Category — Nuclear power

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%). [Read more →]

A good default proposition regarding the government’s role in the economy would state that the government should not loan money to an enterprise if the enterprise in question cannot find one single market actor anywhere in the universe to loan said enterprise a single red cent.  It might suggest – I don’t know – that the investment is rather … dubious.

Alas, like all good propositions regarding the government’s role in the economy, this one is being left by the roadside by the Obama administration.  Unfortunately, the only complaint being made by a not insubstantial segment of the political Right – frequently, the political crowd that is busy decrying “Bailout Nation” – is that the loan guarantees are not fat enough.

I write, of course, about the $8.3 billion federal loan guarantee announced by President Obama this week for Southern Company to build two new nuclear power plants.  The money will be used to guarantee the loans being made by the federal government (via the Federal Financing Bank) to partially cover the cost of Southern’s projected $14 billion nuclear construction project at their Vogtle plant near Waynesboro, Georgia. 

The loan guarantees were authorized by Congress in the 2005 Energy Policy Act and, we are told, are the first installment on a total package of $54 billion that the President would like to hand out to facilitate the construction of 7-10 new nuclear power plants (Congress, however, has only authorized $18.5 billion to this point). 

The claim being made by some – that the loan guarantees are necessary to jump-start investor interest in new nuclear power plant construction – is not quite correct.  Even these lavish loan guarantees aren’t enough to do that.  In a letter to the U.S. Department of Energy dated July 2, 2007, six of Wall Street’s s then-largest investment banks – Citigroup, Credit Suisse, Goldman Sachs, Lehman Brothers, Merrill Lynch, and Morgan Stanley – informed the administration that, contrary to the government’s expectations, anything short of a 100 percent unconditional guarantee would be insufficient to induce private lending. 

Why is it risky to build nuclear power plants?  [Read more →]

This post by Richard Schlesinger of EnergyBizInsider is reproduced with permission. The problem of rent-seeking by corporations (political capitalism) has been explored previously at MasterResource.

Although the electric industry has endorsed the concept of cap-and-trade as the least onerous approach to carbon regulation, at least one major company endorses it with unalloyed enthusiasm. Exelon not only supports the idea, it stated in a second-quarter conference call to analysts, which it posted to its Web site, that it expects to see a “$1.1 billion and growing annual upside to Exelon revenues from implementation of Waxman-Markey.” Is that number real or simply wishful thinking? Does Exelon know something that’s escaped the rest of us?

Actually, if one makes a couple of assumptions, the potential earnings boost is very real. Here’s how it works. Exelon’s 17 nuclear plants, the largest nuclear fleet in the country, generated just over a record 132 million megawatts-hours of power in 2007. That’s fact. Assumption number one: The Senate follows the House and passes an unchanged version of the Waxman-Markey bill.

At the start of the program, about 85 percent of the permits would be given away. Over time, the percentage of free permits would decline. About 15 percent of the permits would be auctioned off to begin with, and that percentage would increase over time. What concerns us is the value of these permits, because that value translates into increased costs for generation. Which brings us to assumption number two: The EPA estimates that during the early years of the program, a permit to emit one ton of CO2 would cost approximately $15. [Read more →]

With thousands of politicians and environmentalists meeting in Copenhagen to discuss ways to achieve major cuts in global carbon dioxide emissions, one might assume that the need for drastic increases in nuclear power capacity would be an obvious solution – a path forward upon which factions on both the Left and the Right could agree.

Alas, that is not happening. Instead, the Green/Left in the US continues its decades-long opposition to nuclear, all the while insisting that the only way forward is through greater use of alternative energy sources like solar and wind.

Los Angeles Times: Now and Way Back Then

Consider the unsigned editorial published by the Los Angeles Times on November 28. The piece, titled “No new nukes – plants, that is,”[1] declares that nuclear energy “is not a reasonable solution because plants take too long to build and cost far too much.” California’s paper of record recommends, predictably, that the US invest more money in “renewable power sources such as solar, wind and geothermal,” as well as “solar thermal storage facilities and plants that generate electricity using biomass.” It concludes that “Nuclear power is a failed experiment of the past, not an answer for the future.”

That piece reminded me of another Los Angeles Times editorial that I found during some recent research at the Library of Congress. While looking for articles about federal price controls on oil and natural gas, I came across another unsigned editorial from the Los Angeles Times, published in May 1975 called “Natural Gas: What to Do.” At that time, the US was facing a shortage of natural gas, a problem that was largely caused by federal price controls on interstate gas sales. The Times declared that a windfall profits tax should be imposed on the gas producers who “failed to plow most of the profits back into the hunt for new supplies.” The paper went on to conclude that “The choice is not between cheap and expensive natural gas, because there is no such thing as a plentiful supply of cheap gas.”

