Duke pushes for nuclear revival
Site chosen, but energy utility must
> make case for risking billions of dollars Aug 16 - McClatchy-Tribune
> Regional News - Bruce Henderson The Charlotte Observer, N.C.
>
> Thirty years after it last broke ground on a nuclear power plant,
> Duke Energy has a site picked out for a new one, 50 miles southwest of
> Charlotte near Gaffney, S.C.
>
> It also has a name, William States Lee III, to honor a late CEO,
> and federal support for a nuclear revival.
>
> What Duke might lack is a convincing argument that the plant
> would be worth risking billions of dollars. Construction costs are
> soaring and Wall Street investors are nervous. Demand for electricity
> is flattening, calls for renewable energy growing.
>
> Duke's 2.4 million Carolinas customers will pay, through higher
> rates, for what the company builds. Duke serves the western half of
> North Carolina and northwestern South Carolina.
>
> Under state law, utilities may recover their costs even if they
> abandon construction projects.
>
> In June, Duke asked regulators to approve a 13.5 percent rate
> increase for N.C. residential customers, in part to pay for a $2.4
> billion expansion of its Cliffside coal-fired power plant in
> Rutherford County. Two smaller expansions, at its Buck and Dan River
> plants, are expected to be completed within three years.
>
> Like other U.S. utilities, Duke also remembers how its last
> nuclear-building spree ended.
>
> The worst nuclear accident in U.S. history, at Pennsylvania's
> Three Mile Island in 1979, chilled nuclear construction for decades.
> Expected
> demand for electricity melted in the early 1980s as oil prices soared
> and, like now, recession raged.
>
> After completing three plants, Duke pulled the plug on two more
> that were among dozens canceled nationwide. Duke raised rates to
> recover about a third of the $600 million it had spent.
>
> "That was a very hard time. We don't want to ever go through that
> again," said Ellen Ruff, Duke's president of nuclear generation. "We
> learned a lot from the 1980s."
>
> Despite that history, Ruff said Duke needs to again build
> nuclear, preferably with a partner to share risks and costs.
>
> Duke hasn't opened a workhorse power plant -- the coal-fired and
> nuclear units that run most of the time -- since 1986 while, Ruff
> said, electricity demand grew 45 percent. Prices for coal and natural
> gas fluctuate, compared with relatively low-cost nuclear fuel. Duke's
> fleet of plants is aging, and some will be shut down.
>
> The Obama administration sees nuclear as a clean alternative to
> coal, which releases carbon dioxide. Duke is the nation's
> third-largest utility in releases of the greenhouse gas, at about 100
> million tons a year.
>
> Duke was not among four companies chosen to share $18.5 billion
> in federal loan guarantees for new plants, but the nuclear industry
> hopes Congress will add money.
>
> The Nuclear Energy Institute, an industry group, says utilities
> including Duke have applied for 26 new reactors based on government
> forecasts that U.S. electricity demand will grow 21 percent by 2020.
> The
> group expects four to eight new U.S. reactors to come online from
> 2016 to
> 2018.
>
> But plans for two nuclear plants, in Missouri and Texas, have
> been put on hold this year. The Tennessee Valley Authority this month
> scaled back plans for a site in Alabama.
>
> Assessing financial risk
>
> Wall Street, meanwhile, appears leery.
>
> Moody's Investor Services, in a June report, described the "bet
> the farm" risks of nuclear investments: huge construction costs,
> shifts in national policy and the unknown impact of energy efficiency
> and renewable-energy standards on electricity demand.
>
> Duke acknowledged those challenges in an analysis filed with the
> N.C.
> Utilities Commission in November.
>
> "The biggest risks to the nuclear portfolios are the time
> required to license and construct a nuclear unit, potential for even
> lower demand than currently estimated, and the ability to secure
> favorable financing,"
> it
> said.
>
> CEO Jim Rogers says Duke has "one of the strongest balance sheets
> in the industry," with access to financing and $1.5 billion in total
> liquidity.
>
> Duke hasn't released cost estimates for Lee. But the Cambridge,
> Mass., research firm Synapse Energy Economics estimates the cost of a
> new reactor at $6 billion to $9 billion -- and Duke plans to build
> two. Synapse also noted that nuclear plants built in the 1960s and
> 1970s cost about three times their original estimates.
