Hearing on new reactors turns into colloquy on subsidies

By Hannah Northey | 05/18/2016 07:28 AM EDT

A Senate hearing focused on the challenges of building the nation’s next-generation nuclear fleet yesterday quickly pivoted to concerns about cost and competition from cheap natural gas, with senators needling each other over energy subsidies.

A Senate hearing focused on the challenges of building the nation’s next-generation nuclear fleet yesterday quickly pivoted to concerns about cost and competition from cheap natural gas, with senators needling each other over energy subsidies.

Republican Sen. Bill Cassidy of gas-rich Louisiana, a member of the Energy and Natural Resources Committee, asked a top executive from Southern Co. whether it made more sense to invest in natural gas — as opposed to nuclear power — given the nation’s massive shale plays.

"I understand what Southern Co. is doing with nuclear, it’s quite unaffordable," Cassidy told Steve Kuczynski, president, CEO and chairman of Southern Nuclear Operating Co. "I asked this energy company why they weren’t doing what y’all were, and they said, ‘Listen, we can make 10 natural gas plants for the cost of what they’re doing, and they’re cheaper to operate.’"


Southern, through its subsidiary Georgia Power, is building two new reactors at its Plant Vogtle in Burke County, Ga. — the first project in the nation to be built from scratch in three decades (EnergyWire, April 8). The Atlanta-based company has also received $80 million from the Energy Department to develop advanced nuclear technologies, which are slated to be commercially ready by 2035 (EnergyWire, May 2).

Kuczynski, calling himself a "huge proponent" of nuclear power, defended Southern’s $14 billion investment in the Georgia reactors, acknowledging that it would be cheaper to build gas units at today’s fuel prices but quickly pointing to the volatile nature of the natural gas market. Cassidy, he said, was making a "big assumption" about gas prices in the future.

"You cannot be all gas," Kuczynski said. "In fact, our fleet has now transformed itself, from less than 20 percent gas to over 55 percent gas, so our ability to switch fuels is a tremendous advantage to Southern Co."

Developers of advanced reactors — including the Silicon Valley-based developer Oklo Inc. and Bill Gates’ TerraPower LLC — appeared before the committee to discuss regulatory challenges that new designs face at the Nuclear Regulatory Commission. They also voiced support for Environment and Public Works Chairman Jim Inhofe’s (R-Okla.) S. 2795, known as the "Nuclear Energy Innovation and Modernization Act." The EPW Committee is slated to vote on that legislation today (E&E Daily, May 16).

Senate Energy and Natural Resources Chairwoman Lisa Murkowski (R-Alaska), a co-sponsor of Inhofe’s bill, said she’s hopeful the legislation and related language in the House will quickly pass and help new technologies navigate NRC’s costly and complicated licensing process. "We must remain the go-to country for nuclear know-how," Murkowski said.

But senators on the panel repeatedly turned back to the question of cost and whether the developers could make their projects compete financially.

Sen. Martin Heinrich (D-N.M.) said he was having a hard time reconciling the closure of nuclear power plants, including units in Illinois that had lost hundreds of millions of dollars in past years, with the industry’s push for new reactor designs. Heinrich asked witnesses what cost per kilowatt-hour they were targeting to ensure the advanced technologies would be competitive in the marketplace.

"I’m assuming all of you have a goal for where you need to get to make sure 10 years from now, as some of these technologies continue to come down the cost curve, you’re ahead of that," Heinrich said.

Independent Sen. Angus King of Maine also questioned the industry’s math, noting that it could cost $7 million per megawatt to build an advanced reactor, whereas the costs for wind and natural gas are substantially lower.

"I’m not anti-nuclear," the senator said. "I like Maseratis, I just can’t afford them."

John Gilleland, chief technical officer for TerraPower, said the levelized cost to produce power from a proposed traveling wave reactor design is about 7 cents per kilowatt-hour. TerraPower is working with China National Nuclear Corp. on next-generation nuclear technology and materials testing.

"Certainly, as Bill Gates said all the way from the beginning, if you can’t afford it, it’s all theory," Gilleland said.


Sen. Lamar Alexander (R-Tenn.), a vocal proponent of nuclear power, warned his colleagues against comparing the upfront costs of building a reactor with that of a gas plant.

Whereas a gas-fired facility will last for up to three decades, a nuclear reactor could be viable for up to 80 years, Alexander said.

"My point is that, even though at first $14 billion for 2,000 megawatts of nuclear doesn’t compare very well with $2 billion for 2,000 MW of gas, if you take the length of time the plants might last and the importance of diversity in a big utility like yours, it does make sense," Alexander said to Kuczynski.

Alexander, who chairs the Senate Energy and Water Development Appropriations Subcommittee, reiterated his support for curbing subsidies for wind power and instead investing the money into research to advance technologies like small modular reactors.

"Is the big wind subsidy that’s been on the books for 23, 24 years a deterrent to the expansion of carbon-free nuclear power?" Alexander asked Kuczynski.

The senator, citing Congressional Budget Office reports, complained that the government spent $9 billion in 2015 and 2016 to subsidize wind energy, and only $5 billion on energy research.

Alexander called for scrapping the tax incentives and doubling expenditures on energy research to $10 billion to spur the development of new reactor designs, as well as carbon capture and sequestration from coal-fired power plants.

Within the nuclear industry, Exelon Corp. has led the call to phase out wind tax credits. Kuczynski said Southern supports that position and believes nuclear power can compete on a level playing field. Exelon in the past has argued the wind production tax credit (PTC) allows wind power producers to sell into competitive markets at negative prices, undercutting its fleet of nuclear reactors (Greenwire, May 15, 2014).

But King questioned Alexander’s math, noting the Senate passed a deal at the end of the year that would phase out tax incentives for wind energy over a five-year period.

The wind PTC tax credit was renewed for an additional five years by Congress as part of a compromise omnibus bill hammered out last December. The incentive pays 2.3 cents for every kilowatt-hour of wind energy produced by eligible projects for the first 10 years of a wind farm’s life. Under current law, the PTC will remain at 2.3 cents for the next two years before seeing a stepped-down reduction in value and phaseout at the end of 2019.

"I think what you’re seeking is actually happening," King said.

The senator went on to ask Kuczynski whether a "level playing field" also meant scrapping federal support for the nuclear industry in the form of the Price-Anderson Act — a 1957 law that created a $12 billion pot of money to cover injuries and property damage during accidents.

When Kuczynski said the industry doesn’t view the law as a subsidy, King was quick to respond.

"It walks like a duck, it talks like duck, it’s a duck. It’s a subsidy," King said. "If you had to buy that insurance, it would cost you a fortune, is that not correct?"