Photo Credit: Flickr/Nuclear Regulatory Commission
Monday kicked off four days of Georgia Public Service Commission hearings on the fate of the state's embattled Vogtle nuclear plant.
In August, developer Georgia Power recommended finishing the two-reactor expansion project, even as it racked up billions of dollars in budget overruns and a delayed timeline. On Monday, the Southern Company subsidiary, along with partners Oglethorpe Power, Municipal Electric Authority of Georgia, and the City of Dalton Utilities, again recommended that construction go forward.
“We believe nuclear is a dominant solution in our long-term energy future,” said Georgia Power Chairman, President and CEO Paul Bowers at the Monday hearing. “Completing both units represents the best economic choice for customers and preserves the benefits of a carbon-free baseload generation for the state of Georgia.”
But the utility's request is far from the final word.
The project, a bellwether on nuclear’s long-term viability in the U.S., still faces a rocky future. After the bankruptcy of its reactor manufacturer, Westinghouse Electric, and the failure of the V.C. Summer Plant in South Carolina, even those who had initially supported the project are concerned about its completion.
“The prudency of investing in nuclear projects has sharply dimmed in the eyes of regulators and industry,” said Devin Hartman, electricity policy manager at the R Street Institute, a free-market think tank.
In the coming days, the Georgia PSC will hear from owners and partners in the project as well as public witnesses. The commission will issue its final recommendation on February 6, but Vogtle’s critics hope the hearings will act as a nail in the proverbial coffin for a costly project they say won’t bring enough return on investment.
“I see this as the last dinosaur in what’s really a broken utility model,” said Katie Ottenweller, an Atlanta-based senior attorney at the Southern Environmental Law Center (SELC), which is intervening in the hearings. “It’s gotten to the point where this project is so over-budget and so delayed that, for all intents and purposes, it’s really a utility entitlement program.”
In its August recommendation filing, Georgia Power projected costs could reach upward of $25 billion for the construction of two 1,117-megawatt reactors. The original budget was $14 billion. The first nuclear project built in the United States in decades, Vogtle was originally slated for completion by 2016. That timeline now stretches into 2021-2022. Despite the challenges, Georgia Power insists it’s committed to finishing the project -- with the assurance of federal production tax credits and money from the federal government.
On Monday, Georgia Power raised more controversy when the company revealed it was aware of an internal Westinghouse document outlining the contractor’s inability to complete the South Carolina and Georgia projects requiring its AP1000 reactors, because of deficiencies in staffing and experience. This fall, Charleston’s Post and Courier reported that Westinghouse had used unlicensed engineers on the South Carolina project and possibly for the Vogtle project as well.
Regulated monopolies
According to SELC, the controversy swirling around Vogtle is a sign of larger problems with the way regulated-monopoly utilities undertake power projects -- namely, signing onto big-ticket projects where there is little incentive to stay on track and budget, because ratepayers foot the bill.
Since 2011, 2.5 million Georgia ratepayers were saddled with about $2 billion in upfront charges for Vogtle construction costs. That comes out to about $100 a year for most ratepayers. “That’s a small piece of the overall price they’ll be paying by the time these units actually go in place,” said Ottenweller. A main element of this week’s hearings surrounds Georgia Power’s request for $6 billion more for the project.
Instead of following the Georgia Power model, Ottenweller points to large, investor-owned utilities such as Xcel Energy in Colorado that are making investments in more distributed generation projects to put downward pressure on rates and bring a relatively swift return on investment. But besides the general economic headwinds now confronting large-scale nuclear, utilities don’t have much incentive to abandon a project that’s already consumed huge sums of money.
“There has to be much stronger cost-control incentives for utilities. The regulated monopoly model socializes risk across captive ratepayers, and utility shareholders only face repercussions in cases of gross mismanagement, which is a low performance bar,” said Hartman. “Note that it’s only regulated monopolies facing these ‘mega-project’ cost overruns, while costs are going down in states like Texas that went to the market model.”
Hartman said, aside from reiterating the fallibility of large utilities, that Vogtle and the canceled V.C. Summer plant were meant to prove the effectiveness of Westinghouse’s AP1000 reactors and the long-range viability of domestic nuclear. “Instead,” he said, “these projects have left a bleak outlook for large baseload nuclear.”
Small modular reactors, which are quicker to build and faster to deploy, could revive U.S. nuclear if Vogtle folds, according to Hartman. But overall, the R Street Institute argues that nuclear should “compete on its merits” against other technologies. While the delays at Vogtle and the failure of V.C. Summer have cast a pall across the domestic nuclear industry, natural gas remains cheap and renewables have become more economically viable.
A friendly market
The current political climate for domestic energy doesn’t exactly favor free-market competition, though. Rick Perry’s recent Notice of Proposed Rulemaking, which would reward plants that stockpile at least 90 days of fuel, is specifically designed to prop up nuclear. About 10 percent of the U.S. nuclear fleet has or is set to retire in the next 16 years. And uncertainty around how Trump will address the Section 201 trade case has the solar industry concerned, even if proposed tariffs are marginal.
And the Vogtle project does have money coming in. In September, the Department of Energy tacked $3.7 billion in loans onto the $8.3 billion the department had already offered the project. Toshiba, Westinghouse’s parent company, will offer up $3.68 billion for the project, $300 million of which has already been doled out. With that cash, and Bechtel taking over for Fluor Corporation as the main subcontractor, Georgia Power insists it is optimistic about completion.
“We have seen a marked increase in productivity throughout this year, with the best improvement being the most recent improvement,” said CEO Paul Bowers in August.
At the Monday hearing, Georgia regulators were skeptical developers could complete the Vogtle expansion project, even with the extended timeline to 2022.
"We're supposed to believe after the budget-busting and schedule changes in past years that this is going to be a schedule we can work with?" said Stan Wise, the chairman of the Georgia utility commission. He added that the nuclear project is "probably one of the most serious issues that this commission has faced," The Post and Courier reports.
Rather than double down on nuclear, groups like the SELC would instead like to see Georgia Power invest more heavily in renewables and distributed generation, including solar. The state is the third fastest-growing solar producer in the country. But Southern Company, Georgia Power’s parent company, recently announced plans to sell off a third of its 1.7-gigawatt solar assets to raise cash. Some of that will likely go toward the Vogtle project.
“That struck me as incredibly ironic -- and frustrating,” said Ottenweller.