Nuclear Off a Cliff

The Washington Post reports that constellation Energy is pulling out of a plan to build a third nuclear reactor at its Calvert Cliffs nuclear power plant.  In a letter to the Department of Energy, Constellation explained that the conditions and costs of the federal loan guarantee was not “workable” and had generated too much uncertainty for the company to go forward.  Wrote Constellation COO Michael Wallace:

in light of the continuing and ongoing uncertainty created by the Office of Management and Budget’s inability to address significant problems with its methodology for determining the project’s credit subsidy cost and the unreasonably burdensome conditions a loan guarantee under this approach would require, we regret to inform you that Constellation Energy does not see a timely path to reaching a workable set of terms and conditions that would be economically reasonable and statutorily justifiable.

Constellation Energy’s decision is a potentially significant setback for the revival of nuclear power in the United States.  The Calvert Cliffs reactorwas supposed to be the first of several new reactors that Constellation would build with a French company, Electricite de France.

The Post further reports:

economic factors have made nuclear power projects more challenging. Low natural gas prices make that fuel an attractive alternative. Congress also failed to pass climate legislation that would have boosted fossil fuel prices. And steep construction costs make the projects a financial stretch for utilities like Constellation. . . .

Obama administration officials said that they had proposed terms consistent with their fiduciary duty. “We want to see this industry go forward, but we also have a duty to protect the taxpayers’ money,” one senior administration official said.

The administration has approved only one conditional loan guarantee for a nuclear power project and that went to a Georgia plant to be built by Southern Co., which under state law can begin to recover costs while the plants are under construction. Maryland regulations say that power plant construction costs can be passed through to customers only once the plant is operating.