Nuclear power makes a comeback

Posted at 8:40 p.m. PST Monday, Feb. 19, 2001

BY FRANK SWEENEY

Mercury News

Spurred by unsatiated electrical demand, a booming economy and deregulation, the nuclear power industry is enjoying a national resurgence after decades in the economic and political dungeons.

Nuclear power's comeback, however, is also spurring another revival -- calls of ``Remember Three Mile Island.'' Critics of nuclear energy, who nervously are watching the industry's nascent resurgence, say public opposition to nuclear energy remains as strong as ever.

But after years of being reviled for safety concerns and costs, and plagued by memories of the accident at Three Mile Island in Pennsylvania and the meltdown of the Chernobyl plant in the former Soviet Union, beleaguered nuclear power is getting a new look from the energy industry.

Plants that once sold for bargain-basement prices are now drawing billion-dollar bids. In a power industry that is rapidly consolidating, the plants are now seen not as white elephants but as cash cows.

Energy companies aren't rushing to build new nuclear power plants -- the last one was ordered in 1978, and no new plants are being proposed in California.

But new ones are being considered, mostly in the East, according to some observers. And the companies that own a large number of existing plants, which are getting closer to the end of their 40-year licensed life spans, are seeking to re-license them for an additional 20 years.

Why the renewed attention? Despite its rocky history and widespread concerns about safety and disposal of radioactive waste, nuclear power has turned out to be a highly efficient way for some power companies to produce electricity.

``People realized there's money to be made from nuclear power,'' said Mitchell Singer, spokesman for the Nuclear Energy Institute, the nuclear power trade organization in Washington, D.C. Because it does not burn fossil fuels, he said, ``it's the greatest source of emission-free electricity. It's environmentally friendly.''

Critics disagree, as strongly as ever.

The nuclear power industry is the ``largest managerial disaster in U.S. business history,'' said Paul Gunter, director of the Reactor Watchdog Program of the Nuclear Information and Resource Service in Washington, D.C.

``It has been built on the myth of the peaceful atom and resulted in the most expensive way ever to boil water to make electricity,'' Gunter said. ``It is a `clean' energy that has resulted in timeless nuclear waste.''

In addition to voicing concerns about storage and transportation of used nuclear fuel, critics worry anew about the risk of accidents. Extending the lives of aging power plants after years of exposure to intense heat and radiation, they say, could invite disaster.

A nuclear power plant is simply a device to heat water to create steam, which turns a turbine attached to a generator to produce electricity. Instead of burning fossil fuels such as oil, coal or natural gas, a controlled nuclear reaction involving uranium heats the water.

The plants use a series of steel and concrete barriers to prevent the release of radioactive material into the outside environment.

Today, 103 nuclear power reactors of two types are operating in 31 states. Only two -- the Diablo Canyon plant near San Luis Obispo and the San Onofre plant in northern San Diego County -- are in California. Voters 12 years ago shut down the Rancho Seco plant near Sacramento.

Nuclear power generates about 20 percent of the electricity in the United States, with coal-fired plants producing about half of the nation's power. In California, nuclear and coal account for less than 20 percent of the electricity generation; natural gas and hydropower provide the bulk of our energy.

The resurgence of nuclear power is a recent development.

``Over the past six to eight months, there has been a convergence of factors -- rising demand, deregulation, growing economy, improved performance of plants,'' Singer said.

``There is an estimate the economy is expected to increase electrical demand 30 to 35 percent by 2010,'' he said, while the Energy Information Agency of Department of Energy ``forecasts 1.8- to 2.5-percent increases per year over the next 20 years.''

In California, Singer said, ``half the growth is the result of the digital economy. Power consumption in Silicon Valley is growing three times faster than in the rest of the United States.''

And this has sent values of nuclear plants, depressed for decades and selling for far less than they cost to build, rising faster than Bay Area housing prices.

``The first transfers were selling for a tenth of a comparable coal plant,'' said Ted Marston, vice president and chief nuclear officer of the Electric Power Research Institute, a non-profit research consortium in Palo Alto. ``Now, prices are going up to levels of other generating assets.''

Singer, of the Nuclear Energy Institute, offered several examples.

Last year, he said, Dominion Electric Co. in Virginia spent $1.3 billion to buy a three-reactor plant in Connecticut, even though one of the reactors will be decommissioned. In November, Entergy Corp. of New Orleans bought two nuclear plants in New York for $976 million after bidding started at about $600 million.

