Cautionary story for nuclear plant vendors and prospective plant owners
Florida state Rep. Mike Fasano (R-New Port Richey), who voted in favor of Florida’s 2006 Construction Work in Progress (CWIP) advanced cost recovery law, has become the prime sponsor of a new law to overturn that rule.
According to a January 11, 2012 op-ed published by the Tampa Bay Times titled No more blank checks for Florida utilities, Rep. Fasano has two primary concerns:
- He believes that the utility and the Public Utility Commission are not doing a good job of controlling the project cost.
- He is worried that the utility’s lack of commitment to the project might end up with customers paying hundreds of millions for a project that gets cancelled and does not ever produce electricity.
Those concerns are valid and must be addressed.
Compared to the cost estimates provided in the 2005-2006 time frame when the CWIP law was passed, estimates for project completion costs rose dramatically. Initially, that was attributed to high materials inflation and competition for construction workers; however the estimates were not revised downward after the financial system collapse of 2008 reversed those trends and brought interest rates for large borrowers to record low levels.
Secondly, if the utility wants to hedge its bets and not commit to a project, why should they start charging customers, committing them to spending money for which there may never be any return? It would be different if the utilities offered customers some kind of ownership in the project where they would see a real return on their investment if the project successfully goes online. Instead, all that the utilities are currently offering is some kind of vague assertion that the project will keep rates under control.
It is fair to make project commitment a qualifying criteria before seeking to charge customers for advanced cost recovery.
Perhaps part of Rep Fasano’s questions could be addressed by better communication from the project sponsors. They need to clearly and repeatedly explain why they believe the nuclear plant investment is the right choice.
They could talk about how nuclear energy investment are a hedge against the possibility of future natural gas price hikes. They could explain how that hedge would never work if they were not making credible progress towards actual operation. After all, why would natural gas vendors be worried about nuclear competition if the 10 year long projects were not even underway?
They could also talk about the need for reliable electricity that does not produce any pollution. In this case we are talking about the “Sunshine State”, a place where people have been willingly paying a little bit more for cleaner sources of electricity for as long as I can remember. In Florida, a hazy day is not a good day to take pictures to fill the tourist brochures or to have people posting those photos on their Facebook pages describing their winter vacations.
Bottom line – nuclear industry leaders need to be sensitive to the questions and criticisms of their supporters as well as their detractors. When the supporters ask valid questions and express real concerns, the vendors and the utilities need to address them head on. If the source of the uncertainty from the vendors and the utility is a concern about unpredictable government regulatory action, they need to make that clear as well.
They should enlist the support of their fans to try to keep the pressure on the government to perform its job of efficiently and accurately reviewing license applications, approving the good ones, rejecting the risky ones, and sending the marginal ones back for additional work.
This will not be the first time that little politicians protect consumers from big utilities by making rates go up. Now that Rod does not live & work near DC, he will enjoy the ramifications of federal regulations that protect us from problems we do not have. Every election, little politicians will boast about how they ‘fight’ for us.
First they make your job go away then they help you pay your electric bill.
First off the people of Florida deserve what they get. Florida has fought independent power producers while Florida utilities lead the way in being IPP in other states. Florida like California does not want to drill for more offshore gas. Then they oppose new pipelines to bring gas in from those who are willing to produce it.
Next Florida rejects coal. The Tampa utility want to build a new coal-fired power plant. With modern controls, there were be no haze from the coal-fired power plant.
Rod being from Florida can tell us about humidity and the effect on visibility. Well maybe, left coaster in Washington State have a can not tell the difference between clouds and haze.
This leaves nuclear. I predict that the new nuke plants will get built in Georgia and Alabama (I am going way out on limb here) excess power sold to Florida at whatever they can get away with.
Florida is not near as bad as California and NY. It is an old cautionary story. You sell the cheap power instate and sell the more expensive power to neighbors.
@Kit P
The political action is being taken because the rates are already increasing without sufficient control and without any commitment from the utility that they will push forward to complete the project, even if there is some resistance.
Without that commitment, the customers who are being charged are placed at risk of paying for something that never delivers.
Remember – the politician is a Republican who supported the initial passage of advanced billing for CWIP and is expressing his disappointment that the companies are not doing a better job. The cost escalation has not been driven by intervenors, yet.
