When Georgia utility regulators last December gave the Georgia Power Company a green light to keep charging customers to build two nuclear power plants at its Vogtle site, nuclear power proponents hailed the decision as a "lifeline" for the construction of nuclear power plants in the U.S. All 29 of the other reactors asserted to constitute a "nuclear renaissance" 10 years ago have been cancelled or indefinitely delayed because of their exorbitant cost, so industry enthusiasm for continuing Vogtle Units 3 and 4 is easy to understand.
Georgia Power argued to its endlessly credulous regulators that even though the existing Vogtle 1 and 2 reactors, nuclear plants in operation for 30 years, had cost at least ten times the original estimates to build, they now operate so inexpensively that they are the "crown jewels" of the utility system. So, they reasoned, the $12 billion cost overruns at Units 3 and 4 will also be forgotten in a few decades when grateful Georgians will again praise the grit, foresight and selflessness of their forebears.
But this entire line of thinking rests on the "crown jewel" status of Units 1 and 2, which is a myth. In fact, the construction costs of Units 1 and 2 have been weighing down the Georgia economy for 30 years. If Georgia Power sold their output at cost (without profit) for the rest of their existence, they would be very unlikely to repay Georgians for the difference between the money spent on the plants to date and the cost of meeting the same needs with less costly fuels and with energy efficiency.
There are two reasons for this. First, the almost $9 billion cost to build the plants was far above the cost of implementing other alternatives. No disinterested person knowledgeable about power plant economics disputes this. Just as paying two or three times the value of a house can’t be made up by savings on the heating bill (even in a cold climate), the astronomical construction cost of nuclear power plants can’t be made up by low operating costs. Not only is the deficit built up at the beginning immense, but the interest on that multibillion dollar deficit over 30 years digs a hole deeper than operating cost savings can ever recover.
And the hole is even deeper than that. There are few operating cost savings, perhaps none at all. All over the U.S. where electricity is sold through competitive markets largely on the basis of operating costs, older nuclear plants are going on their knees to their state capitols and to Washington for special rate increases because they cannot compete with natural gas, with renewable energy and with energy efficiency. They argue that they must have mandated purchase requirements and multibillion dollar surcharges if they are to stay in operation.
These claims have been partially believed in New York and Illinois and continue to be pressed in several other states. Far from being crown jewels, the older plants are draining the public’s money.
They are also a menace to the efficient working of power markets and an impediment to technological advances in the electric industry.
Georgia does not use competitive power markets. Instead, regulation guarantees that the Vogtle units will recover their costs — uncompetitive though they may be — from customers without needing to compete in the daily kilowatt hour auctions that have so embarrassed their brethren elsewhere in the U.S. So regulation automatically and quietly imposes on Georgia customers the above-market nuclear costs that nuclear plant owners elsewhere must impose through special surcharges.
Fortunately, the U.S. can continue to meet climate change goals even as reactors become increasingly uneconomic. The electric sector is evolving rapidly away from the big power plant monopoly paradigm of the last century under which customers had little control and few choices. Just as telephone industry control and intelligence migrated from the central office toward the customer and ultimately the smart phone following the break-up of the Bell System in the 1980s, today’s electric system is following a similar path.
Combinations of grid management, load management, energy efficiency, transmission, renewable energy, storage, innovative pricing and coal-to-gas conversions are lowering electric bills and displacing carbon dioxide emissions at far lower costs than nuclear power can do.
Our evolving power markets are adjusting to these realities by driving prices below those needed by unnecessary "baseload" plants without undermining the high reliability standards to which the U.S. is accustomed. This is market success not market failure, but governmental surcharges and mandates to keep running older reactors long after they become uncompetitive prevent the deployment of more advanced and efficient technologies.
Sometimes the utility stockholders’ crown jewels are the customers’ sows’ ears. That is the case with Vogtle 1 and 2. Vogtle 3 and 4 will be no different.