Tag Archives: Nuclear power

Consumer Group Calls for Scrapping North Anna 3

 

 

 

Dominion Energy may have declared a “pause” in the development of a third nuclear unit at its North Anna Power Station, but a consumer advocacy group says that’s not good enough. It’s time to shut down the project permanently.

“Dominion needs to kill North Anna to protect rate payers,” said Irene Leech, president of the Virginia Citizens Consumer Council (VCCC). Critics have estimated that the project will cost roughly $19 billion, which would make it the most expensive power plant ever built in Virginia by a factor of ten or more. “If Dominion doesn’t do it, the SCC (State Corporation Commission) should intervene.”

Leech made her comments while introducing Dr. Mark Cooper, senior fellow for economic analysis, Institute for Energy and the Environment, at Vermont Law School, in a media conference call. Cooper, who had predicted the recent cancellation of the V.C. Summer nuclear plant in South Carolina after massive construction cost overruns, filed testimony with the SCC today on behalf of the VCCC in regards to Dominion’s 2017 Integrated Resource Plan.

“Dominion’s recently announced decision to suspend development of North Anna 3 is welcome, but long overdue and not as decisive as it should be,” Cooper said. “The Commission should order North Anna 3 removed from the IRP and refuse to allow any cost recovery associated with the development of North Anna 3 other than through the normal rate-making process, in which the utility demonstrates that it is the least cost option and useful to ratepayers.”

While acknowledging that the nuclear plant is extremely expensive, Dominion has argued that the utility should preserve the nuclear option to cope with a worst-case regulatory scenario restricting carbon-dioxide emissions. In its integrated resource plan, the company explores six scenarios. In one of them, Plan H, Dominion would be have to cut carbon emissions 7% compared to a 2012 baseline by 2030, compelling the closure of up to four coal-fired units at its Mecklenburg and Clover power stations, and making it impossible to make up the lost base capacity with natural gas. The plan contemplates 5,760 megawatts of new solar capacity, but solar output is intrinsically variable. That would leaves nuclear as the only option when the sun didn’t shine, the company has said. The company would not need to build the nuclear plant under any other regulatory scenario.

While some observers assume that Dominion hit the pause button on North Anna 3 because of horrendous construction cost overruns at plants in South Carolina and Georgia, spokesman David Botkins says the company made the decision more than a  year ago. Regulatory uncertainty made it prudent to put the project on hold but not to spike it. The Clean Power Plan, which orders states to impose CO2 emissions on their electric utilities, is not dead. Its legality is tied up in the federal court system, and the McAuliffe administration is moving ahead with his own low-carbon plan for Virginia. The company has not made the decision to build the nuclear unit but thinks it worthwhile, after spending roughly $600 million to obtain a Combined Operating License (COL), to keep the option open.

Given the momentum of technology, Cooper argued, there is no chance of nuclear becoming economically viable. “Nuclear construction costs escalate relentlessly, driven by complexity,” he said. “Nuclear is the most expensive way imaginable to reduce carbon emissions. It’s a bad investment. I have wind, solar, and energy efficiency in hand today at a third of the cost of North Anna 3. I want to get [nuclear] off the table.”

The United States electric system is transitioning “to flexible, small-scale, renewable, distributed” energy sources like rooftop solar. Meanwhile investments in energy efficiency and demand-management strategies are holding down growth in electricity consumption, Cooper said. The ability to store large volumes of electricity in batteries will make it possible to overcome the problem of volatile energy output.

“Think about your laptop, tablet, or cell phone. Ten years ago … the battery life was an hour. Now it’s ten hours. They’re making huge progress in energy storage,” Cooper said. Meanwhile, solar + batteries can increase generating capacity in increments rather than in one a big chunk when the nuclear plant comes online. Utilities talk about solar plants sitting idle at night or under cloudy skies. Large swaths of the electrical infrastructure, such as combustion turbine plants that run only during periods of peak demand, spend much of their time idle as well. Nuclear isn’t cost competitive now, and it never will be, he said.

Putting the North Anna 3 project on hold is not an adequate response, Cooper said. The General Assembly allowed Dominion to capture $570 million from rate payers to defray the cost of obtaining the North Anna 3 operating license. That sum has economic value. Assuming rate payers could earn 3% annually on that money, the opportunity cost amounts to almost $300 million over ten years. Even with the project on hold, said Cooper, “rate payers are bearing a burden.”

Dominion thinks of the North Anna 3 option as a form of insurance policy. “As has been shown throughout history, forecasts change over time,” says a prepared Dominion statement. “Fuel diversity is a key component of any energy plan. Our customers enjoy some of the lowest rates in the United States, due in large part, to the safe, reliable, clean and dependable nuclear units at Surry and North Anna.”

“The [Combined Operating License] is good indefinitely, and, while no decision has been made to build it, we could make a decision to move forward with it if business conditions change,” said Richard Zuercher, spokesman for Dominion Energy’s nuclear power operations. “We would not do so, however, without authorization from the State Corporation Commission.”

Electric Reliability and Energy Mix

 Portfolios with high mixes of coal, nuclear and natural gas have the greatest electric reliability.

