Different Perspective on Nuclear Construction Project Costs
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.
Additional Reading
Video Update of Vogtle Nuclear Plant Construction – Units 3 and 4
I think that the construction of thermal plants ( LWR. PHWR) has already peaked in North America and Europe and the time has come for Waste burning fast reactors with molten salt coolant and/or fuel.. Many US states and European countries have put a stop to LWR construction till ‘Waste’ problem is solved. That is not yet the case on other continents. Russia, China and India are continuing with fast reactors. There are US blogs saying much the same.
The US govt has put in place a very restrictive NRC which also effectively hinders the new development. AP-1000 is an example of the US firms having to go to China to develop the new designs.
The US DOE. faced with the responsibility of waste management, must take the lead to sponsor the waste burners and put a halt to consumption of fresh uranium. This will halt the generation of fresh SNF and give time for management of fission products.
Jagdish,
As much as I would love for waste burners to become a reality, the current reality is that we are a couple decades away from Gen IV reactors feeding power to the grid. We have PWR’s right now, proven designs that can be built and produce power.
I am a big fan of molten salt reactors but their development will not speed up the nuclear industry, anti-nukes hate nuclear power no matter what form. The licensing of the AP-1000 took years, imagine how long the NRC will take to license a liquid fueled reactor that is completely different from anything ever built before. MSR’s are definitely something that needs to be invested in, but we can’t lose sight of the fact that we need to be building plants right now. And right now that means PWR’s.
It should be emphasized that the AP article on cost overruns that Rod links to above repeatedly refers to “licensing-delay charges” not so much the “soaring construction expenses and installation glitches”. In fact the article notes that borrowing costs are at historic lows and construction workers are available in this depressed job market. Rather the culprit is stated quite simply: “utilities expect the U.S. Nuclear Regulatory Commission to adopt new safety rules in response to the accident; they cannot predict the exact costs.” I.e. regulatory ratcheting just as after TMI that was largely responsible for the notorious cost spirals of the 80’s.
I believe it is high time for the out-of-control and absurdist regulatory regime of the NRC itself to become a major focus of criticism from fission enthusiasts along with anyone else who advocates for a clean environment and energy independence. It should not require any more than say 25,000 worker-hours (full time work for a dozen NRC employees for a year) to obtain a COL for an approved reactor design at either an existing licensed NPP or the present location of a coal station grandfathered in under the 1970 Clean Air Act.
A big part of the problem I think is that the relevant safety standards should not be open ended or arbitrary but should be based on real-world cost benefit analysis. According to the National Academies of Science, Abt Associates, and the Harvard School of Public Health (PDF) between 10,000-20,000 lives are being shortened every year in the US because of coal burning for electric power generation. This is a far greater mortality rate than any possible nuclear accident even if we were to accept the Green Peace figures on Chernobyl mortality.
We’ve just had the proof from a triple-meltdown and hydrogen explosion that no acute “prompt fatalities” or radiation sickness result from the most dire accident scenarios at Western-design reactors among plant workers and certainly not members of the general public. Now we need more push-back like at the APS annual meeting late last month in Chicago. The BEIR based LNT theories must be revised, we must insist upon the application of empirical science-based standards if we are to avoid future travesties like the forced evacuations of elderly people from around Fukushima
One interesting idea might be if the NRC was somehow financially responsible/liable for “licensing-delay charges”. Some types of limits could be set on what would constitute reasonable delays versus unreasonable ones that the NRC would be liable for. Instituting such a plan would probably require a significant change in the funding model for the NRC, but the present model could use some overhauling as well.
NRC financial liability for unreasonable licensing-delay costs (PROTECTING rate payers) would be considerably more helpful for getting plants built than the “wonderful” (tongue-in-cheek) DOE Loan Guarantee program that has produced such rousing successes as Solyndra, and it would require some level of delusion for such an arrangement to be called a subsidy (in my opinion).
I do imagine that Ralph Nader, despite his alleged consumer advocacy, would be in favor of such a scheme, despite the windfall that it would be for electricity consumers.
Another reform would be to simply demand constitutional equal protection from the government vis-a-vis coal and other fossil generators, dams, gas fatalities and their history of mass casualty accidents, etc and shift the burden of proof back on to the government where it belongs. Can the government prove in a court of law that nuclear fission is somehow inherently more dangerous than other energy sources in order to justify its added regulatory burden which is not applied to other sources of primary energy or industrial operations routinely engaged in our society? Could LNT theory be accepted as a valid argument in a modern court room without population epidemiological evidence to back it up? Let’s put Muller’s work on public trial. The debate would be sure to engage the public and the news media.
Re: Aaron Rizzio
Good mention, but one doesn’t need any trial! All you need are history books and industrial records! Did or not oil and gas production and accidents kill and maim XXX tens of thousands of people since 1941 (when first reactor was born) as opposed how many XXX tens of people killed by nuclear power the same period? It’s a no-brainer assessment in black and white. I’d like any lawyer to prove nukes are deadlier than its rivals with those down-to-brass-tacks stats. Our main problem isn’t having the proof, but getting it out and loudly to the masses which is hard to do since the main pipeline to news for most people, the mass media, are stridently and philosophically anti-nuke and aren’t going to do the truth any favors! Also, I wonder whether LNT theory will be on NASA’s dish when planning manned interplanetary missions through solar storms and cosmic rays!
