New York Times
May 2, 2005


By Matthew L. Wald

WASHINGTON, April 30 -- President Bush may be cheerleading for nuclear
power, but the electric industry is not ready to order new reactors.

Electric companies have shown more interest in building nuclear
reactors in the last few months than they have in the last two
decades. But conditions are not yet right to induce companies and
investors to gamble the billion or two it would take to build a
reactor and see whether the country is ready for a second round of
plants, according to industry experts.

The chairman of the Nuclear Regulatory Commission, Nils J. Diaz, said
he expects five or six applications by 2008 and has asked Congress for
money to add staff members to handle them. "I have no proof, but
that's what they tell me," he said in a telephone interview on Friday.
"They come around and whisper, 'You need to have the people there." "

But others remain cautious. John W. Rowe, the chairman of Exelon, the
largest nuclear operator in the United States, says that the high
price of natural gas is an incentive to build new plants, but that an
offsetting factor is the continuing low cost of coal. The lack of a
solution for nuclear waste is also a deterrent.

Mr. Rowe's company, though, is spending millions of dollars to win
early approval from the nuclear commission for a new reactor site next
to its existing reactor near Clinton in central Illinois. The company
is at least five years from a decision on whether to build there, Mr.
Rowe said.

Dominion, an energy company based in Richmond, Va., is also applying
to have a site approved for a new reactor. But Thomas E. Capps, the
chairman and chief executive, said in a telephone interview, "We
aren't going to build a nuclear plant anytime soon.

"Standard & Poor's and Moody's would have a heart attack," said Mr.
Capps, referring to the debt-rating agencies. "And my chief financial
officer would, too."

Mr. Capps said substantial government aid would be needed, perhaps to
pay the interest costs during construction, which could take six and a
half years. He said that ideally, Congress would also help prevent the
project from being dragged into the federal courts. Both ideas would
face substantial resistance in Congress.

Some experts also think a revival is much further away. Peter
Bradford, a former member of the Nuclear Regulatory Commission and the
former head of the public service commissions in New York and Maine,
said that in the last 20 years, predictions of a revival had "rivaled
- in frequency and in accuracy -- forecasts of the second coming of the
messiah." But the technology is still uneconomic, he said.

And there is still the risk of accidents, which could devastate the
industry even if no one outside a plant was harmed.

"The abiding lesson that Three Mile Island taught Wall Street was that
a group of N.R.C.-licensed reactor operators, as good as any others,
could turn a $2 billion asset into a $1 billion cleanup job in about
90 minutes," Mr. Bradford said in an interview conducted by e-mail.

The accident at Three Mile Island was 26 years ago, and the far more
serious accident at Chernobyl, in Ukraine, was 19 years ago. The
industry asserts it has sharply reduced the risk of accidents since

Environmentalists remain divided. "Many people in the environmental
community think it should be off the table," said John Holdren, a
professor of environmental policy at Harvard. "On the other hand, if
people are as sensitive about climate as they say they are, how can
you throw out the window one of the largest carbon-free sources of

The president's suggestion this week that the federal government
provide insurance to plant builders against the risk of delays might
be helpful, some experts said, but a lot of other factors would have
to come into line first.

The most prominent is the price of natural gas. Most of the electric
plants built in the 1990's were powered with natural gas, but lately
gas has sold for between $6 and $8 per million B.T.U., the standard
unit in which it is sold. The average price in the 1990's was under $2
per million B.T.U. At that price, a kilowatt-hour of power costs more
than 4 cents just for the fuel, and in many hours of the day, that is
uncompetitive with coal and other power sources.

"The high gas prices are making all the utilities stop and think twice
about solid fuel," said David E. Dismukes, an associate professor at
Louisiana State University and the associate director of the Center
for Energy Studies there. But solid fuel, meaning conventional or
lignite coal, carries its own risks because no one is sure what the
rules on emissions will be in the decades over which a new plant would
operate, experts say. For example, a carbon tax imposed in 2015 could
make companies wish they had placed an order for nuclear power

But Dr. Dismukes said there were competitors to new reactors,
including liquefied natural gas, also proposed by Mr. Bush in the same
speech. The Bush administration would like to give the Federal Energy
Regulatory Commission authority to approve liquefied natural gas
plants over the objections of state and local governments, which often
are wary because of safety and security considerations.

Liquefied natural gas could push the price of natural gas down to
about $3 per million B.T.U., said Dr. Dismukes, who added, "I don't
know that nuclear works so well" with natural gas in that price range.

Oil prices are up, too, of course, but new nuclear plants would not
reduce oil use significantly.

Nuclear power also has an unattractive financial history that industry
backers say they must overcome to obtain financing for new plants.

"There is a perception in the capital markets, and with the general
public, that the next generation of nuclear plants needs help in
getting past the perception of risk," said Ray W. Ganthner, the senior
vice president for new plants at Areva, a French-German company that
has sold components for a new plant in Finland and is hoping to do the
same here soon. His company recently began the process of obtaining a
license for its design here.

The nation has 103 operating plants, but about the same number were
ordered and then canceled, in some cases after hundreds of millions of
dollars had been spent on construction, in the 1970's and 80's.

The last nuclear reactor ordered in this country that was not later
canceled was the Palo Verde plant, in Arizona, in late 1973. The last
reactor commissioned was the Tennessee Valley Authority's Watts Bar
reactor, in 1996 (23 years after the construction permit was
obtained). Industry supporters have been predicting a renewal of
orders throughout the 80's and 90's. In the mid-90's, there were
persistent rumors that a plant had been ordered, but no one could
confirm it; in October 1993, a trade publication, Nucleonics Week,
joked that the phantom plant should be called Elvis 1.

But industry executives say they are closer now. Gary Taylor, the
president and chief executive of Entergy Nuclear, which runs 10
reactors around the country, said in a telephone interview on Friday
that there was a high likelihood of a nuclear plant being ordered in
the next few years. His company, like Exelon, has applied for early
approval at its Grand Gulf site, on the Mississippi River south of
Vicksburg, Miss. Dominion is seeking approval for a site at North
Anna, Va., about 40 miles northwest of Richmond. And a fourth company,
Duke Power, has expressed strong interest in a reactor without naming
a site.

"With the president saying this is important to the country, that
brings us to a whole new level of playing field," Mr. Taylor said.

The competition over what type of generating plant to build, he said,
is often within a company. In the South, Entergy's biggest area of
operation, nuclear competes against gas, the price of which is
expected to stay high, he said.

Still, he said, the industry would require financial help. The
underlying economics would have to be sound, he said, but that would
not be enough.

"It's got to be shown that it's a business, but it has got to be jump-
started," he said. "The only people who can make that happen is the
president of the United States and the government." Mr. Taylor said
loan guarantees and risk insurance of the kind mentioned by Mr. Bush
would be very helpful.

The risk of licensing problems has been on the minds of nuclear
advocates for decades. To try to limit risk, the Nuclear Regulatory
Commission began a licensing process in 1989 that was meant to avoid
the debacles of the mid-80's. The process, known colloquially as "one-
stop licensing," is mostly untried. Under it, a utility can apply for
"early site approval" with no commitment to build, and vendors can
submit completed designs for preapproval.

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