Reactors Likely to Cost $9 Billion: Progress Energy Doubles Estimate

October 17, 2008
The News & Observer - McClatchy-Tribune Information Services via COMTEX
Building two nuclear reactors in Wake County could cost Progress Energy customers more than $9.3 billion. The cost estimate, disclosed this month to the U.S. Nuclear Regulatory Commission, is Progress Energy's latest projection for the Shearon Harris proposal. It doubles the previous estimate of $4.4 billion provided in February, when the Raleigh utility applied to the NRC for a license to build two reactors at the site in Wake County.
For nuclear critics, soaring costs offer the strongest case against building new plants. The power industry has long argued that nuclear plants produce the cheapest electricity, but those arguments have been buried under an avalanche of contrary evidence.
Progress has resisted issuing cost estimates for the Shearon Harris project, saying such projections are imprecise and meaningless.
"At the end of the day, you don't know what these things are going to cost until you sign the contracts," spokesman Rick Kimble said.
But Progress updated its estimate this month in response to N.C. Waste Awareness and Reduction Network, a Durham group that is challenging the utility's license application.
"Progress Energy is still low-balling," said Jim Warren, the group's director.
N.C. WARN contends that runaway costs pose an enormous gamble to the public. The group warns that nuclear projects today risk the same cost overruns that derailed about 60 nuclear projects in the 1970s and 1980s.
The Shearon Harris estimates that Progress gave the NRC are based on negotiations with vendors for new reactors in Florida, which have been pegged at $17 billion for two units and transmission upgrades. The Shearon Harris estimate is incomplete and excludes costs for financing, which could add several billion dollars.
Building two reactors in Florida would add as much as $25 a month to a residential power bill in that state. However, Progress would not build two reactors at the same time in this state, Kimble said. Instead it would stagger construction over two decades. Progress has not made a final decision whether to build new reactors here. "We have not done anything we can't walk away from," Kimble said.
Nuclear plants would raise power bills but they would stabilize electricity costs, reduce greenhouse gasemissions and also provide a large infusion of cash for local governments. In 2020, the property tax revenue from twin reactors at Shearon Harris would come to about $30 million, according to an economic impact report prepared for Progress by N.C. State University economist Edward Erickson.
Costs for power plants have more than doubled in recent years, tracking the rising global demand for energy, steel and concrete. Progress told the NRC that new reactors would cost less at Shearon Harris than in Florida because the Florida site requires more infrastructure and is farther from sources of cooling water than Shearon Harris.
Kimble suggested that costs could come down as the economy cools and demand slackens for commodities. The cost of crude oil, for example, has dropped about 50 percent since July. The same could happen for other commodities if demand eases.
Independent analysts warn otherwise. Standard & Poor's, the Wall Street rating agency, issued a report Wednesday titled: "Construction Costs To Soar For New U.S. Nuclear Power Plants."
One cause is a limited supply of materials and equipment. The 600-ton forgings that nuclear plants require are manufactured at only one facility, owned by Japan Steel Works, giving that company a monopoly. There is only one supplier of reactor coolant pumps in this country, according to Standard & Poor's.
Borrowing huge sums in a cash-strapped environment would pose other challenges.
Progress chief financial officer Mark Mulhern recently noted that from a nuclear perspective, it wasn't a bad thing that the stock market crashed now and credit lines seized up before the start of a decade-long nuclear plant project. In mid-construction, the utility would have been forced to borrow from Wall Street at the highest interest rates to keep the project moving along.
"We would have to avail ourselves of contingency plans," he said. or 919-829-8932