Nuclear Reactors 17 - Prepaid Debt
The economic viability of nuclear power is very problematic. I have mentioned a number of issues in past posts that question whether or not nuclear power can really compete with other forms of energy on a level playing field. The residents of three states are currently confronted with very serious questions about the wisdom of investing in new nuclear power plants.
South Carolina, Florida and Georgia have passed laws that allow nuclear power companies to charge in advance for the construction of new reactors. Iowa, Missouri and Utah are currently considering such laws. This policy is called “advanced cost recovery” which strikes me as a bit of an oxymoron. The phrase suggests that something can be recovered in advance.
A major problem with this system of financing nuclear plants is that fact that such plants take years to license and construct. During the time required, the sources and economics of electrical power generation can change dramatically. A second problem is the fact that the construction of nuclear reactors is prone to huge cost overruns. A third concern is that some nuclear reactor projects that consumed millions of dollars were abandoned part way through and never completed. It would be nice to think that the money that energy consumers paid up front for such projects could be recovered from the company that was constructing the reactor but one impediment for such recovery could be a bankruptcy of the company.
Despite the impact of the Fukushima disaster on the public enthusiasm for nuclear power, the United States and some other countries seem to be dedicated to building new reactors in spite of all the good arguments for abandoning nuclear power. There has been a lot of press in the U.S. about the licensing of new nuclear reactors in the U.S. including two new reactors at the existing Vogtle plant in Georgia and a proposed plant in Levy County, Florida. Construction has barely begun on the Vogtle reactors and there have already been cost major overruns. The estimation of the cost for the proposed Levy reactor in Florida has been steadily escalating. Also in Florida, the cost estimates for repairs to the Crystal River reactors has risen so much that the operators have announced that they are not going to repair the reactor and will just shut down the site.
In these three cases, the rate payers have already been charged over six billion dollars for the estimated construction costs. There have been calls for the cancellation of the Vogtle and Levy construction project although money has already been spent. It has been estimated that if the projects proceed, the excess cost beyond the original price tags could be as much as twenty billion dollars. With the availability of cheap natural gas depressing the price of electricity in the U.S. and the closing of the Kewaunee reactor in Wisconsin because it could not compete in the energy market, the Vogtle and Levy reactors may not be able to produce electricity at the market rate when and if they are finished. If the projects are shut down, the laws in place do not allow for the recovery of the six billion dollars already collected. So the rate payers in those areas have to choose between accepting the loss of the six billion dollars or overpaying more than twenty billion dollars for reactors that may not be cost competitive when they are finally completed.
Picture of Vogtle construction site from Charles C Watson, Jr.:
