Ray Perryman: From every angle, nuclear energy great for Texas
Tuesday, October 02, 2007

About 30 years ago, after the Three Mile Island partial nuclear meltdown in Pennsylvania, many Americans wanted to throw out the baby with the bath water and get rid of nuclear power completely.

Some of that fear remains today, but is being overshadowed by reality and the need for clean power. In the renewed debate, Texas is right in the center of it.

Last week, New Jersey-based NRG Energy, a partner in the South Texas Project, filed with the Nuclear Regulatory Commission to construct two new nuclear reactors at its existing two-unit plant near Bay City. This would be the first new nuclear plant since the 1979 meltdown incident in Pennsylvania.

The idea of nuclear operations often brings to mind the billions of dollars spent in the 1970s due to cost overruns, construction delays, burdensome federal regulations and significant public opposition.

Such handicaps are not expected now, primarily because of new technology, today’s regulatory climate and the fact that nuclear plants can produce electricity significantly more economically than gas-fired turbines.

In 2005, the average cost of nuclear-produced electricity across the U.S. was 1.72 cents per kilowatt-hour (kwh). Over the same time, the cost of electricity from coal-fired plants per kwh was 2.21 cents and 7.51 cents from natural gas plants.

The NRC expects soon to see a revival in nuclear electricity production with perhaps as many as 32 construction applications coming its way.

The rush by electric-generating companies is due to recent federal tax incentives, along with growing concern about greenhouse gas emissions from coal, oil, and natural gas plants.

To facilitate the process, the government is providing insurance to protect companies against possible regulatory hurdles that could prevent or delay construction. The first few companies to apply would also receive additional benefits. The NRC also has streamlined the application process by combining the construction and operating licenses.

NRG Energy’s plan calls for the new units to join the power plants near Bay City in 2015.

Work on the first unit could begin as early as the end of 2010. Total costs for the new project are likely to range from $5.40 billion to $6.75 billion.

The reactors would have a capacity of about 2,700 megawatts, approximately equal to that currently being provided by the units at the STP power plant in the Bay City area, which were completed in 1988 and 1989.

The STP nuclear power plant is one of 33 two-unit plants in the country. There are also 31 single-reactor sites and two plants with three units each scattered across the country, for a total 103 nuclear power facilities.

The megawatts of electricity produced by the STP, which has led the nation in production for three consecutive years, powers some two million homes in Austin, Corpus Christi, Houston, San Antonio and surrounding areas. The proposed new units will approximately double the plant’s electricity-producing capacity.

NRG picked Texas for its proposed new reactors because of this state’s need for more electricity and also because of the amount of space available and the strong transmission system in Texas.

Furthermore, the STP had the lowest production cost in 2006 among all U.S. nuclear power plants, about 1.36 cents per kwh.

We need a more diverse fuel mix in Texas to reduce our dependence on natural gas (about three times the national average) and reduce overall power costs. Realistically, nuclear energy ultimately must be a larger part of the power equation (although it cannot happen fast enough to resolve immediate needs).

The application, of course, will face opposition from environmental groups because concerns about the safety of nuclear waste storage, among other matters. This concern is somewhat ironic given the fact that many of the same groups are decrying emissions from coal and gas-fired plants.

Challenges of this kind can delay the development of the nuclear reactors and escalate the costs. Hopefully, over time, such fears can be allayed or resolved and thereby enable Texas to play an even more dominant leadership role in the evolving energy sector of the future.

Economist Ray Perryman is CEO of the Perryman Group. He also serves as distinguished professor of economic theory and method at the International Institute for Advanced Studies.

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