Archive for the ‘Nukes’ Category

NRG put brakes on new plant; industry aims at loan guarantees

Apr 1, 2011

By Steve Gelsi
MarketWatch

NEW YORK (MarketWatch) — While public outrage over radiation seeping from Japan’s damaged Fukushima Daiichi power plant is a huge setback for proponents of nuclear power, securing financing for new reactors poses perhaps an even bigger challenge in the United States.

After a long hiatus, the U.S. nuclear power industry in recent years was finally making headway toward building the next generation of reactors.

Among the group of big electric power producers stepping up to the plate, Constellation Energy Group CEG zeroed in on nuclear with a plan to build a third reactor at its Calvert Cliffs complex in Maryland.

The effort ground to a halt late last year, when Constellation CEG said problems raising a U.S. loan guarantee, a surplus of cheap natural gas for power generation, and uncertainty over pending U.S. rules to reduce greenhouse gas emissions had derailed the project.

Baltimore-based Constellation instead opted to sell its 50% share in the project to Electricite de France , leaving the giant French power company its sole owner.

Fast-forward about six months, and few of the forces that scuttled Constellation’s plans have gone away. Add to that the fact that the Fukushima Daiichi nuclear power station is still leaking radiation three weeks after Japan’s monster March 11 earthquake and tsunami, and the likelihood of finding financing for these billion-dollar projects grows even dimmer.

Just last week, New Jersey-based NRG Energy NRG said it would suspend near-term efforts to begin construction of its South Texas Project nuclear plant. NRG said it would continue efforts to secure an operating license for the project, however.

"Nuclear plants are too large to be financed in the capital markets," NRG Energy CEO David Crane said in a prepared statement to MarketWatch. "Without the federal loan guaranty, our project is dead on arrival."

Loan guarantees amount to a contractual pledge between the government, private creditors and a borrower that Uncle Sam will cover the borrower’s debt obligation in the event of a default. This gives borrowers access to capital markets at the same low interest rates available to the government.

At the same time, companies granted loan guarantees by the Department of Energy for nuclear energy projects pay a premium to participate in the program, called a credit subsidy cost, and have to cover all administrative costs. As with any commercial or bank loan, all loans issued under the program must be repaid in full.

NRG’s decision was also shaped by events in Japan, since the South Texas Project included a $125 million equity investment commitment from Tokyo Electric Power Co., TKECY with an option to invest $30 million more for a total stake of 20%, said NRG spokesman David Knox.

But Tepco also owns the stricken Fukushima Daiichi plant north of Tokyo. Efforts to bring the plant under control and line up enough power to serve its millions of customers now cast doubt over its continued participation in the South Texas Project.

"We won’t ask Tepco what is happening with everything they’re going through," Knox said. "When the time is right we’ll figure out the path forward."

In another blow to the NRG project, CPS Energy, a San Antonio, Texas-based utility, said it would suspend discussions with NRG regarding a power purchase agreement for nuclear power from the proposed plant, though holding the door open to future talks.

U.S. nuclear power plant construction list shortens

Less than a year ago, the U.S. nuclear power industry was counting on four new federal permits for plants approaching construction, paving the way toward the expansion of a fleet of 104 reactors that provide about 20% of the country’s electricity.

With NRG Energy and Constellation Energy now backing out of their construction plans, only two sites with a total of four reactors are still active: Southern Co.’s SO Vogtle Units 3 and 4 in Georgia, and Scana Corp.’s SCG V.C. Summer Units 2 and 3 in South Carolina.

The two projects are likely to receive construction licenses by the end of 2011 or early 2012, according to a March 23 update from the Nuclear Energy Institute, an industry group.

On the financing side, Southern Co. secured a $3.4 billion federal loan guarantee for its project while Scana Corp. has said it doesn’t need a federal loan guarantee to move ahead.

Including the two front-runner nuclear plant projects from Southern Co. and Scana Corp., a total of 18 applicants — power companies and other operating entities — have applied for plant operating licenses from the Nuclear Regulatory Commission. See list of applicants for nuclear power plants.

James Dobson, an electric power equity analyst with Wunderlich Securities, said these nuclear power plant proposals face stiff financing challenges whether they are for regulated utilities selling power to rate payers, or for merchant power producers looking to put electricity on the grid through open market sales to utilities and big industrial customers.

On the regulated side of the business, utilities typically provide debt investors a greater measure of security since they offer the possibility of recovering plant construction costs by convincing state regulators to pass those costs down to consumers in the form of higher rates.