The purple line shows the Composite Reliability Index (CRI) of different energy-mix portfolios. Portfolios with high mixes of coal, nuclear and natural gas have the greatest electric reliability. Portfolios with large wind components tend to be more reliable than those with solar.

Electric utilities in the 13-state PJM Interconnection regional transmission territory have a balanced resource mix — coal, nuclear, gas and renewables — that is “well equipped” to support reliable operation of the regional grid, PJM has found in a new report, “PJM’s Evolving Resource Mix and System Reliability.”

But continued evolution of the resource mix — particularly the decommissioning of coal and nuclear plants and increasing reliance upon natural gas and renewables — could create reliability issues in the future.

PJM is in charge of maintaining the integrity of the electric grid within its territory, which includes all of Virginia. The study analyzed a spectrum of “portfolios” with different fuel mixes to see how they would affect a variety of electric reliability attributes such as voltage control, frequency response, and the ability to ramp production up and down as needed.

Of particular relevance to the ongoing energy debate in Virginia, PJM found that portfolios with 20% or greater of solar energy in the fuel mix would be “infeasible” because they would be unable to reliably meet night-time requirements. There don’t appear to be any upper bounds for natural gas, but excessive dependence upon gas could create vulnerabilities under a “polar vortex” scenario of sustained, bitterly cold temperatures.

In Virginia, Dominion Virginia Power has emphasized the importance of fuel source diversity, including coal and nuclear. Dominion’s plans for nuclear, which include extending the longevity of its Surry and North Anna nuclear units by an extra 20 years and possibly building a third nuclear unit at tremendous expense at North Anna, have proven particularly contentious. Solar constitutes a small percentage of Virginia’s fuel mix but is fast growing, and environmentalists are pushing for a much bigger role.

Across the PJM region, notes the study, the fuel mix has become more evenly balanced over time. In 2005, coal and nuclear generated 91% of the energy on the PJM system. But between 2010 and 2016, extensive coal capacity was retired and replaced mainly with gas and renewables. PJM’s installed capacity in 2016 consisted of 33% coal, 33% natural gas, 18% nuclear and 6% renewables and hydro. PJM has said in the past that the transmission grid was flexible enough that it could accommodate up to 30% renewables.

Each fuel source has advantages and disadvantages in helping electric utilities balance electricity supply and demand while sticking to tight parameters for frequency and voltage. Coal and nuclear are less responsive to changes in demand, taking far longer to ramp production up and down. Wind and solar are easy to turn off but, due to the variability of the wind and sun, cannot be turned on at will. Natural gas tends to be the most flexible, and PJM’s most reliable portfolios include large contributions from gas. Electric batteries also would provide considerable flexibility, but PJM does not foresee them being deployed on a large scale within the time-frame of the study.

States the study:

  • Portfolios with the lowest unforced capacity shares of wind and solar tend to have the lowest composite reliability indices. (Note: “unforced capacity” refers to capacity in normal operating conditions as opposed to maximum “nameplate” capacity.)
  • Composite reliability indices generally improve as capacity shares of nuclear, coal and natural gas increase.
  • When coal and nuclear units are retired and replaced, portfolios with the highest composite reliability indices tend to be ones in which natural gas is the predominant replacement resource.

Bacon’s bottom line: PJM makes no judgment about the “best” fuel source mix, and it does not say that the most reliable fuel mixes are necessarily more desirable. If the goal is to increase renewables for reasons of reducing CO2 emissions, it is possible that some fuel mixes are reliable enough to accomplish both reliability and sustainability objectives.

Still, the PJM analysis suggests that high-renewable fuel mixes are “at risk for underperformance” and likely will need “additional technology requirements and/or new market rules” to ensure electric reliability.”

McAuliffe Reverses, Now Opposes Electric Rate Freeze

Governor Terry McAuliffe

Governor Terry McAuliffe said yesterday that he supports legislation that would cancel the freeze in base electric rates on Dominion Virginia Power and Appalachian Power if President Trump kills the Clean Power Plan. The endorsement came a little late for state Sen. J. Chapman Petersen, D-Fairfax City, whose bill to roll back the freeze was killed in a Senate committee in January in a 12 to 2 vote.

Taxpayers “are entitled to the lowest, most efficient rate that we can deliver to them,” McAuliffe said on the John Fredericks Show, which broadcasts in Hampton Roads, Richmond, Lynchburg, Danville and Franklin. “If Chap Petersen can get me a bill on my desk, I’d sign it. Let me be clear.”

“There’s a better chance of me starting for the Redskins as quarterback,” said Petersen, as quoted by the Richmond Times-Dispatch. “Governor, you’re going to need to send down the legislation.”

In 2015 The General Assembly passed a bill freezing base electric rates, which McAuliffe signed, after the Obama administration had rolled out the Clean Power Plan requiring Virginia’s electric utilities to significantly reduce CO2 emissions. The State Corporation Commission staff had estimated that the legislation could push electric rates 20% higher. With a stated goal of providing rate stability in uncertain times, the legislation locked base rates in place for six years.

