Obama’s “Nuclear Renaissance” Receives Its Final Obituary with Toshiba’s Write Down

Back in 2009 at the start of Obama’s first administration he proclaimed that a “nuclear renaissance” was coming. Although I am a fan of nuclear power, I knew right away that this effort was doomed to failure by a lack of structural incentives in the USA and the ability of NIMBYs and lawyers to drag out and kill any project by a thousand cuts. I wrote that it was doomed here and summarized the players here.

Yet 2 companies plowed along with their nuclear projects – Southern Company (big in Georgia and the south) and SCANA (a South Carolina utility), mainly because their state rate environment was favorable and allowed them to include the cost of assets in their “rate base” rather than being forced to price energy at something close to market prices. Eventually those that pay for electricity in these jurisdictions are going to be soaked with the enormous costs of these plants and / or the finances of Southern Company and SCANA will be seriously impacted. Southern Company has a market cap of around $50B and SCANA has a market cap of around $10B. For context, the Southern Company nuclear project is currently 3 years behind schedule and $3B over budget and likely to cost up to $20B (although costs are borne by many parties, not just Southern Company) and the SCANA project is likely to cost up to $12B (although not all borne by SCANA).

These nuclear projects, already non-competitive due to price declines in natural gas (caused by fracking), became even MORE non-competitive as their completion dates were extended and costs ballooned due to inevitable and completely predictable delays. The history of nuclear power projects is littered with failed efforts and those that were completed often had huge cost overruns, especially those completed near the “tail” of the initial nuclear building effort which petered out in the ’80s.

Now Toshiba is being hit with part of the overrun costs. Their stock recently went down 20% (the most that it can fall in a single day trading session) with discussion of potentially billions of dollars in write downs tied to their work on nuclear power projects.

What is sad about all of this is that the debacles that will hit rate payers in the south (predominantly Georgia and South Carolina) and / or shareholders were completely predictable, although the situation could get even worse if delays stretch on indefinitely and the plants are never even completed (which is always possible in the litigious USA). As the current administration leaves their utterly failed nuclear policy should be something that they accept responsibility for, as well as their ameteur-ish ignorance of history and the predictable consequences of these sorts of mega-projects (in our current legal and regulatory environment). However, I highly doubt that will occur.

Cross posted at LITGM

6 thoughts on “Obama’s “Nuclear Renaissance” Receives Its Final Obituary with Toshiba’s Write Down”

  1. The way to evaluate nuclear power is to see how other nations are doing on similar projects. And how they have done in recent decades. It is not at all certain that huge cost overruns and time delays are the fault of the technology or the engineers; choices made by bureaucrats, politicians, and managers play a role too.

    e.g. how has the USA been doing on high-speed rail projects such as California’s Train To Nowhere. Or the F-35? What has been our experience with various solar and wind power projects compared to foreign projects?

  2. You need to bear in mind that the electrical utility’s efforts to ‘go nuke’ was never about lower electric prices. The driver was the attempt to make prices to the utility predictable. No roller coaster oil prices when you have a ten to twenty year nuclear fuel cycle.
    Most execs in power utilities couldn’t care less what the generation costs are, as long as they’re allowed to pass them on to consumers. (Does the term ‘stranded costs’ ring a bell?)

  3. Why can the Navy since the 1950’s stick steam making nuclear reactors in metal tubes, with men, way under water, that can survive depth charges, move at 40 mph, from the Caribbean to under ice packs and we can’t build one on land?

  4. “we can’t build one on land?”

    Trial lawyers. Maybe if we put the lawyers under water and the reactors on land, things would go better

  5. “Mike K Says:
    December 29th, 2016 at 9:45 am
    “we can’t build one on land?”
    Trial lawyers. Maybe if we put the lawyers under water and the reactors on land, things would go better”

    Mike K, I would like to nominate this as the Comment of the Year!

Comments are closed.