Category Archives: Nuclear

Time For Southern
 To Face Facts:
 Vogtle Project
 Should Be Canceled

The mess at the Vogtle nuclear construction project just keeps getting deeper, and ever-more costly.

Earlier this month, Southern Company CEO Tom Fanning announced that the utility was raising Georgia Power’s share of the already-too-expensive and long-delayed project by $1.1 billion, upping the utility’s 45.7 percent stake in the plant to a mind-boggling $8.4 billion (and that doesn’t even include the $1.7 billion paid by Toshiba to resolve the Westinghouse bankruptcy, but that’s another story). While he continued to defend the company’s work at the roughly 2,234 MW project, Fanning said the company’s shareholders would eat the bulk of the additional cost increase to maintain the project’s “momentum” (if that description is even possible for such a trouble-filled construction effort).

Specifically, Fanning told analysts: “Although we believe the increased…costs are reasonable and necessary to complete the project we have made the judgment that it’s in the best long-term interests of investors, customers and other stakeholders that we not disrupt project momentum by seeking approval of the base capital cost increase so soon after receiving PSC [public service commission] approval to continue with the project. Therefore, when Georgia Power files the increased cost estimate with the PSC as part of VCM 19 later this month, Georgia Power will not request recovery of the $700 million in base capital cost increase.”

I am sure Georgia’s state regulators will take Fanning at his word, probably glad that they can continue to ignore the obvious, that the reactor project is no longer economic. But a much more likely explanation for Fanning’s unusual gesture—for years the company has used the Georgia PSC’s endorsement of the project in 2009 as the justification for each and every cost increase that has come down the pike—is that he and the Southern executive team know that if they sought further cost recovery the commission might finally read its staff analyses and determine that the plant isn’t in ratepayers’ interests nor needed to meet demand.

Consider that in the latest mandatory six-month review of Georgia Power spending at Vogtle, which covered the period from July-December 2017, commission staff concluded that completing the reactor project was only “slightly economic” and, here is the kicker, only “if the company meets its current cost and [commercial operating date] forecasts.” [Emphasis added, but probably not necessary]

That testimony, prepared by Philip Hayet, Tom Newsome and Leah Wellborn, was submitted in June 2018 (it can be found here)—two months before Southern’s latest cost increase announcement. In other words, the additional costs almost certainly render the plant uneconomic, if it wasn’t already, and would explain the company’s decision to soak shareholders for the new charges and not return to the commission.

Worse, more cost increases and delays may be in the offing.

In his early August announcement and subsequent Q&A with analysts (which can be found here), Fanning talked repeatedly about labor-related issues at the site. The company needs, he said, both to boost the size of its onsite labor force, particularly electricians and pipefitters, and to ensure that all these workers are being used productively.

“It really deals with what we’ve been saying for some time now,” he said. “And that is our ability to deploy labor productively onsite. That’s going to help us get to our schedule and that has certainly cost ramifications. We’ve got to keep productivity on the site up, and actually improve the amount of hours worked every month onsite as we get through this ramp-up process into November and then for the next 18 months.”

Whether the company will be able to do that is unknown, but its track record of living up to past promises is spotty, at best.

The degree of difficulty associated with Fanning’s projections for the work that must be done over the next 18+ months if the project is to be completed on time was underscored in testimony by Steven Roetger and William Jacobs as part of the last staff review of the Vogtle project (that testimony can be found here). It is worth noting here that Jacobs and Roetger have been vocal and correct critics of the company’s construction schedules and cost estimates for years (see my story here), and predicted two years ago (see here) that labor productivity issues inside the reactor containment vessels could be a major problem.

Discussing the company’s plan to have the reactors complete by April 2021 and April 2022, which would be eight months earlier than the PSC’s currently approved delayed startup schedule (which is in turn a whopping 69 months beyond the company’s initial announced completion date), the analysts said the staff is not confident the company can meet those targets. To hit those dates, they pointed out, the company would have to boost the amount of work completed each month “to levels never before achieved on this project.”

