Wednesday, April 7, 2010

Exelon will take its time in Texas

Firm files with NRC for an Early Site Permit which is good for 20 years

stepping-stones-5425The Nuclear Regulatory Commission’s idea of an Early Site Permit (ESP) is that it is a stepping stone to applying for a combined construction and operating license (COL) to build a commercial nuclear reactor.

However, Chicago-based Exelon (NYSE:EXC), the nation’s largest nuclear utility, has other plans. It sees the ESP as a marker for the “idea” that it might build a new nuclear reactor, or two, deep in the heart of Texas.

It’s not that many could find fault with Exelon’s cautious view of the nuclear industry in the Lone Star State. The firm has hit a series of rough spots there.

First, Exelon hitched its wagon to the GE-Hitachi ESBWR only to find out the Department of Energy thought the new reactor’s time-to-market might be later rather than earlier giving it a low score in terms of favorable mention loan guarantees. Exelon changed horses in mid-stream to the fully certified ABWR, but it was too late.

Second, Exelon’s attempted all-stock hostile takeover of NRG failed to gain traction last year with the target firm’s largest institutional investors who voted in July 2009 to stay put rather than sell their stock. It was a remarkable vote of confidence in the growth prospects for the South Texas Project and an unanticipated setback for Exelon.

NRG also got itself on the short-list for federal loan guarantees with twin ABWR reactors. Another Texas nuclear utility, Luminant, is a fifth runner up to the final four on the DOE short list for loan guarantees with plans for twin Mitsubishi APWR 1,700 MW reactors. The APWR is still in the design certification process at the NRC.

Third, Exelon originally planned to build two new reactors at Victoria, Texas, but as the recession took hold, along with declining demand for electricity, in July 2009 the firm closed its project office there. The Early Site Permit when approved by the NRC will give Exelon an option to re-visit development of a reactor at the Victoria site.

Thomas O’Neill, a spokesman for Exelon, said last July, “We’re not leaving Victoria, but today’s economic realities compel us to defer any decision on construction.”

Local response to the move was mixed. The Victoria Advocate, the local daily newspaper, reported March 25 that Mayor Will Armstrong said, “All I know is we’re still on their radar screen. I think that’s a real good sign. The national economy seems to be improving and we’re still part of their picture.”

The fact that Exelon is spending money on the ESP would indicate the site is indeed still in the picture. It shows that John Rowe, the firm’s CEO, is tenacious and has not given up on his ambitions to be a player in the Texas electric utility market.

The 411 on the ESP

envpermitExelon on March 25 filed an "early site permit" application with the Nuclear Regulatory Commission for an 11,500-acre site in Victoria County, Texas. At the same time, Exelon formally withdrew its application for a combined construction and operating license for the same site. The proposed site is 13 miles south of the City of Victoria.

If approved by the NRC, the early site permit would effectively reserve the property for new nuclear construction for up to 20 years with the possibility of renewal for another 20. The ESP, does not authorize construction of a new plant. NRC's review of the ESP application could take three to four years.

If Exelon decides to proceed with a new reactor project in Texas, it would be required to re-start the application for a combined construction and operating license.

"A decision whether to build in Victoria County will be made years in the future," said Marilyn Kray, Exelon’s vice president for nuclear project development. "The ESP allows us to establish the suitability of the site, which lessens the amount of work to do should we later decide to pursue a license."

Exelon does not have to reference a specific reactor design in the ESP. It allows the firm to keep its options open until it files a COL. In the next few years, all the major reactors now in the design certification process at the NRC are expected to exit the process with a "good to go" stamp from the regulators. This is not the case for a bevy of small reactors which are just ramping up to submit their applications for design review. It is unlikely Exelon would choose a small reactor, e.g., less than 500 MW, for the site given the size of the markets it is intended to serve in Texas.

Much of the data gathering and analysis contained in the ESP application had been performed for the combined construction and operating license application filed in 2008. Work on that application was suspended last year at Exelon’s request because of uncertainties in the domestic economy, lowered expectations of future electricity demand and related economic considerations.

Under the ESP process, the NRC evaluates site safety, environmental impact and emergency planning regarding a proposed nuclear plant. By issuing an ESP for a specific site, the NRC is certifying that the site satisfies federal criteria in those evaluation areas. If the company later chooses to pursue construction, the ESP becomes part of the combined construction and operating license application, which requires a separate review, public input and approval by the NRC.

NRC public meeting April 15

nrc sealOn April 15 NRC staff will conduct a public meeting in Victoria, Texas to discuss how the agency will review an Early Site Permit (ESP) application for the Victoria County site, about 13 miles south of Victoria.

“We’ve spoken before with residents in and around Victoria regarding Exelon’s activities, and we’re coming back to explain what’s now being proposed and how we’ll review the application,” said David Matthews, Director of the Division of New Reactor Licensing in the NRC’s Office of New Reactors.

The NRC will hold the meeting in the Mini Dome of the Victoria Community Center, 2905 E North St. in Victoria, from 7 to 9:30 PM. NRC staff presentations will describe the overall ESP review process, which includes safety and environmental assessments, as well as how the public can participate in the process. The NRC will host an open house for an hour prior to the meeting so members of the public have the opportunity to talk informally with agency staff.

Water rights an issue

Whooping CraneThe Wall Street Journal reported March 13 that Exelon’s efforts to retain water rights for the future operation of a nuclear reactor in Texas has run into a flock of environmental issues over habitat for endangered whooping cranes. Exelon is an apparent unwilling stakeholder in the issue which was undertaken by environmental groups long before the nuclear utility appeared on the scene with its plans for the reactor.

At the heart of a lawsuit filed against the Texas Commission on Environmental Quality by a green coalition is whether the water in the Guadalupe River is over-allocated. Exelon’s acquisition of senior water rights immediately added a new factor to the ongoing controversy. In drought years, the green groups maintain, there isn’t enough water in the river to service all the water rights and preserve habitat for the birds.

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The Victoria County application is Exelon’s second ESP submittal. In 2007, the company received an early site permit for property beside the Clinton Power Station in Dewitt County, Ill., one of Exelon’s 10 operating nuclear power stations.

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Meredith Angwin said...

I heard a talk at Dartmouth yesterday about the future of nuclear. The panel included Joe Romm, climate activist and anti-nuke (go figure). So Romm points out that nuclear plants use water. His hope for the future is Solar Thermal, out in the desert.

One of the other panelists pointed out that a recent solar thermal project got cancelled because it would use too much water. And there isn't much water in the desert. Of course, this did not faze Romm. It's funny how people can simply not-answer an objection and move on.

Brian Mays said...

Joe Romm is insane.

Meredith, your anecdote provides yet more evidence of this. Most of the evidence can be found at