Environmentalists were critical of the bill from the beginning, arguing that the Clean Power would increase rates only marginally. Then industrial customers contended that Dominion had been overcharging customers before the law went into effect, and the law locked in rates at excessively high levels. Moreover, they charged, the electric companies weren’t even taking on a major risk: If the Clean Power Plan had forced them to retire coal plants and build new generating facilities, they would have been able to pass on the cost through a Rate Adjustment Clause, which wasn’t affected.

Dominion has argued that the law also provided for annual, instead of biennial, review of power companies’ Integrated Resource Plans, making the planning process more transparent. As part of the legislative compromise, the company also upped its financial commitment to its Energy Share energy-efficiency plan for low-income homeowners.

Furthermore, Bill Murray, Dominion’s managing director of public policy, said last week, the company has taken $296 million in write-offs for the past two years for expenses relating to the closure of its coal ash ponds. The freeze prevents the company from recovering those costs. “Those are costs we are absorbing.”

Bacon’s bottom line: McAuliffe’s support for reversing the freeze is a day late and a dollar short. As a practical matter, Petersen’s bill cannot be resurrected. Reversing the freeze without understanding the emerging regulatory context may not make sense anyway. The Trump administration has made clear its intention to kill the Clean Power Plan. We Virginians need a clearer idea of what kind of energy policy we want going forward. Simply rolling back the freeze doesn’t inform that debate.

Solar power is the potential game changer. The cost of generating solar energy continues to decline, and so does the cost of battery storage, which will help offset the intermittent nature of solar generation. No one disagrees with those propositions, but many questions remain open. How rapidly are solar prices declining? When will solar become economically competitive with natural gas in Virginia? That depends in large measure what happens to natural gas prices. Will they rise from currently low levels, and, if so, by how much?

Another big question is how much solar can Dominion, Appalachian Power and Virgina’s electric co-ops absorb without undermining the reliability of the electric grid. A related set of questions revolves around how much retail competition regulators should allow, how to guarantee the integrity of the grid if electric utilities lose market to independent solar operators, and how rate payers will be impacted if utilities experience a decrease in consumption.

One more pressing matter: What’s the role of nuclear in a post-Clean Power Plan world? While it still may make economic sense to renew the licenses for Dominion’s existing nuclear power plants, building a third unit at North Anna guesstimated to be $18 billion probably does not. Dominion wanted to maintain that option as an insurance policy, at a cost of hundreds of millions of dollars in engineering and permitting expenses, to protect against the most onerous of the Clean Power Plan regulatory scenarios. In a Trump presidency, that scenario looks highly unlikely. Should Dominion scrap North Anna 3?

If Virginians want to unfreeze the freeze, we need to recognize that no regulatory action takes place in a vacuum. Rather than dealing with each of these issues piece-meal we should settle them in a comprehensive way.

Nuke Foes Take Case to Dominion Shareholders

North Anna nuclear power station

North Anna nuclear power station

by James A. Bacon

Foes of a third nuclear power plan at Dominion Virginia Power’s North Anna Power Station have taken their case to the shareholders of parent company Dominion Resources, which is holding its annual shareholders meeting in Columbia, S.C., today.

Dominion is racking up billions of dollars of potential liabilities on the nuclear unit (NA3) that it may never recover, argues a shareholder resolution filed by Ruth McElroy Amundsen. State regulators may balk at paying for a project that, according to a Dominion estimate filed with the State Corporation Commission, would cost approximately $14.8 billion and, according to an expert witness for the Office of the Attorney General, would cost $19.3 billion,

Amundsen’s shareholder resolution (page 54) calls for Dominion to prepare and make public “a financial analysis” by November 30 reporting on “potential impact on earnings, share price and dividends should the State Corporation Commission deny a certificate for the development of North Anna 3 and further deny the recover of $1.87 billion in costs associated with the North Anna 3 nuclear reactor.”

“The massive $19 billion cost for the North Anna 3 nuclear reactor project makes it the biggest single threat posed today to the pocketbooks of Virginia consumers,” said Irene Leech, president of the Virginia Citizens Consumer Council. “The ever-escalating cost of this project and the fact that it is at least twice as expensive as other alternatives, including energy efficiency and renewables, makes this a situation that cries out for responsible shareholders to speak up and be heard.”

Dominion responded in its 2016 shareholders proxy statement that the company faces immense regulatory uncertainty. Federal courts must rule on the constitutionality of the Clean Power Plan and then, if the plan is deemed constitutional, the commonwealth of Virginia must select one of four broad regulatory strategies to meet the goals of the plan, which is designed to combat climate change by reducing utility carbon-dioxide emissions.

“The analysis and report … [would] require hypothesizing a number of unrelated factors and contingencies,” stated the board of directors in recommending against the shareholder proposal. “The potential outcomes of these issues, each of which would depend, in part, on subjective determinations by regulators, would need to be taken into account if we were to prepare the requested report. The complexity of any cost-recovery analysis is further compounded by the fact that the legislative process can, at times, alter the regulatory landscape.”

Amundsen’s resolution, which echoes the arguments made by consumer and environmental groups, focuses on the risk that the nuclear plant might never get built and that the company may not recover the significant investments it is making before receiving regulatory approval. Virginia Office of Attorney General has raised concerns with the SCC whether the expenditure of $19.3 billion developing NA3, which could translate into an average rate increase of 25.7% over current Virginia retail rates, is “reasonable and in the public interest.”

