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Vogtle: at $65 billion and counting, it’s a case study of nuclear power’s staggeringly awful economics

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Vogtle Units 3 (left) and 4, July 30, 2015. After 41 months of construction, the project is 39 months behind schedule. Photo by High Flyer, special to Savannah River Site Watch.

Georgia is one state that you would think would be wary of nuclear power economics. The first two reactors at Georgia Power’s Vogtle site, which came online in the late 1980s, were a record 800% over budget.

That is a number that is almost impossible to grasp. Nothing goes 800% over budget–in the real world, projects get cancelled well before reaching that point.

I’m thinking of making about $100,000 worth of improvements to my aging house desperately in need of them. 800% over budget would take that to $800,000. But I could buy a very nice house for that instead, even in the Washington DC area. Of course, I can’t afford an $800,000 house and can’t afford a project that is 800% over budget, either. Most people can’t. Neither can businesses. So if those improvements start to creep up from the budget–in my case if they go more than about 10% over budget–the whole project gets the kibosh.

Sane people do not let projects get 800% over budget. Unless, perhaps, if someone else is putting up the money. And that’s exactly what happened with the first two Vogtle reactors–the overruns were pushed on to ratepayers; Georgia Power had to eat some small portion of them, but basically ratepayers were forced to pick up the tab.

And in a case of history repeating itself as predicted–as farce–that’s exactly what is happening with the two Vogtle reactors under construction now.

When the project was announced, and when the utilities building the project first applied for taxpayer loans to help finance the project, Southern Company (Georgia Power’s parent) said the two reactors would cost about $14 billion and would be online in 2016 and 2017.

That was back around 2008. Vogtle got its taxpayer loan promise in February 2010 and its construction permit in February 2012. Three and a half years later, Vogtle is more than three years behind schedule–39 months behind, in fact.

And the cost of building Vogtle has, not surprisingly, gone up. Way up. Right now, it’s somewhere around $16 billion and rising fast–the over-budget portion caused by the delays alone is $2 million per day. And as you can see from the photo at the top of the page, taken last Thursday, construction still has quite a long way to go.

Georgia Power already has run through half of its federal loan money, paid for by all U.S. taxpayers, not just Georgia ratepayers. Some of the rest of the taxpayer loan (the loans totaled more than $8 billion) was received later by the other partners, so perhaps they haven’t run through their share yet.

In any case, the supposed point of getting the loan, and of charging ratepayers for construction costs as they are incurred (a concept called Construction Work in Progress, barred in most states), and of building the reactors in the first place, was to save ratepayers money. That’s what Southern Company says anyway.

And they run off numbers and argue that building Vogtle, even with the overruns and delays, will save ratepayers $3 billion compared to building a gas-powered plant, which probably would already be operational, by the way, except that neither it nor Vogtle actually are needed.

But those numbers, despite the utility’s protestations, no longer add up.

In fact, according to former Georgia Public Service Commissioner Bobby Baker, the total current benefit to ratepayers–calculated from utility-supplied figures–is $208 million.

But that’s assuming the reactors are online in time, by December 31, 2020, to receive federal production tax credits of $522 million each. Vogtle-4 probably isn’t going to make it. And Vogtle-3 is rather iffy. Any more delays will probably force the utility to concentrate on Vogtle-3, which will make Vogtle-4 even later and cost even more.

If you take that $208 million and subtract $522 million for Vogtle-4 not meeting the deadline, you get negative benefits. If neither reactor makes the deadline, the negative benefits start to get very large. And with costs rising at the rate of $2 million/day, the negative benefits get larger still.

If one–or both–of the reactors gets cancelled before operation, then the negative benefits grow even more. Unless the cancellation occurs before too much more money is spent–then cancellation would turn into a net benefit for the ratepayers by avoiding the costs that have not yet been incurred. Sure, Georgia Power might take a hit and a lot of money that already has been spent would be wasted. But at least ratepayers could breathe easier.

Vogtle-3 and -4 are not at the 800% overrun level, yet. Georgia ratepayers have to hope they won’t get close to that. But history isn’t reassuring, and the modular construction concept adopted by Southern Company that was supposed to keep costs down and prevent overruns hasn’t exactly panned out, as the Wall Street Journal reported last week.

Other utilities were looking at the Vogtle project–the first that had been approved for a construction license in 30+ years–as the harbinger. If the giant Southern Company couldn’t build Vogtle close to budget and close to schedule, then probably no utility could. With the weight of the nuclear “renaissance” on its shoulders, Vogtle already has failed that test. There is nothing at all in this project–which had every possible benefit from CWIP to federal loans–that would make another utility want to try to build a reactor.

The economics of nuclear construction are just too staggeringly awful. But it gets worse.

Because, as former PSC Commissioner Baker said, the total lifetime cost of Vogtle, including construction, is now estimated at $65 billion–a number too high for “staggering” to apply anymore.

Two commenters to the article came up with two radically different estimates of what that means for the kilowatt/hour price for Vogtle’s electricity. One says 6.1 cents, the other 15 cents. The real cost will depend on how well Vogtle runs once it’s built; if, in fact, both units actually are completed. Assuming they are–at this point not a safe assumption–the real number probably would fall between those two guesses.

Except that the $65 billion number doesn’t include decommissioning and radioactive waste disposal costs, both of which will be added to ratepayers’ bills–and probably the rest of us taxpayers as well when the amount collected proves to be too small, as is the case with every other reactor in the country.

Meanwhile, utilities across the country, including Georgia Power, are buying solar power for 5 cents kilowatt/hour and less. And, unlike Vogtle, where the costs keep rising, solar’s price keeps falling.

Georgia ratepayers can only hope the Georgia PSC wakes up in time to prevent any more cost overruns from being passed on to them. The rest of us can only hope Georgia Power and the other smaller utilities can actually repay their taxpayer loan. Actually, we could also hope that everyone involved will come to their senses and end the project now, before it gets any worse.

After all, if the definition of insanity is doing the same thing and expecting a different result then everyone involved in Vogtle-3 and -4 is on the verge of committal.

Correction, as in Doh! Okay, so my math can get a little challenged on deadline….The example of an 800% increase in the cost of renovations to my house is, of course–as several people gracefully pointed out–wrong. An 800% increase to a $100,000 project would have a final cost of $900,000, not $800,000 as I wrote above. I could get an even nicer house for that…and hopefully, if we do decide to do those renovations, our math while we monitor their costs will be a little more accurate.

Michael Mariotte

August 2, 2015

Permalink: https://safeenergy.org/2015/08/03/vogtle-at-65-billion-and-counting/

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