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Edsels of energy? Duke Energy may find new AP1000 nuclear plants are already outdated

In October and then again in December of 2016, Duke Energy won long-pursued federal operating licenses to build and run what was meant to be cutting edge nuclear power plants at sites in Florida and South Carolina.

Duke has no current plans to proceed on either project.

The dilemma? Now that Duke has finally secured these hard-to-get licenses, years have passed since these projects were first proposed. More than $1 billion (much of it still to be charged to customers via higher electric rates) have been spent on early site preparations. And what was once the modern design of the chosen nuclear plants, known as the AP1000, at both sites now looks outmoded by newer plans for smaller, less costly and quicker-to-build nuclear plants.

Like many industries where today's technology is on tomorrow's junk heap, Duke may now possess federal operating licenses for the nuclear plant equivalent of the Edsel.

Extremely expensive Edsels.

The AP1000 from Westinghouse promised to revolutionize the nuclear power industry and make it a cost-effective competitor to the natural gas, coal, oil and alternative energy resources the power industry relies on to generate electricity.

Instead, the likely demise of the AP1000 design was reinforced this past week. Japan's corporate giant, Toshiba, said it would book a $6.3 billion hit to its U.S. nuclear unit, Westinghouse. The massive writedown wipes out Toshiba's shareholder equity and will force the company to sell off some of its profitable businesses. Bankruptcy is not out of the question.

"There's billions and billions of dollars at stake here," Gregory Jaczko, former head of the U.S. Nuclear Regulatory Commission, told Bloomberg News earlier this month. "This could take down Toshiba and it certainly means the end of new nuclear construction in the U.S."

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Even before Toshiba faltered, the AP1000 design was under pressure by next generation designs for SMRs or "small modular reactors."

These units would generate smaller amounts of electricity (under 300 megawatts) but in theory could be built at far less expense. Once up and running, an SMR could be added to like modular blocks when a utility opted for more nuclear power. In Oregon, NuScale Power recently applied to build the first SMR in this country.

Instead of moving the U.S. nuclear power into the fast lane, as the industry has long shouted is its rightful place, the AP1000 has knocked to the curb the prospects for nuclear power.

Not one AP1000 installation is even up and running yet. Globally, 55 nuclear plants of various designs, including the AP1000, are under construction. Nearly two-thirds are behind schedule.

More than a decade has passed since Progress Energy, a company Duke would buy in 2012, first announced plans to build two AP1000 plants in Levy County, north of the Tampa Bay metro area. A similar period of time has passed and more than $500 million spent at Duke's Lee Nuclear Center in South Carolina since the company first unveiled plans to erect AP1000 plants there.

After years of pre-construction work in Levy, Duke shelved its plans for a new Florida nuclear plant but continued to seek a license. In South Carolina, Duke now also has a license but says it has not decided yet whether to pursue a new plant.

Decisions to delay or desist are complex and expensive in the nuclear power business, where decades and billions of dollars are involved.

Duke Energy is part of a small club of power companies with nuclear plant experience and a culture that wants to believe in the future of generating electricity via nuclear power. The company runs 11 nuclear reactors in the Carolinas, and Duke CEO Lynn Good is happy to praise nuclear power. Though backburnered by cheap natural gas prices, established nuclear power plants still generate almost a fifth of U.S. electricity.

To that end, Duke is watching with both interest and agony the progress of two active AP1000 construction sites in this country. Southern Co., parent of Georgia Power, is building two AP1000 units in southeast Georgia near Waynesboro. And SCANA, parent of South Carolina Electric & Gas, is participating in a similar two-unit project under way at its Sumner facility in Jenkinsville, S.C.

Both projects, managed by Toshiba's Westinghouse unit, are long delayed and suffering huge cost overruns. Those losses, amounting to $6 billion and counting, are big factors in Toshiba's serious problems.

Duke experienced similar delays and cost overruns in the early stages of its Levy County nuclear project, an effort whose estimated completion costs between 2006 and 2013 — when Duke pulled the plug on Levy — soared well beyond $22 billion.

After Duke canceled its Levy project, Westinghouse sued Duke for hundreds of millions in development costs. In December, a federal judge ruled Duke did not owe Westinghouse more than $352 million for development costs on the canceled contract. But Duke separately was ordered to pay Westinghouse a termination fee on the Levy project of more than $34 million.

Odds are good Duke eventually will swallow its pride and move on, leaving its long delayed and costly AP1000 plans where they probably belong: On the drawing board.

North Carolina-based Duke is not alone. In South Florida, Florida Power & Light in 2009 applied for a license for two AP1000 reactors. The U.S. NRC has not yet issued the license and FPL says any new nuclear at this point remains only an option.

Of nearly 30 applications for new reactors that started in the mid-2000s, only the four Westinghouse AP1000 units in Georgia and South Carolina have gone forward.

Contact Robert Trigaux at rtrigaux@tampabay.com. Follow @venturetampabay.

Edsels of energy? Duke Energy may find new AP1000 nuclear plants are already outdated 02/17/17 [Last modified: Thursday, February 16, 2017 6:35pm]
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