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Seismic Omen

Fukushima shockwaves hit America’s nuclear renaissance.

Fortnightly Magazine - May 2011

of $122 billion.

However, the federal loan guarantees aren’t bailouts; as presently structured they fall substantially short of funding the next generation of new reactors. At best, the guarantees are characterized as a vote of confidence in nuclear power.

The Energy Policy Act of 2005 provides, among other provisions, for “Standby Support for New Reactor Delays.” The law offers protection to offset the financial impact of delays beyond the industry’s control that might occur during construction and during the initial phases of plant startup for the first six new reactors. The bill provides for 100 percent coverage of the cost of delays for the first two new plants—but that coverage is limited to a maximum of $500 million per reactor—and 50 percent coverage, up to $250 million per plant, for each of the next four units.

Given the controversial nature of the technology and the formidable opposition, investors and utilities ultimately might find the current level of guarantees decidedly inadequate. For example, NRG recently said that it would consider limiting pre-construction activity at the South Texas nuclear station; it already has committed $350 million to the venture. The project is officially moving forward, but it’s possible the future of units #3 and #4 may come into question in response to new regulations following Fukushima. And Old Dominion Electric Cooperative, holder of a minority stake in the North Anna #1 and #2 reactors in Virginia, recently announced its decision to withdraw from North Anna #3. It should be noted that this decision was made just days prior to the Fukushima accident. It may have been a prescient move given that the NRC has reportedly placed North Anna seventh on its list of the most quake-prone nuclear reactor sites in the U.S.

Rethinking the Renaissance

The NRC has received 19 applications for new nuclear reactors. Time will tell whether or not these plants will receive final approval from the NRC and get built or be canceled by the project owners because they find the anti-nuclear public sentiment insurmountable and the costs prohibitive. The anti-nuclear constituencies have already begun to rally around the wagon. Experience has shown that anti-nuclear groups have staying power and will use every regulatory and legal means to halt a project. The net effect of such intervention is to delay in-service dates and increase plant costs. A handful of companies, knowing the hurdles, might be determined to pursue their plans, but we have to wonder whether those utilities with projects in the licensing pipeline aren’t having second thoughts, given the devastating Fukushima nuclear accident.

One investment bank report (by UBS analysts Per Lekander and Stephen Oldfield) says that Fukushima will be more damaging to the nuclear industry than Chernobyl—because it cast “doubt on whether even an advanced economy can master nuclear safety.” The report suggests that as many as 30 life-extension projects will be scrapped directly as a result of Fukushima. While new reactor designs with passive cooling systems might be more capable of surviving a Fukushima-type disaster, the perceived risk of nuclear construction is now much higher than it was