Start in Yokohama.On a dry dock in Yokohama sits 250 tons of steel forgings waiting to be assembled into the core of a nuclear reactor. After it is built it will be shipped to Bay City, Tex., 90 miles southwest of Houston, where it will join two nuclear plants built a couple decades ago. The forgings would enclose the reactor within a new nuclear power plant, the first built in the U.S. since 1990. Power from the reactor would spew forth starting in 2016.
Power spews? Who knew?
That is the vision of David Crane, chief executive of NRG Energy, the $7 billion (sales) Princeton, N.J. power company that wants to build the two-reactor project at a hoped-for price of $10 billion. Crane, 50, thinks he can pull the nuclear energy industry out of the mud and spark a renaissance with a time-honored strategy: use other people's money.
He's first seeking loan guarantees from the Department of Energy and the Japanese government (read: taxpayers) that would cover 80% of the project. That leaves $2 billion. Then there are a pair of partners-the city of San Antonio, which will end up with 40% of the equity, and another partner to be named by the end of this year, which will take another 20%.
The plant's builder, Toshiba, is taking a small chunk. In the end NRG will have a financing bill of $700 million over seven years. On its existing business (full or partial stakes in 48 power plants, including the existing nuke at its Texas site), NRG already has cash flow from operations of $1.3 billion through three quarters of 2009, so having to come up with $100 million a year looks manageable.
"It's how to build a nuclear plant in this day and age," says Steven Winn, who runs NRG's nuclear venture. By that he means that construction delays, public opposition to nukes and uncertain energy prices undermine arm's-length financing. If you want to build a nuke, you round up some sugar daddies.
In the early part of the decade proponents talked breathlessly of a nuclear renaissance in the U.S. Natural gas prices were high, electricity demand was rising, and it seemed that carbon emissions would soon be either taxed or limited. In 2005 Congress passed an energy bill that provided loan guarantees for construction of new nukes on top of tax credits for power produced by the first few new reactors. Utilities fell over themselves planning new nuclear plants - nearly 40 proposals were drawn up.
Four years later the country is where it was a decade ago, at 104 operating nuclear plants (producing 20% of its electric energy). Natural gas prices crashed, making nukes look comparatively more expensive. Carbon remains untaxed and uncapped, and the recession ate into electricity demand, pushing the need for new plants further into the future. Credit markets also dried up, while the pool of government loan guarantees, $18.5 billion, was smaller than the industry hoped for, enough probably for only three plants.
Just when global warming was about to revive the nukes, along comes ClimateGate.
If you really, really want to keep carbon out of the air, it makes sense to build nukes. Solar is still extremely expensive, and wind can get you only so far. It would take a wind farm of 1.2 million acres, bigger than Rhode Island, to produce the electricity that would be put out by the four South Texas Project reactors on its 12,000-acre site.
"We're not going to be able to live without nuclear and coal with carbon capture if you are looking for an economically optimum future," says Revis James, who models future power needs for the Electric Power Research Institute. "We're going to have to build 20 more nuclear units, and we'll need to replace the ones we have. And if carbon capture and storage runs into technical problems, we'll need more."