Thursday, May 3, 2012

Progress reboots Florida reactors back to the future

Utility cites lower than expected customer demand, economic down turn, uncertainty over potential carbon regulation, and low natural gas prices

A segment of this blog post appeared in the News Briefs section of Fuel Cycle Week, V11:N471, 05/03/12 published by International Nuclear Associates, Washington, DC. 

Progress Energy (NYSE:PGN) has pushed back the completion dates for its planned twin Westinghouse 1,100 MW Westinghouse AP1000 reactors at its Levy county site on Florida's west coast. Also, it increased the cost estimate for the two reactors, the land, and the transmission and distribution infrastructure.

Progress changed the date for the first reactor entering revenue service from 2020 to 2024 with the second unit following 18 months later. The utility increased the cost of the power station from a range of $17.2-22.5 billion to a range of $19-24 billion.

These estimates are closer to the PSC's Public Counsel estimates that the "all in" costs to be in the range of $22-25 billion. Florida PSC Chairman Eduardo Balbis said last February he worries that further delays at this point "could result in a reduction in the cost-effectiveness to the point where the project is no longer viable."

Progress spokesperson Susan Grant told this blog that $3 billion is for new transmission and distribution costs and the rest represents the “all in” costs, not just the reactors from Westinghouse. Still, the costs are considerably higher than other AP1000s scheduled to come online after 2020.

Progress CEO Vincent Dolan said in a prepared statement that despite pushing back the start dates of the two reactors into the middle of the next decade, the plants remain a priority for the utility.

Dolan added, "Nuclear remains a key component of Progress's balanced solution strategy to meet customers' future energy needs."

"The Levy County nuclear project continues to be the best long-term baseload generation option for Florida when evaluating cost, potential carbon regulation, fuel-price volatility, and the benefits of fuel diversification."

Anti-nuclear groups call candor refreshing

Jim Warren, an attorney for NC Warn, a North Carolina based anti-nuclear group, told this blog that the announcement about the new schedule and cost estimate "is a refreshing contrast to unrealistic low-ball estimates we see from other reactor projects."

He said the announcement shows that the price is going up event before the utility has received its license. He added that Progress Energy's customers would be better served by investment in co-generation of electricity and steam from natural gas as well as energy efficiency.

Asked whether the 10-year record low of natural gas prices is likely to continue, Warren observed that "people predicting the price of natural gas have had a lot of trouble with their numbers."  

He said that Progress and the Florida PSC "have a point" that natural gas prices won't stay low forever. 

Warren's group is part of a coalition of anti-nuclear organizations that have asked the U.S. Court of Appeals in Washington, DC, to stop the construction work at Southern's Vogtle site, which is also building two AP1000s.

Warren said the basis of the appeal is that the NRC failed to take NEPA into account relative to Fukushima safety issues. These are (1) multiple reactors at a site, (2) spent fuel storage, and (3) seismic risk. The NRC rejected the contention the groups filed to over turn the license the agency issued last February for the two new reactors.

Fuel prices and sources

Carbon taxes are have unlikely prospects in the near-term as republican members of the House and Senate regard then with great hostility. However, the issues of fuel price and source diversification seem to be the ones that gets the most attention.

The utility said in its news release that "over dependence on any fuel, e.g., natural gas which supplies 60% of Florida's needs for electricity generation, "can expose customers to fuel spikes and supply disruptions.

Progress made common cause with the Florida PSC which it said has cited the "growing lack of fuel diversity" in the state "as a major strategic concern."

In plain English, the utility and the regulator are described here as worried that natural gas prices, which are running at 10-year lows, e.g., $2.30/MBtu, could spike in future years or have supply problems or both.

The new schedule and cost estimates were made public as a result of the utility filing its annual nuclear cost recovery numbers with the Florida Public Service Commission (PSC).