Later, they expanded on this: “The staff’s greatest concern and what staff identifies as the most significant risk to the project schedule at this time is the ability of SNC [Southern Nuclear Company] to increase construction production to the level needed to meet the target +21-month schedule.  Meeting the target monthly percent complete will require a significant increase in production by increasing craft personnel and by more efficient use of those personnel, i.e. improve the productivity of the craft. At present, the project is earning approximately 85,000 to 100,000 hours per week on the direct construction scope. This will need to increase to 140,000 earned hours per week by October 2018 to meet the current target +21-month schedule.”

In other words, the amount of work completed weekly will have to increase on the order of 50 percent, and be sustained for months, to meet the 21-month schedule.

Even meeting the approved startup dates of November 2021 and 2022 is likely to pose a serious challenge, the two wrote, noting that “improvements in productivity and the required additions of craft personnel must occur in the immediate future for the potential to meet [those deadlines].” Further, they noted, “gains in productivity must also be maintained over extended months.”

Fanning and his executive team are in a tough spot. Asking the commission again to raise the amount owed by ratepayers clearly is a non-starter, at least at the moment, but analysts were none too happy with the company’s decision to bill shareholders either, with Moody’s downgrading the company’s debt and stock analysts following suit on their recommendations regarding Southern shares. Given the company’s stubborn commitment to the project, and the failed Kemper gasification effort before that, it is almost inconceivable that Fanning would opt to cancel the Vogtle plants, but he should. It’s time.

–Dennis Wamsted

Trump’s Coal Obsession
 To Force Perry, GOP
 To Abandon Free Market

So, it has come to this—Rick Perry, the man who seven years ago couldn’t remember that the Energy Department was one of the government agencies he wanted to eliminate is now essentially going to be entrusted with running the nation’s electricity grid as secretary of the very same department for the next two years.

Or, at least that is the indication from the latest memo (which can be found here) circulating around Washington in the Trump administration’s never-ending effort to rewrite the rules of capitalism, that wonderful free market enterprise the GOP has so often defended in years past. Democrats have frequently been at the receiving end of GOP barbs about the free market, with Republicans warning anyone listening that they were the only thing standing between the country and, that’s right, socialism. See Secretary Perry’s particularly relevant quote below about President Obama from 2012. Oh my, how things have changed.

I think Barack Obama is a socialist. I think he cares for his country – don’t get me wrong about that – but I think he truly misunderstands what this country was based upon, the values that America was based upon, which was free enterprise and having the ability to risk your capital and having a chance to have a return on your investment.

–Rick Perry

Anyway, the general GOP defense of the free market used to run something like this: When cheaper, better products come along, incumbent industries get hurt, some survive and evolve while others go out of business. It’s messy, but that’s what makes America great.

Well, that exact messy transition is under way now in the electric power industry, and not even a two-year grid nationalization, for that in effect is what is being considered, is going to stop it.

Renewable energy is getting cheaper almost by the day and, coupled with storage, offers the much ballyhooed “baseload” power that seems to appeal to Trump and his tag-alongs. At the same time, the administration’s own energy dominance agenda ensures that natural gas will be in plentiful supply and remain low in cost for all the existing and planned new natural gas-fired generating facilities across the country. Those facts can’t be wished away by half truths about resilience and reliability.

Continue reading Trump’s Coal Obsession
 To Force Perry, GOP
 To Abandon Free Market

New Analysis
 Begs The Question:
 Is Vogtle Project
 Too Costly To Complete?

Last week’s headlines focused on Georgia Power’s newly signed agreement with Toshiba committing (recommitting?) the Japanese parent of bankrupt Westinghouse to pony up $3.68 billion to fund the completion of the long-delayed Vogtle 3 & 4 nuclear power plants. While that is clearly good news (at least for the moment) for Georgia ratepayers, who could otherwise have been stuck with the bill, it has obscured the real news—that no one knows how much it is going to cost or how long it is going to take to complete the two reactors.

The day before Georgia Power’s headline stealing news, staff and the independent construction monitor filed testimony at the Georgia Public Service Commission covering the latest six months of activity at the site (from July 2016-December 2016, with rollover analysis through April 2017). Their conclusion? The project has been a mess since the beginning, and there are still no signs of improvement (although admittedly couched in far more diplomatic/technical language, to which we now turn).

