Texas Nuclear Plant In (High) Doubt

I always start these posts by saying that I am a big supporter of nuclear power and believe that it is good for America to have a solid foundation of base load nuclear plants. As a realist, however, I am bound to continually explain the frankly insurmountable obstacles that are in place to any sort of plan to build new nuclear units in the USA. As soon as any of the nuclear events in Japan started I put up this post saying “it’s over”.

While it isn’t final, it looks like it is almost over with the two units that they are building in Texas. You can find this news everywhere but here is a small summary.

Utility company NRG has put the brakes on a plan to build two new nuclear reactors at its South Texas plant, CEO David Crane said Wednesday.

All along I have said that NRG was a lousy candidate to build a nuclear plant. Since they are more of an IPP (Independent Power Generator) than a baseload utility subject to traditional “rate of return” regulation (in a state that has that, like South Carolina or Georgia, where it is NO SURPRISE that the only plants are being built), they need to continually raise money and hit profit targets in the near term and they can’t just pour billions into construction and endless delays.

One of their partners is the Tokyo utility struggling to contain the recent nuclear plant issues in the wake of the Japan earthquake – TEPCO (Tokyo Electric Power Company).

Tepco holds a 10% stake in the NRG expansion project, with the option to purchase an additional 10% share. A spokesman for NRG confirmed the company has been in touch with Tepco following Japan’s twin natural disasters — but only to offer assistance.

On top of that, the US has announced a plan to review nuclear safety throughout the country. Given our relatively poor record of utility planning and regulation (see the Yucca Mountain Storage fiasco for a primer on how our government can’t plan or execute and wastes billions while accomplishing nothing), there is little hope for a near term answer from our regulators.

“The timing of this from where our project stands could not be more unfortunate,” Crane said. “And time can be the biggest enemy for a project like this.” It’s unclear how long the review will take. “We actually agree that we need the review,” Crane said. “But the question is what are we looking at? A three month review or longer?” Crane said he hopes his plant will be among the first to be given the green light by regulators. He stressed that the proposed reactors will sit 10 miles from the Gulf Coast, in a non-seismic area.

It is unfortunate in its timing. This project was already seriously weakened by the pull out of municipalities that used to contribute to new baseload growth; these sorts of alliances were behind many of the nuclear plants that exist in the US right now. But even prior to this disaster in Japan the municipalities were “spooked” by the prospect of unlimited delays and cost over-runs and also under a financial gun more or less to start with.

We will see what happens in Georgia and South Carolina. I will bet that South Carolina is “all in” because they are in a small state and if they have to “eat” this massive hit by writing off their investment and passing it to taxpayers they will be embroiled in rage, so they have little choice. As for Georgia, Southern Company is much bigger and can absorb more pain, so they may be able to take an (unfortunately) more pragmatic approach.

Cross Posted at LITGM

12 thoughts on “Texas Nuclear Plant In (High) Doubt”

  1. The bureaucrats will continue to nickel-and-dime these projects for all eternity.

    It may get to a point where people are so fed up that a political leader will feel emboldened to dynamite whole departments and go back to the original light regulatory touch. Then they will get through. Not before.

  2. Dynamiting the government agency would be step 1 of 50 to get something done.

    Step 2 would be eliminating the ability for lawyers and special interest groups to challenge everything in court for eternity.

    Step 3 would be changing planning regulations to allow us to build something in a reasonable not glacial manner.

    Step 4 would be putting in place incentives at the state level to encourage base load generation rather than just natural gas and letting everything rot.

    Step 5 would be to design some methodology to build long range transmission that provides benefits for the “pass through” states and can be done on a expeditious basis, yet provides financial incentives.

    Step 6 would involve actual education of citizens to realize that damn solar and other marginal efforts won’t provide power to a modern economy.

    Step 7 would involve stopping the electric car in its tracks that is just going to kill the system even more especially if we move from base load power to natural gas which has a higher marginal cost.

    There are so many more. It ain’t happening. Just prepare for the status quo… shutting plants down, an unreliable grid, and people building their own back up sources. Companies already do it. Relying on the public grid soon will be about as smart as sending your kids to school in a bad neighborhood or going to a public clinic for health care or leaving your door unlocked with nothing to protect yourself. Smart people won’t do it.

  3. So what is it about the culture and political system in France which has allowed them to grow nuclear power (now something like 80% of France’s electricity) without the kind of hysteria which has brought nuclear to a standstill in the US?

