aspx?docket=070650
and find document #09467-07. The cost projections are at page 250 of 251
Nuclear power? No thank you.
A couple of points in reply
Whether an ABWR can be built in 4 years in the U.S. is unknown; history would show it won't be. Meanwhile, the NRC has suspended its review of the application for the first ABWRs proposed (by NRG Energy in Texas) and postponed public hearings because the utility wants to make numerous changes to the certified design. TVA, by the way, wants to make numerous changes to the Westinghouse AP 1000 design too, which will slow down its application....so much for design standardization...
While some of the utilities proposing new reactors are in regulated states and presumably could cover reasonable costs from ratepayers, remember that in the first generation of reactors, all utilities were in regulated states--that didn't prevent WPPSS from defaulting on $2.5 billion in bonds nor the bankruptcy of Public Service of New Hampshire, nor numerous significant cost overruns and cost disallowances.
But several of the utilities (for example, Constellation and NRG) want to build new reactors in unregulated states as merchant plants. These utilities have publicly stated that they will build only if they receive federal loan guarantees. They're not about to try to raise money on Wall Street or risk their own money on reactors unless the taxpayers are on the hook for the potential losses.
The choice isn't nuclear power or CO2, SOX, etc--it isn't between coal and nuclear. It's between nuclear and renewables and energy efficiency. We can achieve a carbon-free, nuclear-free future (check out www.ieer.org) that meets our energy needs at the same percentage of GDP that we currently spend. That's the future we need to be aiming for.
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