But with the cost of a plant reaching $6 billion or more, and its income stream years away, the payoff for investors is not terribly appealing, Dobson said.

Safety concerns and regulatory scrutiny resulting from the Fukushima accident merely add to a murky financing mix, he said.

"On the regulated side, bond investors … are worried about the regulatory picture as well as the cost of capital," Dobson said. "One feeds into the other. Companies are saying they need U.S. government involvement to push this along. On the financing side, bond investors are saying, ‘These things seem like a lot of risk and why do I want to be the guy standing behind this?’"

Dobson said regulated utilities may need federal loan guarantees to move ahead but at least one project, Scana Corp.’s V.C. Summer plant, is managing without them, partly because of statewide legislation supporting the project while placing some of the risk on rate payers.

As for unregulated power producers, Dobson said, "I don’t think a merchant plant can be built without loan guarantees."

Despite the hurdles, nuclear remains an economically viable source of electricity, once the plants manage to get built, he said.

"The variable costs of nuclear are low but fixed costs are very high," Dobson said. "Certainly, financing risks borne by equity and debt holders … those same debt holders will be staring at safety standards."

Meanwhile, other types of power such as wind, natural gas and solar, cost less and take less time to build, offering investors quicker returns, he said.

U.S. loan guarantee shortfalls

While President Barack Obama just this week reiterated his support for nuclear power, some in the industry said the government’s loan guarantee program doesn’t provide enough support under its current structure.

Constellation Energy spokeswoman Maureen Brown said the company told the Department of Energy that the program contains a "significant problem" in calculations on credit cost.

Based on the requirements set forth by the government, the Department of Energy offered Constellation an 11.6% credit cost, which would have added $880 million to the cost of its Calvert Cliffs project, Brown said.

The company concluded that such a huge sum would "clearly destroy the project’s economics," Brown said

A hearing was held last fall in Congress on the methodology used to assign credit costs to nuclear plant loan guarantees, but no major changes have been announced by the government. Nor has any federal loan guarantee been announced since Southern Co.’s award more than a year ago.

As the Nuclear Regulatory Commission continues a review of U.S. plants, nuclear power operators have stepped up efforts to promote the improved design and safety of their proposed plants.

But even before these plants move from the planning phase to reality in the U.S., major power producers find themselves facing a shortage of easy financing options to help cover the costly construction bill for America’s next generation of nuclear reactors.

Meanwhile, power generators are turning elsewhere to meet the nation’s growing energy needs.

According to the Energy Information Administration, the U.S. added 23,144 megawatts of non-nuclear power generating capacity in 2009, the equivalent of about 23 atomic reactors.

The figure includes 11,000 MW of natural gas generation, nearly 10,000 MW of wind energy and 880 MW from solar panels in 2009 alone.

April 1, 2011

CNN Money’s Steve Hargreaves explained to Randi Kaye the cost of a U.S. nuclear meltdown and who would be responsible to pay for it. Go the the CNN site to view the video.

March 25, 2011

By Steve Hargreaves, senior writer
CNNMoney

NEW YORK (CNNMoney) — Aside from the human toll a worst-case scenario nuclear reactor meltdown would cause, American taxpayers could also be stuck paying hundreds of billions in damages. But the industry would only be on the hook for a tiny fraction of that — even if it was to blame.

Under current law, the utilities that operate nuclear power plants are responsible for a fund that pays the first $12.6 billion in damages and lawsuits resulting from any incident.

"This thing is obviously not going to cover the costs of any major accident," said a spokesman for Massachusetts Democrat Rep. Ed Markey, who has long served on the House committee overseeing nuclear power, referring to the $12.6 billion fund. "That means the U.S. taxpayer will be left on the hook for the rest of it."

A 1982 study from Sandia National Laboratories, commissioned for the Nuclear Regulatory Commission, said the consequences of a nuclear meltdown would be catastrophic. The disaster could cause 50,000 fatalities and $314 billion in property damage.

In today’s money, that’s $720 billion.

The government gave the nuclear industry the liability cap in 1957 to entice the private sector into building nuclear power plants. The original cap was even smaller than the $12.6 billion — it has been adjusted upward to account for inflation.

Building nuclear plants was effort to boost homegrown energy and showcase the peaceful uses of a technology that had previously only been used for war — known as "Atoms for Peace." Without it, it’s doubtful the private sector would have built nuclear power plants at all.

A worst case scenario would have bankrupted a company, said Winfred Colbert, an energy and environmental attorney at the Houston office of Vorys, Sater, Seymour and Pease. "They would not have gotten into it," Colbert said.

