In a shocking development, (tongue firmly planted in cheek there) the Wall Street Journal has published a lengthy article by Rebecca Smith discussing the potential that the Nuclear Renaissance might be derailed because of rapidly escalating cost estimates for new nuclear power plants. You can find the article at New Wave of Nuclear Plants Faces High Costs. (The article should be accessible whether or not you have a subscription to the Wall Street Journal since it has appeared on Digg.com.)
It should be little surprise that the vendors are in the driver’s seat in the current price negotiations and they are working to ensure that they do not leave any money on the table. As is the case with any supplier of a commodity where the demand exceeds the currently available supply, power plant builders and component vendors are trying to see just how high a price the market can bear. There are not many good alternatives available for the companies that need to add capacity.
In defense of the suppliers, they also have to price in a lot of risk and uncertainty since they will not be breaking ground or even buying a lot of the components for several years. There is a lot of room for many movements in the market, including the possibility that gas, coal and oil prices will fall rather dramatically due to an inflation and credit crunch driven recession. The market conditions existing today remind me most of those existing in 1973-74, when the Arab Oil Embargo increased the price of a barrel of oil by a factor of 4. At the time, there were all kinds of predictions about that rate of price increase continuing.
By the end of 1974, the resulting recession had eliminated most of the growth in electricity consumption that had been going on for more than two decades and companies like PSEG were trying desperately to slow their investments in new power generation. They cancelled the only plants that they had on order – all of them nukes and some of them the very interesting Offshore nuclear plants that Westinghouse was building for them in North Florida.
Of course, I hope that the vendors do not bid themselves out of the market. Fossil fuel suppliers are sitting on growing mountains of cash that will allow them to ride out a slide in prices that will be long enough to cause nuclear plant customers to reconsider any plant construction plans. Remember the 1970s!