If you thought the U.S. would see a nuclear renaissance, you need to think again. No new licenses can be granted until the federal government resolves policy, technical and regulatory issues associated with the disposal of spent nuclear fuel. Meanwhile, on the other side of the world, Middle Eastern countries are doing what America cannot; they are building a fleet of new nuclear power plants. And those foreign plants are turning out to be incredibly good investments.
In the U.S., regulators are allowing only three new power stations to be constructed. Unlike nuclear plants in other nations, these three plants may not be great investments. Over the last several weeks, all three projects warned their construction schedules will be delayed and their costs will increase. One is already beginning to question the urgency for their new plant.
Southern Company's (SO) Plant Vogtle project just announced a possible cost and schedule change. According to the most recent Securities and Exchange Commission (SEC) Form 10-Q, Southern is "evaluating whether maintaining the currently scheduled commercial operation dates remains in the best interest of their customers."
It may not matter if it's in the customers' best interests. The company's 10-Q also revealed that Southern received an official violation notice from the Nuclear Regulatory Commission (NRC). It appears to have a compliance problem based on how it constructed the plant's nuclear island, which is a critical path item. This violation could take weeks to resolve as the utility works its way through a burdensome regulatory process.
SCANA (SCG) also announced a possible cost increase and schedule delay for its V.C. Summer project. According to page 10 of its 10-Q, SCANA is filing a petition with state regulators to "revise substantial completion dates for the New Units." SCANA's petition also includes new costs to, "resolve claims for costs related to regulatory delays, design modifications of the shield building, certain prefabricated structural modules for the New Units and unanticipated rock conditions at the site."
Tennessee Valley Authority TVA recently discovered its Watts Bar project would not be completed in 2013. Last April, TVA advised stakeholders that their schedule was delayed an additional two years. But construction schedules may be the least of TVA's concerns. Watts Bar 2 lacks an operating license from the NRC. It appears Watts bar cannot enter into commercial operations will be delayed further until the federal government resolves spent fuel issues, allowing the NRC to grant licenses.
So it seems that all three nuclear projects are caught in regulatory purgatory. Until policy, regulatory and financial issues are resolved, these projects are effectively on hold. There is no assurance that any new nuclear plant will be operating soon.
Meanwhile, Middle Eastern countries are proceeding to build fleets of new nuclear power plants. According to Nuclear Energy Insider, Saudi Arabia, United Arab Emirates (UAE), Jordan, Egypt, Turkey and South Africa are pushing forward with more than $500 billion worth of new nuclear construction projects.
It all started in 2009, when Korea Electric Power Corporation secured a tender for four nuclear units in the United Arab Emirates. Last month, UAE started construction on a 1,400-megawatt unit. UAE also announced plans for an additional 12 units. Saudi Arabia is planning the regions' largest nuclear project, called King Abdullah City of Atomic and Renewable Energy. Nuclear Energy Insider reports this complex will cost over $250 billion.
UAE, Saudi Arabia and other oil producing nations are highly motivated to build nuclear power plants. For them, nuclear power is an incredibly worthwhile investment because a single megawatt-hour from a nuclear power plant costs approximately $21.00 to produce. To manufacture that megawatt-hour requires approximately 10 million British thermal units (MMBtu) of fuel. Combining fuel and other production costs, a nuclear power plant can produce energy for approximately $2.00 per MMBtu.
In contrast, a barrel of crude oil contains approximately 5.8 MMBtu. With Brent trading at $116 per barrel, crude oil is worth approximately $20.00 per MMBtu.
With almost a 10-to-1 difference, it's in their economic interest to consume cheap nuclear power and export pricy crude oil. For oil producing nations, nuclear power plants pay for themselves several times over.
Nuclear power also works for some oil consuming nations, such as Jordan and China. Instead of consuming $20 of oil-based energy, they use nuclear power to produce $2 energy. The savings to the local economy can be enormous.
But substituting nuclear power for oil only works in special circumstances. In the U.S., the substitution is difficult because electricity and oil are independent and non-correlated commodities. Accordingly, investing in nuclear power to supplant oil cannot reward US utilities with financial returns.
Yes, the nuclear renaissance arrived. Unfortunately, it's over there and not here.