  4. France likes big things. Big government, big business, big powerplants and big interventions in Africa are all a way to assert national greatness for a has-been great power.

    I don’t remember who said that France has the soul of an empire, but not the means; America has the means, but not the soul.

  5. After working almost 5 years on the STP 3 and 4 project, I have to admit my hope is flagging. I’m reminded of Spengler’s motto – “Optimism is cowardice.”

    Note that it is taking longer to get US government approval, of a pre-approved plant design on an existing nuclear site, then it will take to actually BUILD the darn thing.

    My guess is that NRG will sell a large part of its investment in the development costs for pennies on the dollar to one of the really big players like Exelon. The latter made a play on a competing plant in nearby Victoria in hopes of upstaging NRG.

  6. David and Dan, remember that France’s ruling class begins its education with competitive exams and, at each step along the way, they take another round of competitive exams to advance. They really are elites. They know what they are doing. Ours are credentialed but the credentials are created by themselves.

  7. Joseph – I have great sympathy for you. I know that you are on the front lines actually trying to make this happen.

    I hope that if Exelon or someone like that does pick up the site from NRG that they are smart enough to keep you on to see this through!

  8. Carl: I agree with your steps 1 through 6. However, as I demonstrated in the March 12 thread, the Battery Electric Vehicle is a technological has been that will never stage a come back. Don’t worry about it.

    The French syndrome is another thing altogether. It is true that France is run by a an elite bureaucracy which is utterly unconcerned with the opinions of hoi poli. But I am not sure that it is a sufficient explanation of their nuclear industry.

    My own theory (with very little fact to back it up) is that DeGaulle made a deal with the Russians in the late 1960s. In return for withdrawing from NATO, shutting American bases on French soil, and switching sides in the Middle East, the Russians agreed to limit their operations inside France. Not only did this remove the threat of the CGT, but it ended the anti-nuclear agitation that was a regular feature of leftist agitation in the US, the UK, and Germany in the 1970s.

  9. I have a web site where I research stocks under five dollars. I have many years of experience with these type of stocks. I do not think the nuclear accident in japan will have a really great impact on the construction of new nuclear power plants. this was an extraordinary event an earthquake of 9.0 and a tsumini hiting six nuclear power plants all at once in the same place this is a one in one thousand year event. also the potential liability for the utility companies would be so great I do think they will do everything they can to insure the safety of their nuclear facilities.

  10. Carl – I hesitate to ask another person to write a post, but, with due apologies, I’m going to do so, anyway. I’d like to hear your ideas on needed reforms — and some explanation for why they would work.

    Suppose, in 2013, President Pawlenty, Speaker Boehner, and Majority Leader McConnell have called you in to ask for advice on nuclear power. (Assume that Boehner and McConnell have solid, but not overwhelming majorities.) They want to get us back to building nuclear power plants at a steady rate.

    (Your steps in the second comment are all politically impossible, in my opinion.)

    What would you advise them to do? In other words, what are the politically practical steps they could take, short term and long term?

    Now, with the same political assumptions, assume we have had one or two large-scale rolling blackouts. (As I understand it, that’s almost inevitable if we continue to follow current policies.) When we do have blackouts, that will suddenly make nuclear power look more attractive to the public.

    What would you advise then?

    Or do you believe that, even in those relatively favorable circumstances, nothing practical could be done?

    (I assume nothing serious can be done until Obama has been replaced, and Reid is no longer Majority Leader. During the 2008 campaign, I looked hard at Obama’s record on nuclear power and his position, and decided that he is for nuclear power in principle — and against it in practice.)

  11. Carl,

    My deepest respect and thanks for the leadership of David Crane of NRG. He saw an opportunity and took a very large gamble, one that I thought would pay off both for NRG and for Texas. It still might. Such courage and daring is rare in the electrical power industry.

    If Exelon does buy out NRG on this project and resume work, they will likely stay with the current team as they are co-owner and have invested substantial equity in the project. Plus, licensing is almost complete and continues on track. Once an NRC combined operating license is granted, the present value of the project will skyrocket.

    However, within the nuclear power industry, Exelon is almost universally known as “The Evil Empire” (their HQ is Chicago) although one must admit that the performance record of their nuclear fleet is exemplary.

    I, for one, would welcome our new overlords.

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