James Greenidge
Queens NY
“Did or not oil and gas production and accidents kill and maim XXX tens of thousands of people since 1941 (when first reactor was born) as opposed how many XXX tens of people killed by nuclear power the same period? ”
The problem you are up against here is that those who fear nuclear power tend to believe that it is causing many thousands of cases of cancer world wide.
As it is generally impossible to locate the exact cause of any particular case of cancer, this superstition is hard to overcome. For example, there is a woman in Cumbria, UK, who is 100% certain that her daughter’s leukemia was caused by radiation from Sellafield. I don’t think you could ever convince her that it was much more likely to have been caused by a virus.
So there will be enormous disagreement as to how many people have been killed by nuclear power.
Don:
Use demographic health statistics. The US spends hundreds of millions, maybe billions, of dollars every year gathering all manner of statistics, particularly in the area of health. Lawyers in civil liability lawsuits employ them all the time. For example we all have about a 40% chance of contracting some form of cancer and about 1-in-4 chance of dying from it. Cancer rates and mortality figures for all forms of cancers are collected UK statistics show that the longer we live the greater are our chances are of developing some form of cancer, which only makes sense.
We know from US and WHO data that areas of relatively high natural radiation background, far higher than around any NPP site (even Chernobyl or Fukushima Daiichi), there is no positive correlation between doses which vary from region to region by up to three orders of magnitude and chances of developing cancer. In fact the population of the state of Colorado has some of the lowest cancer rates and highest background doses people are naturally exposed to in the US.
Demographic statistics are known to be misused on occasion for example the “Texas sharpshooter fallacy” employed often in alleged “cancer cluster” lawsuits. You must draw your circle first and then look inside it, not look around for clusters of holes to draw a target around.
It does not matter if LNT is accepted or not. The radiation releases to the atmosphere during normal operation of a nuclear power plant are extremely small. Even using LNT this would cause and extremely low rate of illness.
In order for anti-nukes to use LNT to show huge numbers of fatalities they need to use a huge quantity of release and almost always assume every single gram of this material ends up in somebodies body(even if the material never leaves the site or decays in minutes)
I understand that when you guys who work at NPP talk about reforms your talking about cutting a lot of excessive wasted money on in plant protections against vanishingly small quantities of radiation that have historically shown to be of little concern. When people outside the industry hear you talking about reducing regulations thought immediately jump to Deep water Horizons.
When people outside the industry hear you talking about switching LNT to hormoesis it sounds like your trying to make it so you can release all the radiation you want and it won’t matter (because its good for you). That is the logic, you get the limits lowered so you can release more. You don’t get the limits lowered so you can release the same.
I believe that LNT like all other aspects of science should be continually challenged. If it is good it will withstand the assaults, if it is bad then a better theory will prevail.
You can use LNT to prove to people that nuclear fission reactors are safe to operate. Trying to get LNT overturned before proving them safe just seems like a coverup. I’m just saying…
Don,
You are right that it is hard to determine the exact cause of any particular cancer. I have lost track of how many times drinking a glass switched from being a cancer cause to a cancer reducer. So, its no surprise that just about everything you can or can’t do has a study somewhere that shows how it causes or prevents cancer. Every single one of these studies gets its 15 seconds of fame in the news.
At least for me cancer has been everywhere all my life that I have become numb to it. I don’t ignore it. I’m aware of it, but I don’t run from it. I could change my lifestyle and cut my cancer risk by say 10% but who is to say tomorrow I find out all those options that were supposed to be safer actually raise my risk?
Yeah people talk about cancer a lot and the news loves to talk about cancer a lot, but do people really fear cancer from radiation?
In your example with that lady you could easily replace radiation with cell-phone, herbicides on food, etc. She is just one lady who the news touts about because of their love to do so. How many mothers in this town who’s children have leukemia don’t think the power plant did it? I will guess that it is the majority.
I understand the cause to get public opinion changed. But, what is the public opinion in the first place? How many parents of children think their kids get leukemia from NPP? If it is low they why even bother trying to convince these few of a view they don’t want to take?
Just a word of warning, don’t worry about trying to change the minds of those who don’t want their minds to be changed. Worrying too much about what you can’t change usually leads to missing out on things you can change.
People who complain that he projects are not happening perfectly on schedule and budget are just complaining because then never wanted them to begin with.
Budgets and schedule delays are relative ideas. One could schedule longer and higher budget to start, then you end up in a situation where your ahead of schedule because those 3 months you spent repairing concrete was less than the 5 months you scheduled for concrete repair. Your budget could end up being met because you get .5% better rate on interest than you planned.
It is a matter of perspective.