Only large companies with high credit ratings that have utilities in regulated markets can build nuclear plants in the US, and are the only ones likely to move forward with new reactors, Southern Company CEO Tom Fanning said Thursday.
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Companies planning to build and operate nuclear units must be large, since such projects are multi-billion-dollar efforts, Fanning said during a speech at the Bipartisan Policy Center in Washington.
They also must have financial strength, because nuclear projects can take more than a decade from start of planning to completion. "Once you start, you can't stop. You better have staying power to ride through the vagaries of the world's financial markets," he said.
Companies also must have experience and credibility to build and operate nuclear plants. "This is not a business for start-ups or neophytes," he said. Another requirement to deploy nuclear units is that the units be built in regulated markets, Fanning said.
Fanning, who in the past has referred to deregulated markets as "so-called organized markets," criticized the Federal Energy Regulatory Commission for devising the "experiment" of power market deregulation in about half of the country.
Southern operates in a jurisdictions where state regulators approve electricity rates and, in Georgia, allow recovery of nuclear plant financing costs before those units are placed in service.
"We have the kind of regulatory environment that supports the kind of long-term, high-capital-cost big bets. In merchant markets you don't have any pricing that will support that kind of investment, and that's a shame," he said.
Exelon, the largest US nuclear operator, is facing "all sorts of turbulence around short-term market problems driving potentially bad long-term decisions," Fanning said. Exelon's CEO Chris Crane is being forced to make short-term decisions about the future of that company's nuclear fleet based on price signals from deregulated power markets, Fanning said.
Exelon has said it is considering permanently shutting up to five nuclear units in Illinois because low power prices are affecting their profitability. The company said last month that it would delay the decision to shut some of those units for a year to allow legislators to consider low-carbon portfolio legislation that could improve the financial performance of the reactors.
Financial analysts have said other nuclear units in Massachusetts, Pennsylvania and New York are also at risk of being shut for economic reasons.
Regulated electricity markets "will carry us forward" in expanding nuclear generation, Fanning said.
He said the federal government, which has provided loan guarantees and production tax credits for the 2,200-MW expansion of Southern's Vogtle nuclear plant, has "done a great job" supporting nuclear energy.
"The government could help nuclear even more," Fanning said, by recognizing the role of nuclear energy as a dominant part of the energy mix.
Southern's Georgia Power subsidiary is the largest owner of the Vogtle plant, which Oglethorpe Power and the Municipal Electric Authority of Georgia co-owns. Two new reactors are being built at the site of two operating units in Waynesboro, Georgia, at an estimated cost of $16 billion.
While the units were original scheduled to be operating commercially starting in 2017, the latest completion dates are July 2019 and July 2020, respectively.
Despite delays and a subsequent increase in costs, Fanning said, the units will provide power at lower cost than natural gas fired plants in the long term.
"We're leading the renaissance of nuclear in the United States, building what I think will be known later, in retrospect, as one of the most successful modern industrial mega-project in our history," he said.