AmerGen Energy Co. tried to buy a one-reactor plant in Vermont for $23.5 million, Singer said. But with interest from Entergy and others, AmerGen had to increase its bid to $93.8 million, and the deal still isn't done.

Probably the biggest success story against the longest odds in the nuclear power industry is that of Pacific Gas & Electric Co.'s Diablo Canyon plant, which began operating in 1985 -- 11 years behind schedule and $5 billion over budget. It had a history of design blunders that included reversed blueprints and late discovery of a nearby earthquake fault.

So in 1988, the California Utilities Commission allowed PG&E to charge artificially higher rates for electricity from the plant because it was assumed Diablo Canyon would have only a short life and operate far short of its capacity.

But Diablo Canyon turned out to be a fantastically efficient and profitable nuclear power plant. Although it lost money in its first three years of operation, it has produced more than $3 billion in profit for PG&E since.

When both reactors are operating, Diablo Canyon generates nearly 2.2 million kilowatts of electricity, enough the meet the needs of 2 million people, PG&E says.

Although nuclear plants are the most expensive to build, they are the cheapest to fuel.

It costs about $1,300 per kilowatt output to build a nuclear power plant, Singer said, compared with $1,000 for a coal-fired plant and just $440 for a natural-gas plant.

However, the payoff comes in operating costs. In 1999, the latest year for which the institute has complete figures on fuel prices, natural gas cost 3.52 cents per kilowatt-hour, oil was 3.18 cents, coal was 2.07 cents and nuclear fuel was 1.83 cents.

So it makes economic sense to extend the lives of older nuclear plants at a cost of $10 per kilowatt vs. $1,300 per kilowatt to build a new plant, Singer said.

Nuclear power plants were initially licensed by the federal Nuclear Regulatory Commission to operate for 40 years. Last year, two plants in Maryland and three in South Carolina were given 20-year renewals.

``Another 25 have filed or announced their intentions,'' Singer said. ``It's conceivable that most of today's 104 plants will be relicensed.''

That's in sharp contrast to just a short time ago, said Marston of the power research institute. ``Five years ago, the attitude of the utility companies was, `We're going to run these plants, but maybe not as long as we can, and decommission them prematurely,' '' he said.

Now the industry has consolidated, too.

As many as 50 different companies and utilities once operated nuclear plants. ``There are 33 now, and it will be down to six to 12 in the next five years,'' Marston said. ``People who want to be in the business know how to run them.''

Over the years, reactor operators have learned how to squeeze more electricity from their power plants, increasing output more than 20 percent as plants were upgraded and maintenance procedures revised.

In the late 1980s, nuclear power plants operated on average of 63 percent of their capacity, with a lot of downtime for maintenance and replacement of a third of their fuel every 18 months. ``Last year, plants ran close to 90 percent capacity,'' Marston said. ``It's a mature industry. We've learned a lot in the last 30 years.''

The average downtime, Singer said, was 101 days in 1990; two years ago it was 41 days, with a number of plants shutting down for as few as 25 days to refuel.

The increase in electrical generating capacity for those reasons is the equivalent of building 23 additional power plants, Singer said. But critics such as Gunter, of the Nuclear Information and Resource Service, say increased output threatens safety, as it may result in plant operators shortchanging critical maintenance.

``The industry is not only increasing the running times from 15 to 18 or even 24 months between maintenance outages, it is running them 15 percent hotter to get more electricity out of them,'' Gunter said. This, he charged, ``pits profit margins against safety margins.''

Marston disagrees.

``You could always say the glass is half empty or half full,'' Marston said. ``Much of that maintenance is being done while the plant is operating.''

Nuclear reactors have what Marston called ``two or three different trains of equipment to provide a function. You can take one out and maintain it without adversely affecting safety of the plant.''

Ultimately, even with license extensions, nuclear reactors have a limited lifespan and some day will be replaced. Singer predicts new nuclear plants will be built in the next five to 10 years.

Economics will drive the decisions, Marston said. With natural gas prices soaring, the energy industry will look at coal-burning and nuclear-fired technologies.

``And with global climate change, is coal the best option?'' he asked. ``We may see a new nuclear plant being ordered in the next few years.''

Contact Frank Sweeney at fsweeney@sjmercury.com or (408) 920-5675.

-- Swissrose (cellier@azstarnet.com), February 20, 2001