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AP IMPACT: Building costs rise at US nuclear sites

Tuesday - 7/10/2012, 11:09pm  ET

By RAY HENRY
Associated Press

ATLANTA (AP) - America's first new nuclear plants in more than a decade are costing billions more to build and sometimes taking longer to deliver than planned, problems that could chill the industry's hopes for a jumpstart to the nation's new nuclear age.

Licensing delay charges, soaring construction expenses and installation glitches as mundane as misshapen metal bars have driven up the costs of three plants in Georgia, Tennessee and South Carolina, from hundreds of millions to as much as $2 billion, according to an Associated Press analysis of public records and regulatory filings.

Those problems, along with jangled nerves from last year's meltdown in Japan and the lure of cheap natural gas, could discourage utilities from sinking cash into new reactors, experts said. The building slowdown would be another blow to the so-called nuclear renaissance, a drive over the past decade to build 30 new reactors to meet the country's growing power needs. Industry watchers now say that only a handful will be built this decade.

"People are looking at these things very carefully," said Richard Lester, head of the department of nuclear science and engineering at the Massachusetts Institute of Technology. Inexpensive gas alone, he said, "is casting a pretty long shadow over the prospects" for construction of new nuclear plants.

The AP's review of pending projects found:

_ Plant Vogtle in eastern Georgia, initially estimated to cost $14 billion, has run into over $800 million in extra charges related to licensing delays. A state monitor has said bluntly that co-owner Southern Co. can't stick to its budget. The plant, whose first reactor was supposed to be operational by April 2016, is now delayed seven months.

_ The long-mothballed Watts Bar power plant in eastern Tennessee, initially budgeted at $2.5 billion, will cost up to $2 billion more , the Tennessee Valley Authority concluded this spring. The utility said its initial budget underestimated how much work was needed to finish the plant and wasted money by not completing more design work before starting construction. The project had been targeted to finish in 2012, but has been postponed until 2015.

_ Plant Summer in South Carolina, expected to cost around $10.5 billion, has seen costs jump by $670 million; but with lower interest rates and cheaper-than-expected labor; the owners assert the project is still on or under budget. A deadline to put the first new reactor online has been delayed from 2016 to 2017; the second reactor is now eight months ahead of schedule, targeted for early 2018.

Southern Co. and others in the nuclear business say cost overruns are expected in projects this complex, and that they are balanced out by other savings over the life of the plant. Southern Co. expects Plant Vogtle will cost $2 billion less to operate over its 60-year lifetime than initially projected because of anticipated tax breaks and historically low interest rates.

Regulators have been trying to make it easier to build, encouraging the use of off-the-shelf reactor designs that get approval in advance. New construction techniques are supposed to require less in-the-field assembly, making building quicker and reducing human error. Interest rates and labor costs have been down after a bruising recession.

"It's a down environment economically," said Steve Byrne, president of generation and transmission for SCANA's South Carolina Electric & Gas Co., one of the utilities building Plant Summer's reactors. "It's terrible for the country, but it's a great time to be building" a nuclear facility.

But the economy is also working against progress on new construction. The next company in line to build, Progress Energy, has pushed back construction plans for two reactors in Florida because of the economy, low demand and extremely cheap natural gas. It expects its first new reactor to be finished in 2024.

The plants burning natural gas are far cheaper to build than nuclear power plants. But utility executives say they need a diversified mix of power plants, including nuclear, because relying too heavily on a single fuel like natural gas backfires if prices go up.

The rising construction costs hit an industry already under financial pressure, after meltdowns last year at the Fukushima Dai-ichi nuclear plant after a tsunami in Japan. NRG Energy wrote off a $481 million investment in two planned reactors in Texas shortly after the accident, citing uncertainties after the Japanese disaster. Other utilities still seeking to build have said they expect the U.S. Nuclear Regulatory Commission will adopt new safety rules in response to the accident; they cannot predict the exact costs.

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