Load growth, Vogtle boost nuclear's prospects, but utilities seek more support

Rising US power demand and the completion of two new nuclear reactors in Georgia are raising the profile of nuclear as a carbon-free answer to US energy needs. But some industry participants said existing policy incentives are insufficient to encourage new reactor builds.

The US Energy Department wants to triple nuclear capacity — adding 200 GW — to meet net-zero emissions goals by 2050.

"We view it as critical," Michael Goff, acting assistant secretary of the agency's Office of Nuclear Energy, said in an interview with S&P Global Commodity Insights. "We are serious. We need to start deploying now."

Large-load customers such as datacenters and manufacturing — some of the biggest drivers of demand pressure — that are seeking carbon-free power could also steer generation choices toward nuclear.

"I don't remember seeing anything like these demand forecasts in my time watching the industry," said Matt Crozat, executive director of strategy and policy development at the Nuclear Energy Institute trade group. "We're certainly seeing utility interest [in nuclear] grow, especially those with an existing fleet."

'Not enough'

The utilities and state regulators that would shoulder the initial risk of investing in new nuclear, however, remain cautious. Addressing a recent meeting of the Southeastern Association of Regulatory Utility Commissioners, Lynn Good, chair and CEO of Duke Energy Corp., said federal incentives are needed to manage risk during the construction of new nuclear generation. Good suggested that any such commitments by Duke were a decade in the future.

"We've been very engaged at the federal level on what it will take to build new nuclear because we're a believer in it, but we want our customers to enjoy the benefits and not the risks disproportionately of the new technology," Good said June 3. "There's funding at DOE, of course, there are tax credits. But the tax credits sit after the thing is already built, right? So it has to be producing energy to earn the tax credits. What they really need is some support and granting during the construction period."

Speakers at the conference in Asheville, NC, congratulated Georgia regulators and Southern Co. for the completion of two new reactors that added over 2,000 MW at the Vogtle Nuclear Plant. The previous week, during celebrations at the plant, Georgia Gov. Brian Kemp called for a fifth reactor at the site, and other officials made the case that the project had demonstrated new nuclear construction in the US is possible.

"We are determined to build a world-class nuclear industry in the United States, and we're putting our money where our mouth is," US Energy Secretary Jennifer Granholm said at a May 31 ceremony. "Let's draw up some more battle plans for some more reactors."

Southern management, however, has said the company has no immediate plans to pursue additional reactors.

Tim Echols, a member of the Georgia Public Service Commission that oversaw the Vogtle expansion and an outspoken nuclear supporter, said federal backstops against cost overruns would be necessary before he would approve another nuclear unit.

"The current slate of incentives, including production tax credits and loan guarantees, are not enough," Echols told Commodity Insights. "The bankruptcy of [Vogtle construction contractor] Westinghouse ... sent shockwaves through the utility-commissioner world."

"We don't need to lose this momentum," Echols added. "Congress needs to act and keep sweetening the incentives until more states step forward to follow Georgia's lead."

Existing incentives

With November elections looming, there may not be much appetite at the federal level to further sweeten nuclear incentives.

While utilities are speaking in a "more unified voice" about cost overrun insurance and other measures to de-risk nuclear, the DOE's Goff said existing incentives are generous.

"It's probably going to be a challenge to get more," Goff said. "There is a lot there for people to act on."

Goff pointed to multiple credits available under the 2022 Inflation Reduction Act, including new options to layer or sell the credits, and additional credits targeted for clean energy, which can apply to nuclear.

"This is the most incentives we've ever had for moving forward on deployment of new technologies," Goff said.

Those credits make new nuclear more viable and have helped secure lifetime extensions for the existing fleet.

The Inflation Reduction Act credits reversed the fortunes of nuclear operators, especially those in competitive power markets, a Constellation Energy Corp. executive said at a Nuclear Energy Institute conference in May. Constellation is the largest US nuclear plant operator by capacity.

While Constellation had sought federal and state support to keep nuclear units from retiring prematurely in the years before the act, it now expects to renew operating licenses for all of its 23 reactors, said David Brown, the company's senior vice president of federal government affairs.

Capacity increases at existing plants qualify as new capacity under the credits, which could lead to up to 2.5 GW of additional nuclear capacity through uprates, Nuclear Energy Institute President and CEO Maria Korsnick said May 16.

In addition to the tax credits, Goff said the federal government has a slate of efforts to encourage and support large-scale reactors and smaller, advanced designs, including public-private partnerships, programs to de-risk deployment or promote fossil fuel transition, cost-share projects, loan guarantee programs, licensing assistance and research.

The DOE also encourages utilities to share risks of building new nuclear, Goff said, including teaming up to deploy multiple reactors or forging reactor development agreements such as the one Ontario Power Generation Inc. and the Tennessee Valley Authority signed with GE-Hitachi Nuclear Energy Inc.

The Biden-Harris administration recently issued a $1.52 billion loan guarantee to restart an 800-MW nuclear plant in Michigan and launched a working group to mitigate cost and schedule overrun risk for nuclear projects.

Large and small

Much of the nuclear industry's focus has been on small modular reactors, though none are commercially available for utility-scale power generation. Industry experts said three or more applications to build advanced reactors will likely be filed with the US Nuclear Regulatory Commission over the next year.

But the November 2023 cancellation of the first modular project in Idaho, followed by Vogtle's completion, may be tilting financial risk assessments back toward larger reactors.

Large light-water reactors could "show up in utility integrated resource plans in the near future," Korsnick said.

"There will still be large-scale reactor demand," Goff said. "I don't write off any of those options."

Despite the delays and cost overruns at Vogtle and the abandoned V.C. Summer expansion in South Carolina, advocates argued future projects using the same AP1000 reactors could benefit from experience, a prepared workforce and existing supply chains.

"What we're seeing with the completion of Vogtle is more of an openness to consider even larger reactors," Crozat said. "Maybe this is more realistic than we thought, given demand and incentives."