Getting the Money for New Nuclear

nuclear_plant PEPWR

An exciting announcement was made during the Department of Energy (DOE) Nuclear Loan Guarantee Program panel discussion for Nuclear Power International Wednesday afternoon.

Peter Davidson with the U.S. Department of Energy’s Loan Programs Office (LPO) informed attendees that, just a few hours earlier, DOE Secretary Ernest Moniz issued the Advanced Nuclear Energy Projects loan guarantee solicitation. This program provides as much as $12.5 billion to support innovative nuclear projects as part of the administration’s “all-of-the-above” energy strategy.

The first deadline for applications is March 18, 2015, but there will be rolling deadlines approximately every six months.

Davidson explained that close to $30 billion in loans have made through the LPO since 2009, for more than 30 projects. The program provides a senior debt tool designed to fill the commercial deployment funding gap, which falls between a pilot demonstration project and full deployment/commercial maturity. Loans can be as long as 30 years, and the interest rate is based on the U.S. Treasury rate plus a credit-based spread. The outside party developing the project has to put in equity of at least 20 percent.

The LPO-financed project of most interest to the session audience was the Vogtle nuclear facility in Georgia, which will gain two reactors with a combined capacity of 2,200 MW. State utility regulators unanimously approved Georgia Power’s expenditure of $389 million on this expansion in August 2014. The complete project is expected to cost $14 billion, and DOE’s LPO has provided a $8.33 billion loan for the project.

Vogtle is particularly significant in that it is the location of the first new nuclear reactors being installed in the U.S. in the past 30 years, said panelist Douglas Schultz with DOE’s Loan Guarantee Origination program. And the loan is actually structured as three different loans, to project development partners Georgia Power, Oglethorpe Power, and MEAG Power.

The nuclear solicitation is particularly timely. Nuclear facilities account for about 60 percent of all clean energy produced in the U.S., Davidson says. In addition, there is a wave of impending retirements coming in the U.S. nuclear fleet, and nuclear fits neatly into President Barack Obama’s Climate Action Plan, designed to cut carbon pollution by 2020.

Markus Popo, another panelist for DOE’s LPO, enumerated the four project areas included in the nuclear solicitation:

·       Project Area 1: Large Advanced Reactor Projects

·       Project Area 2: Small Modular Reactors

·       Project Area 3: Uprating/Upgrading at Existing Reactors

·       Project Area 4: Front-End Nuclear Fuel Cycle Projects

What criteria do interested nuclear developers need in order to qualify for the program?

·       Innovative technology (one or more meaningful and important improvements in the productivity or value of the technology in comparison to commercial technologies in use in the U.S. at the time)

·       Greenhouse gas benefits

·       Located in the U.S.

·       Reasonable prospect of repayment

Uniquely, a design license is not required for the LPO to give a conditional financing commitment, Schultz said. Developers just have to be in the process of getting a design license. The program also can work through a lot of different financing structures and can even act as co-lender on a project with private lenders.

Earl Long with Southern Company was also on hand to lend his perspective and lessons learned from working with the LPO on the Vogtle plant. He says the Vogtle units have an expected life of 60 years, but that is likely to get extended to 80 or more years. Long also emphasized the importance of taking a long-term view and recognizing that the only way you are going to get a nuclear project of this size and scope financed is in the regulated market.

 

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