Nuclear Cost Estimates
Location: New York
Author: Pam Radtke Russell
Date: Tuesday, June 24, 2008
The rising cost of materials and labor has the potential to put an end to
the nuclear renaissance before it ever gets started. Company estimates that
have been released show costs for an individual unit could be as high as $12
billion, and one consultant expects those estimates could rise if material
prices continue to escalate.
Florida Power & Light told the Florida Public Service Commission late last
year that the cost for building new units at Turkey Point in south Florida
could be up to $8,000 per kilowatt -- or $24 billion for two units. Earlier
this year, Progress Energy pegged its cost estimates for two new units on
Florida's west coast at about $14 billion plus $3 billion for transmission
and distribution. While Progress' estimates are lower than FPL's, they are
more than twice as much as the $2,000 per kilowatt that industry contractors
promised for new nuclear plants just two years ago.
"There's a lot of sticker shock," says Jim Harding, an energy consultant who
helped the Keystone Center develop its June 2007 report, Nuclear Power Joint
Fact-Finding. That report concluded that overnight estimates for a new
reactor would be $2,950 per kilowatt, or between $3,600 and $4,000 per
kilowatt with interest. That estimate, generated with the input of 27
participants, including power companies and nuclear contractors, is already
outdated because of the rapidly rising cost of metals, forgings, other
materials and labor needed to build a new nuclear unit, Harding says.
In October, Moody's Investor Service estimated total overnight costs of a
new nuclear plant, including interest, would be between $5,000 and $6,000
per kilowatt. But even those numbers are only guesses, Moody's notes in its
report, New Nuclear Generation in the United States. "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."
While the Florida PSC ultimately gave FPL approval to move forward with the
Turkey Point project and is evaluating Progress Energy's proposal, other
companies, such as South Carolina's SCANA, are still evaluating whether
nuclear is the right option.
"It's not an easy decision for a utility to make going forward," says
Harding. The decision to move forward with building a new nuclear plant is
going to be a real "head scratcher" for companies to determine whether they
can finance such a large project and whether it will be the most
cost-effective resource, he adds.
Best Option
Adrian Heymer, senior director for new plant deployment for the Nuclear
Energy Institute, says that many companies are regularly evaluating
conditions. He says that new nuclear plants are still the best option for
new baseload generation, but expects that not all 17 companies with plans
for new nuclear generation will move forward.
"Some people may run the evaluation and say no, others may say yes, this is
for us," Heymer says. Moody's report says it expects only one or two new
plants to be online by 2015 -- the target date for many of the companies
that have proposed new nuclear units.
The cost to get firm estimates may turn some companies away from pursuing
nuclear power. A company must spend at least six months and several million
dollars to get a number it is comfortable with, Harding maintains.
Despite the cost issues, new baseload generation is a necessity in many
places in the country. If new nuclear plants aren't built, other power
plants will have to be built.
"If not nuclear, then what?" asks the nuclear industry's Heymer. Coal, gas
and other fossil-fueled power plants all use the same raw materials that are
escalating in price. Moody's report notes that the same cost uncertainties
facing nuclear plants are also problematic for new coal plants.
"It's not so much how much the plant costs, it's what's the price of
electricity is when the plant comes online and how does that compare with
natural gas, that's really the important question," says Heymer.
Yet consultant Harding says that he estimates that operating cost per
kilowatt-hour for a new nuclear plant will be 30 cents per kilowatt-hour for
12 or 13 years until construction costs are paid down, at which point
operating costs will drop to 18 cents. Harding adds those costs are a tough
sell when concentrated solar power and wind power can be had for about 14
cents per kilowatt-hour. He said he believes that those renewable resources,
as well as natural gas, and perhaps LNG, might prove competitive to a new
nuclear plant.
In the end, the cost of a new nuclear plant won't be known until it comes
online. And Harding expects that if prices continue to rise, even FPL's high
estimate could be on the low end. "There's no real escalation in their
numbers moving forward," he says, "just nominal inflation of 2.5 percent."
Nuclear energy's potential could therefore be undercut by the high price of
construction. And while the same phenomenon exists with respect to other
energy forms, the nuclear industry is already battling a generation-long
handicap.
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