Nuclear power, nearly counted out after decades of inaction, is poised for a modest U.S. comeback.

But the power source continues to battle inexpensive fuel alternatives, public safety concerns and steep upfront capital costs that have hobbled the industry for the past 30 years.

New reactors are gaining momentum in Georgia, Florida, South Carolina and other Southern states, where utilities can tap electricity customers to recover costs. But experts say the resurgence may be limited because of inexpensive natural gas and lack of a national scheme for curbing heat-trapping emissions of greenhouse gases.

If these projects are built on time and on budget, industry sources say they expect the nuclear fleet to expand across the continental United States after 2020.

"That construction will be critical as to whether or not more nuclear is done 10 years from now or whether it's basically good night," said Ernest Moniz, a professor of physics at the Massachusetts Institute of Technology. "If these have very, very bad experience in terms of construction, I don't see how anyone would touch nuclear again, at least that model."

The first mover, a consortium of utilities led by Southern Co., is building two $14 billion reactors at its Vogtle plant near Waynesboro, Ga. The utility, which recently received the first license to build and operate a plant since 1978, is already recovering construction costs through ratepayers and slated to receive an $8 billion federal loan guarantee. Industry sources say a utility planning two reactors in South Carolina could receive the second such historic license this month.

Success of those units could also bolster investors' confidence in small modular reactors that have garnered attention on Capitol Hill, said analyst Christine Tezak of Baird Equity Research. "If they build a plant in recent memory, then the idea of taking a risk in small modular reactors will become a much easier sell," she said.

But for now, cost concerns and questions remain, and Southern Co. last month told state regulators in February it continues to manage pressures on the projects' costs and timelines. Consumer advocates have been quick to point out that customers paying for the reactors before they are built will be on the hook for cost overruns -- or if the projects collapse.

"In the event that these reactors are never built -- we've historically seen that happen in the past -- the ratepayers in Georgia don't get refunded; their money is essentially lost," said Mindy Goldstein, a lawyer who represents the Southern Alliance for Clean Energy.

Case for nuclear

The biggest headaches for new nuclear are cheap gas from newly discovered shale plays, a crawling recovery for power demand and the absence of a national greenhouse gas policy, Tezak said.

John Rowe, Exelon's chairman and CEO, for example, said during a speech in Washington, D.C., last March that nuclear, coal with carbon capture and sequestration, wind and solar are not economical; he touted energy efficiency and cheap natural gas. More recently, NRG Energy CEO David Crane told the Wall Street Journal that nuclear construction does not make sense in competitive markets with low-cost natural gas.

Outside of regulated markets, Tezak said, generation developers are confronted with the pressure of making economic decisions on a plant-by-plant basis, driven by lower capital expenditures and current fuel price outlooks. That often leads to construction of gas plants as an alternative to more capital-intensive nuclear projects. In a traditionally regulated market, vertically integrated utilities can take a longer-term, overall view that accommodates potential payoffs of reactors on a much longer timeline, she said.

Federal analysts also say gas is offering stiff competition to nuclear in the near term. The Energy Information Administration said in its "2011 Annual Energy Outlook" that it costs about $114 per megawatt-hour to build and operate advanced reactors brought online in 2016, compared to about $62 per megawatt-hour for advanced combined cycle gas plants over a 30-year cost recovery period without a carbon policy. That estimate assumes gas prices will rise gradually to above $7 by 2035, EIA said.

J. Alan Beamon, a director of the coal and electric power division in EIA's Office of Integrated Analysis and Forecasting, acknowledged that the cost for nuclear under such a scenario would change if it extended past 30 years but added that gas is expected to stay relatively stable. "The big change for nuclear and all other sources is natural gas [plants] -- they're cheap to build, and fuel costs have dropped since 2008," he said. "It's hard to beat."

But nuclear reactors made sense for Southern Co. under every possible scenario, especially after looking over the nuclear plants' 60-year life span, said Mark Williams, a forecaster for Southern's Georgia Power subsidiary. Although he would not provide the proprietary information, Williams said the nuclear plants will allow Georgia Power to hedge against volatility in the natural gas markets and maintain a low-carbon portfolio. In fact, Southern says the reactors will save Georgia customers up to $6 billion in lower electricity rates over their lifetime compared to a coal or natural gas plant.

Even though low gas prices are eroding the near-term competitiveness of nuclear, Jonathan Hinze, a uranium market expert and international operations vice president at Ux Consulting Co., said the power sources can produce extremely cheap power over six decades or more. Those benefits, he said, make nuclear construction attractive.

Aaron Tilton, president and CEO of Blue Castle Holdings, said nuclear power is also an attractive option in the West, because gas prices shift, coal is being regulated and long-distance transmission lines are needed to access wind. Blue Castle plans on submitting an application to the Nuclear Regulatory Commission next year to build a reactor near Green River, Utah. "When I get to build an asset with today's dollars and run it for 60 years, nuclear always wins," Tilton said.

MIT's Moniz made the same observation, noting that reactors can morph into "enormous cash machines" if developers can overcome daunting capital costs.

"If you have a nuclear plant today for which the capital is paid off, this is an enormous cash machine," he said. "You're not paying capital, you have a very low marginal cost, and the plant is always on. So you're just collecting, ka-ching, ka-ching."

Cost and risk

For the first movers in nuclear construction, the ability to secure financing and recover construction costs is essential to overcome the upfront capital expenses, Hinze said.

Regulators in Southern states are making that possible. In states like Georgia, Florida and South Carolina, officials are placing more risk and cost associated with new reactors on customers through a rate structure called "construction work in progress."

The practice allows utilities to recoup costs before the reactors are built, providing certainty to Wall Street investors and lowering the cost of the overall projects, according to state regulators.

"It's kind of like taking it up front for a long-term benefit. Particularly in nuclear, there are investments up to 40 years and some would say beyond," said Rob Thormeyer, a spokesman for the National Association of Regulatory Utility Commissioners. "Once you have it built, nuclear power is incredibly cheap and over time will reduce the cost of the project."

Georgia regulators have also seen some of that controversy in allowing Southern Co. to recover costs while building the Vogtle reactors. Stan Wise, a member of the Georgia Public Service Commission, said it is an uncomfortable part of his job to pass on costs associated with Georgia Power's Vogtle reactors, but costs are closely watched and the practice has saved ratepayers $300 million.

Progress Energy Inc., for example, has spent $875 million to build two reactors in Levy County, Fla., and collected about $545 million under a law Florida passed a few years ago, said Tim Leljedal, a company spokesman.

If the utility abandons the $22 billion project, ratepayers won't be reimbursed, he said.

But groups like the Sierra Club, AARP and the Southern Alliance for Clean Energy say ratepayers could be stuck with higher rates if utilities abandon projects or experience cost overruns or delays. Goldstein, who is also acting director at Emory Turner Environmental Law Clinic, noted that cost overruns plagued construction of two reactors Georgia Power built at the Vogtle site in the 1980s.

"The act-first-consider-what-we-need-to-change-later approach is what brought down the nuclear industry 20 to 30 years ago," she said. "I don't understand why we're going down this path again."