[ RadSafe ] Article: Nuclear Power's Missing Fuel

[John Jacobus]

>From a coworker.  As noted, "The real obstacle isn't
the Sierra Club but the 28-year-old analysts on Wall
Street," . . .
-----------------------------

BusinessWeek Online
Nuclear Power's Missing Fuel

Friday June 30, 3:59 pm ET 

By Adam Aston, with John Carey in Washington and Mark
Morrison in Austin, Tex. 

Nuclear power is hot. Sixteen utilities have expressed
intentions to build up to 25 new reactors across the
U.S. Just last month, NRG Energy Inc. (NYSE:NRG -
News) in Princeton, N.J., unveiled plans to invest
$5.2 billion in two new reactors at an existing atomic
plant near Houston. 

It's a nuclear renaissance, right? Not yet. While
smart money is placing multibillion-dollar bets on
ethanol, wind power, and solar, it's not throwing
buckets of cash at nukes. "The real obstacle isn't the
Sierra Club but the 28-year-old analysts on Wall
Street," says Bob Simon, Democratic staff director of
the Senate Energy and Natural Resources Committee. 

Regulators could balk if proposed designs don't meet
construction and safety standards. But memories of the
delays, titanic cost overruns, and bankruptcies that
ended America's love affair with nuclear power in the
mid-20th century are the most daunting obstacle.
"Investors remain wary of construction risks," says
Paul T. Ho, a director at Credit Suisse First Boston's
(NYSE:CSR - News) energy group. 

That's why, five or so years from now, when the first
construction and operating licenses are likely to be
granted, only the most creditworthy diversified
players, such as Duke Energy (NYSE:DUK - News)and
Southern Co. (NYSE:SO - News), would be likely to dip
a toe in these waters, explains Denise Furey, senior
director of global power with Fitch Ratings. With
their scale, such companies could finance these
projects for a decade or so using some combination of
debt and equity. But that's a far cry from a new
nuclear age. 

Historically, utilities did an "abysmal" job
controlling building schedules and costs, says David
A. Schlissel, an economist at Synapse Energy Economics
Inc. in Cambridge, Mass. Between 1975 and 1989, the
average period required to complete a plant soared
from 5 years to 12. The bill for a group of 75
first-generation plants totaled $224.1 billion (in
current dollars), 219% more than estimated, according
to a 1986 Energy Dept. study. In time, many utilities
collapsed under these debts even as customers' bills
soared. 

Power companies say they can bring costs down, thanks
to new, standardized plant designs and a streamlined,
one-step licensing process. "People forget that the
construction problems happened 30 years ago. There's
been great progress since then," says NRG CEO David
Crane. The company plans to use reactors from General
Electric Co. (NYSE:GE - News) and Hitachi Ltd.
(NYSE:HIT - News) that have been installed in Japan.
This time around, the industry is aiming to build new
plants for $1,500 to $2,000 per kilowatt of capacity,
compared with a peak, inflation-adjusted cost of about
$4,000 in the 1970s. 

Trouble is, the cheapest plants built recently, all
outside the U.S., have cost more than $2,000 per
kilowatt. And the advanced designs now on U.S. drawing
boards have never been built here. "A
first-of-its-kind facility always costs more," says
John Kennedy, a director at Standard & Poor's
(NYSE:MHP - News). "Nukes ought to be part of the
(energy) mix," says Southern CEO David M. Ratcliffe,
but nobody wants to be first to build. "Everyone would
actually like to be No.10," he says. 

Last year's Energy Act dangled $13 billion worth of
extra treats before the nuclear industry, according to
Public Citizen, a consumer-interest group. These are
focused on the first six plants and range from some $2
billion set aside to cover construction overruns due
to legal challenges to a production tax credit worth
up to $5.7 billion. Yet all that still may not
"provide a sufficient incentive to pursue new
construction," says Kennedy. 

Energy Secretary Samuel W. Bodman offers couched
assurances on nukes. "I'm convinced we'll get the
first six reactors, with construction starting by
2010," he says. "But we don't need six reactors. We
need 16, or 26." Until licenses for those first few
plants are granted a few years from now, financiers
and many utilities may just wait to see how the game
changes. "Wall Street is very shortsighted," Furey
says. Or maybe it just can't forget what it has
already seen. 


+++++++++++++++++++
"You get a lot more authority when the workforce doesn't think it's amateur hour on the top floor."
GEN. MICHAEL V. HAYDEN, President Bush's nominee for C.I.A. director.

-- John
John Jacobus, MS
Certified Health Physicist
e-mail:  crispy_bird at yahoo.com

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