The U.S. Energy Department will complete $6.5 billion in loan guarantees tomorrow for two nuclear reactors being built at Southern Co. (SO)’s Vogtle plant in Georgia, four years after conditionally backing the project.
The agency will sign agreements with Southern’s Georgia Power Co. utility, which owns 46 percent of the reactors, and co-owner Oglethorpe Power Corp., Energy Secretary Ernest Moniz said today in Washington. The U.S. continues to work on $1.8 billion in backing for the Municipal Electric Authority of Georgia, another partner, he said.
“The innovative technology used in this project represents a new generation of nuclear power with advanced safety features and demonstrates renewed leadership from the U.S. nuclear energy industry,” Moniz said.
The loan guarantee is a gesture of U.S. support for nuclear power, an energy source set back by a credit crisis in 2008, a triple meltdown at Japan’s Fukushima Dai-Ichi reactors in 2011, and a decline in the price of natural gas, a competing fuel source. For various reasons, in the past year Dominion Resources Inc., Duke Energy Corp., Edison International (EIX) and Entergy Corp. shuttered or announced plans to close reactors.
A decade ago the industry anticipated a renaissance, with companies proposing to build more than 25 units in the U.S. The units at Vogtle, about 26 miles (42 kilometers) southeast of Augusta, Georgia, are among five under construction. Southern won a U.S. Nuclear Regulatory Commission license for the units in February 2012, the first U.S. permits to build new reactors in more than 30 years.
The Energy Department is using a loan guarantee program that has its reputation dented after bankruptcies by some recipients including Solyndra LLC. The setbacks also slowed the pace of awards.
Edwin Lyman, senior scientist at the Union of Concerned Scientists based in Cambridge, Massachusetts, said costs to build a nuclear reactor have soared, and the backing for Vogtle may be the last for the program.
“The loan guarantee program Congress set up in 2005 to help jumpstart the nuclear industry is tapped out,” Lyman said in a statement. “The original amount in the program was $17.5 billion, but back then reactors cost about $2 billion to build. Now they cost anywhere from $7 billion to $9 billion to build, so that original $17.5 billion doesn’t go very far.”
Lawmakers in Washington pressed Moniz’s predecessor, Steven Chu, to support guarantees for nuclear power during his 2009 confirmation hearing.
Southern, based in Atlanta, has said it would build the reactors, designed by Toshiba Corp. (6502)’s Westinghouse Electric unit, even without Energy Department support. The $14 billion project was at least 14 months behind schedule, an independent monitor reported in December 2012.
The U.S. guarantee will lower project costs, saving Georgia electric customers about $200 million, Southern Chief Executive Officer Tom Fanning said on a Jan. 28 earnings call.
Georgia Power will operate the units.
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