|By Sharryn Dotson, Editor|
The U.S. Department of Energy made headlines when it announced in December 2013 a second round of funding awarded to NuScale Power LLC for the development of the company’s small modular reactor technology. The DOE last year also announced financial awards for the research and development of fossil fuels, clean energy, smart grid and other energy sources. With all this money flying around, what has come of the loan guarantee for the two new nuclear builds at Plant Vogtle in Georgia?
Well, the DOE extended talks for the fifth time with Georgia Power, a subsidiary of Southern Co. and majority owner of Plant Vogtle. The latest deadline is now January 31, 2014, almost four years after the guarantees were first announced in June 2010. The loan guarantee is for up to $8.3 billion, which breaks down to $3.46 billion for Georgia Power, $3.05 billion for Oglethorpe Power and up to $1.8 billion for Municipal Electric Authority of Georgia (MEAG), according to a December article in The Augusta Chronicle. The remaining stakeholder in the plant, Dalton Utilities, is not part of the loan guarantee talks. The twin reactors are expected to cost $14 billion total.
“We are encouraged by recent progress in our loan guarantee negotiations as we work with the Department of Energy to address a few remaining points, including the need for intergovernmental agency review and approval,” said Southern Co. spokesperson Tim Leljedal in an email.
Southern Co. CEO Tom Fanning said in a June 2013 article with our media partner GenerationHub that DOE was treating the funding as “project financing” instead of “corporate financing.” Fanning said that the differences are that project financing tends to be based on the projected cash flows of the project, compared to corporate financing, which is based on the actual costs of equipment, construction, etc. Fanning also said in the article that the terms and conditions of the loan guarantee were changed following the events surrounding solar panel maker Solyndra. Solyndra received a $535 million DOE loan guarantee in 2009 and filed for bankruptcy in 2011.
“Those terms and conditions just aren’t suitable for our application, so we’ll just have to see,” Fanning was quoted as saying in GenerationHub.
DOE’s loan guarantee offer would have the feds assume Southern Co.’s debt up to $8.3 billion if the utility defaults on the loan. Georgia Power and parent company Southern Co. have both said they do not need the DOE’s funds to complete the two Westinghouse AP1000 reactors by 2017 and 2018. However, some critics say DOE’s reinforcement may not be enough to protect consumers from having to pay for the project whether it is built or not.
According to a Freedom of Information Act inquiry submitted by Friends of the Earth, a credit subsidy fee of between 0.8 percent and 1.5 percent is supposed to insulate against default of the loan, but the fee doesn’t even cover risks in major nuclear construction, the report said. FOE says that even if Southern Co. finally gets the $8.3 billion loan, the incentives that consumers would have to pay could be more costly than those set up for the loan guarantee given to Solyndra. Customers would still be on the hook for the cost of the reactors even if the project were cancelled, a scenario faced by customers in Florida where plans to build a nuclear project in Levy County were cabcelled and plans to close the damaged Crystal River nuclear plant were disclosed last year. Electricity consumers in the Sunshine State will be paying $5.62 in nuclear charges each month for 1,000 kWh starting in January, which breaks down to $2.17 in fees for the damaged Crystal River reactor over the next seven years, and $3.45 in fees for the Levy County project over the next two or three years, according to the Florida Public Service Commission. Fanning said in the article that Southern Co. customers could expect a cost increase of only 6 percent to 8 percent, down from the 12 percent figure that was initially reported.
Fanning said building these units on time and on budget is essential to maintaining confidence in the nuclear industry. How can the public feel confident that more new nuclear reactors will be built to help maintain reliability of the power grid when it seems difficult to get government financing? Solyndra’s bankruptcy filing already makes some leery of DOE’s judgement of “worthy” projects, so this four-year timeline surely isn’t sitting well. Hopefully, Jan. 31 will be the last time loan guarantee talks are classified as “ongoing.”
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