Two years ago, TCN Journal posed this question: “Could Texas become the capital of a resurgent nuclear power industry?”
At the time, there was accelerating talk of a “nuclear renaissance” – a term promoted by the nuclear industry itself – and of nuclear-produced electricity’s potential to reduce greenhouse-gas emissions from fossil fuels, especially coal.
That, as they say, was then.
The nuclear-reactor crisis that unfolded in northeastern Japan following the huge earthquake and tsunami dealt yet another blow to the prospects for expanding nuclear power in the U.S., which had already been hammered by declining prices for natural gas – a competing source of electricity – and Congress’ failure to pass comprehensive climate-energy legislation that would impose a price on carbon dioxide emissions.
The impact was quickly evident in Texas – a place which appeared just a couple of years ago to be poised to help lead a revival of the long-dormant nuclear-power industry.
The San Antonio Express-News reported last week that the “nuclear crisis in Japan may signal the death knell for the long-planned addition for two nuclear reactors at the South Texas Project,” a power plant 90 miles southwest of Houston near Bay City, where two reactors already produce electricity.
On Monday, the partnership planning the South Texas expansion announced [PDF] that it was “reducing the scope of development” there “to allow time for the U.S. Nuclear Regulatory Commission (NRC) and other nuclear stakeholders to assess the lessons that can be learned from the events in Japan.”
Even so, representatives of the South Texas proposal also said they did not immediately see a need for any changes at that plant’s operating or proposed reactors. And a couple of other Texas nuclear projects that aren’t as far along in the lengthy planning and regulatory process also found it advantageous to draw distinctions between their initiatives and the situation involving the crippled Japanese reactors.
The Texas developments occurred amid a rash of negative news and commentary about the prospects of nuclear power in general.
Quoting industry analysts and using the same phrase as the San Antonio newspaper, the Oil & Gas Journal reported from Houston, for instance, that the Japanese crisis might prove to be “‘the death knell’ for a pending ‘nuclear renaissance,’ increasing demand for natural gas, residual oil and coal to fuel electric power generation.”
Headlines last week painted an increasingly bleak picture for the nuclear industry’s chances for revival. The New York Times reported that the Japanese crisis was “underscor[ing] fears” about the safety of nuclear energy. The Associated Press said the Japanese situation was “cast[ing] doubt on [the] nuclear renaissance” and “spread[ing] doubt in nuclear countries.” In Germany, where nuclear expansion was suspended, Spiegel reported flatly on March 14 that the harrowing problems at the Fukushima Daiichi plant’s reactors “mark[ed] the end of the nuclear era.” Greenwire reported that a former member of the NRC, more cautiously, was saying any renaissance for nuclear power was “dead, for now.”
Time, meanwhile, reported that for all the hype, there had never been a renaissance worthy of the name in the first place in this country:
Even before the earthquake-tsunami one-two punch, the endlessly hyped U.S. nuclear revival was stumbling, pummeled by skyrocketing costs, stagnant demand and skittish investors, not to mention the defeat of restrictions on carbon that could have mitigated nuclear energy’s economic insanity. [President Barack] Obama has offered unprecedented aid to an industry that already enjoyed cradle-to-grave subsidies, and the antispending GOP has clamored for even more largesse. But Wall Street hates nukes as much as K Street loves them, which is why there’s no new reactor construction to freeze.
With progress toward new reactors in the U.S. “lagging,” the proposal to add a third and fourth reactor at the South Texas Project has been seen as a key chance for the nuclear industry to “break a 30-year drought” in such construction, the New York Times reported in January. The lead prospective builder, New Jersey-based NRG Energy, “has been driven to try something never done in nuclear construction: finding a buyer for the electricity before the concrete is even poured.”
The South Texas expansion was picked in 2009 as one of four national finalists for federal loan guarantees intended to help jumpstart a new wave of nuclear plant construction. As recently as March 2, Reuters reported that the project was clearing hurdles toward achieving such support.
