Mark Peters recently wrote an article in the Wall Street Journal about a nuclear project that has run into some trouble. Constellation Energy Group Inc. was going to build a reactor in Calvert County, Maryland, but it recently exited a government program that would guarantee funds for the project. This project was going to be a joint venture between Constellation and Electricite de France SA. However, Constellation claims that the government’s terms are unrealistic, making the project impossible at this point. The federal government demanded $880 million up front from Constellation, in case of a default on the loan. This large request essentially made the project “uneconomic,” according to Constellation (WSJ). This however, is not the only issue in this project. There have been disputes between Constellation and the French company as well. They are arguing a clause in the contract and whether or not EDF is stipulated to buy 12 power plants from Constellation (WSJ). This government problem is just another, larger bump in the road.
All the sides are pushing blame on each other in this dispute. Electricite de France SA is frustrated with Constellation and Constellation is frustrated with both Electricite de France SA and the federal government. They complained in a letter to the Department of Energy that the $880 million in fees came from a “flawed approach that the White House Office of Management and Budget has taken” (WSJ). They claim that the fees could end the project altogether. The government claims that this program is in place to provide affordable financing. There has only been one other grant under this project that went a company in Georgia (WSJ). Now competition remains between other companies and other sites.
This is a tricky article to judge. There is one quotation that brings in what I have said about natural gas, but not about nuclear: “The economics of building multibillion-dollar nuclear reactors have deteriorated with a sharp drop in the price of natural gas… and a pullback in electricity demand during the recession” (WSJ). I have not thought about the correlation between nuclear and natural gas, but it makes sense. One issue that this quotation brings out is the focus of the energy industry. Clearly it is still focused on cheaper fuel like natural gas, not a more expensive cleaner alternative, whether that is nuclear, solar, or wind. I would not necessarily disagree with this approach because raising prices would drastically affect the market. However, at some point, we will have to sacrifice prices for environmentalism.
Peters, Mark. "Constellation Energy Nuclear Project Snags." Wall Street Journal (2010): n. pag. Web. 12 Oct 2010.
This is quite the issue, especially with three different entities involved. It is a shame because a project like this would generate a lot of jobs and profit but your completely right about the correlation between nuclear energy and natural gas. If there was only one other project done under this program then the companies have very little room to blame the government. This now leaves a big chance up for grabs for some companies that might be able to afford the project so it will be interesting to see how it plays out.
ReplyDeleteIt is just a shame that with the proposed aid to nuclear programs that there is such a hassle with regulatory hurdles and deal making issues. I suppose that would be politics, though.
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