[NukeNet] nuclear plant economics and applications

[Diane Farsetta]

http://www.businessweek.com/ap/financialnews/D8RO03VG0.htm
September 18, 2007
Utilities press for new nuclear future
By JOHN WILEN
NEW YORK

The current turmoil in credit markets is unlikely to derail plans by  
power companies to begin ordering the first new nuclear plants since  
cost overruns and public opposition virtually killed the industry  
three decades ago.

Nearly 30 years after Three Mile Island, Entergy Corp., Dominion  
Resources Inc., Exelon Corp. and the Tennessee Valley Authority are  
expected to be among the first to seek regulatory approval to build  
new plants. Constellation Energy Group has already filed a partial  
application with the Nuclear Regulatory Commission, which expects up  
to seven requests this year and 28 by 2009. The first plants could be  
online by 2014 or 2015.

"I think investors are relatively positive on companies that are ...  
planning the next round of nuclear plants," said Barry Abramson,  
analyst and portfolio manager at GAMCO Investors Inc., in Rye, N.Y.  
"The numbers seem to work."

Utilities see in nuclear plants an opportunity to affordably meet  
demand for electricity, which the Energy Information Administration  
is forecasting will grow by 42 percent by 2030. High natural gas  
prices and the prospect of taxes or constraints on greenhouse gases  
are making gas- or coal-fired plants less attractive. New modular  
designs and a streamlined regulatory process further strengthen the  
argument for nuclear power.

"At the end of the day, we believe ... nuclear will be cost- 
competitive," said Randy Hutchinson, senior vice president of nuclear  
business development at New Orleans-based Entergy.

But this nuclear renaissance faces challenges. No company has lined  
up financing, and their ability to borrow affordably will depend on  
federal loan guarantees and state rules about when utilities can hike  
rates to pay for construction. Construction costs are rising due to  
growing global demand for raw materials. And activism, an accident or  
terrorist attack could stoke public opposition.

Still, reactor vendors, such as General Electric Co., Toshiba Corp.- 
owned Westinghouse Electric Co. and France's Areva Group, in a new  
joint venture with Constellation, are positioning themselves to  
profit. GE, in joint venture with Japan's Hitachi Ltd., sees its  
annual reactor business growing from $1.1 billion to $8 billion over  
the next decade.

To strengthen its hand, the industry is pushing legislation to expand  
federal loan guarantees, available for 80 percent of plant costs.  
Utilities are also lobbying state lawmakers to let them raise rates  
to recover construction costs. Florida and Louisiana, for example,  
have passed such measures.

State officials are reluctant. "I just don't want to ... give them a  
blank check and say, build a plant and we can talk about the cost  
later," said Nielsen Cochran, chairman of the Mississippi Public  
Service Commission.

Some states are allowing such rules subject to "prudence reviews,"  
said Diane Munns, executive director of the Edison Electric  
Institute's retail energy services group.

The Energy Department is also helping, paying half the cost of three  
early applications, including $5.5 million of the $11 million Entergy  
has spent so far preparing an application for a new reactor in Port  
Gibson, Miss., site of its existing Grand Gulf plant. GE has received  
$46 million in incentives since 2004, and expects a total of $250  
million by 2010.

Experts doubt the current credit market dislocations will affect  
nuclear plant financing. Lenders will view reactors as safe and  
desirable investments because of the federal guarantees and state  
cost recovery rules, and because they'll be built by established  
utilities with long track records of operating power plants.

Most utilities will invest some of their own equity in the projects,  
and many will finance the plants on their balance sheets -- paying  
for them out of cash flows and borrowings not tied directly to any  
one project.

"I would argue that you're investing in an entire company," said  
Standard & Poor's analyst Dimitri Nikas. "The issue will not be tied  
to a specific asset."

Nuclear plants still use low-grade nuclear reactions to generate heat  
and create steam or pressurized water to spin turbines. But instead  
of the one-of-a-kind designs the new plants will use interchangeable  
modular designs. Gravity, instead of pumps, will move water in an  
emergency and new alloys and digital controls will also improve  
operations and safety. The 1979 accident at Pennsylvania's Three Mile  
Island plant began when cooling system pumps and valves failed.

The NRC has already approved two Westinghouse designs. One GE-Hitachi  
design has been approved, another is pending. Areva plans to submit a  
design for approval soon.

Nuclear plants cost more than conventional plants, but are cheaper to  
operate. A new 1,000-megawatt reactor would cost $2.1 billion in 2006  
dollars, compared to $1.3 billion and $600 million, respectively, for  
comparable coal and natural-gas plants, according to EIA estimates.

But the average cost of nuclear-produced electricity was 1.72 cents  
per kilowatt hour in 2005, versus 2.21 cents for coal-fired plants  
and 7.51 cents for natural gas plants, says the Nuclear Energy  
Institute, a trade group.

