Rapid Response: Industry Moves Forward Despite Constellation Decision, Oct. 14, 2010
The Nuclear Information and Resource Service (NIRS) and other anti-nuclear activists claimed during a news conference today that Constellation Energy’s decision not to move forward with the loan guarantee process regarding Calvert Cliffs Unit 3 “has significant negative implications for the remaining top federal loan guarantee reactor applicants in Texas and South Carolina.”
In reality, each project structure and application for a federal loan guarantee is unique. Broadly speaking, Constellation’s decision has little bearing on other nuclear energy projects. Below, we examine some of the facts surrounding the loan guarantee program.
Constellation Energy’s decision not to move forward with the loan guarantee process regarding Calvert Cliffs Unit 3 will have “significant negative implications for the remaining top federal loan guarantee reactor applicants in Texas and South Carolina.”
Every energy project and loan guarantee application is different. The decision made by Constellation is unique to the company and its circumstances, goals and responsibilities relative to the Calvert Cliffs project. Other projects have their own timetables and circumstances that are being managed separately. The course of any given project is not tied directly to the course of any other project.
Federal loan guarantees are especially important in merchant electricity markets to ensure that there is a reasonable cost of capital that allows utilities in these states to recoup costs in an openly competitive environment.
“Unfavorable economics, runaway costs, and uncontrollable risks such as cheap natural gas and slumping demand” are to blame for a slowdown in reactor development.
U.S. nuclear power plants are operating at high levels of safety, efficiency and reliability. Plans to expand the nuclear energy sector are rooted in the nation’s economic and environmental goals and needs, including efforts to reduce emissions of greenhouse gases. Nuclear energy provides 70 percent of the nation’s electricity supply from carbon-free sources, even though nuclear power plants constitute only about 11 percent of the nation’s installed electric-generating capacity. Plans and timetables for construction of all electric-generating technologies have been affected by the nation’s economic recession, which has reduced electricity demand to below 2007 levels. Nuclear energy is a proven, cost-effective way to generate baseload electricity. The first new nuclear projects are proceeding apace in Georgia and South Carolina.
Consider these facts:
Work on nuclear reactors is under way at three sites: Preliminary construction is under way at the Plant Vogtle power station in eastern Georgia and the Summer plant in South Carolina, and work continues on completion of Watts Bar 2 in Tennessee.
According to a report1 from the U.S. Energy Information Administration, the estimated levelized cost of new electric generation in 2016 from nuclear energy will be 107.3 dollars per megawatt-hour. This would make new nuclear energy generation cheaper than coal and natural gas with carbon capture and all renewable energy on a levelized basis.
New reactors have been affirmed as the lowest-cost option for new electric generation by the public service commissions in South Carolina, Florida and Georgia.
Despite short-term fluctuations, electricity demand will continue to grow. The DOE forecasts that the U.S. will need 21 percent more electricity by 2030. To meet the expected increase in electricity demand by then, the electric power sector must invest an estimated $1.5 trillion to $2 trillion. By then, a portfolio of generating capacity—including nuclear energy—will need to be already in place to meet demand.
1 “Annual Energy Outlook,” U.S. Energy Information Administration, April 2009.