My post is designed as a warning, a topic for a “lunch and learn”. The industry leaders have to recognize that the most effective argument against nuclear during the first nuclear age was that every time a new plant came on line, the utility immediately filed a new rate case to raise electricity prices. That reinforced the assumption that nuclear electricity is expensive electricity, even if it is only true until after you have paid off the initial mortgage.
@Rod. Excellent post and I’m glad to see this level headed understanding of the issue of costs. First it should be noted that if there was one area with pubic or investment owned utilities are completely and totally honest is project costs. They have to be up front, in fact even possibly exaggerate the costs, so those costs can be covered by the rate payers.
In my own pet project of a “National Atomic Energy Investment Bank” loans could be issued at zero percent but in return, a formula used for a stake in plant (as opposed to utility) equity. This is the way Chinese get private investment…you take a stake in the equity of the proejct. (it also combats the idea of ‘creeping socialism’ that private investors might fear…) Needs to be parsed out and I’m not an economist but it seems to dovetail with what you are suggesting as well.
@Kit…what is it with you? What’s with this passive-aggressive thing you have about Rod? Please take it off list.
It is not ‘haze’ that is the problem with coal plants. Steam is the only thing you *see* coming out of large stack (by product of hydro-carbon combustion). If you mean “smog” then this is not an issue either as *Federal* EPA guidelines prevent the emissions of NOx which is the major component of smog. This is true for any fossil fuel generation and these needed regulations have kept most major cities free of generation-caused smog, or ‘haze’.
The people in this venture are sure to get filthy rich!
http://www.proton21.com.ua/
Scientific-research Electrodynamics Laboratory (EDL) was established in 1999 by a group of private investors within a scope of a venture project on creation a safe and effective technology for radioactive waste utilization
Nuclear combustion takes place as an artificially externally initiated explosive collapse (“self-shrinking”) of fundamentally limited portions of the substance, which eliminates the danger of uncontrolled development of the process like uranium fission chain reactions.
Rod, the fission waste problem has been solved! Hot Fusion, Cold Fusion, Sodium Breeder Reactor, LFTR, and now Nuclear Combustion! Join us tomorrow for another episode of ‘Nuclear Miracles Out of the Blue’
http://www.proton21.com.ua/science_en.html
Scientific-research Electrodynamics Laboratory (EDL) was established in 1999 by a group of private investors within a scope of a venture project on creation a safe and effective technology for radioactive waste utilization. The project was based on an innovative and original conception on initiating an extreme conditions for nucleosynthesis process ignition in a super-dense cold substance.
A three-year period of intensive and productive studies enabled highly skilled scientific personnel to create a unique installation and breakthrough experimental technology that have no analogues in the world. The experimental setup guarantees an achievement of the record-breaking energy density in a substance enough for fusion ignition. Performance of the developed process appeared to be equal to k > 1014 -1015 (synthesized nuclei per joule of initial driver).
The scientific approach was based on the original conception of a special kind of electromagnetic impact on a solid substance that can induce, under certain conditions, the self-energizing avalanche process of nuclear supercompression up to the collapse state (at which the conditions for collective multipartical trasmutation reactions are achieved).
Gosh Dave if you read closely Rod wrote ‘a hazy day’. And yes, haze is an issue particularly around national parks or places where a recreational experience might be degraded by visual acuity.
Smog is a different issue. Smog can be a health issue when very high levels persist for long periods of time. Neither Rod or I mentioned smog.
Just for the record, I am not an expert on air pollution. I do not need to be in the nuclear industry and we have very good air quality where we live. If Rod were to argue that China needs to build more nukes to improve, I would agree.
In anyone would say that California’s policy to improve air quality and reduce ghg but ban new nukes is stupid I would agree.
Back to Florida, Rod did not mention it but I am sure he knows. The Florida PUC has rejected building new coal plants. Haze from a coal plant is a moot point.
The topic is how will the new nukes get paid off. If Florida becomes unfriendly to nukes, the new nukes will be built somewhere else.
@Kit P
I would never claim expertise with regard to air pollution, but I have studied the subject and paid careful attention when flying, driving or sailing. You blame it all on cars; that is not backed up by statistics and certainly not backed up by the yellow tinge on the haze that hangs during clear, often cloudless temperature inversion days in the late fall, winter and early spring in my home state.
