The Slouching South Texas Nuclear Project

By Kennedy Maize

The alleged U.S. “nuclear renaissance” has been slowing creeping toward the horizon of reality for over five years. Developers have filed plans at the U.S. Nuclear Regulatory Commission. The Department of Energy has dangled $18.5 billion in loan guarantees for new nukes, although so far it’s just financial foreplay. The nuclear industry avers, with fingers’ crossed in longing, that new U.S. plants are real.

Will it every happen? Not without the DOE money, according to virtually everybody in the nuclear business, utilities and vendors alike. And even then, it’s uncertain. So far, it’s a costly game, nuclear chess, as the parties line up for moves to advance their strategic positions.

Many in the game acknowledge that the first plants in the renaissance have to go well, otherwise the end game is checkmate. The units have to be financed prudently, built properly, and operated efficiently. Jack Davis, chief nuclear officer for Detroit Edison, one of the pioneers of the first round of nuclear development over 50 years ago, said in an Edison Electric Institute forum recently that “success in the renaissance will balance on whether the first plant is a success or not. Actually, the first two or three really have to go well.”

In regard to Davis’s analysis, the news today isn’t good. One of the first movers – NRG Energy’s plan for two new advanced boiling water reactors at the existing South Texas Project – is in financial trouble. San Antonio is seriously considering pulling its City Public Service municipal utility – a 50-50 partner with NRG and Toshiba – out of the project because of escalating costs. Toshiba originally estimated the project cost at $8.5 billion. In late 2008, the cost estimate escalated to $12.7 billion (a figure that was not provided to the city government until late in 2009). There are independent estimates for the plant of close to $17 billion.

The city government was scheduled to vote in late December whether to go ahead with its participation in the South Texas expansion, but has delayed the vote.

The city’s investments are crucial to the project, because the Texas wholesale power market is competitive and South Texas will have to bid its power into that market. San Antonio, as a muni, is not part of the Texas wholesale market So the city offers a safe, and lucrative, haven for a significant portion of the expansion’s output. San Antonio, as a muni taking advantage of tax-free bonds, can also finance its portion of the project at lower interest rates than NRG.

On December 6, the city sued NRG and Toshiba, claiming $32 billion in damages linked to the cost increases for the new plant. On December 23, NRG and Toshiba, through their joint venture, Nuclear Innovation North America (NINA), called on the city to make a deal. NINA said it could not afford to buy out the city’s share of the project, but suggested other, unspecified, ways of working out the dispute.

NINA CEO Steve Winn said the city should make a deal quickly. “Time is of the essence in making the determination of whether CPS Energy is in or out of the project,” said Winn. “The Department of Energy is only going to select two projects for loan guarantees. STP was number one and now is second with another project close behind. Further delays could move STP to third place, losing the loan guarantee and reducing the value of both parties’ investment to zero.” A preliminary hearing on the city’s suit is set for January 25.

I’m reminded of William Butler Yeats’s magnificent 1919 poem, “The Second Coming,” which ends: “And what rough beast, its hour come round at last,
Slouches towards Bethlehem to be born?”