TVA backs away from Bellefonte

The giant utility says won’t fund completion of the 1260 MW plant

In a new Integrated Resource Plan released for public comment this week, the Tennessee Valley Authority (TVA) said it no longer has plans to finish the partially complete Bellefonte Unit I nuclear reactor for which construction started in 1974.  With this decision the utility’s work to finish Watts Bar II later this year may turn out to be the last large reactor project at TVA for quite come time.

The reasons for the change in plans, which still have to be ratified by the utility’s management and board, are low natural gas prices and flat demand for electricity.  The last time the board looked at the Bellefonte project in 2012, it voted to spend $6 billion to complete it by about 2020.  A major contract was awarded to Areva to proceed with engineering services including development of a digital instrument and control system.  However, the board also said that the most significant portion of the work could not start until Watts Bar II was done.

In the meantime, the country has been flooded with cheap natural gas.  A new 700 MW natural gas plant can be build for about $1M per MW and completed in three-to-four years from the time it breaks ground. Additionally, licensing and regulatory costs are peanuts compared to completing a decades old reactor.

Rapid increases in the estimated cost to complete Bellefonte also may have also contributed to the utility taking it out of future plans for new generation capacity.  In 2013 the costs reportedly jumped from about $5 billion  to a range of between $7.4 and $8.9 billion.  A private equity effort headed by Franklin Haney, an investor, offered to complete the reactor and operate it for $10 billion.  TVA turned him down saying the plan didn’t have good enough numbers to proceed.

More recently, cost overruns at four reactors under construction in Georgia and South Carolina may also have given TVA a case of cold feet in committing to completing Bellefonte.

Behind all of the cost estimates is the lurking issue of TVA’s debt ceiling of $30 billion. The utility won’t ask Congress to raise it and has taken several steps, including sale and lease back arrangements for various parts of the electrical generation system, to avoid breaching the limit which was set in 1979.

As of February 2015 the debt stood at $25 billion leaving little headroom for completing Bellefonte and doing anything else by way of major capital expenditures. Earlier this year President Obama cited TVA’s debt as a risk, and suggesting selling the entire system, but later backed off saying the utility was being prudent in its management of the obligations.

Other elements of the new TVA energy plan include closing older coal fired plants as new gas plants are built and generating more electricity from solar and wind sources. Improving energy efficiency will be a long term effort.

Separately, Last October TVA withdrew its request to the NRC for license amendments for power uprates to the three BWR nuclear reactors at Browns Ferry which would have added as much as 400 MW of new generating capacity.

TVA at one time was also serious about exploring an option to collaborate in the design and licensing of two B&W mPower 180 MW small modular reactors (SMR). That relationship did not mature.  Since then B&W has mothballed its SMR work. TVA is seeking an Early Site Permit (ESP) for a future SMR effort, but has not selected a vendor.  The ESP cites TVA’s Clinch River site which already has nuclear infrastructure including connections to the regional power grid.

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3 Responses to TVA backs away from Bellefonte

  1. Jack R. Keeling says:

    This ends TVA’s investment in nuclear power for ALL time. The issue is NOT cheap natural gas prices, it is reduced electric demand. TVA’s power sales are less now than in 2007.
    Two outstanding utility CEOs, Bill Johnson of TVA and Lynn Good of Duke Energy, appear to be taking positions of ‘no new nukes.’ Both utilities have level power sales. I suggest you investigate the position of those two industry leaders and let us know the facts.

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    • djysrv says:

      As the article points out, the time to market for a new 700 MW gas plant is just 3-4 years at a cost of about $1M/Mwe. Compare that to a cost for a similar power nuclear reactor, at $5M/Mwe and all the regulatory hassles, and it becomes a “no brainer” for a publicly traded electric utility to jump on the $3/MBTU or lower price of gas which is expect to stay in that range for a very long time. The closing price Friday was $2.50 according to NASDAQ. http://www.nasdaq.com/markets/natural-gas.aspx

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      • Bob Wallace says:

        Plus gas plants are highly dispatchable. They can be turned off when wind and solar are providing fuel-free electricity. “Always on” generation is going to find less and less of a role to play going forward.

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