Flynn's Harp: Puget Energy CEO thoughts on nuclear power (2-24-10)

Although President Obama’s decision to offer federal loan guarantees to jump-start new nuclear-power plants is a step welcomed by the utilities industry, the CEO of Washington State’s largest utility doesn’t anticipate any new plants being considered in his region in the foreseeable future.

In fact, Steve Reynolds, president and CEO of Puget Energy and its subsidiary, Puget Sound Energy, suggests that any new plants will likely be built “where there are already existing plants, where communities are already accustomed to having a nuclear plant in operation.”

I was prompted to telephone Reynolds for his current thoughts on nuclear power after President Obama’s announcement of $8.3 billion in loan guarantees for two large nuclear power reactors in Georgia. That was a move basically seen as the first step in committing the nation to a nuclear future.

That announcement by the President followed his call in the State of the Union address last month for a “new generation of clean nuclear plants” with billions of new dollars in the budget to guarantee loans for such plants.

“People I know in the industry who are ready to propose new nuclear plants are planning them where they already have an existing site,” Reynolds added. “Where we see a new one, it’ll be where there already is one.”

 In fact, the two new reactors in Georgia would be units 3 and 4 at an existing Southern Co. nuclear plant.

While the interview with Reynolds was about the business implications of Obama’s announcement, it’s impossible to overlook the political implications.

“Would it be accurate to suggest,” I asked Reynolds, “that just as only Nixon, as a Republican president, could have opened the door to China, only Obama, a Democrat, could open the door to nuclear?”

Reynolds chuckled and replied, “that’s probably pretty close. George Bush could never have come out so strongly.”

The President’s embrace of nuclear power, giving it new life for the first time in three decades in this country, amounted to a willingness to confront the anti-nuclear litmus test of the liberal wing of his party in order to move the country toward new-energy policies. He has taken the politics out of nuclear power.

Thus some observers would suggest it’s now the turn of Republican leadership to take the politics out of climate change, seizing the opportunity to demonstrate their own statesmanship with a willingness to confront the litmus test of the GOP’s conservative wing on that issue.

“For the last five years, the industry has known that nuclear needed to be considered,” Reynolds said, but added that no publicly traded energy company wanted to be visible raising the issue.

“We’re talking about it today primarily because of the growing recognition that we need to do something about carbon in the atmosphere,” he said. “I think you’ll see five or six proposals for new nuclear facilities emerge over the next two years.”

But don’t look for Puget’s name to pop up as one of the utilities looking to nuclear, despite the deep pockets of its new owners, long-term global investors Macquarie which owns PSE as Puget Holdings LLC.

Nuclear in Washington State is synonymous in the public’s mind with the Hanford Nuclear Reservation, where the U.S. Department of Energy is engaged in the world’s largest nuclear-site cleanup, and WPPSS, the $2.5 billion default on grand plan in the 1970s and 1980s to build five nuclear plants in the Pacific Northwest.

Jerry Henry, who in the role of Senior Advisor to the Chairman was basically Reynolds number two until his retirement last year, suggests that “the benefit of a government guarantee is that it will give utilities a chance to say ‘if government is willing to go ahead then it’s okay for us to begin talking about this.’”

In addition, analysts have long made the point that Wall Street investors aren’t going to loan electric companies the money to build new nuclear plants, which can cost $12 billion and up, unless Uncle Sam guarantees the loans.

Along with the opportunity for nuclear that Obama’s loan-guarantee commitment brings is the emergence of dramatically smaller and less expensive nuclear plants. Some in the industry are suggesting that the facilities might be modular and as small as a railroad boxcar with a cost about one-tenth of a conventional plant.

But Reynolds points out that the Nuclear Regulatory Commission, which is the key step in the Federal portion of the approval process, “is not in a position to expeditiously approve any non-traditional nuclear plants.”

Both Reynolds and Henry, who is now a consultant for energy companies, cautioned that the issue of nuclear waste remains a formidable problem.

“It’s a huge issue and it’s still out there,” Reynolds said. “There’s now no place to store nuclear waste except on the site of the nuclear facilities. Half the security required at a facility is to protect the spent stuff.”

But Henry said the solution to the storage problem is vital because “without nuclear, there’s not enough renewable energy to begin to address the issue of reducing greenhouse gases.”

But even cheaper more efficient plants are not likely in this area’s future, Henry agreed. “Getting public acceptance is the same issue it always was, in terms of the permitting process,” he said. “And if we can’t get a viaduct or a bridge built in Seattle without a huge permitting battle, can you imagine trying to build a nuclear plant?”