Sept. 27 (Bloomberg) -- Southern Co. is poised to end a three-decade freeze on nuclear development as the U.S. Nuclear Regulatory Commission considers granting it the first license to build new reactors since the Three Mile Island accident.
At stake for Atlanta-based Southern is more than its bottom line and reputation, Chief Executive Officer Thomas Fanning said during two interviews. If there is to be a nuclear revival in the U.S., Southern, the largest U.S. power company, must deliver the $14 billion project on-time and on-budget, he said.
“We’ve got to be successful,” Fanning said during an interview at Bloomberg headquarters in New York. “This is the first, best shot for the nuclear renaissance in America.”
Nuclear expansion ground to a halt in the U.S. as cost overruns, construction delays and a thicket of new regulations after Three Mile Island’s partial meltdown in 1979 turned some plants into economic disasters, Ted Quinn, past president of the American Nuclear Society, said in a telephone interview.
A far worse accident at Japan’s Fukushima Dai-Ichi nuclear station this March so far hasn’t derailed Southern’s project at Plant Vogtle south of Augusta, Georgia, as critics predicted.
No Japan Effect
Commission staff concluded that Japan’s nuclear disaster didn’t offer any new information to consider in the agency’s environmental review of the Westinghouse AP1000 reactors that will power Vogtle, Gregory Hatchett, environmental-branch chief in the agency’s new reactor office, said during a hearing today examining Southern’s license application.
Southern is on track to license the plant by early 2012, provided the commission certifies design changes for the reactors, said Scott Burnell, a commission spokesman, in a telephone interview.
Success at Vogtle, which will be outfitted with safety systems designed to work during a station blackout like the one that crippled Fukushima, could spur investment in other atomic projects in Virginia, Florida and the Carolinas, Fanning said.
If Southern bungles the project, it may prove that the time for massive nuclear reactors is over, moving the nation toward smaller modular reactors or away from atomic power altogether, said Chris Gadomski, lead nuclear analyst for Bloomberg New Energy Finance.
Future Nuclear Development
“If the new projects are fumbled -- over-budget, behind-schedule -- then utilities will be much more hesitant to start new nuclear construction,” Gadomski said in a telephone interview.
Southern and its partners have invested more than $3 billion in the site since 2009, Fanning said, receiving special dispensation from the commission to begin work on cooling towers and other structures not deemed essential to nuclear safety while they awaited final approval to build the reactors.
So far, Vogtle’s new reactors remain under budget and on schedule to begin producing power in 2016 and 2017, Southern said in a Sept. 20 filing with Georgia regulators. Georgia consumers will pay $6.1 billion of the project’s costs through rate hikes, while the Obama administration has pledged loan guarantees for another $8.3 billion.
Vogtle still faces challenges. U.S. Representative Edward Markey, a Massachusetts Democrat, on Sept. 23 called for scrutiny of federal nuclear loan guarantees following the collapse of solar panel-maker Solyndra LLC, which received a $535 million loan guarantee.
Vogtle’s opponents worry it will suffer the same cost overruns experienced by other first-of-a-kind reactors in the U.S. when new units were being built a generation ago, Sara Barczak, program director with the Southern Alliance for Clean Energy, said in an interview.
She’s also concerned that Vogtle may have to be redesigned to comply with tougher seismic standards crafted following Fukushima and an August temblor in Virginia.
“We want them to get it right, get it worked out, because all they’re going to do is cost ratepayers and taxpayers money,” said Barczak.
Seismic testing at the site showed that Vogtle’s potential ground movement exceeds the AP1000 containment structure’s design at certain frequencies, Bret Tegeler, senior structural engineer with the atomic agency, said during the Sept. 27 hearing. Staff concluded the variance posed minimal erosion to Vogtle’s safety margins because the condensed soil used at the site and nuclear island housing the reactors would absorb vibrations, he said.
“We remain confident in the process,” Fanning said. “We fully understand that this is the first nuclear project in a generation. And therefore it will have everyone’s attention.”
Fanning joined the company as a financial analyst in 1980, earning the nickname “Rocket Man” as he blazed through 15 jobs in eight business units before ascending to CEO last year.
A monitor in his Atlanta office broadcasts live images from the Vogtle construction site, where workers are piecing together a giant, plate-shaped base for the reactor’s containment vessel.
“It is in my face every day,” Fanning said. “There’s nothing more important, probably, that I can spend my time on.”
Fanning and Joseph “Buzz” Miller, Southern’s executive vice-president of nuclear development, learned the importance of scrutinizing the process by interviewing executives who struggled to build the first two reactors at that site in the 1970s and 1980s.
A Master Plan
The 104 nuclear power plants built a generation ago in the U.S. were customized to each operator’s whims and built without a true master plan, said John Polcyn, a consultant and senior nuclear adviser who has worked on about two dozen plants in the U.S., Japan and China.
“The one thing the industry has really gotten mature about is standardization,” Polcyn said. “Is it perfect? No. But I tell you we are eons better than we were the last go-round.”
Miller and Fanning have sophisticated software to monitor every element of the project and pre-fabricated construction that’s first being tested at two plants in China.
Miller describes his management style as “Whac-A-Mole,” dealing with problems immediately as they arise and planning for every contingency. His approach has been tested as Southern and its partners deal with suppliers who haven’t built to nuclear construction’s exacting standards since the 1990s.
Among the early headaches: Delays to the world’s largest crane, which lies in pieces at Vogtle. Assembly of the twin-masted crane was supposed to begin Sept. 20 but has been delayed indefinitely since its manufacturer, Bigge Crane and Rigging Co., discovered flaws in crucial pieces of steel that join the crane’s main boom to the carriage at its base, said Gentry Brann, a vice president at Louisiana-based Shaw.
While Bigge recasts and inspects new pieces, Miller has devised plans to deploy smaller cranes so work can continue if the delays persist.
“We expected those kinds of issues as a project risk when we started,” Miller said. “We’ve managed through it quite well to this point.”
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