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U.S. nuclear "renaissance" hits a stumbling block called reality

Nuclear Monitor Issue: 
Michael Mariotte at NIRS

The much-hyped nuclear “renaissance” in the U.S. has run squarely into a stumbling block called reality, and at the moment at least, reality is winning. In retrospect, it may be that the peak of the renaissance occurred in October 2008, when the Nuclear Regulatory Commission announced that it had either received or was expecting by the end of 2010 23 license applications for 34 new reactors. But by June of this year, the number was down to 17 applications covering 26 new reactors, with no more applications expected during 2010.

In July, Exelon, the nation’s largest nuclear utility, became the first to formally withdraw an application, doing so for two proposed reactors at Victoria, Texas. Four of the other applications (for four new reactors) have not been formally withdrawn, but there is no work being done on them and they are all but cancelled. Every proposed reactor project has been delayed from its original schedule and at this point none has a firm date to even receive a construction/operating license, much less a date when construction actually could begin.

Two of the applicants (UniStar Nuclear’s Calvert Cliffs-3 and NRG Energy’s two-unit South Texas Project) generally considered furthest along in the process (and on the Department of Energy’s “shortlist” for taxpayer loans) announced in July that they have slashed spending on their projects, and warned that if they don’t receive taxpayer loans soon, the reactors will be cancelled. The problem for them is that currently there is only enough money in the loan guarantee pot to cover one of the projects—not both.

The factors causing their problems are not unique to them, they are industry-wide: declining natural gas prices projected to remain low for the foreseeable future; declining electrical demand due to the prolonged recession and the impact of state energy efficiency programs; the increasing competitiveness of renewable energy technologies; soaring construction cost estimates for new reactors; and revelations of safety-related design deficiencies that are delaying reactor design certifications—a prerequisite for obtaining a construction/operating license.

In the Calvert Cliffs case, the situation is so bleak that UniStar partner Electricite de France in July took a 1 billion Euro provision for anticipated losses from its US$6.5 billion (5.05 billion euro) investment in Constellation Energy’s existing reactors and in UniStar (Constellation is the other partner in UniStar). And pressure is growing among Constellation shareholders and investors to drop the Calvert Cliffs project and UniStar entirely. An analyst with Macquarie (USA) Equities Research flat out said “we are not happy” about the possibility of UniStar receiving a taxpayer loan guarantee and proceeding with Calvert Cliffs-3, citing the project’s “questionable economics.” Macquarie downgraded Constellation’s rating on July 29. Meanwhile, Constellation executives admitted in July that they are not sure they will proceed with the reactor even if they do receive taxpayer loans. (For an analysis of the Calvert Cliffs situation, see:

The news from Congress hasn’t been much better for the nuclear industry so far this year either. The year began with a strong endorsement of nuclear power by President Obama, a request for an additional US$36 billion (29.5 bn euro) in taxpayer loan authority by the administration, and announcement of the first loan guarantee—for US$8.3 billion—for the Vogtle reactor project in Georgia. All of that happened in February, and the industry was both delighted and hatched plans to try to get even more from Congress.

As it has turned out, however, the industry has received nothing from Congress. While the House of Representatives voted to provide US$9 billion in new loan authority (on an unrelated emergency funding bill), the Senate rejected the plan. That money would have allowed immediate support for both the Calvert Cliffs and South Texas projects.

And while the House Appropriations Committee has approved US$25 billion in new loan money, the Senate Appropriations Committee has approved only US$10 billion. But it isn’t clear at this point whether an energy appropriations bill will even be passed at all this year.

Meanwhile, the nuclear industry was pinning its biggest hopes on the Kerry-Lieberman American Power Act—the Senate’s climate change bill. That bill would not only have included the US$36 billion in loans requested by President Obama, it also would have provided tens of billions more in tax breaks and other subsidies for the industry, while further cutting regulations and making it even harder for the public to participate meaningfully in the reactor licensing process. Indeed, the bill was so larded with goodies for the nuclear industry that even many organizations that support strong climate action couldn’t support the bill.

The industry also wanted a Senate Energy Committee-passed bill that would establish a Clean Energy Deployment Administration with the power to grant unlimited loan guarantees for new reactor construction. That likely would have been added to the American Power Act.

It was the industry’s hope—and the Nuclear Energy Institute was among the most prominent supporters of the bill—that the Senate would pass the American Power Act and them steamroll the House, which passed the Waxman-Markey climate bill last year that contained little for the nuclear industry.

But the Senate proved unable to deal with the climate issue at all (which is a different and very large problem), and the bill never even came to the Senate floor for consideration. Even an attempt by Senate Majority Leader Harry Reid to bring a much more modest energy bill, focused on some energy efficiency programs and liability for offshore oil spills in the wake of the BP disaster, didn’t receive enough support to be considered by the Senate.

With only about three weeks left in the legislative session because of the Fall elections, it is unlikely Congress will have time, or inclination, to enact anything of major benefit for the nuclear industry. It does remain quite possible that some new loan authority will be granted—probably something between US$10 and US$25 billion, but that isn’t enough to support a nuclear renaissance. Indeed, as Congress is learning the hard way, that wouldn’t fund much at all. Back in 2007 -just three years ago- Congress thought the initial US$18.5 billion in loan guarantee authority it approved would cover 6 reactor projects. Now it is clear that will only cover two. Doubling that would only mean two more, and few, if any, reactors can be built without the loans.

The industry has gone from 34 proposed new reactors to between 4-6 potentially viable projects in only two years, and even those are in jeopardy. This is a nuclear renaissance?

Report: no new nuclear without subsidies in UK.  Britain's new generation of nuclear power stations will not be built if the Government persists with a promise to refuse them any taxpayer support, according to a KPMG report. The study, commissioned by RWE npower, says it is still uneconomic for utility companies to invest billions of pounds in nuclear power. The Government has offered to impose a minimum price on carbon permits, which would raise the cost of fossil fuel generation and make low-carbon nuclear more attractive. But it has made a promise not to offer any direct subsidies. According to the KPMG's report a carbon "floor price" is not enough for the big utilities to commit large capital investments to the nuclear sector.
Sunday Telegraph (UK), 18 July 2010

Source and contact: Michael Mariotte at NIRS