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Local utilities put nuclear plans on hold
By Molly Parker
Staff Writer
The utility industry’s attempt to re-establish nuclear energy as a credible power source for the future is like trying to come back to work after a long vacation or hitting the gym after skipping several months of workouts.
Getting started again is never easy.
Under a partnership, Santee Cooper, the state’s publicly owned utility, and Columbia-based SCANA Corp. would like to build a new 1,100-megawatt nuclear reactor next to their existing jointly owned V.C. Summer Nuclear Station near Jenkinsville. They hoped to have it online by 2016.
“It’s definitely behind what we had projected,” Santee Cooper CEO Lonnie Carter said. “It’s taking longer than we thought it would and the prices are so much higher — the prices are way, way higher than what was originally projected.”
It’s been more than 30 years since the Nuclear Regulatory Commission has issued a new permit for construction of a nuclear reactor, but recently enacted federal policies that streamlined the application process and provided tax incentives to build seemed to prime the industry for a rebirth.
Growth pushes demand
Utilities across the country scrambled to ready applications, particularly in the Southeast where nuclear power plants have been largely welcomed. Population growth also is pushing the demand for more base-load generation.
With the environmental implications of coal and the rising price of natural gas casting a shadow, visions of a nuclear revival danced in utility executives’ heads.
Then the price tags came rolling in like a wave of bad news.
“We’re seeing a significant upward trend in the pricing,” said Mitch Singer, senior media relations manager for the Nuclear Energy Institute, the public policy organization representing owners and operators of nuclear power plants in the United States.
“The fact remains that in the last couple of years there has been an increase in the price of commodities like steel and concrete, and that’s having an effect on the overall price of plants, not just nuclear, but any capital projects.”
Benefits outweigh costs?
The high cost of the reactors historically has been a roadblock to building nuclear plants. Throughout the ’70s and ’80s, millions of dollars went to waste in states across the country as nuclear plant construction sites were abandoned.
In 1983, for instance, Charlotte, N.C.-based Duke Energy Corp. attempted to make the best of its soiled project in upstate Cherokee County. The half-built nuke plant there instead became the movie set for the popular 1980s science-fiction thriller, “The Abyss.”
Recently, Duke repurchased the land and is in the process of tearing down the old reactor with plans to build anew, Duke spokeswoman Rita Sipe said. The utility filed its application on Dec. 13 and is expecting to hear back any day whether the Nuclear Regulatory Commission will consider the request. Should it make the docket, it could take up to 42 months before the commission issues a final decision on whether to issue a construction and operating license, she said.
Even with the uptick in projected costs, Singer said he expects several utilities will move forward with plans for new nuclear units. Once the plants are operational, atomic energy — created by inducing the fission of uranium — is relatively cheap to produce, generally less expensive than coal and far below the price of natural gas.
Further, Singer noted, the U.S. Department of Energy is predicting a 30% increase in energy usage by 2030, with much of that demand being driven by newcomers to the East Coast.
The price of electricity will rise along with demand, and utilities will be able to recoup construction costs, Singer said.
“In the long run what is really to determine whether or not utilities build new plants is the price of electricity going out the door to the consumer,” Singer said.
Not off the table
Even though bids came in much higher than expected, Carter did not go so far as to say nuclear plans are off the table.
Carter said he will ask the utility’s board of directors within the next few months to make a policy decision about whether it is cost effective to move forward with the lengthy permitting process.
“There’s no use to start that process if we can’t afford it,” Carter said. He declined to discuss the cost estimates, citing the ongoing negotiations.
Santee Cooper has already spent millions of dollars laying the groundwork for the application process, and last spring the board agreed to spend upward of $390 million just to secure a permit.
SCANA’s outlook on the project was less dire, but company spokesman Robert Yanity acknowledged that the utility has “taken a step back” to analyze the options.
The company, either by purchasing power on the open market or by generating electricity itself, needs to come up with an additional 600 megawatts by 2016.
The utilities anticipate it would take eight to 10 years to get a new nuclear unit online. SCANA is considering a combined-cycle natural gas turbine plant if nuclear plans fall through or take longer than anticipated.
Citing environmental implications and the possibility of a federal carbon tax, the utility considers coal-fired plants an option of last resort, Yanity said.
Nuclear facilities do not emit any of the greenhouse gases that have been linked to global warming, though they evoke other environmental concerns, mostly regarding where and how to store the radioactive nuclear waste byproduct.
“We’re not closing the door on nuclear by any stretch of the imagination,” Yanity said. “It’s kind of a pause. From the input we’re getting on price, we want to make sure we’re doing the right thing.”
Still, it’s unlikely SCANA would make a go of it alone if Santee Cooper bows out, Yanity said.
Along with the rising cost of construction materials, another explanation for the high-valued bids is that only three major companies in the world build nuclear reactors approved for use in the United States — Westinghouse, General Electric Co. and French-based AREVA, which through a joint venture with Constellation Energy Group formed UniStar Nuclear to deploy its technology in the United States.
The Energy Policy Act of 2005 included tax incentives to help offset those costs for utilities that build nuclear plants.
But in studying the process, Santee Cooper discovered those tax incentives do not apply to publicly owned utilities. Carter said he has asked the S.C. congressional delegation to fix what he hopes was simply an oversight.
“This whole nuclear industry getting restarted in this country is proving to be a little more difficult than the utility industry thought it would be,” Carter said. “I’m disappointed that … we really haven’t gotten together as a country to make it take off.”
Molly Parker is a staff writer for the Business Journal. E-mail her directly at mparker@setcommedia.com.
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