Thursday, February 16, 2012

Southern Company Spends $14 Billion On Two New Nukes Without Carbon Price

How does it make economic sense to spend at least $14 billion to build 2 nuclear reactors, without a substantial price on carbon pollution? New nuclear plants emit no heat trapping pollution but make no economic sense in the USA, if the external costs of dumping heat trapping pollution into the atmosphere are not included in the price of energy. Yet, Southern Company has generally opposed significant carbon regulation but just got licenses from the Nuclear Regulatory Commission to build two nuclear reactors that are projected to cost $14 billion by the time that they are scheduled to begin operation in 2016 and 2017.

Monopoly power over generation sources in Georgia and lobbying success in Washington DC to obtain $8 billion plus of federal loan guarantees that move risk from Southern's shareholders to taxpayers answer the question, how does it makes sense to spend $14 billion to build 2 nuclear plants and oppose significant carbon regulation?

Having successfully kept its retail generation monopoly and fended off proponents of electricity competition, Southern is principally using its captured, monopoly electricity customers and federal taxpayers to finance the needed $14 billion, including federal loan guarantees to Southern that are about 15 times greater than the size of the Solyndra loan guarantee.  In fact, current customers of Southern are already paying for the nuclear reactors in their electricity bills, even though they are not getting any service from them and won't for another 5-years.  A monopoly has its benefits.

In the absence of  a substantial price on carbon, no company without a monopoly that can "rate base" nuclear investments and massive federal support would consider spending $14 billion to build 2,200 megawatts of electricity generation capacity.  Such massive costs are not supportable in the competitive electricity generation marketplace, where the same amount of natural gas electricity capacity could be built for approximately $1.6 billion, or at least 85% less than the nuclear capacity.

With ratepayers already paying to finance the plants and the federal loan guarantees banked, building the 2 nuclear power plants makes sense for Southern and its shareholders who will receive substantial returns, with  little risk.  But the impacts on consumers of Southern will be much less happy.  Even if the 2 nuclear plants are built successfully on time and on budget, a shaky assumption indeed, the high costs of these nuclear power plants will make Georgia less competitive for business and industry.

While likely bad for consumers who pay electricity bills in the Southern territory, the nuclear plants will avoid large amounts of carbon pollution, but that is worth absolutely nothing in today's energy marketplace, and so the nuclear plants are being built on the strength of monopoly power or the absence of a competitive generation market in Georgia and lobbying strength for subsidies.

And here is more of the story.  House Republicans in Washington DC support federal taxpayers underwriting 100 more new nuclear plants at a cost of $1 trillion and also totally oppose a carbon price and often deny global warming exists.  Well, no one can say that they don't have an energy policy.

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