Monday, December 11, 2017
Business

Duke Energy ponders more nuclear vs. natural gas

CHARLOTTE, N.C. — Duke Energy will update Florida regulators Tuesday on the status of the broken Crystal River nuclear plant and a report that says it could cost up to $3.5 billion to fix.

The real issue, though, is much bigger: whether the company has any nuclear future in Florida at all.

Duke acknowledged as much at a nuclear industry conference last week.

"Nuclear development is facing the perfect storm," said Duke vice president Chris Fallon, speaking to a gathering of nuclear industry leaders. Natural gas prices are at historic lows, federal regulators have put a moratorium on new nuclear projects for at least two years and power demand is down.

The extended economic recovery, low population growth and greater energy efficiency are expected to slow the rate of growth in electricity demand over the next 20 years, according to the U.S. Energy Information Administration.

While Fallon said he believes it is important to have nuclear power as part of the energy mix throughout the utility's service territory, he acknowledged that low natural gas prices and high-priced nuclear construction have stifled new nuclear development.

"It's very hard to justify a (nuclear) project," Fallon said. "That's making it very challenging for us."

In Florida, Duke is weighing two nuclear power issues: whether to repair or close Crystal River and whether to build two new reactors in Levy County for $24 billion, which could drive up the average customers' bill by hundreds of dollars a year.

Should it do both? Can it — and its customers — afford to do either?

Utilities nationwide face similar questions, showing what a difference a year makes. At last year's Nuclear Construction Summit, the industry readied itself for a "nuclear renaissance," marked by regulatory approval of the first two new nuclear plants in 30 years.

Now nuclear renaissance has become nuclear retreat.

What changed?

An enormous supply of natural gas in the United States — accessible now thanks to breakthroughs in drilling technologies — caused prices to fall to historic lows, making gas plants competitive to operate.

"No one would have imagined the gas phenomenon," Mark Marano, senior vice president of business development for Areva, a nuclear power developer, told the summit.

"Nuclear is going to be there," Marano said. "The question is: What form or shape will it be in? The economics are truly hitting home."

The impact of natural gas has proved so overwhelming that Virginia-based Dominion Resources Inc. announced last week that it would shutter an existing nuclear plant. The utility said no one would buy it when the company offered it for sale.

For Duke Energy, which acquired Progress Energy Florida in a merger that closed in July, the fate of Crystal River is deeply affected by the dramatic change in economic reality. Low demand and cheap natural gas have made it difficult to justify spending billions of dollars to repair a 36-year-old nuclear plant — in particular when there's a risk the repair might fail.

According to Duke, the low natural gas prices are not entirely a good thing: Without Crystal River, Fallon told the summit, 76 percent of Duke's Florida energy production would come from natural gas.

Such dependence on a single source could send customers' bills soaring if natural gas prices spike.

"That's a big concern," said Charles Rehwinkel, deputy state public counsel, who represents consumers before the Public Service Commission. "I think that's probably the biggest thing keeping Progress looking at the repair of Crystal River."

The Crystal River nuclear plant broke during a maintenance and upgrade project three years ago. As workers cut into the nuclear reactor's 42-inch-thick concrete containment to replace old steam generators, the building cracked. An attempt to repair the first crack resulted in more cracks.

Before the merger with Progress Energy, Duke commissioned its own independent review of the troubles at Crystal River and concluded that while the building could be repaired, it would cost $1.5 billion to $3.5 billion plus $300 million a year for as long as seven years for replacement power while the plant sits idle.

If Duke successfully repairs the plant and the Nuclear Regulatory Commission clears it for safe electricity generation, Crystal River could produce low-cost clean energy for 20 more years. Nuclear fuel is cheap compared to natural gas.

By comparison, the construction of a new natural gas plant would cost about $1 billion and take 18 months. The natural gas plant would last 30 years, but would require a steady stream of fuel to keep it going. As Rehwinkel noted, the price of natural gas can be volatile.

In 2008, natural gas prices exceeded $13 per million BTU. Prices dropped below $2 in June of this year. The price now is above $3 but is expected to fall in coming months. Because of environmental concerns about new drilling process (called hydraulic fracturing, or fracking), prices could see a significant uptick if government regulations tighten.

"You've got risk in there," economist Robert Graber told the nuclear summit. "Once you build those natural gas plants, you're at the mercy of those markets."

Graber said one state, Vermont, has already banned fracking and several other states are considering bans or tighter regulation.

