The clock is ticking
For the nuclear industry, the key to the time game is implementing construction loan guarantees authorized in the now holy writ of the Energy Policy Act of 2005. Without the full faith and credit of the U.S. government behind the loans, lenders likely will seek usurious interest rates on the debt. “Loan guarantees,” said Michael Wallace, a Constellation Energy executive vice president, “are most critical.” Baltimore-based Constellation has plans for a new unit at the existing Calvert Cliffs site in southern Maryland (Figure 1). Constellation owns two nuclear units at Calvert Cliffs that bid power into the PJM competitive wholesale market. PPL’s Miller said, “Without loan guarantees, we are out” of the market for new nuclear generation. PPL, based in Allentown, Pa., owns a single merchant nuclear plant that bids into PJM.
1. Third time’s a charm. UniStar Nuclear and Constellation have applied for a combined construction and operating license for a proposed Calvert Cliffs Nuclear Power Plant Unit 3. Courtesy: NRC
UniStar Nuclear Energy and Constellation Energy remain committed to the future of nuclear power, as evidenced by a February announcement of their intention to apply for a COL for an addition to their Nine Mile Point nuclear plant in upstate New York. UniStar is also working with PPL and Ameren UE to develop COL applications for new reactors in Pennsylvania and Missouri, respectively; it’s working with newly formed Amarillo Power to pursue a new reactor in Texas.
Ken Hughey of Entergy Corp., which is currently trying to spin off its merchant nuclear operations into a separate, publicly traded company, noted that his company’s plans for new nuclear units at the existing Grand Gulf site in Mississippi (Figure 2) and at River Bend in Louisiana, are for state-regulated plants. He said that loan guarantees are “very useful” for regulated plants but essential for merchant plants, which Entergy operates in several states.
2. Intelligent investment. The NRC awarded Southern Nuclear an early site permit (ESP) for the Grand Gulf Nuclear Station near Port Gibson, Miss., in April 2007. An ESP allows a utility to “bank” a site for up to 20 years for future reactor placement. Courtesy: Southern Nuclear
Last December, Congress authorized $18.5 billion in loan guarantees for nuclear power plants and $2 billion for uranium enrichment projects. According to Constellation’s Wallace, that amount is adequate for three or four projects to go forward.
The nuclear industry is playing “beat the clock” with the loan guarantees. If the guarantees don’t materialize before a new administration marches into Washington, several speakers told the Platts conference, the nuclear renaissance could become the Dark Ages. The repeated message was that the Department of Energy must get out a solicitation for the loan guarantees within a matter of weeks to be sure that an incoming administration of either party can’t put a hold on them.
Wallace explained the way the timing works for his company’s nuclear plans. Once the DOE puts out the solicitation, it will take Constellation about three months to produce the preliminary letter; that means May. He said it will take another four months to put the loan guarantee in place, which brings them very close to election day on November 4. Wallace said he wants to have his board of directors approve the final decision to move forward to construction, loan guarantee in hand, in early November.
The nuclear industry fears that the DOE won’t get loan guarantees in place before a new administration comes into power in early January 2009. But the timing is even more difficult. The ball game changes entirely immediately after the presidential election. In reality, the new administration will rule Washington the day after the election, as even holdover administrators won’t take action until the new regime moves into office. The industry’s worst fear is that the Democrats will win the White House and expand the Democratic majorities in the House and Senate.
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