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Obama’s Southern Company Play: How Much Nuclear Plant for $14.5 Billion, 80% Federally Guaranteed?

In August 2009, the U.S. Nuclear Regulatory Commission (NRC) issued its fourth Early Site Permit for two new units at Southern Nuclear’s Vogtle site and its first for the Westinghouse AP1000 pressurized water reactor design. The two new units planned for Vogtle also became the reference plant for the AP1000 under NuStart in June 2009. This means Vogtle Units 3 and 4 will be the first licensed installations of the new AP1000 reactor design.

On February 16, President Obama announced that the DOE has offered Plant Vogtle terms for a loan guarantee that could provide up to 80% of the project estimated cost of $14.5 billion with the Southern Nuclear only paying a credit subsidy fee.

That’s a lot of commitment from taxpayers–$11.6 billion worth. Perhaps rapidly rising construction costs of new nuclear plants is partly why the owners want such large protection up front. But there are problems with fundamental economics comparing nuclear to the best foregone opportunity.

My back-of-the-envelope calculations comparing a natural gas-fired combined cycle plant to a new nuclear plant raise more questions than answers.  For example, assume a utility has a baseload need of 2,400 MW in the future (like the new Vogtle units). Next, use the EIA future price projection of about 12 cents/kWh for nuclear and 8 cents/kWh for a gas-fired combined cycle produced electricity.

At today’s gas prices (yes, the prices have historically been extremely volatile), the combined cycle plant would use about $750 million a year of fuel. The 4 cents/kWh difference in busbar cost of generation is also equivalent to about $750 million per year in lower cost electricity generation. In essence, it’s an economic dead heat. However, the first cost of the no-risk gas combined-cycle plant is about a fifth of the nuclear plant, the latter which requires large government subsidies.

Simple math suggests that the gas-fired option should be back on the table. Moderate the fuel price risk with financial instruments with Grade A corporations. Obviously, there are major competitive problems with the nuclear plants to require such a large government subsidy–more explanation is invited in the comments by those in the know.

Background

The Alvin W. Vogtle Electric Generation Plant (Plant Vogtle) is one of Georgia Power’s two nuclear facilities and one of three nuclear facilities in the Southern Company system (Figure 1). Southern Nuclear, a subsidiary of Southern Company 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 (PWRs) rated at 1,109 and 1,127 MW respectively. Unit 1 began commercial operation in 1987; Unit 2 followed in 1989.

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Figure 1. The Alvin W. Vogtle Electric Generation Plant is located on a 3,100-acre site along the Savannah River, 25 miles south of Augusta. Its two units entered commercial service in the late 1980s and together produce over 2,200 MW. Courtesy: NRC

According to Southern Company, the demand for electricity on the Georgia Power system is projected to grow by 30% over the next 15 years. The construction of Units 3 and 4 at Plant Vogtle is one way Southern Company anticipates meeting the need for reliable baseload electricity in the future (Figure 2).

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Figure 2. Southern Nuclear is moving forward with plans to build two new AP1000 Generation III+ nuclear reactors at Plant Vogtle. The two new plants are expected to enter commercial service in 2016 and 2017. This artist’s concept drawing illustrates the placement of the two new units in the foreground with the two existing units in the background. Courtesy: Southern Nuclear

Southern Nuclear has stated that each component of Southern Company’s energy portfolio—nuclear, fossil, and renewables—is equally important. However, the long-range generation planning process identified nuclear power as the most cost-effective, reliable, and environmentally responsible energy source to meet growing electricity demands in its service territory. This requirement, plus the continued successful operation of Vogtle Units 1 and 2, were the primary reasons why nuclear power was chosen for the Vogtle expansion project.

The NuStart Energy consortium was originally envisioned to demonstrate the licensing process for obtaining a combined Construction and Operating License (COL), but it has evolved into one of the critical success factors necessary to support the actual deployment of a new nuclear plant in the U.S. The value of NuStart was standardization. Further, the follow-on projects can in the future just reference those portions of the Plant Vogtle project COL application that contain standard licensing, engineering, technical, quality, and safety information, and develop their own applications much more efficiently. This alignment of resources creates a valuable experience base that can be used in the standardization of new plant construction and bring new technologies to market in a timely manner. This process allows the NRC to focus their resources on the differences rather than go over documentation they have already approved. (An Addendum has been included at the close of the article describing the NRC licensing processes in more detail.)

