The new nukes, Vogtle Units 3 and 4, that the Southern Company is building in Georgia. are already the subject of a $913 million cost overrun dispute. As Yogi Berra would say, "Deja Vu All Over Again!"
Each 1,100 megawatts, the Vogtle Units 3 and 4 had a combined price tag of $14 billion or about $7 per watt, or approximately 7 times the capital costs of a gas plant.
The plants were scheduled to be completed by April 2016 and April 2017, though those dates will not be met. Despite the sliding start dates for operation, the captive monopoly customers of Georgia Power are and have been paying monthly charges to build the nuclear plants.
The cost overrun and completion delays underline the difficulty and economic risks of new nuclear construction. Building a nuclear plant is really difficult. It pushes the limits of human engineering, construction, and management abilities. Big cost overruns often result.
Comparing the Vogtle initial $913 million cost overrun to the capital costs of gas, wind, and solar plants show just how big these cost overruns can be. The Vogtle $913 million cost overrun by itself could have paid for approximately 1,000 megawatts of natural gas generation; 450 megawatts of wind power; and 330 megawatts of solar power.
When just the first cost overrun alone could have paid for a gas plant nearly the size of one of the nuclear units, the economic and financial risks of a nuclear construction program are enormous. Those risks are made worse by the fact that the zero carbon emissions from a nuclear plant has zero economic value in Georgia and most parts of the world.
Moreover, gas, wind, and solar generation could be up and running in 3-years or less from the first day to the last day of development, as opposed to the 10 years or more needed to build a nuclear plant.
A few days before notifying the U.S. Securities and Exchange Commission about this first cost overrun of $913 million, Southern Company made state regulatory filings that disclosed good financing news for the nuclear units. Interest costs for the capital needed to build the $14 billion plants are so far $2 billion lower than were projected about 5 years ago.
Frankly the lower than planned financial costs is good luck that has its roots in our extraordinary economic times and not something that can be routinely replicated in other projects. It is not the equivalent of a technology or construction practice breakthrough. Clearly Southern, nonetheless, wanted news about the financing good luck to precede its disclosure about the $913 million cost overrun.
Good press management, however, will not erase the pain caused by more construction cost overruns that must be considered a real possibility. Only construction excellence can keep these plants on budget. But history repeatedly shows that marshalling the excellence to stay on budget is hard to do when building a nuclear plant.
And even if the plants stay on budget, their costs are big, when compared to a new gas plant or emerging renewable energy and demand-side options.