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Nuclear Damage Control

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March 15, 2011 – Comments (8)

In the last few days there has been a lot of publicity concerning nuclear power plants. A US Congressman promoting investment in nuclear even compared the risk of a nuclear power plant collapse to that of a bridge collapse, where I'd say the risk and amount of damage each can do is not equal. I would say the financial and nuclear industries are ramping up the public relations spending to do some damage control.

However, I'd like to talk about a different kind of risk.

The biggest risk to the nuclear industry is the length of time it takes to build a nuclear power plant.

In the current environment it takes ten years and $18 billion to get a nuclear power plant up and producing electricity. Some of that is construction time, and some of that is regulatory.To a lender that is a long time and a lot of risk. They have to begin lending in year one, and not get a dollar back in sold electricity until year ten. The problem for the lender is that a lot can go wrong in ten years. For example the Government could intervene and ban the use of high electricity consumption methods of illumination in favor of low consumption (incandescent vs. LED's). So the lender needs to believe that Government will not regulate the expected revenue source out of existence. The lender needs a non-interventionist Government for that length of time, or at least as long as it takes to sell the loan.

Another risk to the lender is that even without Government intervention, some company will come along and build an LED bulb at a similar pricepoint to an incandescant. Lighting is a big electrical consumer and if it needs less electricity then there might not be a customer for the nuclear power plant's electricity.

Ten years is a long time to wait see if an investment is going to play out. Even five years is. Right now Dylan Ratigan is reporting that over 60% of the electricity the US produces is wasted in the grid and in consumption. The EU wastes less than 20% and Japan was the leader only wasting 10%. That the US could deliver twice as much electricity to its customers AND generate less than it does today is a huge risk to the revenue stream a nuclear power plant requires and a potential lender might need to justify a loan of this size.

And lenders do not like to actually take the risks they want to be compensated for.

Both of the ways to alleviate the risk is happening in Florida right now. Customers there are beginning to pay today, for the nuclear power they will have delivered in ten years. Their electric bills have gone up, due to increased conventional fuel costs, and the nuclear pre-payment. The increased cost of electricity to the customer increases the likelihood consumption will decrease as people remember to turn off lights and reduce air conditioning use to keep from spending more money on electricity.

The other way to decrease risk to the lenders is with Federal loan guarantees. Two years ago $50 billion of loan guarantees to the nuclear industry were defeated. President Obama and the Republicans/Tea Party/Conservatives/Democrats in Congress recently approved $38 billion in loan guarantees to the nuclear industry. This surely makes the lending industry happy, because now they can charge for a risk that has been passed on to taxpayers. And for a fee they can sell that risk to investors, who would like to get a taxpayer guaranteed revenue stream. You all may remember Fannie and Freddie. So far the only portion of that money that has been used is for the FPL nuclear plant expansion.

So the beneficiaries of nuclear loan guarantees are the power generation facilities, and those who can write the loans.

As for the ratepayers, they get to pay more for electricity.

Another choice for that taxpayer money would be to fund solar panels on homes. Currently that is being done through tax rebates which only benefit only homeowners who have enough income to take the rebate, certainly not the “least among us”. But at least that goes to a greater number of people than the few lenders who will benefit from collecting fees to write US backed loans. The USA could also take that $36billion and finance solar panel loans to homeowners instead. These should be pretty low risk, low interest loans because the revenue stream currently being sent to FPL  in the form of electric bills actually exists, so the money to pay back the loans is there. Plus as more and more Floridians generate their own electricity, the need for expensive new nuclear facilities would go away, saving rate increases for all other Floridians.

Best wishes

Steven

8 Comments – Post Your Own

#1) On March 15, 2011 at 10:29 PM, NOTvuffett (< 20) wrote:

devo, it takes so long to build a plant because of people like you blocking it at every turn.  china is currently building a couple dozen nuke plants... we are building one i think

 

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#2) On March 15, 2011 at 10:51 PM, devoish (98.38) wrote:

Notvuffett,

Thank you. There are so many better choices this discussion should have ended long ago. In seven years they will get better.

 With two years of preparation we can construct the facilities so that they can be commercially operable within five years. Unlike in Japan, we do not encounter opposition from local communities. - Liu Wei, vice president of China Nuclear Power Engineering Corp in an interview published on March 11th.

Of course, in a Democracy, I am supposed to have a voice.

Best wishes,

Steven

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#3) On March 15, 2011 at 11:07 PM, mikecart1 (98.91) wrote:

"In the current environment it takes ten years and $18 billion to get a nuclear power plant up and producing electricity. Some of that is construction time, and some of that is regulatory"

This statement is wrong.  We are building plants in the US and China that have schedules to start power around 2013 for the first fleet.

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#4) On March 15, 2011 at 11:16 PM, devoish (98.38) wrote:

What does it take? FPL is spending $18bil to expand one facility, and it will probably go over budget. What US plant did I miss? When did you start building them?

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#5) On March 15, 2011 at 11:18 PM, mikecart1 (98.91) wrote:

We just placed another section of containment in the China ones this past week.  There are 3 east coast states in the US that have plans going through to be built now.  Our plants definitely don't take 10 years to build.  That stat is probably from old data.  Florida Power and Light is one of our customers.  I am not sure where you got the $18 bil from.  It might be for a group of reactors - not just one.

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#6) On March 16, 2011 at 7:48 AM, devoish (98.38) wrote:

mikecart,

According to Liu Wei - 7 years, no worrys about citizens.

Progress Energy customers are paying $5.53 per month for nuclear projects, including a proposed new nuclear power plant in Levy County and upgrades at the Crystal River nuclear plant. The new Levy County plant could open in 2021 at a cost of up to $22 billion. But the utility won't decide until at least 2012 whether it will build the plant...

...Projects include two new nuclear power units at FPL's Turkey Point plant in Dade County and upgrades to two existing nuclear power units there and two in St. Lucie County. The new Turkey Point units could go online in 2022 at a cost of up to $18 billion.

I thought the $18bil estimate was intended to cover all the costs of what was being done at Turkey Point, not just the new reactors (units).

FPL customers were told "nuclear power plant" "2022" and "up to $18bil."

To me, and the way it is typically described outside your industry it is a nuclear power plant, not a group of reactors. To me, additional reactors equals expanding the nuclear power plant.

If you feel that it is more accurate to describe Turkey Point as "two new nuclear power plants (reactors) at an existing nuclear power facility" or if you want to say "build two new reactors at a cost of $9bil each for a total cost of $18bil at Turkey Point plus upgrades to existing units at additional costs" that is ok with me too. But your marketing people chose the less descriptive word "units" over "reactors".  2022 still seems like it is ten years away, and Florida ratepayers are paying today. As I said, not all of that is construction time. But if the best China can do is five years construction time with the amount of people they can throw at a project, I'd be hard pressed to say we can beat that.

With the Public Service Commission next week holding hearings on revised charges for Florida Power & Light Co. customers, a Senate bill would eliminate a 2006 state law that allows utilities to charge for new nuclear plants even if they are never built.

And Federal loan guarantees make lenders whole, not ratepayers.

So I'd like to see a Federal Government help lower the costs of living for Floridians, not raise them by helping a financial industry that is bankrupting most of the rest of us.

Best wishes,

Steven

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#7) On March 16, 2011 at 8:22 AM, ChrisGraley (29.75) wrote:

I agree Steven.

The free market should decide how we generate power and government intervention is part of the problem.

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#8) On March 17, 2011 at 8:45 PM, devoish (98.38) wrote:

Chris,

If you ever find a "free market" let me know.

Best wishes,

Steven

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