The total delivered cost of power from NA3 would amount to 19 cents per kilowatt/hour, which compares to the average wholesale price of electricity in the PJM interconnection region of 5.3 cents per kilowatt/hour in 2014, stated a supporting document for the shareholder proposal. And that doesn’t take into account the prospect of more cost increases if the project runs behind schedule and over budget.

Even if Dominion never builds the nuclear facility, it has been spending hundreds of millions of dollars on engineering and regulatory work to keep the nuclear option open. As of Sept. 30, 2015, the company had incurred $580 million in development costs, and Dominion expects to have spent $4.7 billion in development by the end of 2020, states the supporting document. “By the time the SCC is allowed to review this spending, more than one-quarter of the total cost will have been spent.”

Amundsen’s bottom line: “Dominion is incurring its North Anna 3 costs purely at its stockholders’ risk.”

Dominion’s recently published 2016 Integrated Resources Plan lays out four potential regulatory strategies for Virginia if the Clean Power Plan is approved. One of those scenarios, a “mass-based” approach that sets caps on CO2 emissions for existing and new power plants, would restrict coal- and gas-based electric generation so drastically that the company would have little choice but to shift to solar and nuclear power, the company has argued.

While the Sierra Club Virginia Chapter argues that “the company can substantially reduce carbon pollution with renewable energy like solar and wind power,” Dominion says that the intermittent nature of wind and solar production forces the company to maintain backup capacity it can rely upon. The low-cost option for “dispatchable” power is natural gas. But the regulatory scenario preferred by environmental groups effectively precludes gas and coal, leaving nuclear as the only option. The company also contends that neither energy-efficiency initiatives nor purchases of wholesale power from the PJM system can make up the difference.

In effect, Dominion regards its expenditures on the NA3 nuclear unit as an insurance policy should Virginia adopt the most carbon-restrictive Clean Power Plan regulatory option.

SCC Asks Tough Questions about Nukes, CO2 Emissions

2015IRPby James A. Bacon

Given the legal and regulatory uncertainties associated with Clean Power Plan, which requires Virginia to reduce CO2 emissions 30% by 2030, Dominion Virginia Power’s 15-year strategic plan filed in July 2015 is reasonable and in the public interest, the State Corporation Commission (SCC) ruled in a final ruling released today. However, the SCC also detailed substantial additional analysis it would like to see in the Integrated Resources Plan (IRP) Dominion files next year.

The electric company had filed four broad options for responding to the mandates of the Clean Power Plan, including one that relied heavily upon nuclear power. The power company did not recommend one option over the others in July because it did not know precisely how the Clean Power Plan would impact Virginia. While the Environmental Protection Agency has finalized Virginia’s CO2 emission targets since then, the state still has yet to choose between two possible approaches, whether to focus on the absolute volume of CO2 emissions or CO2 emissions on a kilowatt-hour basis. That decision could have significant impact on how power companies respond to the mandates.

Consumer and environmentalist groups had urged the SCC to reject the IRP on the grounds that the projected $19.3 billion cost for a third nuclear unit at the North Anna power station was excessive under any scenario. A project of that magnitude, the SCC noted, would roughly double the size of Virginia’s electric rate base.

While the SCC saw no need to amend the 2015 IRP, it noted pointedly that it views the IRP only as a planning document, “not as a document that will determine future Commission decisions on future resources or the recovery of specific expenditures.”

The commission instructed Dominion to take a very different approach to its 2016 IRP. With this ruling, the tight-lipped commissioners signaled what they see as the major issues facing Virginia’s electric power industry response to the Clean Power Plan.

Nuclear power. The proposed North Anna 3 nuclear unit tops the list. The company has incurred approximately $580 million in development costs through September, a portion of which has been passed on to rate payers already, and Virginia’s share of the final project cost could reach $19.3 billion in capital investment. If passed on to rate payers, wrote the SCC, “that investment would represent a large enough increase in electric bills for residential and business customers to impact Virginia’s economic climate.”

Acting as consumer counsel in evidentiary hearings, the Attorney General’s office raised  what the SCC deems to be a “serious concern”: Should Dominion come to the SCC in a future hearing having already incurred billions of dollars in development costs on North Anna 3, will it cite the sunk costs “as a compelling reason for the Commission to approve the application”? Accordingly, the SCC ordered Dominion to answer the following questions in its next IRP:

  • Why might Dominion believe that it should be entitled to recover from customers North Anna 3 costs incurred before being granted formal regulatory approval?
  • Is there a dollar limit on how much Dominion intends to spend on North Anna 3 before seeking that regulatory approval?
  • Without a guarantee of cost recovery, how much can Dominion spend on North Anna 3 without negatively impacting its fiscal soundness and cost of capital?
  • Why does Dominion continue to spend money on North Anna 3 development costs? Is it mainly to seek Nuclear Regulatory Commission approval?

