New York Times  [Printer-friendly version]
June 4, 2006


[Rachel's introduction: The U.S. nuclear industry is expecting orders
soon for a dozen new nuclear power plants. It's a sweet deal because
taxpayers are subsidizing it with billions of dollars and Uncle Sam
is offering "risk insurance" for this latest military-industial
adventure. If nuclear power were not subsidized, it would fall flat
on its face. Investors reap the benefits, taxpayers bear the costs.
Sweet indeed.]

By Matthew L. Wald

WASHINGTON, June 3 -- The nuclear industry is poised to receive the
first new orders for reactors in three decades, but what remains
unclear is whether the smartest buyers will be those at the head of
the line or a little farther back.

The industry expects orders for a dozen or so new reactors. Since the
last completed order was placed in 1973, much has changed. There are
new designs, a new licensing system, new federal financial incentives,
new costs and new risks, and no one is sure how the changes will play
out as orders, or requests to build, are filed.

For example, the federal government is offering "risk insurance" for
the first six reactors, to protect builders against bureaucratic
delays, with the biggest share of the insurance going to the first
two. Loan guarantees are also possible, but probably only for the
first few plants.

Manufacturers have design costs that they will probably try to recoup
from the first few reactors sold, increasing the cost. And no one
seems eager to be the first to try out a radically different licensing

Substantial questions remain about the predictability of the
regulatory process, said James R. Curtiss, a former member of the
Nuclear Regulatory Commission who is a lawyer at Winston & Strawn. The
firm recently helped with an application for a license for a new
uranium enrichment plant in New Mexico.

Long delays occurred, Mr. Curtiss said, as new issues were argued
before a three-judge administrative law panel and then went to the
five-member commission for a ruling. Licensing a second plant will go
much more smoothly, he said.

Progress Energy, a utility based in Raleigh, N.C., has preliminary
plans for four new reactors, and it could be the first to announce
that it is applying for a license.

But Keith Poston, a spokesman, said, "One can imagine the benefits of
not being first, and watching and learning from others."

The industry itself has taken steps to lower the stakes.

For example, the energy bill created a production tax credit, a per-
kilowatt-hour benefit, for the first 6,000 megawatts of new capacity,
which would represent about five new reactors if applied on a first-
come-first-served basis.

The total value is about $1 billion over eight years. But the industry
persuaded the Bush administration to spread the credit around, so it
will be shared by all the plants that are announced by the end of 2008
and have construction under way by 2014, reducing the value of being
first in line.

Michael J. Wallace, the executive vice president at Constellation
Energy, which is also contemplating a new reactor, said the industry's
effort to spread the tax credit was intentional.

"This is not a race," he said.

"If I end up being the first, I'm quite comfortable with that," Mr.
Wallace said, because the incentives would offset the extra risks. "If
I'm third, I'm comfortable, because there is less incentive, but two
guys will be two or three years in front of me."

The first buyer may get concessions from reactor vendors, who are
eager to end a 33-year drought and position themselves for a big slice
of the new market, which industry backers hope will include more than
a dozen reactors in the next few years.

But opponents of new plants predict doom for any company that tries to
build a reactor, with the first likely to draw the most opposition.

"It's like volunteering for an experiment," said Paul Gunter, a
nuclear reactor expert at the Nuclear Information and Resource
Service, an antinuclear group. "These first experimenters carry a lot
of risk."

One, Mr. Gunter said, is getting negative credit reviews from the bond
rating agencies.

Curt L. Hebert Jr., a former chairman of the Federal Energy Regulatory
Commission who is now an executive vice president of Entergy, a
potential builder, sized it up the other way. "I think the financial
incentives and governmental guarantees certainly outweigh the risk,"
Mr. Hebert said. "As we look at this, we see there being more risk in
being third or fourth than being first or second."

For all the companies, the biggest factor is the estimate of future
electricity requirements, executives say. Next is the cost of
competing technologies: the price of natural gas, as well as the price
of coal, which is cheap but requires expensive pollution controls.

Speaking of the various kinds of aid offered in last year's energy
bill, Mr. Poston said, "We would pursue incentives because they would
be beneficial to customers and lower the project cost." That leaves
open, however, whether going first is the lowest-cost option.

While the risk and cost of some factors can be calculated, there are
nonfinancial considerations as well, said Richard J. Myers, executive
director of the Nuclear Energy Institute, the industry's trade
association. "It reflects the C.E.O.'s personality," he said. "Some
corporations want to be the pioneer, want to be the first one out
there. They earn a footnote in the history books by doing so."

Copyright 2006 The New York Times Company