Cheap natural gas prices push back some projects by 10-20 years
This is my coverage from Fuel Cycle Week V11:N462, for March 1, 2012, published by International Nuclear Associates, Washington, DC
In the past year the U.S. Nuclear Regulatory Commission has pushed back the schedules for two early site permits and two combined license applications, but there hasn't been so much as a peep of protest from the affected utilities. The agency's rationale is that none of the related plans, and schedules, for new nuclear reactors are concrete enough to justify a squawk.
The agency is right: plunging natural gas prices have prompted those utilities—PSEG, Exelon, Luminant and NextEra—to reevaluate the timelines for their new build ambitions.
Meanwhile the NRC is using the reprieve to focus on an ambitious new Fukushima-related regulatory agenda; agency resources that would have been otherwise slated for staff work on the four new build cases are now being used to impose new safety requirements on the nation's 104 operating nuclear reactors.
PSEG’s Reactor #4
The planned addition of a fourth reactor at PSEG's artificial island on the Delaware River in the southwest corner of New Jersey would create the single largest nuclear plant in the U.S.
But in a letter sent to the utility just before Christmas, David Matthews, Director of New Reactor Licensing, told PSEG that due to "resource constraints," the NRC had pushed back the completion date for the Early Site Permit (ESP) by 15 months, from March 2013 to June 2014.
Neil Sheehan, an NRC spokesman, told FCW the resource constraints on PSEG's ESP were caused by a "shift in resources" to Fukushima-related safety measures.
"The agency has quite a bit on its plate," Sheehan said. He added, "The delay won't make much difference."
The reason is an ESP contains no requirement to build a reactor. Instead, the regulatory approval is technology neutral, with no reference to a specific design, and it preserves a utility's options for 20 years.
What's interesting is that the utility agreed with NRC's assessment. Joe Delmar, a spokesman for PSEG, told FCW that even when the utility completes the ESP, "there is no likely decision to build anytime soon."
Today’s record low natural gas prices are to blame.
According to figures published by AP on Feb. 27, the price of natural gas is $2.61 per 1,000 cubic feet, a 32% drop from a year ago. The cost of burning natural gas to generate electricity, plus pipeline distribution fees, results in an equivalent cost of roughly $5.61/1,000 cubic feet.
Delmar said that for nuclear energy to be competitive, that price will have to rise to $8-12 per 1,000 cubic feet. He said that toward the end of the ESP’s 20-year shelf life prices might become a reality.
Merchant Nuclear vs LNG
On Dec. 1, Exelon received a similar letter for its Victoria County, Tex., project. NRC moved the ESP application’s completion date to March 2014. That delay didn’t seem to bother Craig Nesbit, vice president for communications at the company’s Chicago offices.
Like his counterpart at PSEG, Nesbit saw the price of natural gas as the real cause of the delay, particularly for a merchant plant, as any reactor Exelon built in Texas would be operating in a deregulated market.
"The delay has no practical impact on our decision making process. Market conditions indicate it will be a long, long time before we build there,” he explained. “The price of power dictates what we can do relative to market conditions and natural gas is driving them."
Nesbit said the utility still holds the Guadalupe River water rights it acquired when it originally filed a combined license application for two reactors. That application was later withdrawn in favor of an ESP.
Exelon's history with the application was also complicated by its decision to switch reference reactor designs, from the uncertain licensing outlook (at the time) for a General Electric ESBWR to the fully certified GE ABWR.
That move, designed to secure a federal loan guarantee, came too late to help the utility. The ensuing drop in natural gas prices then put a long-term lid on Exelon's plans for the site, which is 130 miles southwest of Houston.
Obstacles Times Two
The two-fold problem for Luminant is that the agency has to first complete the design certification for the Mitsubishi reactor before it can then approve the utility’s construction and operating license (COL) application.
Last February NRC and Mitsubishi had a conversation about that process, and the schedule remains in flux. The agency wrote in a March 2, 2011, letter to Luminant that it is "premature" to accept proposed schedule improvements in the design review. The mandatory hearing for Luminant's combined licenses was pushed back to November 2013.
Meanwhile, the NRC’s website showed certification for the APWR in mid-2014 and approval of the COL in early 2015. Clearly, there's been more schedule slippage in the past year.
Asked if natural gas prices in a merchant state like Texas would have any bearing on the timing of Luminant's decision to pursue construction of the two new reactors, the utility told FCW via email that it will make a decision to build once it has the licenses. Based on the latest NRC license schedule, it could be a while.
Too Humid to Hurry
Florida Power & Light, which wants to build two 1,100 MW Westinghouse AP1000 reactors at its Turkey Point site near Miami, has seen its NRC schedule for completing a COL application delayed by 18 months, from October 2012 to February 2014.
The good news for FPL is that it doesn't have to wait for the NRC to approve a reactor design. The agency certified the AP1000 in December 2011.
Roger Hannah, a spokesman for the NRC in Atlanta, told FCW the agency revises licensing schedules when utilities don’t have concrete plans to build in the near-term. That's the case at Turkey Point he said.
"They (FPL) are just not close to finishing the application," Hannah noted.
Veronica Swanson, a spokesperson for FPL, told FCW, "The current project schedule includes some margin that may help absorb the delay or lessen its downstream impact."