In the next IRP the SCC wants Dominion to “quantify the tradeoff between operating cost risks that may be increased and the  cost savings that may be realized by delaying the construction of North Anna 3.” Continue reading

Radiation, Hormesis and Nuclear Power

radiationby James A. Bacon

I belong to a generation that grew up with a fear of nuclear war, fall-out and slow, agonizing death by radiation poisoning. We’d seen the horrors of Nagasaki and Hiroshima. We lived through the scare of Three Mile Island and, years later, had our fears reinforced by catastrophes at Chernobyl and Fukushima. Given the fear of radiation, when people talked about the wonders of nuclear power, my reaction was, “Sounds great. Just make it safe.”

As the United States evolves toward a low-carbon future, nuclear energy has two great virtues. First, it emits zero carbon dioxide. Second, nuclear power plants run around the clock; unlike with wind and solar, output does not vary with weather conditions. The drawback is that nuclear units are hideously expensive to build, largely because federal rules have zero tolerance for radiation leaks.

The zero-tolerance philosophy is based upon a scientific premise known as the linear no-threshold model (LNT), which states a linear dose-risk relationship. We know incontrovertibly that large radiation doses are deadly. The LNT model asserts that small doses are damaging as well, though at proportionately lower levels. While that scientific view has prevailed in the regulatory arena — better safe than sorry — it has not been universally accepted.

Proponents of “radiation hormesis” argue that biological organisms evolved in an environment with measurable background radiation. Not only is this low level of radiation not harmful, says the hormesis hypothesis, it is beneficial because it stimulates organisms to engage in cellular repair activities that counter not only the deleterious effects of radiation but cancers unrelated to the radiation exposure. The positive hormesis effect small, however, so its statistical signal has been drowned out by seemingly infinite variations in environmental conditions and by measurement error.

Still, the hormesis hypothesis has been gaining traction in recent years — so much so that the U.S. Nuclear Regulatory Commission has requested public comment on proposals to change the basis for NRC “Standards for Protection Against Radiation” from the LNT model to the hormesis model. Presumably, the proposed change would declare low levels of radiation emissions to be harmless, which in turn could relax the regulatory requirements surrounding the construction and operation of nuclear reactors.

“Exaggerated radiation fears have been crucial in driving up the safety, waste storage and licensing costs of nuclear power,” declares Holman W. Jenkins Jr. in the Wall Street Journal today. “But change may finally be coming—a paradigm shift in how we think about nuclear risk.”

While sentiment may be shifting, millions of Americans remain less than convinced. Most of the comments I perused in the NRC comments were negative. Many people are convinced that the revised thinking is being driven by a self-serving nuclear power industry.

There is a good chance that the LNT-vs.-hormesis debate will come to Virginia. Dominion has filed for NRC regulatory permission to extend the life of its two Surry nuclear power units, and has spent hundreds of millions of dollars to keep alive the option of building a third nuclear unit at its North Anna power station. Environmental groups, most notably the Virginia chapter of the Sierra Club, have campaigned actively against the nuclear option.

Bacon’s bottom line: What’s fascinating about the NRC’s look at hormesis is that it comes from a Democratic administration, which, all other things being equal, one would expect to be far more responsive to environmentalist concerns than a Republican administration. In a conference on nuclear power last month that generated little attention in the media, the White House reiterated its commitment to nuclear as a necessary component of its clean energy policy.

While Dominion’s proposal to invest roughly $1.5 billion to patch up the Surry units so they can operate another 20 years may be economically defensible, it is hard to see any case being made for spending $19 billion to build a third North Anna unit…. unless Dominion is banking on major regulatory changes at the NRC. If the Obama administration embraces hormesis as the basis for its rule making, and if the new standards strip billions of dollars of expense from building new nuclear reactors, Dominion’s commitment to North Anna 3 makes more sense.

Whatever the NRC decides, fear of radiation is so deeply embedded in our popular culture that the LNT-hormesis controversy is sure to play out here in ye Olde Dominion.

Do Nukes Have a Long-Term Future in Virginia?

Surry Nuclear power station. Photo credit: Dominion

Surry nuclear power station. Photo credit: Dominion

by James A. Bacon

With little fanfare two weeks ago, Dominion Virginia Power announced its intention to extend the life of its two nuclear units at the Surry Power Station for another 20 years. Commencing service in 1972 and 1973 respectively, the units are licensed to continue operating through 2032 and 2033.

“Over the next several years, we will submit thousands of pages to the [Nuclear Regulatory Commission] demonstrating the safety and technical feasibility of extending Surry’s operating licenses,” said David A. Christian, CEO of Dominion’s generation group. “We are excited to be the first utility in the U.S. to begin this process.”

Dominion timed the announcement to coincide with a White House symposium on the future of nuclear energy, during which the Obama administration underlined the importance of nuclear power in the nation’s energy future. “As America leads the global transition to a low-carbon economy,” states a White House fact sheet arising from that event, “the continued development of new and advanced nuclear technologies along with support for currently operating nuclear power plants as an important component of our clean energy strategy.”

The contribution of nuclear power is all the more critical for Virginia, which relies upon Dominion’s four nuclear plants at Surry and North Anna 3 for about 35% of the state’s electric power output. As Dominion scales back its coal-generated capacity in order to meet a Clean Power Plan mandate to cut CO2 emissions 32% by 2030, the company will be all the more dependent upon its zero-emission nuclear plants to meet demand.

