Resources & Stats

New nuclear power plants are projects of immense scope and magnitude in the world of infrastructure development. Reports of periodic cost or schedule variances can be highly misleading if treated in a vacuum and if they fail to take into account the vast scope of the project.

• A nuclear power plant construction project is a multi-year effort. Any variance over a few days, weeks or even months is not indicative of overall project progress. Simply reporting on the variance does not take into account longer-term projections over the life of the construction project.
• Nor does it reflect the ultimate value of the facility when it goes into service—its contribution to the stability of the electrical system, its role in reducing greenhouse emissions and its ability to provide affordable power over the long term.

Short-term cost and schedule variances are simply snapshots in time. As such, they do not reflect factors such as long-term contracts for materials, labor at set prices, lower-than-forecast interest rates and other related financing costs.

• Simply focusing on a short-term variance does not take into account the benefits of “construction-work-progress,” which allows a company to recover financing costs during construction by including them in the rate base. Doing so eliminates additional financing costs, or “interest on interest.”
• Any endeavor as large and complex as a nuclear plant construction project inevitably will pose challenges. Regulatory delays, design changes or protracted approvals may affect project schedule, resulting in adjustments in costs at that particular moment. On the other hand, savings later in project timelines can counter earlier increases. Such variations are expected in large capital projects.

The real gauge of a project’s success or failure is not the variance itself, rather how the company handles these challenges and prepares for contingencies. In view of all these factors, nuclear energy projects in Georgia and South Carolina have experienced no setbacks that would jeopardize their ability to finish on time and within budget and meet customer expectations.

In planning new electricity generating capacity, an energy company takes into account a wide variety of factors. Fuel diversity is among the most important factor, as a company must ensure it is not dependent on one particular source of power, given fluctuations in fuel supply and costs. Even international trade issues can put one fuel source at a disadvantage. Companies also must take into account the need to have reliable, baseload power—electricity that is available 24/7.

• Nuclear energy provides a distinct advantage as an important hedge to natural gas, despite its current low price. Nuclear energy is also a critical source of baseload power, given that nuclear plants remain on line virtually all day, every day.