Nuclear power plants are ‘bleeding cash’

Business columnist: "Let it be written that environmentalists didn't kill the nuclear power industry, economics did"

The V.C. Summer Nuclear Station in South Carolina, September 2016. Construction was recently suspended. CREDIT: AP/Chuck Burton.
The V.C. Summer Nuclear Station in South Carolina, September 2016. Construction was recently suspended. CREDIT: AP/Chuck Burton.

“It sometimes seems like U.S. and European nuclear companies are in competition to see which can heap greater embarrassment on their industry,” the Financial Times wrote earlier this month.

This appears to be the summer that the final nails are put in the coffin of the much-overhyped U.S. nuclear renaissance — despite President Trump’s comment in June that “we will begin to revive and expand our nuclear energy sector, which I’m so happy about.”

The nuclear industry is so uncompetitive now that over half of all existing U.S. nuclear power plants are “bleeding cash” according to a Bloomberg New Energy Finance (BNEF) report released earlier this summer. BNEF found that $2.9 billion is lost every year by just 55 percent of all the nuclear plants in the United States.

But, as the chart below shows, even the profitable plants have the narrowest of positive operating margins.

Negative operating margins are not a good thing.

And if existing nukes are so uneconomic, it’s no shock that new nuclear plants are completely unaffordable. The nuclear industry has priced itself out of the market for new power plants, at least in market-based economies.

Even the nuclear-friendly French — who get most of their power from nukes — can’t build an affordable, on-schedule next generation nuclear plant in their own country.

Earlier this month, two South Carolina utilities decided to abandon construction of two nuclear plants after spending some $9 billion. The twin plants, known as the V.C. Summer Nuclear project, are less than 40 percent finished. They were originally expected to cost $11.5 billion and be operational in 2018, but the latest projections gave at least a three-year delay and a total cost of $25 billion. The utilities plan to pass on some of the loss to customers by raising rates.

“The U.S. plants risk becoming an even bigger fiasco than those involving the European Pressurized Reactor at Flamanville in France and Olkiluoto, Finland,” said the Financial Times. Those plants “although years late and billions of euros over budget, at least look likely to be completed in the next couple of years.”

Vogtle in Georgia is “the last nuclear plant under construction in the U.S.” Bloomberg reported two weeks ago. Back in March, the Atlanta Journal-Constitution called the project “a financial quagmire.” The Westinghouse plants, originally priced at $14 billion, are “currently $3.6 billion over budget and almost four years behind the original schedule.” Recently, Southern Company released new estimates that put the total project cost at $25 billion.

Last week, Bloomberg reported that the developers of the Vogtle plant, “are seeking more federal support for the project, potentially increasing a record $8.3 billion loan guarantee it has already been promised.” But it’s not clear how likely that is given Energy Secretary Rick Perry turned down a request from the South Carolina developers for $3 billion in support.

It is hard to justify a taxpayer-backed loan for a nuclear plant that is all but certain to be a money loser from the moment it is turned on, assuming that ever even happens.

“Let it be written that environmentalists didn’t kill the nuclear power industry, economics did,” explains Houston Chronicle business columnist Chris Tomlinson in a piece headlined, “Nuclear power as we know it is finished.”

Since new construction is all but dead in this country for the foreseeable future, the remaining question is whether taxpayers should subsidize existing ones because of their low carbon pollution — as happened in the states of New York and Illinois. I argued in May that existing nuclear plants can make a plausible case for a modest short-term subsidy. But while that may happen in some states, the AP reported Tuesday that Ohio Governor John Kasich “can’t see supporting a proposed bailout of Akron-based FirstEnergy’s two nuclear plants that’s now stalled in the state Legislature.”

Whatever happens in the near term, the future of new power generation belongs to renewables.