At the time I write this, there are four new commercial nuclear reactors under construction in the United States. Two of those are at the Vogtle power station in Georgia and two are at the Summers power station in South Carolina. All four are Westinghouse AP1000 Generation III+ pressurized water reactors. The III+ designation indicates that the reactors include significant changes for safety and economics compared to previous designs.
Westinghouse Electric Company, which builds and operates nuclear power plants, is no longer an American-owned company. When the original Westinghouse company disappeared through mergers and acquisitions in the late 1990s, the nuclear operations were sold to British Nuclear Fuels Limited. BNFL is wholly owned by the UK government. In 2005, BNFL announced it planned to sell the Westinghouse operations as part of a radical restructuring, valuing Westinghouse at $1.8B. Toshiba bought the company for $5.4B and then sold a minority stake to other investors.
It’s been a rough last couple of years for Toshiba. Early in 2015 they admitted to improper accounting practices. As the details of that came out, the share price lost over half of its value. The price largely recovered in 2016 – until December. Toshiba announced that they would be taking additional large write-offs and the share price dropped 20% in a single day. A five-year history of the share price is shown to the left. Over the course of 2016, Toshiba wrote off more than $2B in value for its Westinghouse operation. Analysts in Tokyo have made guesstimates that the additional write-offs in the nuclear operations will be several billion dollars.
Southern Company, who will own the new Georgia reactors, has made a point that this time it’s not a standard cost-plus contract. The implication is that Southern Company and Georgia ratepayers won’t be on the hook for most of any cost overruns; presumably, the project managers and suppliers will be. Toshiba is now the prime contractor and manager for both projects, after the previous manager decided to get out the nuclear business and sold that portion of its operations to Toshiba. The Vogtle project is now three years behind schedule. Georgia Public Service Commission staff have expressed doubts that any of that time can be made up, noting a “significant negative variance” in schedule changes to date. Guesses about the likely size of future cost overruns are also in the range of billions of dollars.
At this point, I’ve set things up to be “Oh hell no, neither Georgia nor South Carolina are going to get those nukes. Toshiba – or at least the Westinghouse subsidiary – will fold and no one is willing to touch it.” Instead I’m going to predict that the projects will eventually be finished. The Vogtle financing has already made use of $4B in federal loan guarantees, with another $4B+ approved but unused. Georgia ratepayers have already paid $1.4B towards construction of the Vogtle plants. The phrase “too big too fail” comes to mind. The wrinkle, though, will be creating a new federal power marketing administration like the Tennessee Valley Authority or the Bonneville Power Authority.
The rapidly growing Southeast needs more electricity. Political pressures favor low-carbon sources, at least in my opinion. The Southeast is poor in renewable resources relative to the total power demands in the region. That adds up to nuclear, but the finances don’t look good. Many people believe that small modular reactors will make the finances much more manageable in the future, but we don’t know how to build those yet. In the meantime, the workable option appears to be for the federal government to step in, covering the (almost certainly) high up front costs of building and operating new nukes during the learning curve.
Image credits: Front page, South Carolina Office of Regulatory Service, Construction at the Virgil C. Summer Nuclear Generating Station.