US pushes nuclear energy, but its projects lag

Only two of four top reactor projects moving forward, though politicians favor them

WASHINGTON — In his State of the Union address, President Barack Obama proposed giving the nuclear construction business a type of help it has never had, a role in a quota for clean energy. But recent setbacks in a hoped-for “nuclear renaissance” raise questions about how much of a role nuclear power can play.

Of four reactor projects identified by the Energy Department in 2009 as the most likely candidates for federal loan guarantees, only two are moving forward. At a third, in Calvert Cliffs, Md., there has been no public sign of progress since the lead partner withdrew in October and the other partner said it would seek a replacement.

And at the fourth, in Texas, a would-be builder has been driven to try something never done before in nuclear construction: finding a buyer for the electricity before the concrete is even poured. Customers are not rushing forward, given that the market is awash in generating capacity and an alternative fuel, natural gas, is currently cheap.

“The short answer is, there has to be a market for the power,” said John Reed, an investment banker who specializes in nuclear projects. “That’s the most immediate hurdle these projects have to get over.”

Yet there is a fairly sturdy political consensus in favor of building more reactors. By including nuclear power in a proposed “clean energy standard” shifting the electric system away from conventional coal and gas, whose emissions contribute to global warming, the Obama administration is seeking to stoke such support.

Many Democrats and most Republicans in Congress back nuclear construction, as do local officials in most places where reactors have been proposed.

Sen. Lamar Alexander, R-Tenn. and one of the Senate’s strongest proponents of nuclear power, suggests Obama should make building 100 reactors in the next 20 years a national priority, both for energy security and to limit climate-changing emissions.

But for now, he acknowledges, the economics are not in place. “Right now, it’s stuck,” he said of the planned nuclear revival.

Some challenges are not peculiar to the nuclear sector. All forms of clean energy, including solar and wind power, are undercut to some extent by the cheap price of natural gas and the surplus in generating capacity, which is linked partly to the recession. And federal caps on carbon dioxide emissions from coal- and gas-burning plants, which would benefit clean energy sources, are not expected until 2012.

But some obstacles are specific to the nuclear industry, like the ballooning cost estimates for construction of reactors, which are massive in scale. Even when projects are identified as prime candidates for federal loan guarantees, some investment partners turn wary.

“All that uncertainty creates an incentive for you to wait,” said Joseph Aldy, who was a special assistant to Obama until December, said of the nuclear projects.

To counter the uncertainties, Alexander and others have arranged substantial help for the industry. The Nuclear Regulatory Commission has been working for more than 15 years to streamline reactor licensing to cut construction time and to reduce risk. And the 2005 Energy Policy Act provided money for loan guarantees, subsidies for production from the first few reactors and insurance against regulatory delays.

Industry executives say with those changes and the financial help, they had what they needed to build after a gap of three decades. By 2008, the NRC had 15 applications for new nuclear plants in hand and expected 15 more, and it asked Congress for budget increases for personnel to handle the flood.

Across from commission headquarters, in Rockville, Md., workers are now digging a foundation for a $131 million, 14-story office tower for 1,500 employees to handle an anticipated flood of applications. But many of the proposed reactors are fading.

The four projects identified by the Energy Department after the 2005 act as the strongest candidates to share a $18.5 billion pool of loan guarantee money underline the difficulties.