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Duke
Energy's deep pockets are giving it the wherewithal to help lead the
nuclear revival. With ample liquidity and access to capital markets, it is,
indeed, in position to possibly build its own facilities.
Despite
the high cost of construction and the otherwise dreary times, the industry
is fighting for a nuclear resurgence. Its strategy to push ahead is
premised on pending legislation to cap carbon emissions and the need to
refurbish the nation's generation infrastructure with clean-burning power
plants that can run all the time.
Proponents
of nuclear energy furthermore say that future reactors will be safer, more
cost effective and highly efficient. That will give the industry a
regulatory advantage, giving those developers a better chance of raising capital
for their projects.
But
Duke and others are not oblivious to the risks. Estimates are that such
capital-intensive plants will cost as much as $12 billion to build. And
while the public appears to be warming to nuclear energy, any utility would
be unwise to underestimate the civic opposition and the potential delays in
construction.
"The
biggest risks to the nuclear portfolios are the time required to license
and construct a nuclear unit, potential for even lower demand than
currently estimated, and the ability to secure favorable financing,"
Duke wrote in a presentation to the North Carolina Public Utility
Commission, in its attempt to get permission to build a plant outside Charlotte.
According
to the Nuclear Energy Institute, applications for 26 new nuclear units are
now pending with federal regulators. While not all will get built, it does
say that the industry is hoping that at least four such plants are up and
running in the next decade. That would be necessary not only to comply with
expected clean air rules but also to meet the predicted increase in
electricity demand of 21 percent by 2020.
Congress,
too, understands the benefits of nuclear energy. It has previously
authorized billions in tax credits as well as millions in insurance to
protect against delays in construction that are directly tied to regulatory
logjams. And it has promised millions in loan guarantees. Among the
utilities that see potential: Southern Co.,
TVA, Dominion, Entergy, FPL Corp. and Progress Energy.
"Carbon-free
nuclear power is a strategic asset in our statewide effort to become
energy-independent, to reduce our reliance on more volatile-priced fossil
fuels, and to provide a balanced approach to meet the challenges of growth
and climate change," says Vincent Dolan, head of Progress Energy Florida.
While
key market fundamentals are favorable, even Duke knows to tread lightly.
During the 1970s and 1980s, the utility had wanted to build five such
plants, notes the Charlotte Observer. While it was able to complete
three of them, the paper says that it was forced to discontinue its plans
to build another two. And although it was able to pass through some costs,
it had to eat the rest.
Deep
Skepticism
In
fact, no new plants have been started in a couple decades -- something that
is a direct result of the accident at Three Mile
Island in 1979. The Tennessee Valley Authority was the last
one to activate a new nuclear reactor -- Watts Bar Unit 1 in Spring City, Tenn.
-- in 1996. That reactor ended up costing $6 billion to build after
construction and financing in a process that took 20 years.
That
risk is ever-present. Consider the two Florida-based utilities that want to
build there: FPL estimates that the two plants it would construct could run
as high $8,000 per kilowatt, or $24 billion for both. Progress says that
the two units it would like to build could cost $14 billion. In either
case, it not only demonstrates the financial hurdles that utilities face
but also that the industry's earlier cost predictions of $2,000 per kilowatt
are outdated.
"We
believe the ultimate costs associated with building new nuclear generation
do not exist today and that the current cost estimates represent best
estimates, which are subject to change," says a 2007 report issued by
Moody's Investor Services that forecasts the cost per kilowatt to be
$5,000.
The
Nuclear Energy Institute admits that overcoming the financial impediments
will be challenging. But once a plant is up and running, it says that the
operations and maintenance costs are low, or at least half those of coal
and natural gas.
Meantime,
a University
of Chicago study says
that the principal economic barrier to nuclear power will be the ability to
address the costs associated with building and operating the first few
nuclear plants. Those early plant costs, which can include
"first-of-a- kind" engineering costs as well as the construction
and financing expenses, disappear by the time a third or fourth plant
begins operations.
"The
nuclear renaissance has probably already started," says Ferdinand
Banks, an energy professor in Sweden. "What I want is
for nuclear to be considered a public good like streetlights and parks and
police and armies. And if Wall Street can't provide the money then the
taxpayers will have to."
The
pro-nuclear forces are out in full. And while the opposition is less
intense than a few decades ago, a nuclear revival is anything but certain.
To win, the industry must not only persuade the still-resilient skeptics
but it must also convince the timid financiers. As attention shifts to
creating clean generation and to meeting future demand, their odds will
become better.
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