Then came the incident at the Japanese nuclear plant, owned by Tokyo Electric Power Co., which the anti-nuclear Public Citizen organization’s Texas Vox blog noted on March 13 had agreed last year to become a partner in the two new South Texas reactors with NRG and Toshiba Corp.
“As Austin Energy and [San Antonio’s similarly city-owned] CPS [Energy] consider the Power Purchase Agreements NRG is peddling they should look very hard at what is happening in Japan and at TEPCO’s ability to remain a financial partner in STP,” the blogger argued.
The next day, an article in the Austin American-Statesman was headlined “South Texas Project deal dubious in wake of quake.”
The repercussions from an earthquake that has rocked nuclear facilities in Japan threaten to shake up the financial grounding of a proposed power plant expansion in Texas.
A Japanese company that owns the distressed Fukushima Daiichi power plant had figured to own as much as 20 percent of two proposed reactors at the South Texas Project . But with the company, Tokyo Electric Power Co., reeling from reports of radiation leaks, financial analysts on Monday called the deal uncertain.
Some of the South Texas Project electricity is shipped to Austin, which is a part-owner of the two current reactors. The city is considering whether to buy more power from the two proposed reactors.
Tokyo Electric had agreed to spend $155 million to become a 10 percent owner of two proposed reactors at the South Texas Project.
Reuters also reported potential financing problems for the effort, including a possible failure to get crucial federal support:
“For NRG Energy we think the potential added pressure could be the end of its nuclear loan guarantee award from the Department of Energy for [South Texas Project units] 3 and 4 in Texas, which could cause a write-off in the short term, but would be likely positive in the long-term,” Barclays wrote in a note to clients.
Tokyo Electric Power Co also has agreed to invest $125 million in the project, but that investment is contingent on DOE loan support.
Analysts at Moody’s said the Japanese nuclear problems create “uncertainty” for the NRG expansion project, but abandoning the project would be a positive for the company due to uncertainty over its cost.
NRG declined to speculate about the future of the Texas project, saying the focus for now should be on Japan.
On March 15, in its article reporting a possible “death knell” for the South Texas expansion, the Express-News reported a blow to the project in San Antonio, which owns 40 percent of the existing two-reactor plant:
CPS Energy CEO Doyle Beneby announced [March 14] that the utility and NRG Energy, the majority partner in the expansion, have mutually agreed to suspend talks over CPS possibly buying power from the two proposed reactors, which were scheduled to be licensed and begin construction in 2012.
Tokyo Electric Power Co., which owns the crippled Fukushima Daiichi plant in Japan, was expected to invest in the STP expansion if the project was awarded a federal loan guarantee.
In addition, NRG has said it would also rely on loan guarantees from the Japanese government to build the new reactors.
It now seems unlikely that either entity will be in a position to invest in the U.S. nuclear industry anytime soon.
CPS’ recent renewed interest in buying additional power from the plant was seen as an important step forward for a project that, while wounded, had continued to lumber forward.
After a nasty lawsuit and war of words between the once-equal partners, NRG has had a difficult time finding new investors and selling the 2,700 megawatts the new units would produce, in part because of the reduced demand for power and the persistent low price of natural gas.
NRG said earlier this year that it would make a final decision about whether to continue investing in the project near the Texas Gulf Coast by the third quarter of this year.
The NRG-Toshiba partnership planning the two new South Texas reactors said Monday that the decision to slow work on the project meant continuing efforts “for the time being, will be limited to work related to licensing and securing the federal loan guarantee upon which the project stands.”
In concert with that announcement, the Express-News reported, San Antonio’s CPS utility said it “would indefinitely suspend talks to buy power from the proposed reactors.” The newspaper added that the developments on Monday “added a degree of finality to CPS’ announcement March 14 that the parties had agreed to mutually cease talks as the nuclear crisis in Japan unfolded.”
On March 14, the Fort Worth Star-Telegram reported that the Dallas-based electricity company Luminant had shoved back the time frame when it hopes to start commercial operation of two additional reactors at the two-unit Comanche Peak nuclear plant, 40 miles south of Fort Worth, from 2018-20 until 2021-22.