NuStart is participating in a cost-sharing program that is part of the Department of Energy’s Nuclear Power 2010 initiative. The permit time-savings for future projects could be enormous for adopters of the AP1000 PWR design in the future.

Southern Company’s schedule for the two new units at Plant Vogtle appears to be reasonable and achievable assuming the cash flow is available (Table 1).

Table 1. Timeline for Plant Vogtle Units 3 and 4. Source: Southern Nuclear

August 2006 Filed Early Site Permit (ESP) Application
August 2007 Filed Limited Work Authorization (LWA) Application
March 2008 Filed Combined Construction Permit and Operating License (COL) Application
April 2008 Signed contract with Westinghouse-Shaw consortium
March 2009 Georgia Public Service Commission certifies Units 3 & 4
April 2009 Full notice to proceed issued to Shaw for site clearing and preparation
Summer 2009 Excavation of reactor area begins
August 2009 NRC issues ESP and LWA
Summer 2011 NRC decision on plant license
2016 Commercial operation for Unit 3
2017 Commercial operation for Unit 4

The plan to proceed with building two new units at the Vogtle site was confirmed after achieving the following major milestones:

1. The NRC’s renewal of the operating licenses for Units 1 and 2 for an additional 20 years (completed June 2009). The renewal application was submitted on June 27, 2007. In June 2009, the NRC renewed the operating licenses for Units 1 and 2 for an additional 20 years. The new licenses for Units 1 and 2 will expire on Jan. 16, 2047, and Feb. 9, 2049, respectively.

2. The Georgia Public Service Commission’s (PSC’s) certification, required under Georgia law, that approved building two new reactors at the Vogtle site (completed March 2009). The PSC adopted a motion on March 17, 2009, allowing Georgia Power to recover the cost of financing the plant during construction. Both entities will jointly develop mechanisms to provide shared risk protection to taxpayers from significant cost overruns. In addition, the Georgia Senate voted to allow the company to recover its financing costs during construction of the reactors, thereby saving customers about $300 million over time. The PSC agreement set Georgia Power’s portion of the certified cost of each of the new units at nearly $6.5 billion.

3. The NRC’s issuance of an ESP and LWA (completed August 2009). Southern Nuclear had submitted an Early Site Permit (ESP) application for the Vogtle site to the NRC on August 15, 2006 and an application for a Limited Work Authorization (LWA) on August 16, 2007. (An explanation of the NRC licensing process is included at the end of the article.) The ESP application requested the NRC to approve a project site adjacent to the existing Plant Vogtle Units 1 and 2. The ESP and LWA were approved by the NRC on August 26, 2009. The ESP is valid for 20 years. The LWA allows a “narrow set of construction activities at the site,” according to the NRC. In Southern Nuclear’s LWA application, the company can start construction activities limited to the placement of engineered backfill, retaining walls, lean concrete, mudmats, and a waterproof membrane (Figure 3).

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Figure 3. Displacement in below-grade soil and rock is being monitored using an integrated system of highly accurate Geokon extensometers, displacement transducers, and pore pressure transducers. Other applications of this instrumentation include the measurement of ground movements around tunnels and behind retaining walls. Data obtained from the instrumentation at each monitoring location are collected several times each day and transmitted on-site by wireless radio from data loggers at each monitoring point, and then transmitted off-site via an IP phone to a central bank of data servers. Source: POWER

On August 26, 2009, the NRC issued an ESP for the two new units at the Vogtle site. Southern Nuclear’s ESP is the fourth such permit approved by the NRC but the first based on a specific technology: the Westinghouse AP1000 PWR (Figure 4).

