While I am a big supporter of nuclear power, the insane regulatory framework in the US and our broken financial incentive mechanisms for utilities has doomed the promised nuclear “renaissance”. The only places where nuclear plants in the US are even being attempted have “old school” regulation with “cost of service” opportunities that basically mean that the utility will recover whatever they put into service and earn a return on that investment. These include 1) South Carolina, where SCANA (a relatively small utility) is building two 1,100 MW reactors and 2) Georgia, where Southern Company (and a variety of municipal entities) are building two 1,154 MW reactors. The oddest entity, the Tennessee Valley Authority (TVA), is a Federal entity, which allows it to move forward with completion of a unit that is 1,180MW.
No utility in a state with deregulation (partial regulation) can contemplate a nuclear plant, because of the high costs which must be recovered from an open market. The price of electricity is very volatile, driven by demand, weather, and the price of alternative fuels. The low price of natural gas today, not foreseen when these plants were considered back in the late 2000′s, would make high enough energy prices to recapture these costs (and earn a profit) on an open market impossible. The price of natural gas could rise and other factors (such as the impending retirement of much of the US’ coal fleet due to EPA strangulation) could also make them economically viable; but these factors are not present today.
Beyond the enormous (and likely fatal) financial risk that these mega-projects have, (SCANA’s market capitalization is $6B, and the 2 reactors are “planned” to cost $9B), these projects have historically been plagued with immense delays and catastrophic failures such as abandonment. When these projects started, optimistic dates and costs were trotted out, ignoring both the sad history of mega-overruns and the fact that today’s regulatory and legal climate are even MORE unfavorable than those in the 1970′s when the earlier failures occurred. I knew that delays were inevitable, and unfortunately, enough time has passed that the companies are starting to admit their failures (to date).
This article describes how Southern Company has begun to waver from their cost and schedule estimates.
Southern Co. has had a simple message for the past few years: The effort to build the country’s first new nuclear power plant in a generation was on time and on budget. Now, that message is changing. The $14 billion project to build two reactors at Plant Vogtle is trending hundreds of millions of dollars over budget and trailing more than a year behind schedule, according to a report from a state-hired construction watchdog.
TVA recently has begun acknowledging their delays and cost overruns, too, per this article.
Unit 2 at the Watts Bar Nuclear Plant in Spring City, Tenn., is up to $2 billion over budget and three years behind, according to the Tennessee Valley Authority. TVA blames its own management oversight and planning. Instead of basing a plan and estimates on the twin reactor already running at Watts Bar, the utility used as a model the only other reactor work that had ever been deemed on time, close to budget and a success: Unit 1 at Browns Ferry. The trouble was that Browns Ferry and Watts Bar are completely different types of reactors with different work spaces and work needs.
Not only is the TVA admitting the cost and schedule delays, their official in charge of the plant just left the organization.
SCANA too has been acknowledging delays and cost overruns. Per the first article cited above:
In Jenkinsville, S.C., the Scana Corp.’s $9 billion expansion of its Virgil Summer nuclear power station began with work on two new reactors in late March. The Summer reactors already are reported to be at least $300 million over budget because components did not meet shifting safety standards.
Here is a SCANA presentation to EEI from their investor relations web site. Go to page 8, which shows the rising costs and tail of their planned nuclear investment. Frame this page and come back to it 3-4 years out and if it looks anything like this it will be a huge win for SCANA and the US nuclear power industry. Sadly enough, the odds are likelier that the Cubs will win the world series than that the “real” spend will look close to that graph. Note that SCANA is a 55% owner of this plant so it only represents their portion of the spend (other utilities and municipalities foot the rest).
Thus in conclusion:
1. The entities that are embarking on the nuclear construction adventure are either virtually immune to market forces (TVA) or are under “old school” regulation that lets them recover the cost in customer rates regardless of whether or not it makes economic sense
2. While these entities went into the projects with optimism despite the dismal track record of delays and outright abandonment common to nuclear construction, their exhortations and optimism are starting to fade early on in the projects
3. The US has far more to do in the form of favorable “one permit” regulation and removal of potential lawsuits and other barriers, as well as additional financial incentives, before the US nuclear industry really has a chance
Cross posted at LITGM