Part of the equation in Duke's analysis involves the likelihood that Crystal River's insurer will help cover the cost of repairs. The utility and its insurer, the Nuclear Electric Insurance Limited, are expected to begin nonbinding mediation over payment next month.

At Tuesday's PSC hearing, a key question will focus on what it will cost customers to meet their energy needs — with or without nuclear.

Ivan Penn can be reached at [email protected] or (727) 892-2332.

Comments
HSBC says U.S. will dismiss criminal charges against it

HSBC says U.S. will dismiss criminal charges against it

HSBC said Monday that U.S. authorities were preparing to dismiss criminal charges against the bank, five years after it reached an agreement to avoid prosecution related to lapses in its money-laundering controls.In 2012, the bank, one of the world’s...
Updated: 1 hour ago
Major auto manufacturer offers longer hours, incentives to fix airbags

Major auto manufacturer offers longer hours, incentives to fix airbags

TAMPA — With nearly 200,000 people around Tampa Bay still driving around with defective airbags that could kill them, a major automaker is trying to dramatically cut that number down this week.Fiat Chrystler Automobiles U.S. has launched Airbag Recal...
Updated: 1 hour ago
This 6-year-old kid made $11 million in one year reviewing toys on You Tube

This 6-year-old kid made $11 million in one year reviewing toys on You Tube

When most people think back on the child celebrities of their time, they likely think of child movie actors, the well-trained stars of showbiz. For some, these were stars like Mary Kate and Ashley Olson, or Macaulay Carson Culkin from "Home Alone." F...
Updated: 2 hours ago
Ticket-fighting firm hires former Florida Bar president to sue the Bar

Ticket-fighting firm hires former Florida Bar president to sue the Bar

Times Staff WriterWell, this is awkward. A company that is suing the Florida Bar has hired a former Bar president to represent it. Ramon Abadin has joined the legal team of TIKD, a company that expedites the process of fighting traffic tickets in Pin...
Updated: 5 hours ago
Tampa: Hundreds protest Trump’s decision on Jerusalem

Tampa: Hundreds protest Trump’s decision on Jerusalem

TAMPA — Hundreds rallied near the University of South Florida on Friday night to protest President Donald Trump’s recent declaration that the United States will recognize the divided city of Jerusalem as the capital of Israel.The protest was organize...
Published: 12/08/17
Updated: 12/09/17

Duke outage leaves 7,700 without power near Pinellas Park

PINELLAS PARK — Up to 7,700 customers across Pinellas Park, Lealman and Kenneth City lost power in a Thursday night outage, according to Duke Energy.The outage impacted a cloverleaf-shaped area of customers, with pedals extending in the cardinal dire...
Published: 12/08/17
Express lanes set to open on Veterans. They’re free -- for now.

Express lanes set to open on Veterans. They’re free -- for now.

TAMPA — Drivers on the Veterans Expressway will gain an extra lane from Gunn Highway to Hillsborough Avenue starting Saturday.But there’s a catch: Once drivers enter the lane, they won’t be able to leave it — not until a designated exit about six mil...
Published: 12/08/17
St. Petersburg chamber of commerce charts ‘Grow Smarter’ economic development strategy

St. Petersburg chamber of commerce charts ‘Grow Smarter’ economic development strategy

Times Staff WriterST. PETERSBURG — What started more than five years ago as an exploratory conversation among a handful of business leaders blossomed Friday into a full-blown community discussion of how to nurture business while working to make sure ...
Published: 12/08/17
Visit St. Pete/Clearwater makes Orlando tourists a top target

Visit St. Pete/Clearwater makes Orlando tourists a top target

In a decision driven by some major data crunching, Visit St. Pete/Clearwater next year will focus its tourism advertising on three target markets: Orlando, New York City and its Tampa Bay home."Research is going to dictate our behaviors and direction...
Published: 12/08/17
Having JW Marriott run Water Street Tampa’s new 519-room hotel expected to help Tampa pursue more upscale conventions

Having JW Marriott run Water Street Tampa’s new 519-room hotel expected to help Tampa pursue more upscale conventions

TAMPA — JW Marriott, a luxury hotel brand new to Tampa, will run the new 519-room hotel that the Water Street Tampa project is building next to the Marriott Waterside Hotel & Marina, developers announced Friday.Construction on the 26-story hotel is ...
Published: 12/08/17