The act that created the cap, known as Price-Anderson, said that federal and state governments will step in and cover "bodily injury, sickness, disease or resulting death, property damage and loss as well as reasonable living expenses for individuals evacuated" in the event of a disaster, according to the NRC’s Web site.

Because the losses are covered by the government, homeowner insurance policies won’t cover any of the damages. "All property and liability insurance policies issued in the U.S. exclude nuclear accidents," says the NRC’s site.

If you live within the fallout area of a nuclear power plant and can no longer return home, you’ll have to get in line with everyone else for a government payout, which may or may not cover your needs.

Neither Colbert nor other experts could think of any other industry that enjoys such protection resulting from a failure of its product.

$700 billion debated

Putting a number on a hypothetical scenario such as a full nuclear meltdown in the United States obviously leaves much room for guesswork.

The NRC noted the age of the 1982 Sandia study, suggesting it’s no longer accurate.

The agency is working on a new study, said NRC spokesman Scott Burnell, but that study focuses on health impacts, not property damage.

Still, while a property estimate could not be provided, Burnell said the new models show a release of radiation would be much smaller and happen more slowly, largely thanks to improved understanding of the containment structures and emergency responses at U.S. plants.

Smaller radiation releases "would be expected to have smaller economic effects," said Burnell.

The industry didn’t address the $700 billion estimate directly, but said the $12.6 billion is adequate to cover any foreseen incident.

Colbert, the energy attorney, noted that in the only major disaster at a U.S. nuclear plant, the partial meltdown at Three Mile Island in 1979, the containment structure generally worked. Not much radiation is thought to have leaked into the atmosphere. The $70 million or so in evacuation, cleanup and other associated costs were easily paid for by the industry’s $12.6 billion fund.

The industry noted the crucial role greenhouse gas-free nuclear power plays in the nation’s energy mix.

"They are generating 20% of the country’s electricity," said Bryant Kinny, a spokesman for the Nuclear Energy Institute. "That’s something we can’t live without."

But with so many major U.S. cities so close to nuclear power plants — New York, Boston, Chicago, Washington D.C. and Philadelphia are all with a 50-mile fallout zone — it’s hard to imagine a major disaster wouldn’t result in damage far exceeding $12 billion.

A 60-mile radius around Chernobyl — the site of the worst nuclear disaster in history — is going to be off-limits for human occupation for hundreds of years. American cities may not need to be abandoned in the event of a metldown, said Frank von Hippel, a noted Princeton nuclear physicist and co-chair of the International Panel on Fissile Materials.

"It might be that people would be willing to live with higher radiation levels in exchange for not moving out," said von Hippel. "Also, more drastic decontamination efforts than we have assumed might be applied."

Still, he said the $720 billion Sandia estimate is "consistent with our calculations, especially if the wind blew toward New York."

March 23, 2011

By Charles Riley, staff reporter
CNNMoney

NEW YORK (CNNMoney) — Utility company NRG has put the brakes on a plan to build two new nuclear reactors at its South Texas plant, CEO David Crane said Wednesday.

High levels of uncertainty in the aftermath of Japan’s nuclear disasters have led the company to limit work on the project to the licensing and securing of federal loan guarantees, Crane said.

No new nuclear plant has won final approval in the United States since the Three Mile Island accident in 1979, although site work is being done at a couple of locations around the country.

Eighty miles southeast of Houston, NRG (NRG, Fortune 500) wants to expand its nuclear facility from two reactors to four — in part with financing from Tokyo Electric Power Company, the owner of the Fukushima Daiichi plant that was heavily damaged in Japan’s earthquake and tsunami.

Tepco holds a 10% stake in the NRG expansion project, with the option to purchase an additional 10% share. A spokesman for NRG confirmed the company has been in touch with Tepco following Japan’s twin natural disasters — but only to offer assistance.

Complicating matters is the industry-wide regulatory review instituted by the Nuclear Regulatory Commission in the wake of the Fukushima Daiichi disaster.

"The timing of this from where our project stands could not be more unfortunate," Crane said. "And time can be the biggest enemy for a project like this."

It’s unclear how long the review will take.

"We actually agree that we need the review," Crane said. "But the question is what are we looking at? A three month review or longer?"

Crane said he hopes his plant will be among the first to be given the green light by regulators. He stressed that the proposed reactors will sit 10 miles from the Gulf Coast, in a non-seismic area.

But even seemingly small changes in regulations could kill the project. For instance, NRG’s plan calls for the new reactors to be spaced much further apart than those at Fukushima Daiichi plant. But if regulators demand additional space, it could derail the project, Crane said.

