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New Nukes

This spring, Progress Energy is expected to announce where in Florida it wants to build a 1,100-megawatt nuclear power plant -- the first nuclear plant proposed for the state since FPL's St. Lucie 2 reactor at Hutchinson Island got its operating license in 1983.

The company says it hasn't decided on a location, but a likely site is Crystal River in Citrus County, where Progress Energy already operates an 838-megawatt nuclear plant. Expanding on the Crystal River site would take advantage of existing transmission lines and avoid the problems associated with putting a nuclear facility in a new community. Crystal River also is close to the north-central Florida region where Progress Energy is experiencing the highest growth in demand for power.

Because it's been more than 25 years since a utility sent an application for a new nuclear plant to the federal Nuclear Regulatory Commission, Progress Energy is in uncharted territory. Keenly aware that a terrorist event or a change of sentiment on Wall Street could sway the current atmosphere quickly, the company is careful in its public statements. "We're keeping our options open for our customers," says Jeff Lyash, Progress Energy's senior vice president for energy delivery in Florida.

But there hasn't been a time in the past two decades when the conditions for undertaking a new nuclear facility have been more favorable, starting with recent federal legislation that offers financial support, loan guarantees and production tax credits to utilities that create a new generation of nuclear plants. The Energy Policy Act of 2005 even creates delay insurance for utilities, putting the federal government on the hook for up to $2 billion if the Nuclear Regulatory Commission's licensing process produces cost overruns, or if there are litigation delays that are not the fault of the private sector.

In addition, the federal government has streamlined its licensing process for nuclear plants, combining construction and operating licenses -- which previously posed separate sets of regulatory hurdles -- into one combined operating license (COL). Progress Energy projects that it can complete the COL application process by 2008 and then begin ordering components before the first stage of a five- or six-year construction process begins in 2010.

Meanwhile, the supply-demand equation is working in Progress Energy's favor. With the price of oil rising, few dispute the need to diversify the nation's power sources. And fast-growing Florida needs the juice. The state produces less than 1% of the energy it consumes, according to Florida's Energy Plan, a Florida Department of Environmental Protection report released in January. The DEP expects the state's consumption of electricity to increase by 28% over the next decade. "People use more electricity each year across the entire system," says Lyash.

The power industry even has reason to think that public attitudes toward nuclear power have grown more benign. An August 2005 report commissioned by the Nuclear Energy Institute surveyed 1,100 people who live within 10 miles of a nuclear plant. It found that 76% would find it acceptable to add a reactor at the site near them. Lyash characterizes reaction to publicity about Progress Energy's plans as "very positive, very supportive, including areas where we would potentially site these plants."

As it proceeds, Progress Energy won't lack for support from other utilities. "We think that having nuclear as part of the state's portfolio is a good idea," says Bruce Christmas, vice president of fuels management for Tampa Electric Co., which does not operate any nuclear plants but does buy energy on the spot market when needed.


For all the favorable conditions, new cooling towers in Crystal River or anywhere else in Florida aren't a foregone conclusion.

Potential opponents are quiet for the moment but could become more vocal. One prominent growth management/environmental group, 1000 Friends of Florida, has not taken a position. Another appears to be holding its fire. "We definitely have concerns," says Florida Public Interest Research Group field director Holly Binns, who adds that the group will become more vocal "when there is a formal proposal for a definite site."

There's still no solution to the problem of what to do with spent fuel rods. Most spent nuclear fuel is stored in pools of water on the sites of the nuclear reactors. The Yucca Mountain nuclear waste repository in central Nevada was supposed to host the waste, but it has been mired in regulatory and legal red tape, and its opening date has been pushed back to 2012. Even with Yucca Mountain, there are questions about transporting spent fuel across the country.

And while nuclear power plants are cheap to operate -- producing electricity for almost half the cost of natural gas generation's 3.5 cents to 4.5 cents per kilowatt hour -- they are not cheap to build.

Edward Kee, a member of the global energy practice at PA Consulting Group in Washington, D.C., says that the cost for the first of the large, new nuclear plants could be as high as $5 billion. Progress Energy estimates the cost of its proposed plant at $2 billion to $3 billion.

Meanwhile, navigating the federal and state regulatory channels -- and actually building the plant -- will take plenty of time. In addition to federal laws and regulations, Florida electric utilities also must comply with the Power Plant Siting Act, a licensing process coordinated by the Florida DEP. The January DEP energy report recommended streamlining the Florida licensing process, which includes permitting, land use and zoning, and public hearings. In any event, Progress Energy's plant probably can't be up and running until at least 2016.

Ever cautious, Lyash points out, "You will not see anyone build a nuclear power plant if the people don't want it."


The Energy Policy Act of 2005 offers financial support to utilities that are first out of the starting block with a new generation of nuclear power plant. The legislation provides:

? Delay insurance. Cost overruns because of Nuclear Regulatory Commission licensing delays and litigation delays that are not the fault of the private sector will be picked up by the federal government, up to $2 billion in total for up to six new nuclear power plants.

? Loan guarantees. Lower-cost financing is available for up to 80% of the project's cost.

? Production tax credits. A tax credit of $18 per megawatt hour for new nuclear capacity through 2021.

A NuStart

NuStart Energy is a consortium of energy companies founded in 2004 to demonstrate the Nuclear Regulatory Commission's new design and application process.

? What's the plan: NuStart will use two sites in Mississippi and Alabama to test the NRC application process for a combined operating license. A final decision on whether to build the plants will be made when the license is issued. NuStart will not be involved in the construction process.

? Who's participating: Eight power companies, including Progress Energy, Juno Beach-based FPL Group and Southern Co. (parent company of Pensacola's Gulf Power). Also, the Tennessee Valley Authority and nuclear plant design-build companies GE Energy and Westinghouse Electric Co. are participating.

? Who's paying: The U.S. Department of Energy is sharing the cost of the licensing process with NuStart and its members. Each will pay $260 million.