Nuclear power costs surge in rush to build
Customers may help shoulder the increase.
By ASJYLYN LODER, Times Staff Writer
Published December 12, 2007
Nuclear energy -- billed as the cheap, carbon-free energy source of the future -- isn't sounding so cheap anymore.
The price for a new nuclear plant has soared as the rush to construct nearly 30 facilities across the country over the next 15 years has pushed up the cost of labor, raw materials and possibly even the plants themselves.
New industry estimates double and even triple prices quoted a year ago by utilities throughout the Southeast, including those for Progress Energy Florida's planned nuclear plant in Levy County. Based on cost estimates for other nuke plants and analyst reports, Progress Energy's costs could balloon to more than $10-billion, far more than early estimates of $4-billion to $6-billion.
Jeff Lyash, president and CEO of Progress Energy, said that material prices have escalated and that the utility's early estimates didn't include costs like the land purchase, financing or transmission. But he refused to offer a new estimate.
The upshot for Florida customers of Progress Energy? Be prepared to pay billions of dollars more than you bargained for. Under Florida law, customers could start seeing that cost tacked on to their monthly bills years before the plant is complete.
That scenario has raised concerns in the industry that optimistic early estimates may leave customers with sticker shock.
"We were very concerned early on that there were some improper expectations being set by not telling the whole story," said Steven Scroggs, who is in charge of new nuclear plants for the state's biggest utility, Florida Power & Light.
Its two-reactor project planned in South Florida could cost $12-billion to $18-billion, Scroggs said. That's far higher than prices quoted elsewhere in the industry, and double Progress Energy's early estimate in Levy County.
FPL's unusual candor raises questions about the low estimates offered by utilities throughout the Southeast: What did their estimates include? Are those estimates reliable? Just how much will this nuclear renaissance cost us?
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No one knows what a new nuclear plant will cost. No one has built one here in more than 30 years, and no U.S. utility has signed a contract yet for a new plant.
The utility industry quotes costs in its own jargon of cost per kilowatt. Progress Energy's early estimates ranged from $1,800 to nearly $3,200. FPL recently offered a much higher range of $3,108 per kilowatt to $4,540.
Moody's Investor Services offered an October estimate of $6,000 per kilowatt.
A year ago, Progress Energy quoted costs of $2-billion to $3-billion for a one-reactor project in Levy County, and later said that it might build two reactors. The St. Petersburg utility selected a new reactor called the Westinghouse AP1000 -- the same technology FPL is considering.
So why the enormous difference in their costs?
Lyash said that the early estimates were "generic overnight costs." It didn't include interest costs, price escalation, the $47-million the utility spent buying land, or the cost of more than 200 miles of transmission lines the utility will need to run through 10 counties.
By contrast, Scroggs' estimate of $12-billion to $18-billion for FPL's plant is "all in," and includes costs like transmission, site preparation, financing and price escalation.
"To understand how it really impacts customers, you have to talk about the all-in costs," Scroggs said.
The confusion over what estimates include is only part of the problem. Prices for materials like cement and steel have risen dramatically, driving up the cost of coal and natural gas plants as well as nuclear.
Lyash said he didn't want to give an estimate while negotiations are ongoing with Westinghouse. He also declined to say whether FPL's estimates seemed in line with Progress Energy's expectations.
"I'm not trying to be evasive," Lyash said. "I'd prefer to wait until we have a specific number."
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Utilities throughout the Southeast face the same quandary as Progress Energy.
Five utilities chose the Westinghouse AP1000, for a total of 12 reactors. Progress Energy plans to build four of those, two in Levy County and two in North Carolina. Georgia Power and Duke Energy have also selected the AP1000.
Georgia Power hasn't offered a public estimate, but Duke Energy offered early estimates of $4-billion to $6-billion for two reactors, similar to Progress Energy's early estimate.
Rita Sipe, spokeswoman for Duke Energy, said those estimates are now being revised but declined to offer a new number.
Westinghouse spokesman Vaughn Gilbert said the company will not discuss costs while it is still negotiating with utilities.
The nuclear industry already has a credibility hangover from the multibillion-dollar cost overruns that plagued the industry in the 1970s and 1980s. If the public senses that its numbers aren't reliable, it could face a backlash.
Hoping to avoid a repeat, the Nuclear Energy Institute, an industry trade group, pulled back from early estimates last year, said Adrian Heymer, senior director for new plant deployment for the Nuclear Energy Institute, a Washington, D.C., nuclear trade group.
Many utilities weren't very clear about what their early estimates included, he said.
"We sensed about a year ago now that we were a little out of synch with each other, and we've been drilling down trying to figure out what is the number, and we're getting varying stories out there," Heymer said.
But his group couldn't offer a number, either. Heymer said a real number won't be known until utilities sign their agreements with Westinghouse, which he predicted will happen in the next six to 18 months.
Times researchers Angie Holan and John Martin contributed to this report. Asjylyn Loder can be reached at firstname.lastname@example.org or (813) 225-3117.