Reports related to this article:
Project(s): View 1 related project in PECWeb
Plant(s): View 1 related plant in PECWeb
Released June 08, 2023 | SUGAR LAND
en
Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Sometime later this month, Unit 3 of the Alvin W. Vogtle Nuclear Power Station is scheduled to begin commercial operations, billions of dollars over budget and about seven years late. The start of commercial operations follows final testing of Unit 3, which first achieved 100% energy output on May 29.
Unit 4 is scheduled to begin commercial operations later this year or early next year.
Although the start of commercial operations for Unit 3 was a happy day for the owners, that happiness likely was tempered by the scale of that unit's cost overruns and the yearslong delay. Both Unit 3 and Unit 4 are 1,117-megawatt (MW) Westinghouse AP (advanced passive) reactors. The units are owned by Georgia Power Company (Atlanta, Georgia) (45.7%), Oglethorpe Power Corporation (Tucker, Georgia) (30%), Municipal Electric Authority of Georgia (MEAG Power) (Atlanta) (22.7%) and Dalton Utilities (Dalton, Georgia) (1.6%).
Unit 3 can generate enough electricity for about 500,000 homes and businesses.
The current estimated price tag for the two new nuclear units is about $32 billion, a figure that does not include a $3.7 billion payment made to the co-owners by Westinghouse Electric Company LLC (Cranberry Township, Pennsylvania), after it declared Chapter 11 bankruptcy in 2017. With combined generating capacity of about 2,234 MW, the installed capacity cost of about $14.3 million per MW is far and away the most expensive power plant ever built.
The unit additions were meant to be the start of the "nuclear renaissance" in the U.S., but as costs spiraled upward and planned in-service dates backed up, would-be owners and operators backed away. The Vogtle unit additions were the first new nuclear units built in the U.S. in over three decades. Georgia Power proposed building them in 2001, and the Georgia utility regulators green-lighted construction in 2009.
Some of the cost overruns and delays resulted from the March 29, 2017, Chapter 11 bankruptcy filing by Westinghouse, which until then had been the engineering, procurement and construction (EPC) firm for the project. Bechtel Corporation (Reston, Virginia) provided EPC services after Westinghouse went bankrupt.
The COVID-19 pandemic and the ensuing supply-chain bottlenecks also contributed to the delays and cost overruns at the Vogtle unit additions.
But even before the Westinghouse bankruptcy or the COVID-19 pandemic, construction of the first-of-its kind nuclear facility had already run billions over budget and years behind schedule. In 2001, when Georgia Power first decided to add two new nuclear units to the existing Vogtle complex in Waynesboro, Georgia, the cost to build both units was estimated at about $7.5 billion. That rose to about $14 billion in 2009, when Georgia utility regulators approved construction of the project. The first new unit, Unit 3, was scheduled to go into service in the spring of 2013.
Despite billions of dollars in loan guarantees from the federal government, and a generally supportive state utility regulatory environment, the project seemed snake-bit from the start. Proposed comprehensive federal energy legislation that included a carbon dioxide (CO2) emissions cap & trade system died in the U.S. Congress in 2010. The prospect of federal support for the construction of new non-emitting electric generation was a significant source of support for the nuclear renaissance.
Things started out on a positive basis. In the early years of this century, as the project developers assessed the economic rationale for adding two new units at Vogtle, natural gas prices were rising: The price utilities paid for natural gas rose from about $3 per million British thermal units (MMBtu) 20 years ago to about $13 per MMBtu in 2008. Higher gas prices made building new nuclear generation look like a good economic bet. But shortly after the Georgia utility regulators green-lighted the unit additions in 2009, gas prices started to slide, falling back to the price levels of 2002, where they stayed for years until a brief surge following last year's invasion of Ukraine by Russia. Today, prices are back to where they were two decades ago, undermining a lot of the economic rationale for building new nuclear generation. As a result, Georgia Power officials stopped accentuating the economic benefits of nuclear vs. gas, and have instead focused on electric reliability, safety and emission-free electricity as the new units' selling points.
