NEW YORK (Standard & Poor’s) Feb. 15, 2012–The issuance of a combined construction and operating license to Georgia Power Co. could mean that the first new nuclear power units will be built in the U.S. for the first time in decades, according to a report published today by Standard & Poor’s Ratings Services titled “The U.S. Nuclear Power Industry Takes A Giant Leap Forward.”
Electric utility industry observers have been watching these developments with interest to see whether other utilitieswill follow suit–leading to a “nuclear renaissance” in the U.S. However, market conditions indicate that the likelihood of such a rebirth is faint at this time. The economic slowdown that started in 2008 significantly reduced demand for electricity,and there are no signs that the economy will surge back anytime soon.
Moreover, consistently low natural gas prices have caused other utilities that were considering nuclear plant construction to either postpone or cancel their plans and pursuegas-fired generation, where needed. Still, a number of utilities, including Progress Energy Inc. and Duke Energy Corp., are pursuing COLs for new nuclear plants, even if they do not intend to start construction in the near to intermediate term, sinceonce a utility obtains a COL, it can hold on to it for up to 20 years.
“In our opinion, the current market conditions combined with nuclear projects’ long planning and construction timelines will prevent the construction of additional new units until at least the end of this decade,” said Standard & Poor’s credit analyst Dimitri Nikas.
Now that Georgia Power has received the go-ahead to begin full construction of its new nuclear units, all industry participants will likely keep a very close eyeon how well the actual nuclear construction proceeds and whether the plants are built on budget and on schedule. And we think the likely hiatus before the next round of new construction may actually benefit the nuclear power industry. As Georgia Powerand South Carolina Electric & Gas demonstrate the feasibility of building the first new nuclear power plants in more than 30 years, other utilities will be able to learn from them while using the time to help shape their own regulatory frameworks tosupport such projects. Therefore, while this first giant leap forward is critical, it appears to be the first of many more that electric utilities will need to take before a true nuclear rebirth takes hold.
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