Of course, there’s no way that the Times could have foreseen how the shale gas revolution[2] would overhaul the US natural gas sector. But the paper’s stance on nuclear power is of a piece with the myopia of America’s most influential environmental activists. [Read more →]

July 17, 1955, was the first time electricity generated by a U.S. nuclear power plant flowed into a utility grid. In what then was an experiment, Utah Power & Light plugged in the Argonne National Laboratory experimental boiler water reactor, BORAX-III.

The plant produced merely 2 megawatts for more than an hour, as planned. Since then, the U.S. nuclear industry has steadily improved their ability to effectively manage the operations and maintenance of nuclear power plants. Now,  more than 50 years after that first nuclear power supply, America lags far behind even developing nations in new construction. New roadblocks threaten to further erode progress in the U.S. Whether this is good or not I will leave to the reader, but here is a snap-shot of the situation facing the U.S.

Significant Global Growth

Today, 436 nuclear power plants are in operation in 30 countries with a total capacity of 370 GW, according to the International Atomic Energy Agency (IAEA). The U.S. operates 104 of those plants, totaling a bit over 100 GW of installed capacity. France is runner-up with 59 operating plants and one new plant under construction.

As with picking stocks, the U.S. nuclear industry’s past performance may not be a predictor of future performance. According to IAEA, 53 reactors, rated at just over 47 GW, are under construction around the world today (here). In the U.S., the only “new” nuclear plant is Watts Bar Unit 2. Construction of that unit was stopped in 1985 but restarted two years ago. When completed in 2013, Watts Bar Unit 2 will add almost 1.2 GW to the Tennessee Valley Authority grid (Figure 1). 

In quick succession, the Obama administration has dealt a near-death blow to new civilian nuclear reactors in the U.S.

First, the Yucca Mountain Project, a waste storage facility in Nevada, was “zeroed-out” of the 2009 budget. Second, the administration has just ended U.S. participation in a new nuclear fuel recycling project, one that would extract more energy from existing fission energy sources, and reduce sharply the high level nuclear waste from nuclear power.

Presiding over both of these decisions–that effectively terminate the feasibility of new nuclear power plants for the U.S.–is Dr. Steven Chu, Secretary of Energy, Nobel Laureate in Physics, and former director of the Lawrence Berkeley Energy Laboratory.

In contrast to the crowing of Senator Harry Reid about “killing” the Yucca Mountain Waste storage project, Dr. Chu described nuclear fuel recycling as an essential element of nuclear power for the U.S., and noted that storage of the type proposed for Yucca Mountain would be necessary for a few more years. In a 2009 interview with MIT’s Technology Review, for example, Dr. Chu specifically touted fast neutron (breeder) reactors and hybrid fission-fusion plants as good routes for future nuclear power technology.

In earlier interviews, Dr. Chu had called nuclear energy a vital component of the U.S. energy mix and restated his desire to see the share of nuclear power rise above its current level of 20% of electricity generation. “Nuclear has to be a necessary part of the portfolio, said Chu prior to his confirmation as Energy Secretary. In line with that view, license applications will be sought by investor-owned utilities for 35 new nuclear power plants over the next several years.

In comparison to a technological sure thing, Chu has noted that “making solar cheap will require ‘transformative technologies’, equivalent to the discovery of the transistor,” something that the billions spent on solar energy have so far failed to create. [Read more →]

As I posted last week, conventionally sized nuclear power (≈750–1,250 MW) is dramatically uncompetitive with coal- and gas-fired electricity generation in light of the huge increase in construction costs recently estimated by various utilities. A typical new coal-fired plant may cost on the order of $2,000/MW compared to new nuclear estimated to cost as much as four or five times more. The lower operating costs of nuclear compared to fossil-fired plants cannot erase this capital-cost premium.

Micro-nuclear, with capacity in the 5–100 MW range, while exciting as a new technology, is no panacea. Actual installed costs are yet to be published. But operating cost estimates of less than ten cents a kilowatt-hour have drawn attention to the designs. But are the scale economies in construction, operations, maintenance, and the fuel cycle considered in these preliminary estimates? Small may be beautiful, but a push for decentralizing small nuclear power generators takes our eye off the prize: financing and constructing needed utility-scale nuclear power projects, as well as coal- and gas-fired plants.

