Nuclear power history repeats itself

Posted by Christine, April 26, 2012

Robert Trigaux, of the Tampa Bay Times, reports:

The failure of the U.S. nuclear power program ranks as the largest managerial disaster in business history, a disaster on a monumental scale.

The rant of an antinuclear activist?

Hardly. It was the first sentence of an in-depth story in a conservative business magazine, Forbes.

In 1985.

Forbes‘ point then — that out-of-control costs and poor decisionmaking doomed the nuclear power industry — may prove as relevant in 2012 as it was a generation ago. And it points up a looming question as Tampa Bay faces its own $22.4 billion nuclear project:

Is the U.S. nuclear power industry poised to repeat its own troubled and, at times, inept history?

• • •

Eerie parallels link then and now. Just as today, it was an age that began with great nuclear optimism.

In 1954, the chairman of the Atomic Energy Commission, Lewis Strauss, predicted that nuclear technology would let “our children enjoy electrical energy … too cheap to meter.”

By the 1960s and early 1970s, utilities stumbled over one another to order about 50 nuclear plants. The industry assumed U.S. demand for electricity would skyrocket, especially in places like fast-growing Florida, and justify an investment boom in nuclear power.

A lack of experience and standardized designs caused many utilities to suffer soaring costs. Some plants had to be redesigned. Parts of others repeatedly were rebuilt or reinforced. Major deficiencies began sprouting up — a reactor installed backward, a control panel that caught fire, defective concrete. In one case, the Nuclear Regulatory Commission approved designs for a reactor even though the utility was building a different type of reactor.

“The bungling the industry is capable of boggles the mind,” the Forbes article stated. “The ineptitude had no pattern, and virtually anything could go wrong.”

Progress Energy, then known as Florida Power, jumped into the fray in the early 1970s, choosing to build its first nuclear plant by the Gulf of Mexico in Crystal River, located in Citrus County about 90 miles north of Tampa Bay.

At first, Florida Power said its nuclear plant would cost $150 million to $200 million. Final cost: $375 million.

At least it got built.

Mismanagement killed off other projects. Then, in the early 1970s, the “Arab oil embargo” crisis struck. That spurred high inflation in the United States, driving up costs as many utilities struggled to complete their nuclear plants.

Then came 1979’s partial meltdown of the Three Mile Island nuclear plant in Pennsylvania. The resulting safety backlash led to rising costs that drove the price of a nuclear plant closer to $2 billion.

The industry canceled 75 nuclear power plant projects between 1978 and 1985. Some utilities simply ran out of cash to finish their plants. Back then, they could not force their customers to help pay to finish them.

Forbes said wildly differing prices to build the plants amounted to “a prima facie case for mismanagement in the first degree.”

Financing for new nuclear projects disappeared.

“The truth is that nuclear energy was killed not by its enemies, but by its friends,” Forbes wrote.

The final nail came in 1986 with the meltdown at the Chernobyl plant in Ukraine.

Charging customers

Fast forward to 2005. Congress passed the Energy Policy Act, authorizing tax incentives and loan guarantees to encourage new energy sources — including nuclear power.

President George W. Bush signed the bill into law. President Barack Obama proposed expanding the program.

Fifteen power companies jumped at Uncle Sam’s sudden financial generosity, announcing plans to build at least 29 plants. That rush ushered in an era known as the “nuclear renaissance.”

Legislatures in mostly Southern states — Florida, Georgia and South Carolina among them — passed laws allowing power companies to shift much of the risk of building a nuclear plant to ratepayers.

By charging customers in advance to cover the expense of building nuclear plants, projects have gone forward that otherwise would never have found financial backing.

The industry also adopted several standardized nuclear plant designs, including the popular Westinghouse AP1000, a move to help avoid the construction fiasco that bedeviled the industry 30 years earlier.

Despite those advantages, the euphoria did not last.

Today, only two nuclear projects — in Georgia and South Carolina — are under construction and likely to be built in the near future. Both already report construction delays and cost overruns. Elsewhere, many other proposed plants are already mothballed. A handful of utilities continue modest preconstruction site work on about half a dozen U.S. projects while they await a license. Their fate is unclear.

What’s killing the renaissance this time? Critics point to three familiar culprits: high costs, safety concerns and mismanagement.

Progress Energy’s project in Levy County is becoming Exhibit A of soaring expenses.

In 2006 the utility, which provides electricity to west-central Florida, announced the plan to build the two-reactor site. The project quickly stalled. Progress originally estimated it would cost $5 billion and be up and running by 2016. Now Levy’s price tag has soared to $22.4 billion with start-up in 2022 or later.

Progress failed to gain federal loan guarantees, which could have kept costs lower. It has yet to secure an operating license and faces multiple lawsuits and environmental challenges with the site it selected to build the plant.

And the $22.4 billion price tag may already be outdated. Last month, the Nuclear Regulatory Commission said proposed projects may face new delays and costs as the agency analyzes U.S. nuclear plant safety based on lessons learned from Japan’s 2011 meltdown at its Fukushima Dai-ichi nuclear plants. The disaster in Japan, like Three Mile Island and Chernobyl, has also forced the U.S. nuclear industry to again fight the public perception that nuclear isn’t as safe as other energy sources.

No matter what, Progress will spend at least $1.1 billion on Levy, a tab its customers are already paying as part of their electric bills.

As the Tampa Bay Times reported last month, Progress will make $150 million on the Levy plant even if it cancels the project right now. And it will clear $3.5 billion if it finishes the job at $22.4 billion.

Progress recently negotiated the right to cancel the construction contract for the plant, should it so choose.

What does all this mean? Progress wants to spend more of its customers’ money long enough to get a license to operate the Levy plant. And it may yet decide not to build it.

But thanks to the strange accounting in the utility business, betting big on nuclear is still appealing. Utilities see a nuclear power plant as a huge capital investment that can earn them fat returns based on how much they spend on it, says Ellen Vancko, a former utility executive and now the nuclear energy and climate change project manager with the Union of Concerned Scientists, a watchdog group on energy.

“The bigger the project and the more capital that has to be invested in it, the more money they make,” Vancko says.

Read the complete article and find the Nuclear Timeline here.

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