June 28, 2010

By Kate Galbraith
Texas Tribune

Seventeen years ago, Texas turned on its last nuclear reactor, about 50 miles southwest of Fort Worth. In another decade, several more reactors could get built here — if events in Washington go the power companies’ way.

Nuclear power now accounts for 14 percent of Texas’s electricity usage (below the national average, 20 percent). The case for adding more reactors rests on a rising appetite for electricity sparked by a growing population and ever-proliferating gadgetry. And proponents point out that nuclear power, unlike coal or natural gas, is virtually free of the greenhouse gas emissions associated with global warming during its operations, although environmentalists strongly dispute the merits of the plants.

The federal government is moving ahead with a program that provides loan guarantees for the plants — a crucial step to placate financiers nervous about the economic risk of building them. Earlier this month, the Department of Energy agreed to a $3.4 billion guarantee for the expansion of a nuclear facility in Georgia, and the Obama administration recently asked Congress for more funds to help out more plants. Two proposed nuclear projects in Texas are high on the list of potential recipients.

"We’re very serious about moving ahead," says Jeff Simmons, who is leading the development efforts to add two new reactors to the Comanche Peak plant in Glen Rose, near Fort Worth. The project is a joint venture between subsidiaries of Luminant, a big Texas power generator, and Mitsubishi Heavy Industries. The companies are hoping to get a license from the Nuclear Regulatory Commission by the end of 2012 — a crucial green light for the plant.

"Before we even get the license, we will be hundreds of millions of dollars into the development of this project," Simmons says.

A second project is proposed for Bay City. Already, that site, called the South Texas Project, has two reactors, which began operating in the late 1980s. NRG Energy and CPS Energy, the San Antonio utility, have applied for a license to add two more reactors as well, although CPS recently whittled down its share of the project in a legal settlement as cost estimates ballooned.

Many hurdles remain before either project can be built, however. No new nuclear plants in the United States have been started in several decades (the Bay City and Glen Rose projects are the only ones in Texas and are among the last plants nationally to be built). Fears of another Three-Mile Island-type accident have hung over the industry, and the economics are daunting. Nuclear plants are extremely expensive to build — each new reactor can cost $6 billion to $8 billion, according to the Nuclear Energy Institute. As a result, many plant operators have convinced the government to extend the life of old plants rather than build new ones. (The four existing Texas reactors are new enough so that an extension is not an issue yet.)

Cost concerns have been compounded by the recent economic turmoil. With the credit markets still tight, financing a huge project is difficult. Also, the recession has depressed demand for electricity — which makes it less necessary to build more power plants in the near term. Texas’s electric usage last year was 1.3 percent less than forecast, and a new report from ERCOT, the state grid operator, projects that peak electricity use will grow by 1.72 percent annually between 2010 and 2019, compared with last year’s projection of 2 percent growth during those years. Also, low natural gas prices have pulled down the overall price of electricity, making it harder to justify building an expensive plant.

Economic uncertainties propelled one major nuclear plant operator, Exelon, to pull back on its plans. Last year Exelon changed its license application for a new plant in Victoria County to a less arduous application, for an "early site permit," which covers environmental and safety portions of the applications only.

"Right now we don’t plan to build a plant there. We do want to preserve the option to build there in the future," says Craig Nesbit, the vice president for communications at Exelon Generation.

Companies exploring a fourth possible Texas plant, in the Panhandle, have not yet applied for a license from the Nuclear Regulatory Commission, despite statements in 2008 that an application was planned for 2009.

The federal government holds the key to the economics, through loan guarantees. These essentially mean that the government will pick up the tab if the borrower — the plant owner — defaults. Earlier this month Southern Company agreed to a $3.4 billion loan guarantee for a reactor project in Georgia, part of a $8.3 billion loan-guarantee package for the plant announced in February. The total federal pot currently stands at $18.5 billion — enough for one more project but perhaps not more. (There is also a far smaller amount allocated to loan guarantees for renewable energy projects, which are considered risky and in need of federal guarantees because of their newness.)

As a result, there is jostling for a place in the loan-guarantee queue. The South Texas Project is third in line, after the Georgia project and a plant proposed by Constellation Energy. The Comanche Peak project is fifth in line. The Obama administration asked Congress in May to add $9 billion to the $18.5 billion program, which would mean enough for a few more projects after the Georgia one.

Environmentalists think nuclear power is a terrible idea.

"We think expanding the Texas nuclear fleet is a huge mistake because of cost and waste issues primarily — and that there are significantly cheaper alternatives that could provide the power at a fraction of the cost," says Tom "Smitty" Smith, the Texas director of the environmental and consumer advocacy group Public Citizen. Energy-efficiency and renewable energy — such as the wind power that has grown quickly in Texas — would be far more cost-effective, he says.

Smith also maintains that nuclear plants’ "zero-emissions" arguments on greenhouse gases (although potentially crucial in the forthcoming debate about national energy legislation) are a red herring. "There are enormous emissions of greenhouse gases during the mining and enrichment, construction, decommissioning and then the storage for 50,000 years of this waste," he says. (At both existing Texas plants, the waste is stored on-site.)

But in Somervell County, home to the Comanche Peak reactors, there is community support for building more. The county has used homeland security grants to buy a military-style armored truck — to defend itself and its plant if needed.

"We’ve got to have more nuclear power," says County Judge Walter Maynard. "From a selfish standpoint, it’s very viable to our local economy."