Obtaining approvals from the federal Nuclear Regulatory Commission is just one hurdle. Virginia environmental groups oppose not only building a third nuclear unit at North Anna, at a mind-boggling cost of $19 billion, but extending the life of existing nuclear units at much lower cost. Glen Besa, executive director of the Virginia Chapter of the Sierra Club, likens the aging Surry units to an old car. “The older the car is, the more unreliable it is.”

The pros and cons of the two nuclear options — building a new plant and extending the old ones — shake out very differently.

Dominion wants to spend more than $800 million over the next six years on pre-construction design, engineering and permitting work for the North Anna 3 nuclear unit just to keep open the option of building it later, and that’s on top of hundreds of millions of dollars spent and passed on to rate payers already. Dominion’s logic is that  (a) nuclear has zero carbon emissions,  (b) nuclear will be less affected by fluctuations in the price of its fuel source than natural gas, and (c) the company has gotten really good at running nuclear power plants efficiently.

In the current economic environment, however, it’s hard to imagine the State Corporation Commission approving a $19 billion project when the cost of clean wind and solar power is steadily declining and the option always exists to purchase electricity on wholesale energy markets. Environmentalists also will make an issue of North Anna’s location on a fault line and the expense of disposing of nuclear waste.

The Surry project poses very different considerations. First, the capital cost of rehabbing the power plant to operate another 20 years will be modest — in the realm of $1.5 billion or so, roughly the cost of building a major gas-generated plant. Second, Surry’s operating costs are among the lowest in the nation.

In a ranking by Nucleonics Week earlier this year, Dominion’s Surry nuclear stations were the second lowest cost producers of 27 companies that reported their costs to the federal government between 2010 and 2012 — bested only by the company’s North Anna units.

“Safety, operational excellence and low costs are goals we strive for every day,” David Heacock, chief nuclear officer, told Nucleonics Week. “Key to our low-cost performance is our highly skilled and experienced work force in addition to having identical units. It is gratifying to see that we have been very successful when compared to other operating nuclear units.”

“We have a huge advantage in being able to share spare parts, and share workforce and procedures,” Heacock said. The company also gains a cost advantage over other nuclear operators by performing more work in-house.

Besa with the Sierra Club said that nuclear power plants experience wear and tear after decades of operation. Radioactive bombardment can cause the steel and concrete in the pressurized containment vessel to become brittle and less able to withstand the pressure, increasing the odds of a radioactive incident. “The analogy with an old car is a good example,” he said. “All sort of things start to happen when you have an old car. When a car breaks down, it’s just an inconvenience. When a nuclear plant has an accident, it can be catastrophic.”

Dominion responds that the company has a decades-long record of operating nuclear power plants safely and efficiently, and that nuclear provides much-needed diversity to its power portfolio as the company phases out most of its coal-fired units. Too much dependence upon natural gas exposes rate payers to fluctuating gas prices. Gas is cheap right now, but if history is any guide, it could easily double or triple in price in the future. Too much dependence upon wind and solar creates problems as well. The electric transmission grid can handle fluctuations in wind and solar output up to about 35% of total generating capacity. Any percentage higher than that can create interruptions to the power supply.

Extending the life of the Surry nuclear station will provide that fuel diversity at modest cost for years to come, Dominion says.

How Much Is It Worth to Preserve Dominion’s Nuclear Option?

Schematic of proposed North Anna 3 nuclear plant. Image source: Dominion.

Schematic of proposed North Anna 3 nuclear plant. Image source: Dominion.

by James A. Bacon

Perhaps the biggest question facing Virginia as it implements the Clean Power Plan, which mandates a 37% reduction in CO2 emissions from Virginia power plants by 2030, is what fuel mix to rely upon. Compelled to cut coal use sharply, Virginia’s power companies effectively have a choice of natural gas, nuclear and renewables such as wind and solar.

While not committed to building a third nuclear plant at North Anna Three, Dominion Virginia Power has spent hundreds of millions of dollars to create that option. But leading Virginia environmental groups have declared their all-out opposition to nuclear power, despite its zero carbon emissions. Then on Wednesday the Attorney General’s Office, which represents the interests of Virginia’s consumers, publicly stated that Dominion should abandon its nuclear initiative on the grounds of cost.

“How many hundreds of millions or billions of dollars does a company need to spend … before we can say we are planning to build this generation project?” said William Reisenger, an assistant attorney general, as reported by the Richmond Times-Dispatch. “Is there a threshold? Could Dominion spend $3 billion on a generation project without deciding whether it is building that project?”

At present, North Anna 3 is the third most expensive option for complying with the Clean Power Plan, Thomas P. Wohlfarth, Dominion’s senior vice president for regulatory affairs, acknowledged Wednesday in a hearing about Dominion’s long-range planning document, the Integrated Resources Plan. But that ranking could change. “All it takes is some variation on how the state decides to implement the plan, or decisions by other states, or a change in gas prices. You could very easily see a flip in the value where North Anna ends up being the lowest cost. … You can’t go all in on one fuel source.”

Framed this way, the question becomes how much is it worth to maintain diversified power sources for Virginia’s electric grid?