>
> Anti-nuclear forces insist that the future lies in energy
> efficiency and renewable sources such as solar power, which could eat
> into demand for new power plants.
>
> "The whole nuclear revival is just replete with risk, and they
> are desperate to transfer that risk to the public, either through
> taxpayers or ratepayers," said Jim Warren of the N.C. Waste Awareness
> and Reduction Network, which frequently opposes Duke.
>
> The company is likely to make a final decision on Lee in 2010,
> Rogers said. It's also considering a new nuclear plant in Ohio.
>
> Until then, the company will sift its data for assurance.
>
> "Almost every piece you look at has one arrow pointing one way
> and another arrow pointing the other," said Steve Patterson, director
> of UNC Charlotte's Energy Production and Infrastructure Center, which
> trains engineers. "That's why this is an interesting time for
> utilities."
>
> Electricity demand slumping
>
> Duke doesn't make the final call on what new power plants it will
> build in the Carolinas. That's up to state utility commissions. For
> nuclear plants, federal regulators also get a say.
>
> South Carolina's Public Service Commission, which would decide
> whether to permit Lee, approved S.C. Electric and Gas's application
> for two new nuclear reactors in February. At an estimated cost of $6.3
> billion, customer rates are expected to rise 37 percent over the
> decades-long life of the project.
>
> N.C. and S.C. utility commissions have already approved Duke's
> spending up to $160 million in Lee development costs by the end of
> this year.
>
> State utilities law demands the lowest-cost way of making
> electricity.
> Duke says its N.C. rates are 31 percent lower than the national
> average.
>
> But because of their public impact, utilities also have to prove
> that new power plants are needed. And even before recession sapped the
> Carolinas, Duke's electricity demand numbers were slumping.
>
> As textile mills and other industries closed, Duke's Carolinas
> growth rate has slowed in the past decade. Its long-range forecasts of
> peak demand in summer, when the system is most stressed, has dropped
> for four years in a row.
>
> Statewide, summer-peak demand is expected to grow at 1.6 percent
> a year from 2008 to 2017, about half its growth rate in the 1990s, the
> N.C.
> Utilities Commission reports.
>
> Duke says its lower forecasts reflect the expected impact of new
> energy-efficiency programs and a federal phaseout of energy-hungry
> incandescent bulbs. Duke hopes to turn energy conservation into
> profits through its save-a-watt initiatives now before Carolinas
> utility commissions.
>
> In planning new plants that will operate for decades, the company
> has to look beyond recessions that come and go. "We're careful not to
> let current trends drive us over the long term," Rogers said.
>
> A challenge to Duke
>
> Yet two years ago, when the company asked to expand its Cliffside
> coal-fired plant, the N.C. Utilities Commission decided Duke didn't
> need the two new boilers it sought. Commissioners, who approved one
> boiler, cited Duke's dropping growth forecasts and testimony that Duke
> had considered selling the electricity from one unit.
>
> N.C. WARN used those numbers when it recently asked the
> commission to stop construction at Cliffside, even though work is 40
> percent complete. "We think they're playing games with (projections)
> to justify Cliffside and Lee," Warren said.
>
> The Utility Commission's Public Staff, which represents
> consumers, disparaged WARN's challenge as "based on a simplistic
> methodology and a number of inaccurate and unrealistic assumptions."
>
> The commission has not ruled on WARN's challenge. But its
> decision in March, on another issue, could hurt Duke's ability to
> justify new power plants.
>
> Commissioners allowed Duke's request to sell wholesale power to
> Orangeburg, S.C., which is outside its regulated service territory
> -- but
> not if cheap rates raised costs for N.C. retail customers.
>
> The request would have added to Duke's need for new power plants,
> consumer advocates argued, while its N.C. customers were paying for
> new green-energy and efficiency programs that reduce the need for
> those plants.
>
> Orangeburg has appealed the state commission's terms to federal
> regulators.
>
> More than any other sector, according to its forecasts, Duke pins
> its expected growth on wholesale markets. It makes sense, the company
> says, to spread costs among more customers during a plant-building
> cycle.
> Even if the
> Orangeburg ruling stands, said spokeswoman Paige Sheehan, "there are
> plenty of other (wholesale) opportunities out there."
