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January 19, 2018

Regulations Hurt Economics of Nuclear Power

January 19, 2018
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The state of Georgia is facing difficulties keeping the construction of its two nuclear units alive. The bankruptcy of Westinghouse, the project’s lead contractor, in March and construction delays have resulted in a five-year delay in opening its units at the Alvin W. Vogtle generating station near Augusta, from initial opening dates of 2016 and 2017 to 2021 and 2022. Construction costs have almost doubled from $14 billion to at least $23 billion.

Yet Georgia utility regulators recently approved the continued construction of the units because they will be a valuable source of reliable electricity for a long time. The reactor design, the Westinghouse AP1000, is a significant advancement in nuclear technology and safety and is being successfully built in China. Benefits include plant reliability, fuel diversity, and zero greenhouse gas emissions. The Vogtle units will also help the United States compete worldwide in nuclear construction.

Nuclear plants in the United States are among the safest and most efficient in the world. Because of improved operator training and equipment reliability, plants that used to shut down several times a year are now averaging less than once a year. Because of quality maintenance, plants that used to run seven or eight months a year are operating for over 11 months. Improvements were also made in radiation exposure, industrial safety, and equipment failures.

But regulatory burdens on nuclear plants are making them expensive.

Regulation and Nuclear Plants

The American Action Forum (AAF) found the average nuclear plant bears an annual regulatory burden of around $60 million—$8.6 million in regulatory costs, $22 million in fees to the Nuclear Regulatory Commission (NRC), and $32.7 million for regulatory liabilities. That amount covers long-term costs associated with disposing of waste, paperwork compliance, and regulatory capital expenditures and fees paid to the federal government. Further, they found that there are at least six nuclear plants where regulatory burdens exceed profit margins, assuming only a $30 million annual regulatory burden.

Besides competition from low-cost natural gas plants and subsidies and state mandates to wind and solar power, regulatory costs are clearly contributing to the premature retirement of nuclear plants in this country. Further, despite new nuclear reactor designs being safer, reactor design approval times take several years, costing money and discouraging new plants from being built.

For example, increasing the output of existing plants (called uprates) can take years for approval from the NRC and their fees are expensive. The following list of units with requests for uprates shows the approval times and fees paid to the NRC to review those requests:

  • Fitzpatrick Reactor: 54 months and $136,934
  • Nine Mile Reactor: 31 months and $1.7 million
  • Monticello Reactor: 60 months and $2.3 million
  • Braidwood Power Plant: 29 months and $597,050
  • Byron Power Plant: 29 months and $632,147

It has taken the NRC an average of 80 months to approve the most recent combined construction and operation licenses. This contrasts to regulatory approval in the United Kingdom, which can be completed in about 54 months. Furthermore, license renewals in the United States take as long as approval for uprates. The uncertainty of being granted a license renewal and the long wait time for a license extension have caused some plants to shut down prematurely rather than wait multiple years.

In 2016, a paper in Energy Policy documented the delays and costs of nuclear power generation around the world. The study examined overnight construction costs for nearly every nuclear plant in history. For the United States, costs increased from $650 per kilowatt to around $11,000 per kilowatt. Between 1970 and 1978, overnight construction costs increased by up to 200 percent, or 5 to 15 percent annually. The authors concluded that licensing, regulatory delays, and back-fit requirements were significant contributors to the rising cost trend.

The authors also found that some nations managed to mitigate these increasing cost trends. For example, in South Korean overnight capital costs declined by 13 percent for reactors constructed between 1989 and 2008 and the average construction time was seven years.

In Canada, regulators approved the initial phase of a design review for a molten-salt nuclear power plant—a technology developed decades ago in the United States. Other fourth-generation-reactor companies such as London-based Moltex Energy and Advanced Reactor Concepts of Delaware have opted to pursue early regulatory approval in Canada, rather than the United States.

While the U.S. nuclear review process is considered the “gold standard” on safety, it does not adequately accommodate advanced technologies. Specifically, the NRC does not provide the early feedback that would let companies properly assess regulatory risk before investing hundreds of millions of dollars in further design and development. The Canadian process, on the other hand, is better defined and offers a series of earlier official reviews. The commission evaluates designs on the basis of broader safety principles rather than specific technological requirements, which offers greater flexibility for emerging technologies.

Conclusion

Although more advanced technology should, theoretically, be resulting in cheaper, safer, and more efficient nuclear technology, the strict requirements of the NRC are resulting in the opposite. Instead, nuclear technology is becoming increasingly expensive, and a drawn-out design and licensing process results in continued reliance on an aging nuclear fleet. The U.S. nuclear industry is struggling, as the federal government has imposed increasingly onerous burdens on the industry, which supplies around 60 percent of the carbon-free electricity in the United States.

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