The unit additions at Vogtle were plagued by contractor problems and safety issues. The Georgia Public Service Commission (GPSC) (Atlanta, Georgia) eventually appointed a third-party construction monitor that assessed Georgia Power's internal semi-annual construction updates to the GPUC. That outside firm consistently said the scheduled in-service dates the utility provided to the commission were unrealistic. In 2022, cost overruns and project delays caused two of the Vogtle 3 and 4 co-owners, Oglethorpe Power Corporation and the Municipal Electric Authority of Georgia, to file separate suits against Georgia Power, a unit of Southern Company (NYSE:SO) (Atlanta).
The start of commercial operations for Vogtle Unit 3 is an important milestone for the co-owners, and it comes as the U.S. is about to enter peak electric demand season. Vogtle 3's electricity will help keep air conditioners humming in a region marked by high temperatures and humidity.
The controversies over the Vogtle new nuclear unit additions will continue, as Georgia utility regulators soon will decide how much of the costs will be borne by customers of Georgia Power, and what portion of its outlays the utility will be forced to absorb. The unit's other three co-owners are not regulated by that panel.
Georgia Power's residential customers have been paying a portion of the costs to build Units 3 and 4 for years as part of a price phase-in process meant to ease sticker shock. That sum reportedly has been estimated by the GPSC staff at about $4.1 billion.
Typically, customers don't begin paying for a new power plant until after it has started operations and utility regulators deem it "used and useful." By having customers start paying for Units 3 and 4 before they are finished, Georgia Power and the GPSC determined the monthly price increases would be more gradual if they were spread out over a greater number of years.
The next monthly increase for the new units will take place when Unit 3 begins commercial operations. Residential customers' monthly bills will rise by about $3.78 per month later this summer.
That increase follows a $16 per month increase, effective June 1, to pay for higher fuel costs. Further increases of 4.5% are scheduled to go into effect in 2024 and 2025 as part of a long-term price increase agreement between Georgia Power and the GPSC. Some estimates say the cost of building Units 3 and 4 could further increase yearly electric bills for residential customers by as much as $400 per year for the average residential household.
Consumer advocates and environmental groups have been pushing back for years against letting Georgia Power recover all or most of its outlays for Units 3 and 4. Georgia Power's corporate parent has written off about $3.26 billion of its share of construction costs since 2018, according to an Associated Press analysis.
Recently, Georgia state lawmakers got involved. Representative Becky Evans (D) sponsored a bipartisan resolution urging the Public Service Commission not to pass construction costs on to customers.
"Georgia Power customers should not have to pay that burden. Georgia Power shareholders should be paying that burden," Evans said, according to local news reports.
Liz Coyle with the advocacy group Georgia Watch said Georgians already have to make tough decisions, and higher electric bills would impose an additional burden. "It causes people to have to choose between getting medicine, buying a new pair of athletic shoes for their child who plays high school basketball, or putting food on the table," said Coyle.
Patty Durand, president and founder of Cool Planet Solutions and a candidate for the Georgia Public Service Commission, has been sharply critical of the unit additions. In a recent commentary article in Utility Dive, she wrote: Nuclear power "happened because today's utility business model rewards capital investment, a perverse incentive that results in overbuilding in pursuit of profit. This business model worked well in the 20th century when the country needed a massive grid buildout, but 21st-century goals are different: we need to quickly reduce carbon emissions, increase grid resilience and build a distributed, digital grid that is flexible, engages customers and is affordable."
"Nothing about nuclear energy meets those goals: it's slow to build, hugely expensive, is neither flexible nor distributed and does not engage consumers. It fails at resilience too: 10 nuclear plants in Europe shut down last summer due to low water from drought and heat."
Britt Burt, vice president of research for the Global Power Industry, made this comment: "The nuclear renaissance we believed we would see over a decade ago never materialized in the United States for a number of reasons. After watching the buildout of Vogtle 3 & 4, I can say we will not see a rush to build conventional nuclear reactors. Many of the challenges from decades past are still there today. However, there is a strong opinion we will never reach decarbonization in the power industry without nuclear power, although it likely will be in the form of small modular reactors and other advanced reactor designs."