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Figure 4. The AP1000, based on the proven performance of Westinghouse-designed PWRs, is an advanced 1,154-MWe nuclear power plant that uses the forces of nature and simplicity of design to enhance plant safety and operations and reduce construction costs. Source: Westinghouse

Although the ESP, LWA, and COL processes can be combined, Southern Nuclear decided to treat each process separately. Southern Nuclear chose to manage their construction and licensing schedules concurrently. Also, there are certain types of construction activities that can be performed prior to receiving NRC approval. For example, workers have been proceeding with excavation activities for Unit 3, which are expected to continue through February 2010. The excavation will consist of a hole about 90 feet deep, several hundred feet wide, covering about 42 total acres. More than four million cubic yards of soil will be removed from the excavation. Once the existing soil is removed, backfill and compaction activities must be approved and monitored by the NRC.

The NRC Issues a COL (pending—scheduled for mid-2011). On March 31, 2008, Southern Nuclear filed an application with the NRC for a COL. The NRC has scheduled completion of the Vogtle final safety evaluation report in April 2011. Southern Nuclear expects to receive its COL later in 2011 and then immediately begin safety-related construction.

NuStart is working with Southern Company toward demonstrating the nation’s new process for licensing a nuclear power plant. For instance, Vogtle recently became the reference plant for the AP1000 under NuStart in June 2009. What this means is that Vogtle Units 3 and 4 will be the first to implement the NRC-approved AP1000 technology, and the Vogtle license application will serve as the reference COL.

The ability to have the two new units operating by 2016 and 2017 were key reasons for Southern Nuclear selecting the AP1000. Southern Nuclear believes this timeline is reasonable because the NRC staff has provided them with schedules or milestone dates as to when it expects to complete its reviews of a particular licensing submittal.

Southern Nuclear has signed an engineering, procurement, and construction (EPC) contract with the consortium of Shaw and Westinghouse for Units 3 and 4.

It’s worth noting that ESP, LWA, and COL processes are not unique to Vogtle Units 3 and 4; the NRC reports that 18 companies (or groups of companies) have submitted COL applications for up to 28 new nuclear reactors as of February 2010. Some of the earlier applicants in this process are also signing EPC contracts. As at the Vogtle site, other companies looking at new nuclear construction are conducting site preparation work such as land clearing, soil testing, and access road construction in anticipation of constructing new nuclear power plants.

The AP1000 Is NRC-Certified

Although no new nuclear plants have been ordered in the U.S. in 30 years, the major designers and manufacturers of these plants have continued to improve and refine designs, building several evolutions of successful designs in foreign countries. Westinghouse submitted the Standard Design Certification Application for its AP1000 reactor design on March 28, 2002. The NRC issued a final rule in the Federal Register certifying the Generation III+ design on January 27, 2006, and it remains the only Generation III+ reactor certified to date. Additionally, the European Utility Requirements organization certified that the AP1000 can be deployed in Europe. China is currently building multiple AP1000 reactors; its first unit is scheduled to be online by 2013, three years before the new Vogtle units.

The AP1000 has been designed to make use of modern, modular construction techniques (Figure 5). The design incorporates vendor-designed skids, equipment packages, and large multi-ton structural modules, as shown in Table 2. Welding and fabrication activities are performed in a factory environment, which improves working conditions, scheduling flexibility, and reduces the special tools and equipment needed on-site. Furthermore, modularization allows construction tasks that were traditionally performed in sequence to be completed in parallel, thus reducing capital costs and shortening construction schedules to approximately 36 months from the pouring of first concrete to the loading of fuel.

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Figure 5. The inherent passive safety of the AP1000 derives from its modular construction design, which has fewer pumps and valves than the typical plant operating in the U.S. today. This increases reliability and reduces maintenance and operating costs. Source: Westinghouse

Table 2. Typical breakdown of AP1000 modules. Source: Westinghouse

Structural Modules Piping Modules Mechanical Equipment Modules Total
Containment

41

20

12

73

Auxiliary Building

42

34

29

105

Turbine Building

29

45

14

88

Annex Building

10

-

-

10

Total

122

99

55

276

Principal Building Structures

The AP1000 plant is arranged with five principal structures—nuclear island, turbine building, annex building, diesel generator building, and radwaste building—each on its own base mat (Figure 6).