With regard to the effect of natural gas prices, she said that that each year FPL conducts a feasibility analysis to determine the long term viability of the project.
"In 2011 the project was economically beneficial when compared to a similarly sized natural gas unit in 6 of 7 fuel and environmental cost scenarios and offered fuel diversity and zero greenhouse gas emissions not provided by natural gas generation."
According to its own data, FPL generates 64% of the electricity it delivers to rate payers from natural gas and another 20% from nuclear.
U.S. Renaissance Littered with Casualties
The NRC posts on its website current information on the status of early site permits and combined license applications. In some cases the future of the project is best characterized as indefinite limbo because the reviews have been suspended. Examples include Ameren's Callaway site in Missouri and Unistar's Nine Mile Point site in upstate New York.
Ameren keeps trying to convince the Missouri legislature to approve a CWIP mechanism that would allow it to charge ratepayers some construction costs as they are incurred, but has not been successful. Unistar halted the review of a new unit for Nine Mile Point, saying it wanted to put its resources into Calvert Cliffs 3.
Unistar's Calvert Cliff's project is also looking for a U.S. investor since by law, French nuclear builder EDF cannot hold more than a 49% equity stake in the project.
Constellation, the U.S. partner, pulled out after a public dispute with the Energy Department over the credit risk premium assigned to the loan guarantee for the merchant project. The company is now merging with Exelon.
Exelon CEO John Rowe said in a speech in late 2011 it is "inconceivable" that a new reactor would be built as a merchant at Calvert Cliffs due to the low price of natural gas.
Dominion's North Anna 3, which changed from GE’s ESBWR to a 1,500 MW version of the Mitsubishi reactor, must also wait for the NRC to complete a safety review of that design.
NRG pulled out of the South Texas Project leaving reactor builder Toshiba without a U.S. investor. The effort to build two fully certified ABWRs is on indefinite hold.
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4 comments:
This blog entry verifies what I have said several times -- on the drive between my home and the Comanche Peak Nuclear Plant here in north Texas one can see numerous signs of the fuel of the future, shale gas.
And I repeat -- the principal reason Southern and SCANA are proceeding with construction of the AP1000 Nubuilds in their regulated service areas is to draw new blood into the industry so the operating nukes don't shut down shortly after 2020 due to insufficient personnel to keep them operating.
Marvin Fertel of NEI forecast that 5 - 6 plants would be underway or complete in 2020. These would be the four AP1000 Nubuilds, Watts Bar Unit 2 and (maybe) Bellefonte 1.
And a shadow may be drawing across Watts Bar 2 and Bellefonte 1. From the latest issue of INSIDE TVA, the monthly publication for employees and retirees:
[NAME DELETED] ...also serves TVA’s single largest directly served customer – the United States Enrichment Corporation. USEC announced in early January that it may have to close its operations at the end of May 2012. Holman – and TVA – could be losing a 1,650 megawatt load.
“Alone, USEC uses more electricity than all but two of the power distributors we serve. It is using more electricity each year than the city of Chattanooga,” says... [NAME DELETED] “TVA has served USEC since 1951, and it represents about 4 percent of TVA’s revenues.”
No utility can loose loads of this size and justify continuation of expensive new plant construction.
In closing, the Nuclear Renaissance is a flash in the pan. Maybe after 2050...
"In closing, the Nuclear Renaissance is a flash in the pan. Maybe after 2050..." A frog in a well thinks the sky is the size of a saucepan. The USA is not the world. As well, the existence of many drilling rigs do not indicate the actual size of the natural gas reserves. Reputable geologists are challenging the estimates of Chesapeake Energy etc. of a "100 year supply" and think that the actual data indicates perhaps 10 years. And so the real "flash in the pan" might be the alleged "shale gas miracle".
If in 2 years the price of nat gas is back up to the break even price for most shale plays (~$5-6/MMBTU), then most of the shelved reactor projects quickly get pull back off the shelf.
Given the lead time to build a reactor, it is sad that the utilities cannot start building now understanding that the nat gas price cannot remain below half the cost of the marginal production for very long...
Short sighted policies to boost stock prices I imagine...
Good article Dan; I believe that it provides some long overdue perspective as to what is happening to the U.S. Nuclear Renaissance and why. Nuclear power may seem to be the obvious path to energy independence based solely on technical and engineering merits; however, the interplay of political and economic factors unique to our form of government make this a complex and, at times, frustrating process . Decision making in directed economies, such as some of those in Europe and Asia, may seem to those with technocratic inclinations as logical and streamlined; however, such processes do not guarantee success either; the failures in the USSR being an extreme example of this. Furthermore, given the choice, many of our citizens would be reluctant to have a significant portion of our economy directed by the Washington as can be witnessed by the current divisions caused by the government’s increased involvement in medical care policy.
I believe that the Renaissance may have been overhyped in the US by nuclear utility executives within the context of a persistently weak energy policy and vendors willing to reinforce the desires of a potential customer. One can only speculate that in some instances there was an eagerness within the utilities industry to be the first with its attendant bragging rights. As to whether there was an earnest consensus on governmental energy policy and private enterprise at the beginning of the 21st Century remains to be seen.
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