Falling Demand Leads TVA to Trim New Reactor Plans

Stung by falling demand for power and roughly a billion dollars in potential cleanup costs from December’s massive coal ash spill, the Tennessee Valley Authority (TVA) has announced that it is significantly scaling back its new nuclear plants in northern Alabama, scrapping plans to build two reactors at the site and looking now at building one unit or none.

TVA did not announce that change directly, instead issuing a press release August 7 announcing plans for a supplemental environmental impact statement analyzing three options for the Bellefonte site in northern Alabama, the site of a partly finished nuclear plant abandoned in 1988.

The options TVA said it will consider are “completing and operating one of the partially completed units, constructing and operating a new Westinghouse AP1000 nuclear unit, and taking no action to operate a nuclear unit at the site.”

The announcement is significant because it replaces far more ambitious plans that TVA has been pursuing for several years. TVA in 2005 announced plans to pursue construction of two AP1000 units at the site in conjunction with NuStart Energy Development LLC, a coalition of power companies and reactor vendors working to deploy the first new U.S. nuclear plant in more than two decades.

In 2007, TVA and NuStart applied to the Nuclear Regulatory Commission (NRC) for a license to build the new reactors. That application was intended to serve as the “reference” application for member companies that wanted to file their own subsequent applications to build the Westinghouse reactor.

However, NuStart later switched to use a license application submitted by Southern Co., which is planning to build two AP1000s at its Vogtle plant in Georgia, as its reference application.

Several months after submitting the Bellefonte license application, TVA began to seriously consider completing construction of one or more of the partly finished Units 1 and 2 at Bellefonte, partly because the rising cost of commodities at the time made that option look less costly than building reactors from scratch. The NRC reinstated TVA’s old construction licenses for the units earlier this year.

Under its newest plan, however, TVA is looking at building at most one reactor at Bellefonte or scrapping new nuclear plans altogether. The federal power administration did not give a reason in its August 7 press release announcing the decision, but spokesman Terry Johnson said later that a recent drop in demand for power brought on by the ongoing recession was a large reason.

Johnson said demand from TVA’s customers has dropped 7% to 8% this year compared to last and that, as a result, “there is some delay in the expectation of a need for the next baseload unit.”

He said TVA’s projection for when a new nuclear plant will be needed has slipped to the 2018-2020 time frame, compared to an estimate of 2015-2017 when TVA was initially planning to build two AP100 units at Bellefonte.

The same trends were starkly clear in TVA’s most recent financial results. On July 31, TVA reported third-quarter losses of $167 million, compared to a gain of $100 million for the second quarter in 2008. For the first nine months of this year, the power agency lost $339 million compared to income of $243 million over the same period in 2008.

“TVA experienced considerable challenges during the nine months ended June 30, 2009,” the agency said in the quarterly report.

“This period has been characterized by continued economic weakness in the areas served by TVA and across the United States, and a global financial crisis which has severely disrupted world markets.”

TVA also acknowledged another, significant financial albatross—the highly publicized December coal ash spill at the Kingston coal-fired power plant in Tennessee, when a retaining pond burst and released 5.4 million cubic yards of sludge containing water and fly ash onto adjacent property and into the nearby Emory River.

TVA did not identify the substantial cost of cleaning up the massive spill as a reason for scaling back its new nuclear plans but did identify it as a major financial “pressure” the power agency faces for the rest of the year.

TVA said the problem would take between $993 million and $1.2 billion to fix, but added that did not include certain potential expenses that it said were too hard to quantify. “Those possible costs include future regulatory actions, litigation, fines or penalties that may be assessed, final remediation activities, or other settlements,” TVA said.

Johnson, the TVA spokesman, stressed that TVA has not yet decided what to do at Bellefonte. If the power agency decides to complete the partly completed units, he said the company would complete them largely as envisioned in the 1980s but will use some components—such as reactor coolant pump motors—that have been significantly changed and improved since construction on the units was begun.

Among other changes, the plant’s control room would also be “significantly modified and updated,” Johnson said.

Units 1 and 2 at Bellefonte are 1,200-MW units manufactured by Babcock & Wilcox.

—Jeff Beatty is a reporter for The Energy Daily, a sister publication of MANAGING POWER.