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Figure 6. The AP1000 plant arrangement consists of five principal building structures: the nuclear island, the turbine building, the annex building, the diesel generator building, and the radwaste building. Source: Westinghouse

The nuclear island consists of a free-standing steel containment building, a concrete shield building, and an auxiliary building. These are the only Seismic Category I structures required with the AP1000 design. The foundation for the nuclear island is an integral base mat that supports these buildings.

The safety-related equipment designed to perform accident mitigation functions is located on the nuclear island. Therefore, the nuclear island structures are designed to withstand the effects of natural phenomena such as hurricanes, floods, tornados, tsunamis, and earthquakes, as well as the effects of postulated internal events such as fires and flooding, without loss of capability to perform safety functions.

To preclude adverse interactions, the plant arrangement provides for separation between safety-related and non-safety-related systems and equipment. This separation is provided by partitioning an area with concrete walls and provides confidence that the safety design functions can be performed. The remaining nonseismic structures do not contain any safety-related equipment.

Passive Safety-Related Systems

The AP1000’s passive safety systems include the passive core cooling system, containment isolation, passive containment cooling system, and the main control room emergency habitability system.

A major safety advantage of passive plants is that long-term accident mitigation is maintained without operator action or reliance on off-site or on-site AC power. Instead of relying on active components, the AP1000 relies on natural circulation to keep the core and containment from overheating. For example, in the event of a design-basis accident, such as a coolant pipe break, the plant is designed to achieve and maintain safe shutdown conditions. To provide high reliability, these systems are designed to move to their safeguard positions upon loss of power or upon receipt of a safeguards actuation signal.

The passive safety system design does not require the large network of active safety-grade support systems (such as AC power, diesel generators, and HVAC) that are needed in a typical nuclear plant. Therefore, less Seismic Category I building volume is required to house the safety equipment, resulting in an approximately 45% smaller footprint compared to an existing nuclear power plant with the same generating capability. This provides a large capital cost savings, as seismic structures cost roughly three times as much as nonseismic structures.

The AP1000 uses extensively analyzed and tested passive systems to improve the defense-in-depth safety of the plant. The ACRS and the NRC have scrutinized these systems and ruled that they meet all the required criteria.

These defense-in-depth capabilities for accident mitigation result in extremely low core-damage probabilities while minimizing occurrences of containment flooding, pressurization, and heat-up. For example, the AP1000’s probabilistic risk assessment (PRA) core damage frequency (CDF) is 1/100 of the CDF of currently operating plants and 1/20 of the maximum CDF deemed acceptable for new, advanced reactor designs.

The AP1000 is designed to mitigate a postulated severe accident such as core melt. Additional features and improvements include the absence of bottom-mounted in-core instrumentation and a lack of vessel penetrations below the top of the core. Having the core lower in the reactor vessel minimizes core temperature excursions during loss-of-coolant accidents. The AP1000 operator can flood the reactor cavity space immediately, thereby surrounding the reactor vessel with water. The cooling is sufficient to prevent molten core debris in the lower head from melting the steel vessel wall and spilling into the containment.

Improved Operations and Maintenance Efficiencies

Operating U.S. nuclear plants are already competitive producers of electricity compared with coal-fired plants. They also have the advantage that fuel accounts for about 25% of production costs for nuclear power, while the remaining 75% is for fixed costs of operation and maintenance. Therefore, nuclear power production is much less sensitive to changes in fuel costs than fossil-fueled plants, where fuel can account for 75% or more of the production costs.

As an added benefit, the AP1000 reactor has several design features that improve plant production, enhance worker safety, and reduce costs:

· The modular plant design and component standardization ensures a high degree of reliability, requiring significantly reduced maintenance, staging, and testing and inspection requirements.

· An 18-month fuel cycle results in improved availability and reduced overall fuel costs.

· Radiation exposure and the volume of generated plant radwaste are reduced.

