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Monday, October 11, 2010

Constellation Cancels Nuke Loan Guarantee and Reactor

Constellation Energy has cancelled its proposal to build a new reactor at its Calvert Cliffs nuclear power plant.  The utility pulled out even though the Obama administration had decided to award the project a $7.5 billion loan guarantee.  Evidently, the administration's loan guarantee terms were "unworkable" for  Constellation.  The core problem was a "credit subsidy cost" or up-front fee of 11.6% of the amount guaranteed, which works out to approximately $880 million.  It completely destroys the economics of the project.

Constellation's nuclear partner, Electricite de France (EdF) is left out in the cold by this unilateral decision.

The Center supports the construction of a third reactor at Calvert Cliffs.

Constellation and French power company Electricite de France are partners in Unistar, a joint venture that had intended to make the new Calvert Cliffs reactor the first of a fleet of identical units around the country. They filed the loan guarantee application in July 2007. Unfortunately, the escalating cost of building nuclear reactors have made nuclear power projects "unworkable."  EDF appears to have been surprised by Constellation "unilateral decision to withdraw from the project.  EDF remains committed to pursuing new nuclear [power plants] in the U.S.

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 Company, which under state law can begin to recover costs while the plants are under construction. There are serious environmental justice issues at the proposed Vogle plant proposal in Georgia.  Unlike Georgia, Maryland regulations say that power plant construction costs can be passed through to customers only once the plant is operating.

Constellation and EDF, a major shareholder in Constellation, also have a major conflict over whether Constellation can force EDF to buy several older fossil fuel power plants for $2 billion.

Shares in Electricite de France SA slid as much as 1.5 percent to $43.43 on the Paris stock exchange on Monday after the French state-owned utility’s U.S. partner, Constellation Energy Group, pulled out of a project to build the first of a new generation of nuclear power plants in Maryland.  (Wash Post, 10/9/2010, The Daily Record, 10/11/2010))

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