>
>
>
> make case for risking billions of dollars Aug 16 - McClatchy-Tribune
> Regional News - Bruce Henderson The Charlotte Observer, N.C.
>
> Thirty years after it last broke ground on a nuclear power plant,
> Duke Energy has a site picked out for a new one, 50 miles southwest of
> Charlotte near Gaffney, S.C.
>
> It also has a name, William States Lee III, to honor a late CEO,
> and federal support for a nuclear revival.
>
> What Duke might lack is a convincing argument that the plant
> would be worth risking billions of dollars. Construction costs are
> soaring and Wall Street investors are nervous. Demand for electricity
> is flattening, calls for renewable energy growing.
>
> Duke's 2.4 million Carolinas customers will pay, through higher
> rates, for what the company builds. Duke serves the western half of
> North Carolina and northwestern South Carolina.
>
> Under state law, utilities may recover their costs even if they
> abandon construction projects.
>
> In June, Duke asked regulators to approve a 13.5 percent rate
> increase for N.C. residential customers, in part to pay for a $2.4
> billion expansion of its Cliffside coal-fired power plant in
> Rutherford County. Two smaller expansions, at its Buck and Dan River
> plants, are expected to be completed within three years.
>
> Like other U.S. utilities, Duke also remembers how its last
> nuclear-building spree ended.
>
> The worst nuclear accident in U.S. history, at Pennsylvania's
> Three Mile Island in 1979, chilled nuclear construction for decades.
> Expected
> demand for electricity melted in the early 1980s as oil prices soared
> and, like now, recession raged.
>
> After completing three plants, Duke pulled the plug on two more
> that were among dozens canceled nationwide. Duke raised rates to
> recover about a third of the $600 million it had spent.
>
> "That was a very hard time. We don't want to ever go through that
> again," said Ellen Ruff, Duke's president of nuclear generation. "We
> learned a lot from the 1980s."
>
> Despite that history, Ruff said Duke needs to again build
> nuclear, preferably with a partner to share risks and costs.
>
> Duke hasn't opened a workhorse power plant -- the coal-fired and
> nuclear units that run most of the time -- since 1986 while, Ruff
> said, electricity demand grew 45 percent. Prices for coal and natural
> gas fluctuate, compared with relatively low-cost nuclear fuel. Duke's
> fleet of plants is aging, and some will be shut down.
>
> The Obama administration sees nuclear as a clean alternative to
> coal, which releases carbon dioxide. Duke is the nation's
> third-largest utility in releases of the greenhouse gas, at about 100
> million tons a year.
>
> Duke was not among four companies chosen to share $18.5 billion
> in federal loan guarantees for new plants, but the nuclear industry
> hopes Congress will add money.
>
> The Nuclear Energy Institute, an industry group, says utilities
> including Duke have applied for 26 new reactors based on government
> forecasts that U.S. electricity demand will grow 21 percent by 2020.
> The
> group expects four to eight new U.S. reactors to come online from
> 2016 to
> 2018.
>
> But plans for two nuclear plants, in Missouri and Texas, have
> been put on hold this year. The Tennessee Valley Authority this month
> scaled back plans for a site in Alabama.
>
> Assessing financial risk
>
> Wall Street, meanwhile, appears leery.
>
> Moody's Investor Services, in a June report, described the "bet
> the farm" risks of nuclear investments: huge construction costs,
> shifts in national policy and the unknown impact of energy efficiency
> and renewable-energy standards on electricity demand.
>
> Duke acknowledged those challenges in an analysis filed with the
> N.C.
> Utilities Commission in November.
>
> "The biggest risks to the nuclear portfolios are the time
> required to license and construct a nuclear unit, potential for even
> lower demand than currently estimated, and the ability to secure
> favorable financing,"
> it
> said.
>
> CEO Jim Rogers says Duke has "one of the strongest balance sheets
> in the industry," with access to financing and $1.5 billion in total
> liquidity.
>
> Duke hasn't released cost estimates for Lee. But the Cambridge,
> Mass., research firm Synapse Energy Economics estimates the cost of a
> new reactor at $6 billion to $9 billion -- and Duke plans to build
> two. Synapse also noted that nuclear plants built in the 1960s and
> 1970s cost about three times their original estimates.