· A 60-year design life.

Competitors in the race to build the next generation of U.S. nuclear plants may be slow out of the blocks, but expect the level of activity will accelerate in 2010 as companies that are serious about constructing Generation III+ reactors ramp up staff and on-site construction presence in preparation for a full construction release in 2011–2013 (Figure 7).

Expect Plant Vogtle to be the first of the next generation of nuclear plants to enter commercial service during 2016.

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Figure 7. Workers are preparing for new construction by removing concrete foundations from old buildings to clear the area for Units 3 and 4. Work is also under way to support the electrical power and water supplies needed for construction. Courtesy: Southern Nuclear

Addendum: Improving the Nuclear Plant Licensing Process

The NRC is responsible for licensing and regulating commercial nuclear plants in the U.S. The current fleet of nuclear plants was licensed under a two-step process requiring both a construction permit and an operating license.

Beginning in 1989, the NRC promulgated a complementary licensing process that incorporates three fundamental elements: Early Site Permits (ESP), Standard Design Certifications, and Combined Licenses (that is, a combined construction permit and operating license, or COL) to improve regulatory efficiency and add greater predictability to the licensing process.

Early Site Permits. The applicant can evaluate future nuclear plant site-related issues (such as safety, environmental protection, and emergency preparedness) for NRC approval that is independent of a construction permit, COL, or specific nuclear plant design. Because the NRC considers public involvement to be a cornerstone of strong, fair regulation of the nuclear industry, it issues a Federal Register notice for a mandatory public hearing after the NRC staff and the Advisory Committee on Reactor Safeguards (ACRS) complete their safety reviews. Once approved, the ESP is initially valid for no less than 10 and no more than 20 years, and can be renewed for 10 to 20 years. In addition to the ESP, the applicant may seek approval for a Limited Work Authorization (LWA) to perform site preparation activities in advance of issuance of a COL.

Standard Design Certifications. The NRC may approve and certify a standard nuclear plant design through a rulemaking, independent of a specific site. The level of detail in the application, equivalent to a Final Safety Analysis Report for an operating nuclear plant, must be sufficient to enable the NRC to reach a final conclusion on all safety questions associated with the design, with the exception of site-specific design features such as intake structures and the ultimate heat sink. The ACRS reviews each application for certification, together with the NRC staff’s safety evaluation report, in a public meeting. Upon determining that the application meets the relevant standards and requirements, the commission drafts a rule to issue the standard design certification that is valid for 15 years. The NRC can grant a renewal for another 10 to 15 years.

Combined Licenses. The COL is a one-step licensing process designed to reduce regulatory uncertainty through which the NRC approves and issues a license to construct and operate a new nuclear power plant. The COL must contain the same information as was required for a construction permit under the old two-step process. Then, not less than 180 days before the date scheduled for initial fuel loading, the NRC will publish a notice of intended operation of the facility in the Federal Register. There is an opportunity for a hearing at this time. However, the NRC will consider petitions for a hearing only if the petitioner demonstrates that the licensee has not completed required inspections, tests, and analyses, or will not meet the acceptance criteria that are necessary to provide reasonable assurance that the plant has been constructed and will be operated in conformity with the license and applicable regulations. The NRC then authorizes operation of the plant after verifying that the licensee has met the required acceptance criteria. A combined license is issued for a specified period not to exceed 40 years.

The COL application may incorporate by reference a standard design certification, an ESP, both, or neither. The advantage of this approach is that the issues resolved during the design certification rulemaking and the ESP hearing processes are excluded from reconsideration later, at the COL stage. However, if an ESP and design certification are not referenced, then the NRC reviews the technical and environmental information as described for the two-step licensing process.

— Also contributing was James M. Hylko, a POWER contributing editor. Portions of this article were previously published in POWER magazine.

5 comments

1 Paddy { 03.05.10 at 12:14 pm }

Obama’s ostensible support for development of nuclear energy plants is deliberately misleading, in fact out right lies. His actions, including termination of the Yucca Mtn disposal project and refusal to cancel President Carter’s executive orders that prohibit development of breeder reactors for spent plutonium fuel, demonstrate that he has no interest in actual development of nuclear power plants.

