When I last chatted with NRG Energy CEO David Crane, he explained to me how the nuclear disaster in Japan had created an environment of uncertainty for U.S. nuclear projects, and specifically for the expansion of NRG’s own South Texas nuclear plant. That’s partly because Tokyo Electric Power Company (TEPCO), the beleaguered utility that owns the damaged nuclear plants in Japan, was supposed to be an investor in NRG’s nuclear project. Well, this afternoon in a note to investors, NRG Energy says it will be providing no more money for the development of the South Texas Project units 3&4, and will be recording a first quarter 2011 pretax charge of about $481 million.
Ouch. NRG said in a statement that given the “diminished prospects” of the South Texas nuclear project it “will not invest additional capital in the STP development effort.” At the same time, NRG said it would fully support any of its current or future partners if they want to continue to develop STP 3&4 units. (Crane will be speaking at our Green:Net 2011 event this Thursday April 21, in San Francisco).
The design work for the project had already essentially been halted, as NRG Energy waited for a review of the industry by the Nuclear Regulatory Commission (NRC) in the wake of the incident at the Fukushima reactors in Japan. The NRC is reviewing all nuclear projects built and under construction in the U.S. to see if there could be any lessons learned from the Japanese nuclear incident. Nuclear industry executives fear the NRC review process will be very lengthy and will paralyze any new nuclear projects in the pipeline, which was what happened in the aftermath of the nuclear incident at Three Mile Island in 1979. Crane told me last month that he hoped a NRC review process wouldn’t last any longer than 3 months.
CPS Energy, which had been in discussions to purchase the nuclear power from NRG’s expanded plants, had already suspended its talks to buy the power. CPS also owns over 7 percent in the expansion project.
The U.S. hasn’t built any new nuclear reactors in decades, thanks to fears after Chernobyl and Three Mile Island. The short-term costs of nuclear construction after the Japanese nuclear disaster is expected to soar in the short term, and development of new nuclear technologies from some startups could be stalled as well. Nuclear technology has also crept along because of the low price of natural gas.
NRG’s decision to cut its losses so to speak, is an even greater indication that the Japanese nuclear disaster has set back development of nuclear power in the U.S. by many years. Other countries, like Germany, are moving even more swiftly to halt the construction of nuclear plants.
NRG will be holding a conference call later today to provide more details on its decision.