According to the NRC, the schedule for the combined construction and operating license for the plants indicates a decision by the regulatory agency in 2013. Progress has not said whether it will ask for the agency to change the licensing schedule relative to the new, later planned start date.

Crystal River reactor containment repairs

Progress is working on an engineering analysis of the technical steps and costs to fix the broken concrete in the containment building at its Crystal River reactor. The unit has been shut down since Fall 2009. The containment structure was damaged while Progress was replacing the steam generator for the reactor.

In a rate agreement with the Florida PSC, Progress committed to starting the repairs by December 2012 and having the reactor back in revenue service by 2014. It faces substantial financial penalties if it fails to meet these milestones.

As part of its rate agreement with the Florida PSC, the utility is limited in terms of how much it can charge for work on the new reactors and for repairs to Crystal River. The repair costs are estimated by Progress at between $900 million and $1.3 billion. The revenues from the rate agreement that would be allocated to new reactor development are quite low compared to the cash flow the utility would have needed if it had retained the old schedule.

Along with the plan to to put a repaired reactor containment building back in service, Progress wants to execute a power uprate for the reactor from 900 to 1,080 MW.

Levy site gets clean environmental bill

The Nuclear Regulatory Commission and the U.S. Army Corps of Engineers (USACE), Jacksonville District, have completed the Final Environmental Impact Statement (FEIS) for the Combined Licenses (COL) for the proposed Levy County Units 1 and 2.

The NRC concluded in the FEIS that there are no environmental impacts that would stand in the way of issuing the COLs for construction and operation of the proposed reactors at the site on Florida's west coast.

The NRC’s publication of the FEIS is only part of the overall review of the Levy County project. The agency staff continues to compile its final safety evaluation report (SER), which will include recommendations from the NRC’s Advisory Committee on Reactor Safeguards, an independent group of nuclear safety experts.

The NRC’s Atomic Safety and Licensing Board is currently conducting a proceeding on challenges to the staff’s environmental review. The objections were raised by the Southern Alliance for Clean Energy (SACE).

The NRC’s five Commissioners must also conduct a mandatory hearing regarding the application and the staff’s review. All of these items must be completed before the NRC can reach a final decision on the COL application.

Progress Energy submitted a COL application July 30, 2008, seeking permission to construct and operate two AP1000 nuclear reactors at the Levy County site. The AP1000 is a Westinghouse 1,100 megawatt electric pressurized-water reactor design the NRC certified in December 2011.

Duke merger still pending

Last January Progress Energy and Duke Energy (NYSE:DUK) agreed in principle to a merger said to be worth almost $14 billion. Duke is developing the William States Lee III power station in South Carolina which references two Westinghouse AP1000 reactors.

It is not clear whether the combined firm would proceed with both the Levy County and Lee projects at the same time. Duke has estimated the cost of the new reactors at the Lee site at $11 billion. The NRC licenses for the Lee reactors are due in 2013. Duke has said the start date for the Lee units would be 2020 and 2021.

The utility isn't waiting until then to boost its electricity supply.  In July 2011 Duke signed a letter of intent to buy a 5-10% stake in the twin AP1000s being built at Scana's V.C. Summer plant in South Carolina.

And Duke isn't the only utility buying up stakes in the Scana reactors. Dow Jones News Wires also reported these developments.

In February 2011, Jacksonville, Fla. municipal utility JEA agreed to pay $7.5 million for an option to buy up to one-fifth of the Lee plant after Duke obtains a license to build it.

In March 2011, Santee Cooper signed a letter of intent with Florida municipal utility Orlando Utilities Commission to explore selling that utility a 5% to 10% stake in the V.C. Summer project.

Neither Progress nor Duke would comment on future plans for their respective reactor projects relative to the merger since it has not taken place yet.

A key question for the two firms is whether the combined business has the financial and organizational resources to sustain construction of four reactors at the same time.

The closing date for the merger has been postponed to July of this year pending approvals from state and federal energy regulatory agencies on the market impacts of the merger.

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