This is a false flag tactic. Remember that there are rent-a-NYMBYs on call from his constituencies. No nuclear plants will be built unless federal and state environmental policy laws, and the plethora of siting and licensing regulatory laws and rules are dampened like the Alyeska Pipeline law to prevent endless regulatory appeals and litigation.

Obama’s nuclear snake oil is known to be the most toxic and has a billion year half-life.

2 The Elephant's Child { 03.06.10 at 5:04 pm }

When costs are estimated for new energy plants of any sort, are the costs of potential litigation and regulatory appeals factored in at all? And is it possible to eliminate or control these costs? Or are we forever at the mercy of BigEnviro?

3 Dr. Jack { 03.09.10 at 2:24 pm }

The opening paragraphs regarding gas fueled plant costs are interesting, if correct. But they overlook one critical point, the economic law of supply and demand. The higher the demand for gas to generate electricity, the higher the cost of gas for all other applications, such as heating our homes. Is it really prudent to waste gas for baseload power generation when it has other valuable uses in applications were there is not good second chose — again home heating comes to mind.

An unrelated point, why are government load guarantees so important? Could it be because that same government has made the licensing process so risky that no one else is willing to take the risk for a reasonable interest rate? If licensing was assured for those following the rules in place at the beginning of construction, nuclear plants would be a much safer investment and government loan guarantees might not be necessary.

4 Leonard { 02.17.12 at 10:26 pm }

A couple items to point out. Approximately 20% of US electricity comes from nuclear power electric plants. Most of these plants will reach the end of there first license extension in 2030. Now 20 years sound like a long time, but licensing a nuclear power plant is a very long process and construction takes years. We need to build new one just to replace the ones that will go out of commission in 20 years or switch to more fossil plants. Yes, there is “Green” technology, solar and wind, but they have not proven themselves to be reliable sources for continuos power. The other alternative is more fossil, but then as you mentioned it drives up demand and costs go up accordingly. If you look at the AP1000 design is it for lack of a better word, revolutionary, compared to the existing nuclear plants and is many times safer with the passive cooling systems and no need for expensive active safety components. So if for nothing else, lets replace the existing 40 year old plants with new ones.

Why loan guarantee? Well nuclear hasn’t had a very good track record building plants on time and one budget, budget being the biggie. There are many reasons for this. TMI caused many design changes when most of the plants were in middle of construction and the NRC imposed additional requirements, which is a good thing. The economy was horrible in the 80′s during peak construction. Utilities went form 8 to 10% interest to 25 to 30% interest. That caused a lot of plants to go under. Also, the 2 step licensing process, where they got a construction permit, then an operating license opened the door for intervention and law suits every step of the way. A utility in New England had 100 attorneys on retainer all during construction. They estimated 44% of the cost over runs to legal battles. So with that kind of track record would you invest in construction a new plant? Neither would private investors. The loan guarantees won’t last for ever, just the first 2, 3 or 4 plants, once they get the first couple build on time and under budget, private investor will start investing. Remember, it’s a loan guarantee, not a loan or funding. Vogtle so far is tracking below budget.

Forgot another factor, standard design. The AP1000 is a standard design, meaning it is the same everywhere, except for support systems, some sites may use cooling towers, other cooling lakes, rivers, the ocean, whatever but the design of the reactor and turbine systems will remain the same for all AP1000′s, not like the old plants which had Westinghouse reactor and GE turbines and each plant was uniquely designed.

Regards, Splitting atoms since 1972.

5 My2Cents { 06.11.13 at 5:22 pm }

A large part of the cost of any new power plant is the cost of money. You have to raise the money at the beginning before you have even applied for the permit. Figure 6-8 years for all the studies and 2-4 years for the permits, and 4 to 6 years for construction. Then add on 6-8 years on hold for each round through the courts, assuming the utility wins at every level. So they are looking at 25-30 years of interest before they even start paying it back, call it 70%-80% of the final cost.

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