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
Unit 4 is scheduled to begin commercial operations later this year or early next year.
Although the start of commercial operations for Unit 3 was a happy day for the owners, that happiness likely was tempered by the scale of that unit's cost overruns and the yearslong delay. Both Unit 3 and Unit 4 are 1,117-megawatt (MW) Westinghouse AP (advanced passive) reactors. The units are owned by Georgia Power Company (Atlanta, Georgia) (45.7%), Oglethorpe Power Corporation (Tucker, Georgia) (30%), Municipal Electric Authority of Georgia (MEAG Power) (Atlanta) (22.7%) and Dalton Utilities (Dalton, Georgia) (1.6%).
Unit 3 can generate enough electricity for about 500,000 homes and businesses.
The current estimated price tag for the two new nuclear units is about $32 billion, a figure that does not include a $3.7 billion payment made to the co-owners by Westinghouse Electric Company LLC (Cranberry Township, Pennsylvania), after it declared Chapter 11 bankruptcy in 2017. With combined generating capacity of about 2,234 MW, the installed capacity cost of about $14.3 million per MW is far and away the most expensive power plant ever built.
The unit additions were meant to be the start of the "nuclear renaissance" in the U.S., but as costs spiraled upward and planned in-service dates backed up, would-be owners and operators backed away. The Vogtle unit additions were the first new nuclear units built in the U.S. in over three decades. Georgia Power proposed building them in 2001, and the Georgia utility regulators green-lighted construction in 2009.
Some of the cost overruns and delays resulted from the March 29, 2017, Chapter 11 bankruptcy filing by Westinghouse, which until then had been the engineering, procurement and construction (EPC) firm for the project. Bechtel Corporation (Reston, Virginia) provided EPC services after Westinghouse went bankrupt.
The COVID-19 pandemic and the ensuing supply-chain bottlenecks also contributed to the delays and cost overruns at the Vogtle unit additions.
But even before the Westinghouse bankruptcy or the COVID-19 pandemic, construction of the first-of-its kind nuclear facility had already run billions over budget and years behind schedule. In 2001, when Georgia Power first decided to add two new nuclear units to the existing Vogtle complex in Waynesboro, Georgia, the cost to build both units was estimated at about $7.5 billion. That rose to about $14 billion in 2009, when Georgia utility regulators approved construction of the project. The first new unit, Unit 3, was scheduled to go into service in the spring of 2013.
Despite billions of dollars in loan guarantees from the federal government, and a generally supportive state utility regulatory environment, the project seemed snake-bit from the start. Proposed comprehensive federal energy legislation that included a carbon dioxide (CO2) emissions cap & trade system died in the U.S. Congress in 2010. The prospect of federal support for the construction of new non-emitting electric generation was a significant source of support for the nuclear renaissance.
Things started out on a positive basis. In the early years of this century, as the project developers assessed the economic rationale for adding two new units at Vogtle, natural gas prices were rising: The price utilities paid for natural gas rose from about $3 per million British thermal units (MMBtu) 20 years ago to about $13 per MMBtu in 2008. Higher gas prices made building new nuclear generation look like a good economic bet. But shortly after the Georgia utility regulators green-lighted the unit additions in 2009, gas prices started to slide, falling back to the price levels of 2002, where they stayed for years until a brief surge following last year's invasion of Ukraine by Russia. Today, prices are back to where they were two decades ago, undermining a lot of the economic rationale for building new nuclear generation. As a result, Georgia Power officials stopped accentuating the economic benefits of nuclear vs. gas, and have instead focused on electric reliability, safety and emission-free electricity as the new units' selling points.
