The Nuclear Godot
Nuclear power remains the last best hope for zero-carbon emissions from baseload generating plants and was many analysts’ early pick for a generating revival in the first decade of the 21st century. If one accepts the conventional view of climate change, the rational case for nukes appears unassailable. If you want low-carbon generation, you must go nuclear.
The first decade of our new century has passed. After years of waiting for the nuclear renaissance, it doesn’t look as if the second decade will bring the nuclear industry closer to revival. Indeed, the horizon may be receding. Literature Nobel laureate Samuel Becket could not have had U.S. nukes in mind when he wrote his iconic 1953 play Waiting for Godot. But some of its dialog is eerily on target. The character Vladimir in the second act comments, "What are we doing here, that is the question. And we are blessed in this, that we happen to know the answer. Yes, in this immense confusion one thing alone is clear. We are waiting for Godot to come."
In the U.S., we are into the second decade of the 21s century, waiting for the nuclear renaissance, after the market collapsed in the 1970s. Waiting and waiting.
Nuclear power plants won’t pick up U.S. generating market share in 2010, by all accounts. That’s despite prior federal government policy aimed at jump-starting new nuclear generation, including allegedly streamlined federal regulations and a longed-for candy jar of additional subsidies, such as major loan guarantees, pledged in the Republicans’ Energy Policy Act of 2005. Those have yet to materialize.
Some in the Obama administration and Congress are contemplating additional loan guarantees and other nuclear subsidies, to be included in pending climate change legislation. Arguing for $50 billion in additional federal loan guarantees, Exelon CEO John Rowe told a Senate committee in late October, "Deployment of new nuclear plants simply will not happen, given the large up-front capital costs, without a much more robust federal loan guarantee program than currently exists." There doesn’t seem to be much enthusiasm on either side of the partisan aisle for committing that kind of money to nuclear power.
The 2005 congressional vision (perhaps a hallucination) was of a modest new fleet of nukes — a dozen or so — that would come into the U.S. market and revitalize the stagnant industry. New reactor designs from U.S., Japanese, and French companies; interest from multiple utilities; applications for more than 30 units under the streamlined approach of the Nuclear Regulatory Commission’s (NRC) licensing reforms of the 1990s; and the Energy Policy Act of 2005 all led to irrational exuberance among nuclear power developers. The 2005 loan guarantees would jump-start the market, the legislation assumed and the industry agreed.
More than four years later, the presumably vibrant market for new nukes in the U.S. is becalmed at best. That’s a factor of the worldwide economic collapse of 2007 – 2009, combined with U.S. regulatory and technical difficulties afflicting the new, putatively safer and more efficient nuclear reactors, plus the industry’s inability to deliver on promises of new reactor designs that will be easier, quicker, and cheaper to build. Then there is the unwillingness of anyone with real money to finance new plants.
The NRC has been unable to certify the latest new reactor designs under its "combined operating license" reform, for reasons indicting both the industry and the regulators. The French AREVA evolutionary design is facing its first round of NRC scrutiny while experiencing major cost overruns and schedule delays in construction of a new unit in Finland. U.S. regulators at the end of the year rejected a modified advanced reactor design from Westinghouse for the AP1000 that they had earlier approved. Westinghouse made changes in the shield building to protect the reactor from airline strikes, earthquakes, hurricanes, and tornadoes. The NRC said those changes raised new licensing issues. General Electric, according to the NRC, never provided design details for its advanced boiling water reactor sufficient to judge the safety of the machine (Figure 6).
6. New nuclear queue grows. The location of planned new nuclear plants in the U.S. Source: U.S. Nuclear Regulatory Commission
Given regulatory uncertainty and the conditions of current capital markets, no rational investor is likely to commit major private-sector resources to building new nuclear plants, according to several investment bankers who talked to POWER on background. If new nukes are to be built, they argued, the effort will require large commitments of federal dollars, probably in the form of loan guarantees vastly exceeding those in the 2005 act. That’s an unlikely prospect. Even with much larger federal loan guarantees, it isn’t clear that Wall Street will commit the capital necessary to build units at $8 billion to $10 billion a pop, the latest estimates.
In Congress, feckless Republicans are calling for a fleet of 100 new nukes within 20 years, at a $700 billion price tag. That’s pure politics, or else they are smoking some powerfully atomic wacky-weed that induces weird policy visions. There is no U.S. capacity to license or build that many plants. Maybe the system could support three, or six, new nukes, but that’s a guess. A hundred? Fugetaboutit.
Waste Storage Discussions: A Waste of Time. Another blow to the prospects for U.S. nukes was the White House decision last year — no surprise — to euthanize the Yucca Mountain, Nev., project for permanent underground storage of spent nuclear fuel and other high-level nuclear wastes. The Obama administration, fulfilling a deal with Senate Democratic Majority Leader Harry Reid of Nevada, zeroed out Yucca in its budget submission early in 2009. The funding decision will stick. Sic transit gloria Yucca.
