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Monday, June 17, 2013
Nuclear renaissance in Florida crumbles, meets economic reality
Has the so-called “nuclear renaissance” finally met economic reality? The nuclear industry recently experienced their “worst week” since the Fukushima disaster in Japan. Not only did Duke Energy scrap plans to build new reactors at their Shearon Harris site in North Carolina but the many events which unfolded in Florida, culminating with Governor Scott’s signing of Senate bill 1472 late last Friday, affirm that the “renaissance” is crumbling – and economic reality is prevailing.
The new law amends a 2006 anti-consumer law that was meant to promote nuclear reactor construction by shifting all the financial risk of constructing new nuclear reactors to the power company’s customers. The earlier law drew significant consumer pushback and has now been scaled back. This new law is a step in the right direction. Proposed new nuclear projects in Florida will face more procedural checks that are intended to better protect consumers and must show that a project remains feasible and that project costs are reasonable. Find a brief summary of the new law here and our statement on its signing here.
This is the first time a state in the U.S. has scaled back a so-called “construction work in progress” (CWIP) or “advance/early cost recovery” law for new nuclear reactors. CWIP laws generally mitigate the financial risk of constructing a reactor by shifting part or all the financial risk of construction to utility customers. Essentially, customers are charged in advance, but with no assurance that they will ever receive a benefit from that forced investment. These laws have the perverse incentive of encouraging power companies to pursue speculative projects, even when there is no intent to build the plant because there is no risk for utility shareholders.
The law in Florida was sold to state legislators back in 2006 as a way to help finance the expansion of nuclear power. The help was necessary because Wall Street was (wisely) reluctant to finance new reactor projects given the abysmal industry track record of abandoning dozens of nuclear projects due to soaring cost overruns and a drop in electricity demand. A 2010 Forbes article mentioned, “A 1985 article in FORBES (Feb. 11) made the case that the U.S. nuclear power program was the largest managerial disaster in business history.” That’s primarily why there hasn’t been a new nuclear plant built in the U.S. in over 30 years.
But this time around, the industry and its proponents promised things would be different. Former Vice President Cheney’s Energy Task Force issued recommendations that pointed to a possible nuclear power resurgence and the Department of Energy launched the “Nuclear Power 2010” program, with the goal of having two reactors online by 2010. And thus, the nuclear “renaissance” was born as dozens of new nuclear reactors were proposed in the U.S. But that cheerleading has not led to much and the “renaissance” has seriously faded. Today, just four reactors are actively under construction at two plants: Vogtle in Georgia and V.C. Summer in South Carolina.
One need look no further than Florida, where four reactors are proposed, to see how the so-called renaissance has gone awfully wrong...