In another blow to the planned expansion, San Antonio power company CPS Energy — which already holds a 7.62% stake in the planned reactors — announced it was indefinitely suspending all discussions about purchasing more power from the plant. However, CPS did not rule out future discussions.

Crane said finding power purchasers will be crucial.

"That was going to be the critical task ahead of us in the second and third quarters," he said, but added that the more immediate concern is getting approval from regulators to build.

For South Texas, there are jobs at stake. (Read what Bay City residents want.)

Less than 20 miles from the NRG plant lies the town of Bay City, where many people work at the power plant and hope an expansion would bring more jobs. The plant itself already employs 1,200 people.

— CNNMoney senior writer Steve Hargreaves contributed to this report.

March 31, 2011

By Dominic Di-Natale
FoxNews.com

Workers at the disaster-stricken Fukushima nuclear plant in Japan say they expect to die from radiation sickness as a result of their efforts to bring the reactors under control, the mother of one of the men tells Fox News.

The so-called Fukushima 50, the team of brave plant workers struggling to prevent a meltdown to four reactors critically damaged by the March 11 earthquake and tsunami, are being repeatedly exposed to dangerously high radioactive levels as they attempt to bring vital cooling systems back online.

Speaking tearfully through an interpreter by phone, the mother of a 32-year-old worker said: "My son and his colleagues have discussed it at length and they have committed themselves to die if necessary to save the nation.

"He told me they have accepted they will all probably die from radiation sickness in the short term or cancer in the long-term."

The woman spoke to Fox News on the condition of anonymity because, she said, plant workers had been asked by management not to communicate with the media or share details with family members in order to minimize public panic.

Japan is dealing with a major nuclear crisis following the deadly magnitude 9 earthquake and subsequent tsunami.

She could not confirm if her son or other workers were already suffering from radiation sickness. But she added: "They have concluded between themselves that it is inevitable some of them may die within weeks or months. They know it is impossible for them not to have been exposed to lethal doses of radiation."

The plant operator, Tokyo Electric Power Co. (or TEPCO), says medical teams conduct regular testing on the restoration workers for signs of contamination-related illness. It claims there have been no further cases following the three workers who were treated last week after coming into direct contact with radioactive water. There are no reports of new members of the Fukushima 50 developing radiation sickness.

Although two suffered radiation burns to their legs and ankles and absorbed radiation internally, they have since been released from the hospital and are regularly being checked for signs of any deterioration in their condition, says TEPCO.

The company has pledged to improve the tough conditions for workers who stay on the site due to the short turnaround of shifts on safety grounds.

Some restorers directly tackling the problems with the fuel rod containment chambers are limited to 15 minutes at a time inside the reactor buildings or working near highly

radioactive substances, including traces of plutonium that have appeared at numerous locations within the plant complex.

Living conditions for the hundreds of employees staying within the plant’s perimeter to support the restoration efforts are also equally as hazardous, say the authorities.
Banri Kaieda, the interior minister who also acts as a deputy head of the nuclear disaster task force jointly set up by the government and TEPCO, said 500 to 600 people were at one point lodging in a building within the complex. He told a media conference it was "not a situation in which minimum sleep and food could be ensured."

Japan’s Nuclear and Industrial Safety Agency says that workers were only eating two basic meals of crackers and dried rice a day, and sleeping in conference rooms and hallways in the building.

According to Kaieda, not all of the workers had apparently been provided with lead sheeting to shield themselves from potentially radiation-contaminated floors while sleeping.

"My son has been sleeping on a desk because he is afraid to lie on the floor. But they say high radioactivity is everywhere and I think this will not save him," said the mother of the worker who spoke to Fox News.

Meanwhile, bad weather has delayed TEPCO’s plans to limit the spread of radiation from the plant. It has intended to spray a water-soluble resin to affix radioactive particles and substances to the debris sent scattered across the devastated complex to prevent it from being dispersed by wind and moisture.

It will now attempt on Friday test the synthetic solution using remote control vehicles to spray an area of 95,000 square yards at reactors four and six. The company hopes the resin will provide sufficient protection to allow restoration workers better access to areas critical to restoring the reactors’ cooling systems to prevent a meltdown.
Growing pools of dangerously radioactive water and deposits of plutonium have been inhibiting access to important parts of the plant.

A large sea tanker is also being prepared to siphon and ship the water from the plant after it was discovered that run-off containers and drainage tanks were almost full at three of the most critical reactors.

The government says it has yet to be decided where they will dispose of that water.