Experts: Five Years After Vogtle Loan Guarantee Announcement, Promised New Nuclear Boom Has Fizzled As Industry Struggles With Major Cost Overruns And Delays

WASHINGTON, Feb. 12, 2015 /PRNewswire-USNewswire/ -- Five years ago, when the White House announced on February 10, 2010 that $8.3 billion in taxpayer-backed loan guarantees would be provided for two new reactors at the Vogtle project in Georgia, it forecast a "new start" for the U.S. nuclear power industry and the Administration said Vogtle would be "just the first of what we hope will be many new nuclear projects."  Half a decade later, all five of the new reactors under construction in the U.S. are mired in what is so far more than $7 billion in cost overruns and up to three years of delay in reactor construction.

The Obama White House said that the Vogtle loan guarantees would be a "major step toward restarting the domestic nuclear industry," but all it ushered in was an increasing array of costly problems with the construction of the two Vogtle reactors. The Vogtle red ink and delays have been mirrored at the three other reactors under construction in the U.S. without the benefit of federal loan guarantees:  two reactors at VC Summer in South Carolina and the Watts Bar project, where construction actually began in 1973 when Richard Nixon was president, was suspended in 1988, and then restarted in 2008.  (See details on all five reactors below.)

During a news conference held today to mark the fifth anniversary of the Vogtle loan guarantee announcement, former Nuclear Regulatory Commission (NRC) Commissioner Peter Bradford, currently adjunct professor on Nuclear Power and Public Policy, Vermont Law School, and former chair of the New York and Maine state utility regulatory commissions, said:  "Vogtle, V.C. Summer, Watts Bar and recently cancelled nuclear projects are far from the scenario of revived nuclear construction that the White House anticipated in approving that first conditional loan guarantee five years ago.  Although the nuclear revival was announced by the Department of Energy in 2002, and the nuclear industry was given all that it asked by Congress and a few states as of 2005-2006 in the form of subsidies that dwarf anything given to efficiency and renewables, not a single molecule of greenhouse gas (GHG) emissions has been prevented by a new reactor in the 21st century."

Bradford added: "Efficiency, renewables and the substitution of other fuels for coal are the resources that have significantly reduced US GHG emissions and achieved declining costs while creating tens of thousands of jobs. Indeed, doe has not even been able to give away the remainder of its $18 billion in nuclear reactor loan guarantee authority.  Claims and implications by a few climate scientists and others that the environmental movement is stalling a needed nuclear renaissance are demonstrable twaddle."

Also speaking at the news conference today was Dr. Mark Cooper, senior fellow for economic analysis, Institute for Energy and the Environment, Vermont Law School and author of "Renaissance in Reverse:  Competition Pushes Aging U.S. Nuclear Reactors to the Brink of Economic Abandonment" (2013), a widely cited report identifying the 38 most at-risk reactors in the United States, and All Risk, No Reward for Taxpayers and Ratepayers: The Economics of Subsidizing the 'Nuclear Renaissance' with Loan Guarantees and Construction Work In Progress" (2013), which documented the harm that subsidizing construction of uneconomic reactors would do to ratepayers across the Southeast.

Dr. Cooper said: "Vogtle had everything going for it and it was hailed as the trigger that would set off the nuclear renaissance.  The abysmal failure to execute this project, with the long delays, repeated construction screw-ups and escalating costs, means that even if Vogtle is completed, it will not be the starting gun of the race for new reactor construction in the U.S., it will be the mausoleum in which nuclear power is laid to rest." 

"This grim prospect for nuclear power, because of its underlying economics, is only half of the story," Dr. Cooper said. "The positive part of the story is that while nuclear has been demonstrating once again that it cannot live up to its hype, alternative low carbon resources have been undergoing a true renaissance.  In the five years since the loan guarantee was offered to Vogtle, while its projected costs have risen substantially, the cost of wind and solar has declined by 40 percent, storage costs are plummeting, and efficiency has reduced demand growth by as much as one half." 

Though overrun run estimates are difficult to pin down and are subject to constant updates as new delays compound past problems, the new reactor picture looks like this:

• VOGTLE.  The Southern Alliance of Clean Energy has summed up the situation this way:  "Southern Company's and the nuclear industry's 21st Century flagship nuclear expansion project at Plant Vogtle is suffering from the same problems that have historically plagued this industry: significant delays, massive cost overruns and project mismanagement. Vogtle is now more than three years delayed and the total project costs are at least $4 billion over budget." Originally expected to come online in 2016, the project has been hit with repeated delays that will delay the startups to mid-2019 for Unit 3 and mid-2020 for Unit 4.  Cost overruns and delays to date are expected to only worsen over time.
  
  
• VC SUMMER. Cost overruns to date have piled up to $1.2 billion.  Originally, the VC Summer Unit 2 reactor was supposed to begin operating in 2016 and Unit 3 in 2018.  It is now estimated that Unit 2 now will not come online until late 2018 or early 2019 and Unit 3 not before late 2019 at the earliest.  By the time the first reactor comes online, South Carolina consumers will have been hit with 11 pay-in-advance rate increases to foot the burgeoning bill for the reactor project.
  
  
• WATTS BAR.  If Watts Bar is delivered as now promised in late 2015, it will be 37 years behind the original schedule and three years behind the updated schedule that was set out for it in 2007.  The project was originally budgeted in 2007 for completion with an additional $1.5-2 billion, but it is now expected that completion will require $4-$4.5 billion. Containing 40-year-old components that date back to the original construction process, Watts Bar will hardly be a new reactor with a current design: It will rely on an archaic "ice condensers" design involving two-three million pounds of chipped ice hanging in baskets around the reactor in order to maintain containment. 

Dr. Cooper noted that the costs to consumers of failing reactor projects under pay-in-advance schemes can be extraordinarily high.

He noted:  "The impact of treating consumers' money as if it has no time value, which is what advanced cost recovery (or CWIP) does can be seen in sharp focus in the case of Watts Bar.  TVA spent $2 billion before the project was abandoned over 30 years ago.  The money came out of consumer's pockets, even though they got no electricity for it.  If consumers could have achieved a 1 percent real annual return on that money, they would have $5 billion more in their pockets.  Combining the present value of $6 billion in those long ago sunk costs, to the additional $4-4.5 billion that will be spent to bring Watts Bar online makes it just about the most expensive reactor built in the United States, with an overnight cost in the neighborhood of $8000/kw."

EDITOR'S NOTE:  A streaming audio recording of the news event will be available on the Web as of 5 p.m. EST on February 12, 2015 at http://bit.ly/vogtleanniversary.

SOURCE Mark Cooper and Peter Bradford, Washington, DC.