President Barack Obama on Tuesday offered to conditionally guarantee $8.33 billion in loans for Southern Co.’s project to build two AP1000 nuclear reactors at the Alvin W. Vogtle Electric Generating Plant in Burke, Ga. The pledge marks the first federal nuclear loan guarantee, and it could boost construction of the first U.S. nuclear plant in more than 30 years. More commitments are on the way, the Energy Department said.

Investment in nuclear energy is integral for the U.S. if the nation wants to keep its stance as a clean technology exporter, the president said in a speech at the Maryland headquarters of Local 26 of the International Brotherhood of Electrical Workers. Obama also spoke about nuclear energy’s role in energy security and as a low-carbon option that would prevent climate change, alluding to efforts to forge a middle ground between congressional Democrats and Republicans who are currently shaping a comprehensive climate change and energy bill.

The administration’s support for nuclear power was first affirmed during the president’s State of the Union speech last month. Then, earlier this month, the DOE’s Fiscal Year 2011 budget unveiled by Energy Secretary Steven Chu highlighted $56.5 billion in nuclear loan guarantees—$36 billion added to the $18.5 billion allotted by the Energy Policy Act of 2005 and $2 billion that was subsequently added for fuel cycle facilities. The guarantees could support the construction of seven to 10 new reactors, Chu said, if their designs are approved and the developers raise their share of the capital.

Leading the Nuclear Race

The Alvin W. Vogtle Electric Generation Plant is one of Georgia Power’s two nuclear facilities and one of three nuclear facilities in the Southern Co. system. Southern Nuclear, a subsidiary of Southern Co. since 1990, is the licensed operator of Plant Vogtle, which is located about 25 miles south of Augusta, Ga.

The plant is jointly owned by Georgia Power (45.7%), Oglethorpe Power Corp. (30%), Municipal Electric Authority of Georgia (22.7%), and the Dalton Utilities (1.6%). Units 1 and 2 consist of Westinghouse four-loop pressurized water reactors rated at 1,109 and 1,127 MW respectively. Unit 1 began commercial operation in 1987; Unit 2 followed in 1989. The federal loan guarantees could boost completion of two 1,100-MW AP1000 reactors, which are currently scheduled to be completed in 2016 and 2017. (For more about the plant, see POWER’s November 2009 feature on the facility, “Plant Vogtle Leads the Next Nuclear Generation.”)

According to the DOE, the Energy Policy Act of 2005 allows the department to issue loan guarantees for projects that “avoid, reduce, or sequester air pollutants or anthropogenic emissions of greenhouse gases and employ new or significantly improved technologies as compared to technologies in service in the United States at the time the guarantee is issued.”

Plant Vogtle’s expansion was eligible for loan guarantees because it “achieves substantial environmental benefits by reducing greenhouse gases and other pollutants,” the DOE said in a statement on Tuesday. “In addition, the Westinghouse AP1000 reactor has incorporated numerous innovations resulting in significant operational, safety, and cost enhancements.”

Technical Clearances

The DOE stressed that the guarantee deal was conditional. One condition is that the U.S. Nuclear Regulatory Commission (NRC) must determine if the AP1000 fulfills the regulatory requirements for a construction and operating license (COL), a decision Southern Co. expects by the end of 2011.

But that issue alone could pose hurdles: The Vogtle project has recently faced increased scrutiny, owing to the NRC’s Oct. 16 notice to Westinghouse Electric Co. that it had not adequately demonstrated the structural strength of certain components of its AP1000 reactor design, specifically for the shield building.

That decision prompted concerns by congressmen like Rep. Ed Markey (D-Mass.), who asked Energy Secretary Steven Chu in November not to issue nuclear loan guarantees before the NRC had fully reviewed plans for proposed nuclear plants and granted combined construction and operating licenses.

Seven of 17 COL applications under review by the NRC are based on the AP1000 design. As well as Southern Co.’s Vogtle plant in Georgia, proposed AP1000 projects reportedly shortlisted for DOE nuclear loan guarantees include Scana Corp.’s V.C. Summer plant in South Carolina.

In Georgia, the NRC’s decision meanwhile prompted groups to try to block construction of the two planned reactors at Plant Vogtle, saying it could cause delays, which in turn would drive up costs. Georgia Power has since testified to state regulators that the $14.4 billion project would be on schedule and within budget. Officials also said that that the price tag for the two new reactors had dropped $1.5 billion from when the company requested permission to build them.

In a statement on Tuesday, Westinghouse celebrated the loan guarantee announcement, saying that the action—a major boost for the “entire nuclear industry”—would “produce many long-term benefits.” The company pointed out that although two AP1000s at the Vogtle plant would be the first in the U.S., four reactors of that design are already under construction in China.

Financial Clearances

Another condition Southern Co. must overcome before obtaining the loan guarantee is to post the credit subsidy—a percentage of the loan guarantee amount based on the project’s risk level. That percentage is still under negotiation with the DOE, Southern Co.’s Chair, President, and CEO David Ratcliffe told reporters in a press call.

The two parties had reached a “ballpark” range, though Ratcliffe would not disclose it. “We’re going to continue to work to drive that cost as low as we can,” he said.

Ratcliffe also told reporters that Southern Co. would likely use the guarantee to cover up to 70% of Southern Co.’s $6.1 billion share of the total project, and that Southern Co. planned to divide its 30% share between debt and equity.

More Commitments?

Obama’s announcement is the fifth time that the DOE has offered conditional commitments for a loan guarantee under The Energy Policy Act of 2005. Other recipients of commitments for loan guarantees include Solyndra Inc., a manufacturer of cylindrical solar photovoltaic panels; Nordic Windpower, USA, a maker of two-blade, 1-megawatt wind turbines; Beacon Power, an energy storage company; and Red River Environmental Products, an activated carbon manufacturing plant.

Jonathan Silver, executive director of the DOE’s loan guarantee program, told the New York Times that the administration was “actively engaged in advanced work on three other transactions” and has begun analysis on four more beyond that. Projects include those in Maryland, San Antonio, and Fairfield County, S.C.

On Tuesday, meanwhile, contenders shortlisted for the first round of federal nuclear loan guarantees expressed their hopes of receiving conditional commitments from the DOE.

Unistar Nuclear Energy—a joint venture between Constellation Energy and Électricité de France—said its proposed Calvert Cliffs 3 facility in Southern Maryland would “represent one of the largest economic and industrial development projects in Maryland’s history.”

San Antonio’s CPS Energy and NRG Energy, which had solicited nuclear federal loan guarantees for their expansion of the South Texas Project and are currently embroiled in a heated legal battle, did not comment.

Sources: POWER, POWERnews, The White House, Southern Co., DOE, Westinghouse, UniStar Nuclear Energy, New York Times