The U.S. finds itself in the embarrassing position, not for the first time, of having no practical idea about nuclear waste storage. Spent fuel rods will remain at reactor sites for the unforeseeable future, probably past the lifetime of anyone reading this article. In the wake of the administration’s decision, the NRC last September began a rulemaking that would give regulators the authority to approve at-reactor waste storage for 40 years, up from the current limit of 20 years.
The administration says it will appoint a "blue-ribbon" commission to study options for nuclear waste disposal. That’s classic D.C. talk for, "We are clueless."
Nuclear Merger. The only positive glow for nukes was the NRC decision last October to allow Electricité de France (EDF) to buy a major share of Constellation Energy’s two-unit Calvert Cliffs nuclear plant. Baltimore-based Constellation, swimming upstream against most energy analyses, and burdened with a heavy load of debt, wants to build new (merchant) nuclear capacity at its existing Calvert Cliffs, Md., site. The only way that can happen, Constellation admits, is if it has access to EDF’s deep financial pockets, which reach into the French government’s endless treasury.
The Constellation-EDF deal won Maryland Public Service Commission approval at the end of October, but with caveats, including a commitment to invest $250 million in the company’s distribution company, Baltimore Gas and Electric (BG&E), and a $100 rate rebate to every BG&E customer, a one-time, $110 million hit for the merged company. Constellation has agreed to those conditions.
Other than the Constellation-EDF parlay, U.S. nuclear projects appear to be waiting for the nuclear Godot that will lead them into a new day of robust construction and profitable prospects. We’ve seen that play before. As Becket’s Vladimir says to Estragon, "On the other hand what’s the good of losing heart now, that’s what I say. We should have thought of it a million years ago, in the nineties."
Skyrocketing Costs Dampen Enthusiasm. At the end of October, the San Antonio City Council was stunned to learn that the price tag of the two new reactors at the existing South Texas Project (STP) had increased by $4 billion. The two existing reactors at STP are owned by NRG Energy (44%); CPS Energy (40%); and Austin Energy, the municipal utility of Austin, Texas (16%), although the San Antonio municipal utility had recently reduced its share in the two new nuclear projects to 20%, effectively leaving 20% of the plant unsold. CPS Energy is responsible for finding a buyer for that 20% slice of the project.
According to a knowledgeable source, the new cost estimate from the project’s primary contractor, Toshiba, is up to $4 billion higher than estimates made public by CPS in late July, which predicted a project cost of $10 billion, or $13 billion including financing.
The fate of the new units at STP is being closely followed by the industry as the STP new addition is one of only three nuclear projects that the Energy Department selected in 2009 to receive a federal loan guarantee, which will cover a good portion of the plant financing costs. NRG Energy has said it also will seek financing help from Japanese export agencies due to the role of Toshiba and other Japanese firms in the project.
The STP project would also benefit from a legislative change that the Nuclear Energy Institute (NEI) is pushing to Congress. That change would let municipal nuclear plant owners (like CPS) transfer nuclear production tax credits to private sector partners (like NRG Energy). Because munis are tax-exempt, the credits would otherwise go to waste.
The San Antonio City Council isn’t the only prospective plant owner struggling with jaw-dropping cost estimate increases. Florida Power & Light’s Turkey Point addition of two new 1,100-MW units is said to cost between $12 billion and $18 billion, Duke Energy’s Lee Nuclear Plant was last estimated at $11 billion for two 1,100-MW units at a "greenfield" plant (the estimate, by Duke in June 2009, was quoted in 2008 dollars), and Georgia Power’s two new units at Plant Vogtle are estimated at $14 billion.
The rising construction costs for new nuclear power do not necessarily translate into rates that are uncompetitive with other technologies in the future. In a commentary published in The Energy Daily, Richard J. Myers, vice president of policy development at the NEI, made the case that new nuclear plants can be cost competitive:
The National Research Council’s recent analysis shows a 6 – 13¢/kilowatt-hour (kWh) cost range for new nuclear plants. The low end represents a nuclear plant financed through the DOE’s loan guarantee program. This is better than coal-fired capacity with carbon capture and storage (CCS) at 9 – 15¢/kWh, and significantly more stable than gas-fired combined-cycle generation, which could be the lowest- or the highest-cost option, with a range from 4¢/kWh (unrealistically low gas prices, no carbon controls) up to 21¢/kWh with high gas prices and CCS.
Using the capital cost assumptions built into its annual energy outlook, the Energy Information Administration calculates that new nuclear will have a levelized capital cost of $107.30/MWh in 2016. Advanced coal with CCS is at $122.60/MWh; gas-fired combined cycle at $115.70/MWh; onshore wind at $141.50/MWh (cost of gas-fired back-up power not included).
In the 2009 update to its 2003 report, The Future of Nuclear Power, the Massachusetts Institute of Technology shows nuclear energy at 6.6¢/kWh absent the "technology risk premium" (i.e., when the first few plants have been built). Coal-fired and gas-fired plants are at 6.2¢/kWh and 6.5¢/kWh without CCS, 8.3¢/kWh and 7.5¢/kWh with carbon controls, respectively.
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