Introduction

The resurgence of interest in nuclear power closely followed the introduction of new intrinsically safe Generation III reactor designs such as the Evolutionary Power Reactor (EPR) from AREVA, Westinghouse’s AP-1000, and General Electric’s Enhanced Simplified Boiler Water Reactor or ESBWR. All three are utility-scale designs that range in size up 1,600 MW. The EPR and ESBWR are under active review by U.S. Nuclear Regulatory Commission (NRC) and are expected to be licensed mid-2011 and the end of 2010, respectively. The AP1000 has submitted a design certification amendment that is also scheduled to be completed by the end of 2010.

Perhaps the prime motivator for the nuclear renaissance are the provisions of the Energy Policy Act of 2005 that provide loan guarantees of up 80% of a project’s cost and provides tax credits of 1.8 cents per kilowatt-hour for 6,000 MW from new nuclear power plants for the first eight years of operation—up to about $18 billion in incentives. (Other EPAct incentives are listed in an appendix at the end of the post.) The new NRC combined operating license process also promises to shorten the plant certification process although how much time will be trimmed from this time-intensive process remains to be seen.

There are currently 17 proposals for 26 reactors in licensing hearings before the NRC and more applications are expected. However, the U.S. remains far behind the world in constructing new projects. 45 reactors now under construction world-wide, although 22 of them have encountered delays. The first Generation III+ reactor under construction is AREVA’s EPR at TVO’s Oikiluoto Nuclear Plant in Finland. Also, EDF’s unit 3 at their Flamanville plant in France began construction in 2007 for a scheduled 2012 startup. Two additional EPRs are scheduled to begin construction in China this year.

The technical and financial challenges of building the first of any new complex plant design are many. The price of the first EPR plant is no exception—it has risen from an estimated $4.2 billion to about $8 billion and the in-service date has slipped over 18 months to June 2012. Also, the first two plants using the AP-1000 reactor technology began construction in April with the two-unit Sanmen plant in China. The first reactor is scheduled to begin operation in 2013 and the second in 2014. [Read more →]

Eighteen separate plants with 28 individual utility-scale nuclear projects are working their way through the Nuclear Regulatory Commission. Each share a common characteristic with their operating cousins built in the 1970’s and 1980’s: their actual construction price will be far more than today’s estimates–generally between $8,000 to $10,000/kW. (And as I will explain in a separate post next week, micro nuclear, such as designed 125 MW and 335 MW models, is no panacea with cost problems associated with first generation technology.)

Hoping to reduce the rate of construction cost increases, utilities today are using lump sum pricing and standardized designs to better manage the construction and completion risks. However, nuclear fuel price uncertainty–both purchase and disposal of spent fuel costs–may also push up future operating costs. Future nuclear fuel reprocessing is the answer everywhere but the U.S.

Long-cycle Production = Cost Inflation

The New York Times reported on January 18, 1984: “3/4 of [U.S.] reactors cost consumers at least double what was promised,” and “in 28% of cases, final cost was more than four times the estimate.” The developers of those plants were heavily criticized a quarter-century ago for their steeply rising cost of construction.

Today, the final construction costs are all but forgotten because of our fleet of 104 nuclear plants produce electricity for less than 2 cents/kWh and are this country’s most reliable electricity generators. But to the extent that long-cycled production still exists, the likelihood of significant cost inflation remains, unfortunately. [Read more →]

As a physicist, my belief is that one of the reasons that intelligent energy policies have not gained sufficient traction is that we are allowing those with political agendas (vs scientists) to define some key energy terms. And as a golfer, I know that a wager can be won or lost at the first tee — where the terms and conditions are agreed on.

Outside of “fiscal responsibility” probably the most significant misused concept that we have unwittingly gone along with is the term “renewable energy”. Giving some critical thought to this moniker is no academic matter, as the majority members of the U.S. Senate’s Energy Committee are currently pushing for a national Renewable Portfolio Standard (RPS), or what is now called the Renewable Electrical Standard (RES). Their decision as to what is a “renewable” will have profound technical, economic and environmental consequences on the United States.

To my knowledge there is no “official” definition of this bandied about term. [Read more →]

A clear strategy is emerging from the Obama administration’s recent moves on the energy front: not-so-slow energy strangulation.

The pattern is hard to miss:

To ensure that nuclear power does not grow (even while claiming he supports it), President Obama is de-funding the long-studied Yucca Mountain Repository, increasing uncertainty about waste disposal and scaring off potential investors.

To guarantee that coal becomes too expensive to burn (even as Obama pretends to support it), Obama’s EPA just suspended permits for mountaintop mining of coal, a move that could affect 200 coal mining operations in the Appalachians. (Now that’s job creation for ya!)

Finally to ensure that we don’t develop our own oil and natural gas resources (which Obama claims to support), [Read more →]