Chairman of the Nuclear Regulatory Commission (NRC) Gregory Jaczko listens to his introduction before he delivers remarks at the Regulatory Information Conference on March 13, 2012 in Rockville, Maryland.The long-expected federal decision giving SCANA a license to build two new nuclear reactors in South Carolina came along with news that project has already encountered delays and cost overruns.

The Nuclear Regulatory Commission approved the license for SCANA’s Summer station near Columbia, SC on Friday, seven weeks after approving a similar license for Southern Company’s Vogtle station near August, Georgia. The vote was again 4-1, with Chairman Gregory Jaczko again dissenting over the commission’s decision not to attach a specific provision requiring compliance with future post-Fukushima requirements.

Both utilities are building Westinghouse AP1000 reactors, a 1,100-megawatt design that has never been built in the US. Four of the reactors are under construction in China.

Cost estimates are being given as about $9.8 billion for the Summer units, without financing costs, and $14 billion for the Vogtle units, including financing costs.

Overruns Spark Discussion

News emerged in February that SCANA and Southern were in talks with Toshiba-owned Westinghouse and project manager Shaw over some $400 million in cost overruns – about $340 million at Summer and the balance at Vogtle.

The day before the NRC licensing vote, SCANA’s South Carolina Electric & Gas unit announced a “preliminary agreement” with Westinghouse and Shaw for SCANA and Summer partner Santee Cooper to pick up $138 million of the overrun.

According to reports filed with state regulators and company statements, part of the cost at Summer stems from unanticipated problems with the bedrock that are complicating construction.
Other problems for both sites stem from NRC’s restudy of the AP1000 shield building, and from manufacturing delays due to NRC quality assurance issues with modular fabrication at Shaw’s Louisiana plant.

The NRC initially certified the AP1000 design in 2006, but two years ago asked new questions about the shield building’s ability to cope with aircraft crashes. That review was finished and the design certified in December 2011, but the timing delayed NRC approval of the Vogtle and Summer licenses into 2012.

NRC’s manufacturing quality issues are in the process of being resolved, but Shaw’s ability to provide approved parts on time is central to both projects’ staying on schedule.

A key innovation of the AP1000 design is on-site assembly of large, factory-fabricated, modular components. The process is supposed to ensure uniform quality and standardize on-site work, allowing better scheduling and cost control.

Shovels Already in the Ground

While they waited for licenses for nuclear-specific work, the companies proceeded with excavation and preparation for full construction at both sites. The projects now employ about 1,000 workers each and both utilities say they’ll employ about 3,000 workers at construction’s peak, with 600-800 permanent jobs once the reactors begin operation.

SCANA holds 55% of the Summer project and state utility Santee Cooper holds 45%. Santee Cooper has talked with Duke Energy and Progress Energy about their taking minority stakes of up to 10% each in the project, but those two utilities are currently negotiating with regulators over their merger. No decision on Summer is expected before the merger is final.

SCANA has not applied for a federal loan guarantee, and has said so far that it intends to finance its share without that backing. Southern’s Georgia Power unit obtained a federal guarantee for $8.33 billion in financing last year.

Nuclear critics who oppose the new units leaped on news of the cost overruns as proof the projects will run far beyond estimates and further evidence both should be halted. State regulators in both Georgia and South Carolina have so far backed the projects and allowed some costs to be recovered.

Nuclear proponents say their units will prove cheapest in the long-term, with plants operating at least 60 years.

Nuclear plants cost far more to build than most other generating plants, but once operating they have proven over the last two decades to generate huge amounts of power at very low and predictable operational cost. That contrasts with fuels like natural gas, where the initial plant is less expensive but the cost of generating varies with fuel costs that have been highly volatile.
In 2010, according to Ventex, the average cost of a nuclear kilowatt-hour was 2.14 cents, of a coal kWh, 3.06 cents, and of a natural gas kWh, 4.86 cents.

Fuel diversification was a major subject of the Platts Global Power Markets Conference in Las Vegas this week. Read more about those discussions here.