The True Cost of Delays

Historically, a major challenge facing the nuclear power industry in the United States and worldwide has been construction delays, which have created massive cost overruns, thereby limiting the economic competitiveness of nuclear plants. In late December 2016, Toshiba, the owner of Westinghouse Electric Company, announced that it would write down the value of its nuclear operations by several billion dollars in the current fiscal year ending March 2017. (Toshiba was to release the exact number for accounting charges in February; see stories in International, p. 66, and Late News, page 17.) The announced preview of the write-down prompted a 20 percent drop in Toshiba's stock price in a single day. The company's announcement is an indication that after 60 years of experience, the commercial nuclear power industry is struggling to establish a construction model that works.

The U.S. nuclear power industry grew out of the Atomic Energy Act of 1954, which encouraged private corporations to build nuclear reactors, and the passage of the Price Anderson Act in 1957 limited the potential liability for nuclear power plant owners, further encouraging private industry participation. In the earliest days of the industry, there was widespread participation by companies in reactor research, design, and construction. With the prospect of low-cost, environmentally clean power generation from nuclear plants, utility companies jumped on the bandwagon. The lesson learned over the last 60 years is that building and operating nuclear power plants is more difficult and more expensive than it looks.

Because of their size and complexity, nuclear power plants are expensive and take a long time to build. Extensive regulatory oversight adds to the cost and complexity. As the industry evolved, it became obvious that small to mid-size utilities did not have the management skills or the financial risk tolerance to construct nuclear plants. A large number of companies have sustained significant financial losses related to the construction and operation of nuclear power plants, and as a result, the U.S. nuclear industry has been consolidated into a few major players that are still committed to the industry.

In spite of the nuclear industry's somewhat tumultuous history, nuclear power plants still generate almost 20 percent of the United States' electricity. As a large-scale source of carbon-free electricity, nuclear remains an attractive technology if the industry can just figure out how to control the construction schedule and process. The Toshiba write-down is a reminder that the problem has not yet been solved.

This above is an excerpt from an article that appears in the Power section of 
the March 2017 issue of Nuclear News. The complete article begins on page 20;
members can also access it at click on Member Center; log in with your e-mail 
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Linda C. Byus is a Chartered Financial Analyst and currently runs her own business, BYI Consulting, established in 2004. As a consultant, she provides feedback to utilities' senior management regarding industry trends and investor concerns as a basis for their strategic discussions and planning.