Dominion, like other electric utilities across the country, is increasing its commitment to natural gas. Gas is cheap (at the moment), it is virtually pollution free, and it has half the carbon emissions of coal. But there are legitimate questions how long it will remain cheap. No one is certain how long the Marcellus and Utica shale fields can continue to expand production, or how long supplies can keep pace with increasing consumption, especially after the U.S. starts exporting liquefied natural gas.

The main non-nuclear alternatives to natural gas are solar energy and wind power. In the past, those power sources have been exceedingly expensive, but improving technology has brought costs down. In Virginia, off-shore wind is still wildly uncompetitive in the near-term, and it appears that on-shore wind, sited mainly along mountain ridges, will be only a niche power source. The economics of solar look far more positive. The issue with solar, as with wind, is the intermittent nature of the power production. How much conventionally powered backup will be required, and what will be the impact, as solar becomes a major contributor, on electric grid reliability?

The strategic question Dominion is asking is this: Does Virginia want a future electric grid that relies largely upon natural gas, wind and solar? Or does it want to diversify its fuel mix with nuclear power to provide a stable base? Should the state roll the dice on two or three power sources or spread its bets to include nuclear?

The cost of nuclear is a huge consideration. According an expert witness for the AG’s office, North Anna 3 would cost in the realm of $19.3 billion, a sum that could increase customers’ electric bills by 25%. Irene Leech, president of the Virginia Citizens Consumer Council, declared the nuclear project “the biggest single threat posed today against the pocketbooks of Virginia consumers.”

Dominion spokesman Richard Zuercher says the AG office’s $19.3 billion estimate is “not unreasonable.” But it’s important to understand the context. That is not the up-front capital cost of building North Anna 3. The figure includes the cost of interest, which is paid out over decades. It also doesn’t take into account the fact that, once built, a new nuclear unit would likely have a 60-year life span, longer by decades than the life span of an investment in gas, wind or solar. All things factored in, will nuclear will be economically competitive? As Wohlfarth says, it all depends.

So, how much is it worth to maintain the nuclear option, not knowing whether it will ever be exercised? It’s not clear from the Times-Dispatch article where Reisenger with the AG’s office got the $3 billion figure. (I suspect it was a number pulled out of thin air for purpose of making a rhetorical point, not meant to be an authoritative cost projection.) Whatever the source, Dominion takes issue with it. Wrote Zuercher in an email late yesterday:

We disagree with the $3 billion stated by the witness in reference to how much the company could spend before committing to the new unit. The net capital spending to date is $278 million, net the $301 million that the Virginia General Assembly  allowed to be covered by existing rates, and does not include interest. It is more likely that spending on the unit could be in the $450 million range (net the write off) by the end of 2017, the year in which we expect the NRC to issue the license that would allow us to build and operate the North Anna 3.

Combining the $301 million “write-off” (what Dominion has already spent and is charging to rate payers) plus an additional $450 million, the total cost of preserving the nuclear option would be about $750 million. That’s about one-quarter the $3 billion figure cited.

Is the benefit of of preserving the nuclear option worth spending $450 million over and above the $301 million in sunk costs? If you’re dead-set against nuclear, no number is worthwhile. If your primary interest is holding down electric rates, maintaining system reliability and reducing greenhouse gas emissions over the long haul, reaching a judgment is a lot more complicated.

Can't Beat those Old Nukes for Cheap Energy

Image credit: Nuclear Energy Institute

Image credit: Nuclear Energy Institute

by James A. Bacon

Dominion has shut down both nuclear power units at its Surry County station to repair water leaks. The first one was taken offline over the weekend, the second was deactivated Monday. Reports the Richmond Times-Dispatch:

The leaks amounted to about 1,000 gallons, all of which was captured and processed for reuse once the reactors are running, [spokesman Rick] Zuercher said. Each reactor’s coolant system operates with about 71,000 gallons of water.

“These happen occasionally. They’re not significant,” Zuercher said. “There are levels of leakage that require us to shut down, but these did not rise to that level. We always try to capture problems when they’re small and fix them so they don’t become big problems.”

The incident follows a leaking pump in January that reduced the Unit 2 reactor to 60 percent capacity during repairs, and a shutdown this spring to refuel the two units. When Dominion shuts down its nuclear units, it has to make up the difference from other sources, either within its own fleet of power plants or by purchasing power from other companies over the PJM Interconnection grid. That energy can be expensive during the peak demand period of the summer.

Every time a nuclear plant shuts down for repairs, it seems to make the news. I suppose it’s the old Three Mile Island syndrome. Stuff that happens at a nuclear power plant is way scarier than the stuff that happens in any other kind of power plant. Other kinds of power plants shut down for maintenance and repairs, too — we just don’t hear about it.