Weighing in nuclear power's favor is utilities' belief that the  
government will constrain or tax greenhouse gases, which would  
significantly increase operating costs at conventional plants.  
Nuclear plants emit greenhouse gasses, but far less than conventional  
plants.

Also pushing utilities toward nuclear power are new regulations that  
let companies apply for a single construction and operating license.  
In the past, the licenses were separate.

"You might spend a few billion dollars, and then you're at risk of  
not getting an operating license," said NRC Chairman Dale Klein.

Long Island's Shoreham Nuclear Power Station, for instance, was  
completed in 1984 for $6 billion but never opened due to community  
opposition.

Licensing isn't cheap, either. Hutchinson estimated the process can  
cost $50 million to $100 million.

"Bottom line, in developing a nuclear project, you could be spending  
several hundred million dollars just to keep the option open,"  
Hutchinson said.

Critics say the industry is overstating the new plants' advantages,  
and ignoring the unresolved issue of spent nuclear fuel.

"There clearly are some benefits to relying on gravity over electric  
motors and pumps," said Paul Gunter, director of the reactor watchdog  
project at the Nuclear Information and Resource Service, which  
opposes nuclear power plants. "But there are no guarantees that  
terrorism or an accident won't penetrate one of these new designs."

Indeed, radioactive water leaked into the Sea of Japan from buildings  
housing reactors built to one of GE's newer designs after July's  
magnitude 6.8 earthquake struck Japan's Kashiwazaki-Kariwa Nuclear  
Power Plant.

Community opposition could stop projects. Steel parts could cause  
another potential bottleneck: Most necessary large forgings can only  
be made at Japan Steel Works, which can supply only 7 to 8 plants a  
year, Hutchinson said.

Still, GAMCO's Abramson says investors are comfortable the industry  
and NRC have addressed the problems that caused cost overruns last time.

"I think investors know that you can't find anything with zero risk,"  
he said.


http://money.cnn.com/news/newsfeeds/articles/newstex/ 
AFX-0013-19658971.htm
Devil's in the details for nuclear power
Sep. 18, 2007 (Thomson Financial delivered by Newstex) --

WASHINGTON (AP) - The promise of a U.S. nuclear renaissance will  
start with thousands of pages in each regulatory application, and  
differences of opinion about the intricate process have already  
surfaced before the first has been filed.

'We've had pointed conversations on the level of detail' required,  
based on a 900-page guide the government updated in the last year,  
said Joe Colaccino, a reactor design expert at the Nuclear Regulatory  
Commission. 'It's the one (issue) we're working on the hardest.'

The NRC also has issued or revised hundreds of guidance documents,  
and the utility industry has raised substantial concerns in areas  
including radiological monitoring of wastewater and vibration  
assessments for reactors during startup, said Adrian Heymer, senior  
director of new plant deployment at the Nuclear Energy Institute, a  
Washington-based trade group.

Industry wants a good rationale for a change instead of 'someone  
thought it was a good idea,' said Heymer, who quickly added that  
there are 'no showstoppers' and he expects the first new plant to  
begin operating in 2015.

But a March report from the nonpartisan Congressional Research  
Service predicted the overall review and construction process would  
take at least 10 years and closer to 15 years for several reasons,  
including new procedures. Questions about environmental issues and  
safety evaluations also could cause delays.

Kenneth Hughey, senior manager of business development at Entergy  
(NYSE:ETR) Nuclear Inc., which is pursuing a license at its Grand  
Gulf plant in southwest Mississippi, expects the NRC to take the full  
42 months to review the first few applications. But he said the  
timeline should shorten if industry builds standardized plants.

'They do need to get more efficient in their review process,' said  
Bryan Dolan, vice president of nuclear plant development at Duke  
Energy. (NYSE:DUK PRA) (NYSE:DUK) The government reviews should take  
no more than 24 months, he said.

NRC Chairman Dale Klein has said the reviews should quicken once the  
first license for a certain reactor design is approved. In June, the  
commission approved some internal task force recommendations designed  
to conserve resources and trim the reviews by between six months and  
15 months.

But one company already has delayed its nuclear plans. Progress  
Energy in May told the NRC that if it opts to build a new reactor in  
Wake County, N.C., the plant would be online in 2018 or beyond, two  
years past where its initial forecasts.

Still, the NRC is training hundreds of workers to process the 19  
applications expected through 2009.

Bill Borchardt, director of the NRC's Office of New Reactors, said  
the agency is establishing processes to apply its regulatory  
decisions repeatedly so subsequent reviews will be shorter.

Each application will include about 2,500 separate tasks that require  
requests for additional information. About 100 government employees  
will work on each application and every reviewer will be managing  
tasks on multiple projects.

'We don't have anybody with any dead time,' Borchardt said. The  
Office of New Reactors started with about 85 people late last year  
and is expected to grow to 430 by the end of 2007.

'This is a long haul activity, this isn't something we can just lock  
the doors and work 24/7 for a week,' he said.