Princeton, N.J.-based NRG made headlines in September when it became the first company in the U.S. since 1978 to submit a request a build new nuclear power.
Coal-based generation is currently the power source of choice, accounting for 50% of total U.S. electricity production, but it’s also a major contributor of carbon dioxide emission. State and federal initiatives to curb greenhouse gases associated with climate change are likely to make coal-based electricity more expensive in the future.
“The higher the price of carbon dioxide, the more economic the nuclear option becomes,” says Jim Rogers, chairman and chief executive of Duke Energy.
Charlotte-based Duke may build a nuclear power plant in South Carolina in the next decade, but that decision hinges largely on the “cost of carbon,” says Rogers.
A Federal Case
As compelling as price trends might be, federal incentives are helping to pave the way for an industry that still has vivid memories of huge losses and a spate of cancelled projects decades ago.
The Energy Policy Act of 2005 provides incentives for new electricity generation, including renewable energy and nuclear power.
The three biggest draws, say companies considering nuclear plants, are production tax credits of up to $6 billion, which will likely to be divided among the first nine newly-built units; regulatory risk insurance to cover licensing delays, worth up to $2 billion; and loan guarantees, which would cover most of the financing in case any of these multi-billion dollar projects wind up in default.
For an unregulated energy provider like NRG Energy, federal incentives were a primary driver in plans to move forward with two new nuclear units in Texas, says Crane.
The incentives were also important to UniStar, a joint venture between Baltimore-based Constellation Energy and French electricity group EDF.
UniStar plans to submit the second half of its application for a new reactor in Maryland by March of 2008. CEO George Vanderheyden says the company is also considering an application for a new reactor in New York.