The unit additions at Vogtle were plagued by contractor problems and safety issues. The Georgia Public Service Commission (GPSC) (Atlanta, Georgia) eventually appointed a third-party construction monitor that assessed Georgia Power's internal semi-annual construction updates to the GPUC. That outside firm consistently said the scheduled in-service dates the utility provided to the commission were unrealistic. In 2022, cost overruns and project delays caused two of the Vogtle 3 and 4 co-owners, Oglethorpe Power Corporation and the Municipal Electric Authority of Georgia, to file separate suits against Georgia Power, a unit of Southern Company (NYSE:SO) (Atlanta).
The start of commercial operations for Vogtle Unit 3 is an important milestone for the co-owners, and it comes as the U.S. is about to enter peak electric demand season. Vogtle 3's electricity will help keep air conditioners humming in a region marked by high temperatures and humidity.
The controversies over the Vogtle new nuclear unit additions will continue, as Georgia utility regulators soon will decide how much of the costs will be borne by customers of Georgia Power, and what portion of its outlays the utility will be forced to absorb. The unit's other three co-owners are not regulated by that panel.
Georgia Power's residential customers have been paying a portion of the costs to build Units 3 and 4 for years as part of a price phase-in process meant to ease sticker shock. That sum reportedly has been estimated by the GPSC staff at about $4.1 billion.
Typically, customers don't begin paying for a new power plant until after it has started operations and utility regulators deem it "used and useful." By having customers start paying for Units 3 and 4 before they are finished, Georgia Power and the GPSC determined the monthly price increases would be more gradual if they were spread out over a greater number of years.
The next monthly increase for the new units will take place when Unit 3 begins commercial operations. Residential customers' monthly bills will rise by about $3.78 per month later this summer.
That increase follows a $16 per month increase, effective June 1, to pay for higher fuel costs. Further increases of 4.5% are scheduled to go into effect in 2024 and 2025 as part of a long-term price increase agreement between Georgia Power and the GPSC. Some estimates say the cost of building Units 3 and 4 could further increase yearly electric bills for residential customers by as much as $400 per year for the average residential household.
Consumer advocates and environmental groups have been pushing back for years against letting Georgia Power recover all or most of its outlays for Units 3 and 4. Georgia Power's corporate parent has written off about $3.26 billion of its share of construction costs since 2018, according to an Associated Press analysis.
Recently, Georgia state lawmakers got involved. Representative Becky Evans (D) sponsored a bipartisan resolution urging the Public Service Commission not to pass construction costs on to customers.
"Georgia Power customers should not have to pay that burden. Georgia Power shareholders should be paying that burden," Evans said, according to local news reports.
Liz Coyle with the advocacy group Georgia Watch said Georgians already have to make tough decisions, and higher electric bills would impose an additional burden. "It causes people to have to choose between getting medicine, buying a new pair of athletic shoes for their child who plays high school basketball, or putting food on the table," said Coyle.
Patty Durand, president and founder of Cool Planet Solutions and a candidate for the Georgia Public Service Commission, has been sharply critical of the unit additions. In a recent commentary article in Utility Dive, she wrote: Nuclear power "happened because today's utility business model rewards capital investment, a perverse incentive that results in overbuilding in pursuit of profit. This business model worked well in the 20th century when the country needed a massive grid buildout, but 21st-century goals are different: we need to quickly reduce carbon emissions, increase grid resilience and build a distributed, digital grid that is flexible, engages customers and is affordable."
"Nothing about nuclear energy meets those goals: it's slow to build, hugely expensive, is neither flexible nor distributed and does not engage consumers. It fails at resilience too: 10 nuclear plants in Europe shut down last summer due to low water from drought and heat."
Britt Burt, vice president of research for the Global Power Industry, made this comment: "The nuclear renaissance we believed we would see over a decade ago never materialized in the United States for a number of reasons. After watching the buildout of Vogtle 3 & 4, I can say we will not see a rush to build conventional nuclear reactors. Many of the challenges from decades past are still there today. However, there is a strong opinion we will never reach decarbonization in the power industry without nuclear power, although it likely will be in the form of small modular reactors and other advanced reactor designs."
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
