U.S. utilities will need government help to build nuclear reactors as other forms of electric power become less expensive, a top executive of Exelon Corp. (EXC:US), the nation’s largest commercial producer of atomic energy, said.
State support may include letting companies recover costs from customers during construction, providing loan guarantees or agreeing to buy power from the plant, Mayo Shattuck III, executive chairman of Chicago-based Exelon, said today at a conference in Washington.
Building reactors may require “the sovereign support of that state, which really means it’s on the backs of the ratepayers, not the backs of the shareholders,” Shattuck said at an event hosted by the Center for Strategic and International Studies.
The Nuclear Regulatory Commission on March 30 awarded Scana Corp. (SCG:US) a permit to build two reactors at a plant near Columbia, South Carolina, and on Feb. 9 approved Southern Co. (SO:US)’s plan for two units at its Vogtle plant near Augusta, Georgia. Southern expects its project to cost $14 billion. Scana will cover 55 percent of the estimated $10.2 billion for the South Carolina reactors. The plants, being financed partly by customers, may be among the last in the U.S. this decade.
A glut of natural gas created by advances in drilling techniques has lowered electricity prices, discouraging investment in other forms of generation, including nuclear. Gas prices at a 10-year low means developing nuclear power isn’t feasible in states with deregulated energy markets. Generating companies can’t win investors or recapture capital costs as gas drives wholesale electricity prices lower.
Natural gas fell 4.7 cents, or 2.3 percent, to $1.984 per million British thermal units today on the New York Mercantile Exchange, the lowest settlement price since January 2002.
Economic conditions raise “very serious questions” about the possibility of building new reactors without government support, Shattuck said.
“Even the existing fleet is feeling a little bit of the pressure in this kind of environment,” he said. The U.S. has 104 commercial operating reactors.
Exelon operates in states where electricity prices are determined by traders, rather than being set by regulators. The company, which currently has no plans to build more nuclear reactors, can’t recover costs during the construction phase because of this regulatory structure. The company operates 13 nuclear power plants, with 22 reactors.
It’s “naive” to assume gas will remain the preferred low- cost option for generating power because circumstances, including a price on carbon emissions, environmental concerns about natural-gas drilling or a terrorist attack on a gas plant, would raise costs, Shattuck said.
Unforeseen events “could easily occur in the next few years that will change the game again,” he said. “The generation footprint of 50 to 60 years from now has to have some nuclear” energy, he said.
Exelon merged last month with Constellation Energy Group Inc. (CEG:US), a utility led by Shattuck. John Rowe, Exelon’s former chief executive officer, promoted natural gas as an alternative to clean-energy subsidies for nuclear reactors, and wind and solar energy.
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