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Legislator asks Agriculture Commissioner Adam Putnam to study costs of nuclear vs. natural gas

The Perry Nuclear Power Plant sits on the shore of Lake Erie in North Perry, Ohio. Duke Energy Florida is building a nuclear plant in Levy County, which it contends will give it a balanced energy portfolio as opposed to sticking strictly with natural gas-powered electricity plants.
The Perry Nuclear Power Plant sits on the shore of Lake Erie in North Perry, Ohio. Duke Energy Florida is building a nuclear plant in Levy County, which it contends will give it a balanced energy portfolio as opposed to sticking strictly with natural gas-powered electricity plants.
Published May 14, 2013

A Tampa Bay area lawmaker on Monday urged Agriculture Commissioner Adam Putnam to conduct a study of the proposed Levy County nuclear plant to ensure consumers were getting a good deal.

In a two-page letter, Rep. Mike Fasano, R-New Port Richey, said a Tampa Bay Times report Sunday that compared the cost of the nuclear plant to a natural gas facility highlighted the need for the review.

Fasano said Putnam's office should conduct the review because "I do not believe that, if asked, the Florida Public Service Commission would conduct a fair and unbiased cost analysis."

The concern, Fasano said, is that Levy is projected to cost billions of dollars more than a natural gas facility.

"The potential savings to utility customers are incredible," Fasano wrote to Putnam, the state's point person on energy matters.

Putnam is one of several decisionmakers in Tallahassee who have argued that nuclear in the long term is a cheap source of electricity, particularly compared to the "volatile" costs of natural gas plants.

The Times set out to see if the premise that nuclear-saves-money is true by conducting an analysis of the cost of Levy and an equivalent natural gas plant — including construction, operating and maintenance costs and fuel — over 60 years.

The analysis showed that a natural gas facility would be billions of dollars cheaper than Levy, which would be the most expensive nuclear plant ever built in the United States. The Times analysis, conducted over three months, was based in large part on Duke Energy's 2012 filings with the state.

The Times' findings reflect the conclusions of other studies about nuclear's costs compared to natural gas, including Duke's own analysis. Duke found in 2012 that Levy would cost $3.9 billion more in today's dollars than an equivalent natural gas plant using middle-of-the-road estimates for fuel costs and without a carbon tax. Even an updated report that Duke filed May 1 concluded a natural gas facility would be $3 billion less expensive than the Levy plant.

In both of its reports, Duke assumed a fuel price that is higher than projections from the federal government. Using the government projections, the 60-year cost of a natural gas facility falls even further. Duke also has the start date for the gas facility as 2016, and the Levy start date as 2024. In accounting calculations, the difference in start dates can increase the price of the gas facility compared to the nuclear plant.

R. Alexander "Alex" Glenn, president of Duke Energy Florida, said in a letter to the Times that a natural gas plant could cost more than Levy, if the government ever considered imposing a carbon tax on emissions.

The Times' analysis included financial penalties for carbon emissions, even though there is little political will at this time in this country to tax carbon. Glenn said the newspaper's analysis assumed a lower carbon tax than Duke, making the natural gas plants less expensive than in the utility's report. He maintained that the Levy project remains a good deal for consumers.

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"As a state and a country, we need to have a balanced portfolio in order to sustain and secure our energy future," Glenn wrote. "Florida's Levy nuclear project remains cost effective when compared to building comparable natural gas-fired power plants."

Glenn further stated that Florida is the "fifth most dependent state on natural gas, and we are poised to continue increasing our dependence. . . . This is like investing your retirement in one stock — and a very volatile one at that."

The cost and supply of natural gas is a critical issue in energy policy. State policy makers fear spikes in natural gas prices will send utility bills soaring, so they say Florida needs to diversify its energy mix. Utility's produce about 60 percent of the state's electricity from natural gas.

Part of the solution has been to push for new nuclear plants. But the ballooning price tag on construction costs of reactors have left many with sticker shock.

Fasano said another startling fact was the profit Duke would make off the Levy nuclear plant compared to a natural gas facility.

In today's dollars, Duke would earn $4 billion for Levy over a 60-year period, compared with $369 million for the natural gas facility, the Times analysis found.

"I never realized the profit that they make off a nuclear plant," Fasano later said in an interview.

Duke's written response on Monday did not address the issue of profit.

Duke proposes to build the Levy plant on a 5,000-acre tract 100 miles north of Tampa. The first of two reactors at the plant is projected to come online in 2024 with the second following a year later.

Levy was supposed to begin producing power in 2016 at a construction cost of $5 billion to $6 billion. But delays in approval of its federal operating license, the Great Recession and falling electricity demand pushed back the start date and in turn led to increases in cost.

"To date, nuclear power has been dominating the debate," Fasano wrote to Putnam. "Natural gas may be a more cost effective method to supply Florida's ever-increasing power demands."

Ivan Penn can be reached at ipenn@tampabay.com or (727) 892-2332.