There are many stories on the web this week about cost overruns at Vogtle and VC Summer, the two active new nuclear power plant projects in the United States. TVA has also had well publicized cost increases and schedule delays at Watts Bar II, a construction project that was started more than 30 years ago but put on hold for more than a decade.
There is no doubt about it – large, complex construction projects are difficult tasks that occasionally run into unpredictable circumstances that result in unexpected delays. As the well known saw goes – “Time is money”. That is absolutely the case when working on a project involving several thousand people, many billions in material costs, and large, unique components with limited supply chain alternatives.
Being the first of a kind (FOAK) increases the challenges; that cost increasing disadvantage is not reduced much when the real first of a kind is happening on the other side of the planet in a country with a completely different regulatory system, a radically different work force, and a language that few Americans speak fluently. The challenges are not eased by being a nuclear project with a federal regulator led by a powerful Chairman who loves the limelight, dislikes nuclear technology, and believes that the only safe nuclear plant is one that is not operating.
It is therefore as predictable as the rising sun that people who are not huge fans of nuclear energy to begin with will be able to tell plenty of negative stories during the design and construction phase about how the cost projections were all wrong. When all eyes in the country are focused on just one or two similar projects and when the media has unlimited space on line and plenty of time to fill on news programs, it is also likely that you will hear the same story told several dozen different ways; making it seem like new news every time.
With that in mind, I’d like to offer you a different perspective from what the Associated Press (AP) is spreading throughout the land.
The first thing that Americans need to know is that there are not any of your federal tax dollars on the line. The much ballyhooed and repeatedly criticized $8.3 billion loan guarantee that was conditionally offered to Southern Company for Vogtle 3 and 4 in March of 2010 – which was authorized as the first part of a program with a ceiling of $18 billion contained in the Energy Policy Act of 2005 – HAS NEVER CLOSED!
All of the project money has come from the companies involved and from the ratepayers in the rate-regulated monopoly service territories in Georgia and South Carolina that the plants will serve. The owners of VC Summer (Santee Cooper and SCANA) have always said that they are going to move forward with or without federal assistance since they believe they have a good enough story to tell creditors that they can obtain reasonable cost financing on their own.
Southern is still negotiating with the Department of Energy (DOE) and the Office of Management and Budget (OMB) to obtain acceptable terms and conditions for its conditionally offered guarantee, so there might someday be a change in that situation. (If I was in charge at Southern, I would quit talking and keep building. It is a cost benefit to keep federal medling to a minimum.)
It might also be of interest to you to watch the below video telling about the project progress from the perspective of the people who are involved in the day to day effort. I like to remind people that when there are “cost overruns” at a US nuclear power plant construction project the good news is that it mostly means more wages being paid for a longer period of time to American workers who are supporting American families; it is a much better news story in my opinion that reading about how the price of a barrel of oil or a metric ton of liquified natural gas (LNG) imported from a far off land has just increased by several dollars.
Aside: I apologize to readers who are not Americans if I sound too nationalistic. My excuse is that American taxpayers paid for both undergraduate and graduate education, they paid for me to receive some of the best available nuclear energy training on the planet and they paid me a reasonable (sometimes generous) salary for more than 30 years. They continue to pay me a pension. It would be ungrateful of me if I did root for them (us) to have a significant stake in a growing energy economy. End Aside.
(Note: the full transcript of the video is available at Video Update of Vogtle Nuclear Plant Construction – Units 3 and 4)
There are other cost and schedule pressures that worry me as the Vogtle and VC Summer projects progress. I am worried that the supply chain efficiencies that should be developed for a growing industry will not be developed if there are not some additional projects started pretty soon. This will mean that pipes, pumps, valves, cranes, wiring, displays, and a host of other components will never start to come down in production cost because they are still unique and may remain unique for the life of the plant. If suppliers never have the incentive to invest in efficiencies, they will also never have the incentive to lower their prices; all of the pressures will push in the upward direction.
Though it is probably not an issue yet, there will also be schedule pressures later in the construction projects at Vogtle and VC Summer that result from an understandable human tendency to prefer remaining employed if the end of the project approaches with no new projects in sight. The last nuclear plants built in the US were the most expensive and took the longest; who can blame workers who have good jobs in pleasant places to live without a lot of alternative opportunities if they develop work habits that result in delaying what appears to be the inevitable layoff when the project is complete?
That big beautiful school house in the video will become a ghost town if there are not more projects developed that also need to train a new cadre of licensed operators. Sure, there will be continuing training needs for the four units under construction today, but maintaining skills for a trained work force requires less infrastructure than continuing to train new workers every year.
If America wants to fail in its important effort to restore our ability to build large electrical generating facilities that can operate for 18-24 months on a few truckloads of cheap, emission free fuel, we can. It is easy to fail and to give up when the task is hard and when there are plenty of naysayers on the sidelines hoping that you fail.
I cannot think of a more important task, however, than to do everything in my modest power to encourage success, to help people understand that the job is important, and to cheer for those heroic point people who are at the front of the pack but who need others to come quickly behind in order to ensure they are not left out to dry. I know that natural gas seems awfully cheap right now, but do you really believe that it will remain available for anything close to today’s prices by the time that a new nuclear plant that breaks ground in the next couple of years will be up and operating?
Disclosure: I am putting my money where my mouth is and have invested in the stock of a number of companies involved in building and operating new nuclear power plants in the United States. My current holdings include Toshiba, Shaw, B&W, SCANA, GSE Systems and several uranium producers.
PS – If anyone at Southern Co reads this blog, I would appreciate it if you would pass the following note to your corporate HR and PR departments.
Please work harder to find some women to train! They make excellent employees and operators. If you already have women in the training pipeline, please make sure that you swing the video camera in their direction for the next quarterly update. I am the father of two professional women and the grandfather of a little girl; I like seeing more women in promotional videos describing challenging technical projects.