It does not take a measuring device any more sensitive that the human eye to notice that yellow color. It does not take a specialist in atmospheric chemistry to know that the yellow color indicates sulfur. A little research will indicate that the primary source of SOX emissions in the eastern US after the massive efforts to shift to ultra low sulfur diesel is burning Appalachian or Illinois derived coal.
I am familiar with Florida’s ability to import electricity from other locales and its tendency over the years to make that decision rather than build generating plants inside the state. Dad was the supervisor of transmission substation engineering for FP&L for the last twenty years of his career, which happened to have corresponded with my teenage years and early 20s. We talked hundreds of times about his 500 KVA “coal by wire” project that was moving power generated in Georgia down a corridor that parallels the Turnpike for much of its length.
That transmission path was selected over building new nuclear power plants when “the nuclear industry” lost control of costs. His company was quite experienced in dealing with environmental opposition, so that was not the issue; cost was.
Part of the cost increases happened because the plant vendors and the utilities rolled over when intervenors, often funded by some of your favorite fuel suppliers, successfully forced delays and the imposition of new rules like ALARA. Part of the cost increases were driven by the vendors who kept redesigning their systems, making it difficult for the component manufacturers to automate and move down learning curves. Some of the cost increases were driven by high interest costs, but companies like FPL still had to pay interest on capital projects like transmission lines that were chosen INSTEAD of building new nuclear plants after about 1974.
Dad liked his job, but he often expressed his frustration at having to build massive, ugly transmission corridors instead of building more of the clean nuclear power plants that his company had completed at Turkey Point and at St. Lucie. He cared deeply about the land (he grew up on a farm) and hated seeing so much of it subjected to herbicides under the hundreds of miles of several hundred feet wide corridor – wider than the Turnpike itself.
Rod my studies were formal on the graduate level in environment engineering.
Rod first in correct statement is that I ‘blame it all on cars’ and his second incorrect statement is ‘that is not backed up by statistics’.
Places that have an air pollution issue have statistics to identify the sources. While I have only looked at the statistics for a few places, producing electricity was less that 10% of the source.
It has been more than 20 years since I have seen a NOx or SOx plume. Unlike Rod, I grew up in the rust belt, it snowed grey. I have also was stationed in Long Beach in 1971. I do know what pollution looks like and have not seen any in many years.
http://www.airnow.gov/
What pollution are you talking about Rod? Yes, it can be measured. If fact it is measured. I have again provided Rod with a link for the whole country. Rod and everyone else will continue to ignore it because it does not match their media driven perception of the world is a terrible place.
The air is clean Rod.
Rod writes, “coal by wire”
Do you mean like
http://thehill.com/blogs/e2-wire/e2-wire/203613-a-look-at-the-countrys-most-polluting-power-plants
“1. Robert W Scherer power plant: Juliette, Ga. — 22,978,929 metric tons of carbon dioxide equivalent
Owned by: Georgia Power, a subsidiary of Southern Company
2. Bowen coal-fired power plant: Cartersville, Ga. — 21,026,397 metric tons of carbon dioxide equivalent
Owned by: Georgia Power, a subsidiary of Southern Company
3. James M. Barry coal- and natural gas-fired power plant: Quinton, Ala. — 20,752,490 metric tons of carbon dioxide equivalent
Owned by: Alabama Power, a subsidiary of Southern Company”
Rod you keep saying things like ‘imposition of new rules like ALARA’ but never back it up. Since I was there let me explain cost overruns. It was caused by poor construction management and very high inflation. Many utilities avoided the poor management trap but it is hard to avoid inflation. All of my startup experience is post TMI and Browns Ferry events, yes they did add costs but they needed for technical reasons and not some evil conspiracy.
I do understand your father’s frustrations. I earned mine working in California. Closing Rancho Seco and replacing it with NG could not help air quality. For a couple years I kept my boat at a marina near freeway. Trading easy to get the boat for closer to good sailing. At the time I could just guess what the source of the daily black grime that would build up on the white deck but now I can calculate it:
Emissions Factors & AP 42, Compilation of Air Pollutant Emission Factors
http://www.epa.gov/ttn/chief/ap42/ (aka Air Chief, good term for EPA web search skipping the junk science for school teachers).
@Kit P
You have been voted off of the island. Not for the above comment, but for a repeated history of aggression towards the other people who participate in the discussion here. In the past four days, I have received a dozen requests. So long.