Japanese disaster dims future of nuclear power

Mar 28 - St. Louis Post-Dispatch

The future of 30 proposed nuclear reactors in the United States, including a second at Ameren Missouri's Callaway plant, has been thrown into limbo while the world anxiously watches efforts to control the spread of radiation half a world away.

Even before the crisis in Japan, dubious economics jeopardized nuclear energy's second act in the United States. Now, the potential for tougher safety requirements and regulatory scrutiny threatens to pile on more uncertainty and re-ignite a public backlash against a technology that lately has been viewed as a prime defense against global warming.

The shifting landscape of politics and public opinion over the past three weeks recalls the hysteria surrounding nuclear power in decades past, after incidents at Three Mile Island in 1979 and Chernobyl in 1986.

Dozens of permitted reactors were canceled after Three Mile Island -- including the original plans for a second Callaway reactor, first drawn up more than three decades ago. Regulators have yet to sign off on a new plant since. Even the first Callaway project had to be re-engineered on the fly to meet new safety rules, furthering construction delays and driving up already inflated costs.

Now, the nuclear industry is struggling to prevent a new but familiar crisis of confidence.

Even nuclear energy's harshest critics concede that events in Japan won't interrupt operation of current nuclear power plants. But financial and energy policy analysts believe the fallout from Japan could dim the industry's prospects for years to come.

"This is a substantially worse accident than Three Mile Island, so it seems inconceivable that there won't be a reassessment in some areas," said Peter W. Bradford, a member of the Nuclear Regulatory Commission during the 1979 crisis who now teaches environmental law at the University of Vermont. "I don't see how there cannot be a major reappraisal."

Public and political pressure could make it tougher to permit and site new reactors. Heightened regulatory scrutiny could mean delays or extended licensing reviews for plant developers and additional costs for a technology challenged by steep capital and financing costs.

"A renewed public focus on the inherent risks of nuclear power will demand as much," credit ratings firm Standard & Poor's said in a March 15 report. "This could result in delays in license-extension approvals and deteriorating economics for new plant construction."

Even before Fukushima, the oft-referenced U.S. nuclear renaissance was stuck in neutral.

New reactors have been proposed in 14 states, but development efforts have slowed or stalled in many cases because additional electric generation isn't needed or because developers can't get them financed.

The biggest obstacle to building new nuclear plants has been the staggering upfront cost.

That's the case in Missouri, where St. Louis-based Ameren asked the NRC to suspend a review of its construction and operating license application in 2009 after efforts to repeal the state's construction work in progress (CWIP) law failed. The measure would have eliminated a current prohibition against charging electricity ratepayers to finance power plant costs before the plant is completed.

Ameren has said it cannot build the plant without a repeal of that law, even though the utility has applied for a federal loan guarantee to help finance construction. The utility has avoided answering detailed questions about the potential costs of a second nuclear plant at Callaway, calling the discussions premature.

The Energy Information Administration, the statistical arm of the Department of Energy, recently estimated that a nuclear plant would cost $5,539 per kilowatt -- a significant jump from its own estimate a year earlier.

At that price, a 1,600-megawatt project such as that being contemplated by the utility would carry a price tag of almost $9 billion -- roughly equivalent to the market value of the state's two largest utilities (Ameren Corp. and Great Plains Energy Inc.) combined. And that's in today's dollars. A new Ameren plant is still years away.

Even John W. Rowe, chief executive of the nation's largest nuclear operator, Chicago-based Exelon Corp., recently questioned the wisdom of building new reactors, while singing the praises of natural gas as an alternative to coal.

In a speech to the conservative American Enterprise Institute three days before the Japan earthquake, Rowe said that "natural gas is queen" -- and that doubling or tripling the size of the current nuclear fleet would require $300 billion to $600 billion in government subsidies, because the plants aren't economic at today's natural gas prices.

One way some nuclear developers are seeking to lessen the credit risk is CWIP financing, a subject that's been controversial in Missouri and other states. Indeed, Missouri's prohibition against such financing was passed in 1976 amid a grassroots push to prevent construction of a second reactor at the Callaway site.

The federal government's $18.5 billion nuclear loan guarantee program has also been promoted as a means to help jump-start the nuclear revival in the face of financial uncertainty.

