On Saturday, May 11, 2013, the Tampa Bay Times published a lengthy piece by Ivan Penn titled Levy Nuclear Plant More Costly Than a Natural Gas Facility that uses a detailed analysis with substantial “error bars” around cost estimates to show that under nearly all scenarios considered, the two reactor installation that has been proposed for Levy County, Florida is a more expensive option than a natural gas power plant.

The effort is a serious attempt to raise questions about the proposed facility and to ask hard questions about the company’s statements about the reasons that they are going forward with the project. Despite my unreserved support for nuclear technology development, I believe the nuclear industry needs to understand the implications of the results and consider taking action to that will encourage unbiased observers to change the underlying assumptions.

The primary action we need to take is to develop a cost aware culture that understands that losing control of cost is almost as hazardous for the health of the general public as losing control over quality or safety. A “cost is no object” approach to quality and safety cannot be sustained because it results in a culture where even the tiniest issue can result in responses that have almost no upper limit in capital expenditures or man-hours. Anything that gets reported becomes a high priority item; which often skews resource allocation and prevents or delays actions that may be more important.

There is an ever present danger of political pressure to move as slowly as possible to make effective regulatory decisions. We must never lose sight of the fact that people who oppose the use of nuclear energy are well-funded, well-connected, and highly motivated to add as much cost and delay as possible. It is often politically easy for the regulator to announce that they are going to review every change and analyse every issue in an unconstrained manner that pays no attention to the cost associated with the imposed delay.

Our competition does not make the same mistake; they often push back against overreaction to minor issues and effectively use cost-based arguments to help establish action plans based on sound prioritization decisions. Take, for example, the delays and associate cost increases that resulted when inspectors at plant Vogtle noticed that the rebar pattern for the basemat did not exactly match the version of the concrete construction code that was used during the design certification application. Based on news reports, here is the chronology:

April 26, 2012 NRC says Vogtle rebar differs from approved design

Rebar installed at the construction site for Plant Vogtle’s new Unit 3 reactor is not consistent with approved design standards, according to the U.S. Nuclear Regulatory Commission, whose inspectors identified the issue last week.

July 14, 2012 Nuclear Regulatory Commission rejects plan to modify rebar in Plant Vogtle’s Unit 3 reactor

A proposal to modify – rather than replace – non-conforming rebar in the foundation of Plant Vogtle’s Unit 3 reactor is unacceptable, according to the U.S. Nuclear Regulatory Commission.

October 23, 2012
NRC approves plan to resolve Plant Vogtle rebar, concrete issues

Southern Nuclear’s request to amend Plant Vogtle’s construction license to resolve issues with noncompliant rebar and unlevel concrete will be approved, according to the the U.S. Nuclear Regulatory Commission.

March 14, 2013 First nuclear concrete placed at Plant Vogtle expansion

Georgia Power has completed the placement of basemat structural concrete for the nuclear island at its Vogtle Unit 3 nuclear expansion site, a significant achievement in the building of the first new nuclear units in the United States in 30 years.

Anyone who has been involved in a complex project will recognize the costs and schedule impact associated with resolving an issue that slows construction progress for nearly a year on a project with a projected total cost of approximately $14 billion. It appears, from the outside looking in, that the necessary modifications were relatively minor, even though they consumed a huge chunk of analytical resources along with substantial time investments by associated company license experts. During the entire episode when construction was not moving as scheduled, the company was paying $274 per hour of regulatory review time.

I have no knowledge of the details, but I am nearly positive that there were opportunities to more quickly address the issue and move to the same safe decision in a much shorter period of time.

It is construction performance and regulatory responses like that that makes cost estimators add plenty of padding and contingencies. Of course, if things go more smoothly, there is a normal human tendency to use up the available budget. The result is that large, complex nuclear projects often ratchet with a strong bias in the upward direction. The nuclear industry must take effective action to slow the ratchet effect and to help the regulator recognize that cost is an object whose control contributes to overall public safety. If we do not succeed, the result will be a more precarious dependence on fossil fuels, a power source with known deleterious effects on human health and climate stability.

There are a few assumptions and analysis techniques worth challenging in the Times report. It appears to me that their models used natural gas price assumptions that smooth out variations and spikes to result in a steady, inflation driven increase in the price. That is unrealistic based on history.

Graph displaying natural gas prices from 1997-2013

Daily price of natural gas at Henry Hub

Like many recent cost comparison studies, the Times report starts with the assumption that natural gas price performance during the period from 2000-2008 was an aberration that resulted in prices that will not be seen again for another decade. The narrative that the industry currently encourages is the one in which the new technology of horizontal drilling with hydraulic fracturing has created an enormous, cheap resource that is the source of a long period of low prices.

Even with an overestimate of the capital cost of a nuclear power plant, the cost comparison between natural gas and nuclear energy would be quite different under an assumption that prices from 2008-2012 were caused by a difficult-to-repeat confluence of irrational exuberance in the drilling industry, a drop in demand caused by the Great Recession of 2008-2012 and a couple of mild winters. If natural gas prices return to the pattern established in 2000-2008, fuel expenditures and the capacity factor assumption for a replacement gas plant would both lead to much higher costs than calculated for the gas plant alternative.

I also have to challenge the capital cost assumption made for the gas plant. As I understand the cost estimates for the Levy county power station, about $4 billion of the $24 billion cost estimate is associated with building the required transmission infrastructure to tie the plant into the grid. A gas plant construction project would need to make a similar of investment in transmission and distribution infrastructure, but the Times asserts that a natural gas plant with the same output as the Levy county plant can be built for $2.5 billion.

I also wonder if there is any accounting in the comparison for the cost of the increased gas pipeline infrastructure. I am sure that Mr. Penn realizes that Florida is a peninsula that does not produce its own natural gas; the pipelines that supply Florida do not have enough available capacity to supply a new 2200 MWe plant operating at the assumed 81% capacity factor.

There was one more issue with the article that indicated to me that the author is not actually interested in a fair comparison. Though people who have not been following nuclear issues closely might miss the bias indicator, long term participants in the battle for public understanding should see the problem in the following concluding quote:

Diversity in any system is a good thing, “but there’s no point in overpaying for it,” said Bradford, who approved 21 nuclear plants while a federal regulator. The financial realities of nuclear plants changed long ago, he said.

Including nuclear in an “all of the above” strategy “has become kind of a last refuge of scoundrels,” Bradford said. “If we’re talking about world hunger we don’t talk about an all of the above strategy. We don’t say, ‘Lets fight world hunger with caviar.’ “

Peter Bradford has made a career out of being a former Nuclear Regulatory Commission member who is opposed to the use of nuclear energy. He serves on the board of the antinuclear UCS, a group that includes a few scientists and a lot of antinuclear lawyers. Peter Bradford was a member of the Nuclear Regulatory Commission from August 1977 through August 1982. That period included the Three Mile Island accident, after which there were no new nuclear plants licensed for at least three years.

I need to do some research to find out which 21 plants he claims to have approved. Perhaps one of you could do that for today’s homework assignment. I need to get ready for my day job.

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