Nuclear Costs Explode
By RUSSELL RAY
The Tampa Bay Tribune
Published: January 15, 2008
Progress Energy Florida is going to have to spend more than originally planned to build two nuclear reactors in Levy County, the utility's top executive said.
The St. Petersburg-based utility won't disclose how much more expensive the project will be until it's presented to state regulators within 90 days. Based on new industry estimates, the revised cost could be two to three times more expensive than the projection Progress issued more than a year ago.
That's because the cost of concrete, steel, copper, labor and reactor technology has soared as energy companies move forward with plans to build more than 30 new reactors nationwide. Also, Progress Energy's initial estimate excluded the cost of land, inflation, interest payments and new transmission lines.
"Yes, it will be higher," Jeff Lyash, president and CEO of Progress Energy Florida, said of the project's cost. "The price of any construction project you undertake today is going to escalate based on commodity prices. That's not a nuclear issue."
Lyash wouldn't provide a specific estimate because of ongoing negotiations with vendor Westinghouse Electric.
But based on new industry estimates, the tab for Progress Energy's project could surpass $10 billion, well above the company's initial estimate of $5 billion to $7 billion.
Information from Florida Power & Light, the state's largest electric utility, has shed new light on the potential expense of Progress Energy's project and others like it.
FPL, based in Juno Beach, said recently that the "overnight cost" of its two-reactor project would range from $12 billion to $18 billion, more than twice as high as Progress Energy's December 2006 estimate. Overnight estimates exclude the interest paid on the loan and are based on commodity prices when the estimate is made.
The FPL project may be the best measuring stick, because FPL is considering the same Westinghouse technology Progress Energy has selected, and the capacity of each two-reactor project is about the same: 2,200 megawatts, enough energy for 1.3 million homes.
"We made a very comprehensive estimate range based on the latest studies in the marketplace," said FPL spokesman Mayco Villafana.
What's more, Moody's Investors Service, one of three major rating agencies, said in October that new reactors would cost up to $6,000 per kilowatt of capacity to build. At that price, Progress Energy's two-reactor proposal would cost $13.2 billion. FPL's recent estimate was $3,100 to $4,500 a kilowatt.
"Moody's is closer to the reality we're seeing," said Michael Mariotte, executive director of the Nuclear Information and Resource Service, a nonprofit group opposed to nuclear power. "Even before they start building, the costs are going up. Meanwhile, the cost for solar, wind and energy efficiency are on a downward trend."
No one knows for sure how much America's nuclear renaissance will end up costing, Mariotte said.
"Nobody knows because this new generation of reactors hasn't been built yet," he said. "Most of these designs are designs on paper. It's one of the reasons Moody's has pushed the cost up so high. It's because we're looking at a lot of first-of-a-kind designs."
A September 2007 report commissioned by the Edison Electric Institute, a nonprofit trade group for the nation's electric utilities, showed that steel prices have risen 60 percent since 2003. Copper prices nearly quadrupled between 2003 and 2006 and cement prices rose 30 percent during the same period, the report said.
The higher prices for raw materials and labor have led to sharp increases in the cost of new power plants, said Ed Legge, a spokesman for Edison Electric.
"It's costing more to build a coal plant, too," Legge said.
The higher cost of Progress Energy's two-reactor project will be reflected in the electric bills of the utility's 1.7 million customers. Normally, construction costs are passed on to customers once the plant begins generating power. Under a new Florida law, utilities can begin recovering the cost of building a nuclear plant years before the first watt of power is produced.
Nuclear plants are the most expensive to build, Lyash said, but customers will pay less in the long run because the cost of generating electricity from a nuke is far below the cost of making it from coal, natural gas, wind or solar.
According to industry estimates, the cost of generating electricity from a nuclear plant is about 0.4 cents a kilowatt-hour, 4.2 cents from a coal plant and 7 cents from a natural gas plant.
"Over its lifetime, it will have the lowest fuel cost and it will have the lowest environmental impact," Lyash said.
Another benefit is that unlike coal- and gas-fired power plants, nuclear reactors don't emit greenhouse gases, including carbon dioxide, which scientists have linked to global warming.
Also, the government is expected to begin regulating carbon emissions from power plants, a move that will make coal plants substantially more expensive to build and operate. Natural gas-fired power plants are cleaner, but gas is increasingly expensive and Florida already generates more than a third of its power from natural gas.
"It's on a trajectory to increase, not decrease," Lyash said of natural gas prices. "Even coal prices have risen."
As a result, nuclear power is a more cost-effective option for utilities and their customers, Lyash said.
"Nuclear energy reduces our dependence on foreign fuels, it provides long-term cost stability for customers in that we're not as dependent on volatile and expensive natural gas and oil, and it doesn't produce any greenhouse gases," he said.
Meanwhile, the Nuclear Energy Institute has stopped offering cost estimates because many of its member companies, including Progress Energy, are in contract negotiations. Any projection from NEI could affect the outcome of those discussions, said Adrian Heymer, NEI's senior director of new plant deployment.
"It's best for us, at this point and time, to remain silent," Heymer said.
More than 30 new nuclear reactors are being considered nationwide. So far, three companies have filed applications with the Nuclear Regulatory Commission to build and operate reactors in Texas, Alabama and Virginia.
If the first few plants can be built on time and within budget, nuclear capacity in the United States will soar, Heymer said.
"If we do that, I think you could see 20 new plants by 2020," he said.
Reporter Russell Ray can be reached at (813) 259-7870 or rray @ tampatrib.com.
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