Most energy forms get some sort of subsidy. Those that lack direct subsidies often get other forms of support, like special loans, special licenses on water flows or maybe grandfathered emissions allowances. Even if energy shouldn’t be subsidized, providing one type of energy subsidies raises hurdles for others. Congress had this in mind in 2005 when it passed the Energy Policy Act. Since all forms of energy have subsidies to some extent, those energy forms that face more regulatory burden also face more financial risk. For nuclear projects, critics argue loan guarantees Congress authorized in 2008 are unfair. But the $20 billion in loan guarantees are enough to build two plants, and the cost of those guarantees - like all insurance, depends on the probability of payout.
Right now that’s estimated at less than $1 billion, yet the risks are huge. Few utilities or companies, if any for that matter, can finance new nuclear construction on
Closest U.S. experience
The most recent U.S. experience was the last nuclear generation construction wave that ended in the late 1980s and early 1990s. When that wave was finished, several utilities were bankrupt, billions of dollars were lost in cancelled projects and utilities wrote off billions more for every sort of failure to exercise due diligence and control in authorized projects that were delayed, ran above budget or saw technical problems of rework.
Unfortunately, in the U.S. and elsewhere in the west, we might be poised to do this again. Finland’s Olkiluoto 3 plant, contracted in 2003 between Finland’s Teollisuuden Voima (TVO) and Areva, is now several years behind schedule with costs well above its firm fixed-price contract of € 2.4 billion euros. That bodes ill for new nuclear construction everywhere, but drives home the risk more than ever to financial organizations. With 30 new nuclear unit applications, the U.S. NRC and its applicants have similar problems with license reviews for the new nuclear designs, the Westinghouse AP-1000, GE ESBWR and Areva EPR. Congress passed the 2005 Energy Policy Act to cover the risks of construction losses related to delays. So far, their net effect appears to have been to exclude GE’s design from further development because it was further behind in the projected 4+ year licensing process than the AP-1000. GE also lacked the financial clout to continue its development without the aid of new loan guarantees.
Furthermore, all new nuclear construction will have to deal with modernization. License review processes are more complex, and have more details to review to license new plants than ever before. Measures intended to facilitate work under a “one-step” licensing process, 10 CFR Part 52 - the Combined License, haven’t been effective in completing the necessary work to prepare a new licensed design for construction.
The people performing licensing are largely inexperienced - virtually all but a few top-level NRC managers started work after the licensing debacle of the 1970s and 1980s. Roughly 1,000 staffers have less than a couple years with the NRC. They not only lack experience in design and construction, but also familiarity with new methods like digital controls, and even traditional regulatory processes. They also aren’t used to licensing new plant designs with the traditional NRC rules augmented by Probabilistic Risk Assessment (PRA). PRA is the method regulators use to assess many merits of design. While it appears to make design more robust, it also adds complexity. Add to this the need to update technology, like off-site emergency power supply for the emergence of Combustion Turbines (CTs) as an alternative to Emergency Diesel Generators (EDGs), and you have confusion. Superior technology like EDG alternative CTs, distributed digital controls and rotary air compressors have been around the rest of U.S. industry for 30 years, still they haven’t been licensed for nuclear designs by the U.S. NRC.