Financing new nuclear power generation in the U.S.

As I mentioned in a previous post, the US Nuclear Regulatory Commission has approved the first new combined Construction and Operation Licenses (COL) in the U.S. since 1978.  The licenses are being issued to Southern Nuclear Company to build two new nuclear reactors at Alabama Power's Vogtle Electric Generating Plant south of Augusta, Georgia.

Financing

The total cost of the project is estimated at $14 billion.  Of this about $6 billion is coming from Southern Company.  The remaining $8.3 billion is coming in the form of loans guaranteed by the Department of Energy's (DOE) Loan Programs Office (LPO).  The LPO enables DOE to work with private companies and lenders to reduce the financing risks associated with building commercial-scale clean energy projects.  LPO supports nearly 40 projects include the world’s largest wind farm, several of the world’s largest solar generation facilities, one of the country’s first commercial-scale cellulosic ethanol plants, and the new Vogtle nuclear units.

The Energy Policy Act of 2005 was passed by the United States Congress in July, 2005, and signed into law by President George W. Bush in August of the same year. The act changed US energy policy by providing tax incentives and loan guarantees for energy production of various types and has far reaching consequences for nuclear power.  Specifically it authorized loan guarantees of up to 80% of project cost to be repaid within 30 years or 90% of the project's life.  (The Energy Policy Act of 2005 also changed daylight savings time and enabled the shale-gas drilling boom in the U.S. by exempting shale-gas exploitation from Federal environmental oversight.)

In December 2005, the Southern Company sent a proposal to DOE to include Southern Nuclear in new nuclear plant licensing projects co-funded by DOE.  In February 2010 President Obama and DOE Secretary Steven Chu announced the award of conditional loan guarantees for Vogtle Units 3 and 4, and in June of the same year Southern Company and DOE announce the final agreement regarding loan guarantees for the new Vogtle units.

Traditionally cost recovery for electric power projects, in other words, passing the cost onto consumers, begins after commissioning.  But some jurisdictions, for example, Ontario, are now permitting cost recovery to begin earlier, during construction.  In April, 2009 Georgia Gov. Sonny Perdue signed into law a bill which allows Georgia Power to recover financing costs during the construction of the new nuclear units.

Vogtle Units 3 and 4 are planned to be operational by 2016 and 2017, respectively.