The reality of the situation is that nuclear power plants spend more time online, operating 24/7, than any other type of electricity-generating plant. Based on 2013 data, the Nuclear Energy Institute asserts that nukes operate 90.9% of the time. That handily beats coal- and gas-fired plants and it clobbers wind and solar (although biomass plants experience relatively little downtime). That’s why Dominion Virginia Power can seriously talk about building a third nuclear generator at its North Anna facility despite a mind-numbing price tag measured in the billions of dollars. Not only do nukes generate power two to three times more of the time than alternatives, they tend to be longer-lived — 40 years routinely, and potentially as long as 60 years.

surry

The Surry nuclear station

In its 2015 Integrated Resources Plan, Dominion expressed its intention to inform the Nuclear Regulatory Commission of its intent to “potentially submit” a license application to extend the Surry Power Station Units 1 and 2 for another 20 years. Built in 1972 and 1973, those units are already 40 years old. I presume that the initial construction cost of the two units has been fully written off. Assuming they can be operated safely, extending their life another 20 years would provide incredibly inexpensive power for Virginia.

Old versus new. That’s not necessarily to say that nuclear is the best option for new plants. Nuclear has hard-to-quantify risks not shared by other power sources. The fact that the North Anna station is built on a fault line does not inspire confidence. Neither does the fact that United States has yet to devise a permanent solution for the disposal of radioactive waste. The engineering and physics of nuclear power are so complex that anyone (from power companies to environmentalists to neighborhood kooks) can make any claim and members of the public have no ability to appraise them. That inherent uncertainty weighs heavily against nukes in the popular mind.

Not long ago, Dominion appeared ready, willing and able to start pushing for a third, 1,453-megawatt nuclear unit at North Anna, a proposal that would be sure to ignite massive controversy. For now, having spent hundreds of millions of dollars in preliminary work, the company is keeping that option alive. But the 2015 IRP seems less settled upon nuclear than before. The company’s own portfolio risk assessment showed that, on a risk-adjusted basis, new nuclear was marginally more expensive than alternatives that rely more upon gas or solar.

Can’t Beat those Old Nukes for Cheap Energy

Image credit: Nuclear Energy Institute

Image credit: Nuclear Energy Institute

by James A. Bacon

Dominion has shut down both nuclear power units at its Surry County station to repair water leaks. The first one was taken offline over the weekend, the second was deactivated Monday. Reports the Richmond Times-Dispatch:

The leaks amounted to about 1,000 gallons, all of which was captured and processed for reuse once the reactors are running, [spokesman Rick] Zuercher said. Each reactor’s coolant system operates with about 71,000 gallons of water.

“These happen occasionally. They’re not significant,” Zuercher said. “There are levels of leakage that require us to shut down, but these did not rise to that level. We always try to capture problems when they’re small and fix them so they don’t become big problems.”

The incident follows a leaking pump in January that reduced the Unit 2 reactor to 60 percent capacity during repairs, and a shutdown this spring to refuel the two units. When Dominion shuts down its nuclear units, it has to make up the difference from other sources, either within its own fleet of power plants or by purchasing power from other companies over the PJM Interconnection grid. That energy can be expensive during the peak demand period of the summer.

Every time a nuclear plant shuts down for repairs, it seems to make the news. I suppose it’s the old Three Mile Island syndrome. Stuff that happens at a nuclear power plant is way scarier than the stuff that happens in any other kind of power plant. Other kinds of power plants shut down for maintenance and repairs, too — we just don’t hear about it.

The reality of the situation is that nuclear power plants spend more time online, operating 24/7, than any other type of electricity-generating plant. Based on 2013 data, the Nuclear Energy Institute asserts that nukes operate 90.9% of the time. That handily beats coal- and gas-fired plants and it clobbers wind and solar (although biomass plants experience relatively little downtime). That’s why Dominion Virginia Power can seriously talk about building a third nuclear generator at its North Anna facility despite a mind-numbing price tag measured in the billions of dollars. Not only do nukes generate power two to three times more of the time than alternatives, they tend to be longer-lived — 40 years routinely, and potentially as long as 60 years.

surry

The Surry nuclear station

In its 2015 Integrated Resources Plan, Dominion expressed its intention to inform the Nuclear Regulatory Commission of its intent to “potentially submit” a license application to extend the Surry Power Station Units 1 and 2 for another 20 years. Built in 1972 and 1973, those units are already 40 years old. I presume that the initial construction cost of the two units has been fully written off. Assuming they can be operated safely, extending their life another 20 years would provide incredibly inexpensive power for Virginia.

Old versus new. That’s not necessarily to say that nuclear is the best option for new plants. Nuclear has hard-to-quantify risks not shared by other power sources. The fact that the North Anna station is built on a fault line does not inspire confidence. Neither does the fact that United States has yet to devise a permanent solution for the disposal of radioactive waste. The engineering and physics of nuclear power are so complex that anyone (from power companies to environmentalists to neighborhood kooks) can make any claim and members of the public have no ability to appraise them. That inherent uncertainty weighs heavily against nukes in the popular mind.

Not long ago, Dominion appeared ready, willing and able to start pushing for a third, 1,453-megawatt nuclear unit at North Anna, a proposal that would be sure to ignite massive controversy. For now, having spent hundreds of millions of dollars in preliminary work, the company is keeping that option alive. But the 2015 IRP seems less settled upon nuclear than before. The company’s own portfolio risk assessment showed that, on a risk-adjusted basis, new nuclear was marginally more expensive than alternatives that rely more upon gas or solar.