Nukes face stiff political wind
A new Democratic administration isn’t likely to push licensing of new nuclear plants. Indeed, the nuclear industry’s worst regulatory nightmare is very much a political possibility: NRC Commissioner Gregory Jaczko becoming the agency’s chairman. Jaczko, a very bright and sharp-elbowed political player, is considered “Harry Reid’s guy” at the NRC.
A PhD physicist, Jaczko came to Congress as a science fellow working for Rep. Ed Markey (D-Mass.), one of the most anti-nuclear members of Congress over the past 30 years. Jaczko decided he liked Washington and became Reid’s chief advisor on nuclear waste issues. Reid has vowed to kill Yucca Mountain, and he may be able to keep his promise come January 2009. Jaczko professes, no doubt honestly, that he is not anti-nuclear power.
But Jaczko has every reason to be anti–nuclear industry. The Nuclear Energy Institute tried, and failed, to block his initial appointment to the NRC when he won a recess appointment—as did Republican Peter Lyons, a former advisor to former Senate Energy and Natural Resources Committee Chairman Pete Domenici (R-N.M.). That was a deal the White House and Reid negotiated, over the objections of the nuclear lobby.
Then the nuke reps tried to derail Jaczko’s nomination to fill a full term last year. They failed. Recently, the nuclear lobby tried to abort a second term for Jaczko. They were unsuccessful. Said our lobbyist, “We’ve tried to screw this guy three different times and failed. How understanding and helpful is he going to be when he runs the NRC?” There’s little doubt that if the Democrats reclaim the White House, Jaczko, the only Democrat on the commission, will become its chairman.
The industry’s political support in Congress has diminished substantially recently. Domenici, the nuke lobby’s leader in the Senate, is a spent force. He’s ill and sometimes unfocused, and he’s announced he’s stepping down at the end of 2008. The second-most-ardent nuke supporter in the Senate is Idaho Republican Larry Craig. His political career is apparently in the toilet. In recent years, the number-three supporter was Wyoming Republican Sen. Craig Thomas, a buddy of vice president Dick Cheney. Thomas died last year. There are no important nuclear stalwarts on the Democratic side of the House or Senate.
The politics of nuclear power will manifest themselves directly in financial markets. It won’t matter how badly a utility wants to build new nuclear capacity if it can’t convince lenders their investment is a safe one. No one is going to risk $5 billion or more on a new plant without assurance of at least capital recovery plus a return. For most generators, it’s a bet-the-company gamble.
So while the politics of new nukes look bad, their short-term financing outlook isn’t very promising, either. An October study of the U.S. industry by Moody’s Financial Services concluded that “there can be no assurances that tomorrow’s regulatory, political or fuel environment will be as supportive to nuclear power as they are currently.” The NRC’s 42-month COL process, Moody’s noted, “remains untested.” Opponents of nukes are likely to litigate NRC decisions, adding time, money, and doubt to the process.
Most ominously, Moody’s suggests that the current estimate of the average cost to build a reactor and start it up by 2015—around $3,500/kW of capacity—is pie in the sky. A more realistic all-in cost for a new reactor, says the bond rating agency, is in the $5,000 to $6,000/kW range. That’s considerably more than conservative estimates for new integrated gasification combined-cycle (IGCC) coal plants. American Electric Power (AEP) estimates its planned 600-MW IGCC plant will cost $3,500/kW.
Coal’s progress slowed
If nuclear has another losing hand in 2008, will that make coal a winner? Maybe, maybe not. It’s another case of the political correctness of generation. Coal—and its link to CO2 emissions—has become at least as un-PC as nuclear power.
Last year opened with good prospects for coal for three reasons: its superior economics, more-efficient ways to burn it (such as supercritical boilers), and slowly improving prospects for CO2-capturing IGCC plants. TXU had an ambitious plan to build 11 conventional coal-fired plants to serve the booming Electric Reliability Council of Texas wholesale market (the same market NRG is targeting with its nukes). Tampa Electric, which already operates a DOE-subsidized 260-MW IGCC unit in Florida, was saying it would build another of 630 MW valued at $2 billion by 2013.
Other coal-fired projects popped up consistently during the early months of 2007. Then the pace slowed in response to stepped-up environmental opposition, concerns about future greenhouse gas regulation, and spotty support by state regulators.
By the end of the year, many of the early ambitions for coal had faded. As part of a leveraged buyout orchestrated by Kohlberg Kravis Roberts & Co. to take the company private, TXU agreed to scrap all but three of its planned coal plants. Local activists opposed to the utility’s coal-based strategy persuaded KKR that green protests and litigation would delay or derail the buyout unless the utility scaled back its plan.
The tactics used by environmentalists against coal projects around the country were clever. If a utility or IPP proposed a conventional coal-fired plant, they argued to local regulators that it shouldn’t be approved unless the developer promised to make it capable of capturing carbon. If the developer agreed, the plant’s opponents would demand that the project abandon pulverized coal in favor of the cleaner but untested IGCC technology.
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