>
> Anti-nuclear forces insist that the future lies in energy
> efficiency and renewable sources such as solar power, which could eat
> into demand for new power plants.
>
> "The whole nuclear revival is just replete with risk, and they
> are desperate to transfer that risk to the public, either through
> taxpayers or ratepayers," said Jim Warren of the N.C. Waste Awareness
> and Reduction Network, which frequently opposes Duke.
>
> The company is likely to make a final decision on Lee in 2010,
> Rogers said. It's also considering a new nuclear plant in Ohio.
>
> Until then, the company will sift its data for assurance.
>
> "Almost every piece you look at has one arrow pointing one way
> and another arrow pointing the other," said Steve Patterson, director
> of UNC Charlotte's Energy Production and Infrastructure Center, which
> trains engineers. "That's why this is an interesting time for
> utilities."
>
> Electricity demand slumping
>
> Duke doesn't make the final call on what new power plants it will
> build in the Carolinas. That's up to state utility commissions. For
> nuclear plants, federal regulators also get a say.
>
> South Carolina's Public Service Commission, which would decide
> whether to permit Lee, approved S.C. Electric and Gas's application
> for two new nuclear reactors in February. At an estimated cost of $6.3
> billion, customer rates are expected to rise 37 percent over the
> decades-long life of the project.
>
> N.C. and S.C. utility commissions have already approved Duke's
> spending up to $160 million in Lee development costs by the end of
> this year.
>
> State utilities law demands the lowest-cost way of making
> electricity.
> Duke says its N.C. rates are 31 percent lower than the national
> average.
>
> But because of their public impact, utilities also have to prove
> that new power plants are needed. And even before recession sapped the
> Carolinas, Duke's electricity demand numbers were slumping.
>
> As textile mills and other industries closed, Duke's Carolinas
> growth rate has slowed in the past decade. Its long-range forecasts of
> peak demand in summer, when the system is most stressed, has dropped
> for four years in a row.
>
> Statewide, summer-peak demand is expected to grow at 1.6 percent
> a year from 2008 to 2017, about half its growth rate in the 1990s, the
> N.C.
> Utilities Commission reports.
>
> Duke says its lower forecasts reflect the expected impact of new
> energy-efficiency programs and a federal phaseout of energy-hungry
> incandescent bulbs. Duke hopes to turn energy conservation into
> profits through its save-a-watt initiatives now before Carolinas
> utility commissions.
>
> In planning new plants that will operate for decades, the company
> has to look beyond recessions that come and go. "We're careful not to
> let current trends drive us over the long term," Rogers said.
>
> A challenge to Duke
>
> Yet two years ago, when the company asked to expand its Cliffside
> coal-fired plant, the N.C. Utilities Commission decided Duke didn't
> need the two new boilers it sought. Commissioners, who approved one
> boiler, cited Duke's dropping growth forecasts and testimony that Duke
> had considered selling the electricity from one unit.
>
> N.C. WARN used those numbers when it recently asked the
> commission to stop construction at Cliffside, even though work is 40
> percent complete. "We think they're playing games with (projections)
> to justify Cliffside and Lee," Warren said.
>
> The Utility Commission's Public Staff, which represents
> consumers, disparaged WARN's challenge as "based on a simplistic
> methodology and a number of inaccurate and unrealistic assumptions."
>
> The commission has not ruled on WARN's challenge. But its
> decision in March, on another issue, could hurt Duke's ability to
> justify new power plants.
>
> Commissioners allowed Duke's request to sell wholesale power to
> Orangeburg, S.C., which is outside its regulated service territory
> -- but
> not if cheap rates raised costs for N.C. retail customers.
>
> The request would have added to Duke's need for new power plants,
> consumer advocates argued, while its N.C. customers were paying for
> new green-energy and efficiency programs that reduce the need for
> those plants.
>
> Orangeburg has appealed the state commission's terms to federal
> regulators.
>
> More than any other sector, according to its forecasts, Duke pins
> its expected growth on wholesale markets. It makes sense, the company
> says, to spread costs among more customers during a plant-building
> cycle.
> Even if the
> Orangeburg ruling stands, said spokeswoman Paige Sheehan, "there are
> plenty of other (wholesale) opportunities out there."
>
>
>