A company representative said the delay was caused by the NRC’s decision to postpone a safety review by a year and a half and “has absolutely nothing to with with the Japan issue,” the newspaper reported.
Luminant issued a statement saying it would “work in close concert with the [NRC] and industry groups to incorporate lessons learned from the events in Japan into the ongoing process of designing, licensing and building of our proposed units.”
Meanwhile, the Japanese situation was also addressed last week in an NRC hearing on yet another possible nuclear project in Texas – a plant contemplated by the Chicago-based Exelon energy company near Victoria, 70 miles west of the existing South Texas plant.
The company is seeking the first-ever federal permit for a nuclear plant site where construction is not yet planned, saying it won’t build the facility until business conditions are different. Bloomberg reported on March 8 – three days before the Japanese earthquake and tsunami – that Exelon’s CEO had told a conservative think tank that the U.S. should use more natural gas as a bridge toward “clean energy,” rather than subsidizing other electricity sources such as nuclear, wind, solar and carbon-capturing coal.
At the NRC hearing on the Exelon site-permit request, an opposing group coupled its contention that geological formations in the vicinity could create safety risks with a reminder about the “sober[ing]” events in Japan, the Texas Tribune reported. A company attorney contended in response that the faults around Victoria “pose no seismic threat,” because “unlike those in Japan, they are not tectonic in nature.” [“Tectonic” refers to large-scale processes in the earth’s crust.]
Likewise, the South Texas partnership’s announcement on Monday also sought to draw a sharp distinction between that plant and the Japanese crisis with regard to seismic questions. It quoted David Crane, who heads both NRG and the partnership company, Nuclear Innovation North America:
“Since STP is very differently situated from the stricken nuclear plant in Japan – ten miles from the Gulf of Mexico, in a non-seismic area with hardened watertight protection around both its backup generation and its spent fuel storage facilities – it is not obvious to us that any modifications are necessary to regulatory requirements applicable to either our existing or planned nuclear facilities. However, as we unreservedly support our government’s proposed nuclear safety review, the prudent thing for us to do is to await the outcome of that review before committing more of our own or our partners’ capital.”
The Exelon chief executive’s advocacy of natural gas was a reminder – followed by many more in the days following the Japanese disaster – that the politics and economics of how to produce electricity involve intense competition among different power sources and that claims involving “clean energy” continue to be a major factor, even in the absence of a comprehensive national climate-energy statute.
Noting the “message battle” that had broken out in response to the Japanese nuclear crisis, Greenwire reported that nuclear proponents were continuing to make a climate-linked argument:
Supporters of nuclear energy say it comes down to this: Accept the risk of rare nuclear accidents or face the possibility of catastrophic climate change.
The argument echoed across Washington, D.C., as nuclear advocates sought to counter critics in the wake of calamity at Japan’s Fukushima Daiichi power plant.
“If we close down our nuclear reactors or do not build nuclear reactors, the implications for climate change would be staggering,” said Charles Ebinger, director of the Energy Security Initiative at the Brookings Institution, a Washington think tank. “China alone, if China were to abandon its very ambitious nuclear program, and India as well, they would have no near-term alternative to coal, and that would be devastating for the atmosphere.”
Echoing such arguments, the announcement of the decision to slow down the South Texas expansion project quoted Crane as saying that its proponents “stand squarely behind new nuclear power as the most important component in our transition to a low-carbon economy.”
The Obama administration reiterated its continuing support for federal loan guarantees for new nuclear construction last week, though a poll for USA Today and Gallup found declining public support for nuclear power. Different energy analysts, meanwhile, saw different potential winners – coal, natural gas and solar among them – if the Japanese crisis does prove to be a new burden for the nuclear industry.
Given Texas’ status as an energy-producing and energy-consuming powerhouse, the jockeying for advantage by vying interests has as much relevance here as it does anywhere.
The state has a huge and growing appetite for electricity. It relies heavily on coal. It leads the nation in emitting greenhouse gases. It is a leading producer and consumer of natural gas. And renewable-energy advocates are trying to boost solar power, hoping it might follow the rapid rise of Texas’ wind industry to national prominence.
– Bill Dawson