At the macro level, much of the problem can be traced to the absence of a credible integrated project schedule or IPS, an absolute must in a project as complex as this, William Jacobs, Jr., and Steven Roetger told the commission. Jacobs has served as the project’s independent construction monitor since 2009; Roetger is the commission’s lead analyst for the project. They have been highly critical of the Southern/Westinghouse work at Vogtle for years and have warned consistently that the stated completion dates bore no relationship to reality; see my stories here and here.

Continue reading New Analysis
 Begs The Question:
 Is Vogtle Project
 Too Costly To Complete?

Trump Paris About-Face Likely To Hurt, Not Help Nuclear, Coal Sectors

President Trump, with his fossil fuel fantasists in tow, made it official Thursday, announcing that he would pull the United States from the Paris climate change accord in order to “make America great again.” The administration’s inability, as well as that of most of the Republican Party in general, to come to grips with climate change is sad, but that will have to wait for a future post. The issue at hand is the decision’s likely negative impact on the U.S.’ already-battered nuclear and coal industries.

For years the nuclear industry has been making the case that it was vital to the country’s climate change mitigation efforts because of its emissions-free generation profile. While accounting for just 20 percent of the nation’s annual electric generation, the industry noted ad infinitum, it was responsible for 60 percent of the carbon dioxide-free emissions (see chart below). In a carbon-constrained world, that would be a valuable attribute. But the Trump administration has now made it clear that it places no value on CO2-free generation sources.

That, in turn, could be a major problem for the industry, as the effort to secure nuclear subsidies—successful so far in Illinois and New York (although now tied up in court), still pending in Ohio, Connecticut and now Pennsylvania—has relied in large part on the sector’s glowing greenhouse gas attributes. In an interesting twist, just before the administration’s head-in-the-sand announcement, Chicago-based Exelon said it would close the 837-megawatt Three Mile Island nuclear reactor in late 2019 because the facility couldn’t compete in the PJM electricity market, which sprawls across 13 states and the District of Columbia. The company largely blamed the market’s structure, including its failure to reward the plant for its emissions-free generation, for its decision to shutter the plant.

Continue reading Trump Paris About-Face Likely To Hurt, Not Help Nuclear, Coal Sectors

Looking At The Brackets:
 New Nuclear Plants
 Are Odds-On Favorite
 To Lose In First Round

I just finished filling out my March Madness brackets (for recreational purposes only, I assure you), so I think we also should start a pool on when the next utility will ask its state regulators for permission to build a new, large-scale nuclear power plant? If we did, should ‘never’ be one of the options?

Anyone willing to put their money on Georgia Power? The company actually had gotten state approval to do some preliminary work at a possible site for two new reactors In Stewart County on the border with Alabama. But earlier this month the utility told regulators it was suspending work on the expansion plans at least until its 2019 integrated resource plan is filed.

How about Florida Power & Light? The company’s planned two-unit expansion at Turkey Point has been on the books since 2008, when FPL was optimistically forecasting the new reactors would be up and running by 2018 and 2020, before subsequently pushing the start-up back first to 2022 and 2023 and now to 2027 and 2028. But last year the company told Florida regulators that while it still intended to secure its NRC license for the facility (which is expected sometime this year), it didn’t intend to do anything else until 2020.

Finally, how about Dominion Resources, which has been pushing for years to add a third unit to its North Anna site in Louisa County, Va. The proposed reactor, a 1,470 MW design developed by GE and Hitachi known as the ESBWR (Economic Simplified Boiling Water Reactor), is a first-of-its-kind unit with an estimated capital cost of almost $15 billion and an all-in cost of about $20 billion. Despite its enthusiasm for the project, even Dominion acknowledged in its 2016 IRP that the reactor was only economic in one scenario—full implementation of the former Obama administration’s soon-to-be defunct Clean Power Plan.

The problems for these companies, and any others considering such a step, go well beyond the well-documented, and still far-from-over cost overruns and delays that have plagued the four new reactors currently under construction in Georgia and South Carolina. The real issue is that the technology—one with high capital costs requiring a long time of steady state operation to get into the black—doesn’t mesh with the nation’s rapidly evolving electric power system. Committing to a nuclear plant constrains you for at least 40 years, and perhaps for as long as 80 years; and while you are still committed, everything else is changing.

Continue reading Looking At The Brackets:
 New Nuclear Plants
 Are Odds-On Favorite
 To Lose In First Round