By providing billions of dollars in loan assurances, the Department of Energy loan guarantee program was supposed to help the first of the next wave of nuclear plants across the finish line. If those projects could be finished on time and on budget, the theory goes, then Wall Street would be less leery of the risks of new reactor designs and step up with billions more dollars to help fund the next wave of plants.

Opponents say that the nuclear loans didn't make sense before the crisis in Japan and that they certainly don't now.

The Fukushima accident "has demolished the entire premise of the nuclear loan program," said Michael Mariotte, executive director of the Nuclear Information and Resource Service, an anti-nuclear group. "Not only are investors concerned about cost overruns and delays, now Wall Street and private investors got another reminder that multibillion-dollar reactors can turn into multibillion liabilities within hours."

Even in the aftermath of Fukushima, an expansion of nuclear power remains a key part of President Barack Obama's energy policy -- an ambitious plan to generate 80 percent of the nation's electricity from "clean energy sources" by 2035.

The president has proposed adding $36 billion to the nuclear loan program in next year's budget. Given the lingering budget crisis and events in Japan, experts say that seems less likely now.

Steve Kerekes, a spokesman for the Nuclear Energy Institute, the industry's main lobbying group, said it was premature for anyone to speculate on what, if any, consequences the events in Japan would have on the future build-out of nuclear projects in the United States.

"It's just way too soon," he said. "Let's keep in mind the current timetable we're on."

Developers have only begun site work on two twin-reactor projects in Georgia and South Carolina, but they are still at least 10 months from obtaining construction and operating licenses, Kerekes said. Regulators are also reviewing applications for an additional 16 reactors that could be built at some point over the next 15 years.

"It's not a very rapid expansion pace," he said. "And the pace that we're on certainly allows the lessons that we take away from Fukushima to be understood and applied."

Just as with many other developers, the recession and depressed electricity demand bought Ameren more time to make a decision about a second Callaway reactor. The utility hadn't planned to begin construction for years anyway. Now, even that time frame has been pushed back.

Recent opinion polls suggest they may need that time to win back a skeptical public.

A March 15 Gallup poll showed seven in 10 Americans were concerned about a nuclear disaster occurring in this country, and 39 percent said they were "very concerned." A CBS poll showed that support for building nuclear plants had fallen to 43 percent -- even lower than it was immediately after Three Mile Island.

Bill Miller, a nuclear engineering professor at the University of Missouri-Columbia, said perception problems had less to do with the industry's actual safety record than knowledge about nuclear energy and the true risks. Terms such as "radiation" and "meltdown" get tossed around casually by the media and whip people into a frenzy.

"We say 'nuclear,' and we don't know if we're talking about a bomb going off or nuclear energy," he said.

Miller maintains that the U.S. nuclear industry that exists today is substantially more mature than it was 30 years ago, not to mention safer.

Keenly aware of how public perception can translate into political power, nuclear operators have gone to great lengths to assure the public that plants are safe from natural disasters and that they have competent backup systems to prevent leaks of radioactivity in the event of a power loss such as the one that crippled Japan's Fukushima Daichii nuclear complex. New Orleans-based Entergy purchased a full-page advertisement in the New York Times last week to highlight comments by Energy Secretary Steven Chu that its Indian Point plant in New York and all other U.S. nuclear plants remained safe.

Top executives at Ameren held a media briefing at the company's headquarters a week after the disaster to answer questions and explain the Callaway plant's redundant safety and backup power supplies would prevent a similar crisis at the facility, which lies just 175 miles from the New Madrid Seismic Zone.

Adam C. Heflin, the utility's chief nuclear officer, acknowledged the potential for tougher safety requirements, but didn't speculate on any potential financial impact.

"I think the public concern level realistically will go up," he said. "It probably should go up. This is a serious incident. The reality, though, in my mind, is that nuclear power is still a very safe way to generate electricity."

No matter how safe the nuclear industry and regulators are convinced the current plants are, they've promised to meticulously review plant and process safety and apply any "lessons learned" in Japan. And that will inevitably slow the pace at which nuclear construction and operating license reviews proceed, said Bradford, the former NRC member.

"You can't fulfill pledge to implement lessons learned before you even know what they are," he said.

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