NEW YORK--(BUSINESS WIRE)--Fitch believes the Tennessee Valley Authority's (TVA) agreement with Babcock & Wilcox (B&W) to develop the first small modular nuclear reactor in the U.S. could eventually provide affordable access to an alternative to gas-fired generation for public and cooperative power providers. The joint effort between TVA and B&W will include remaining design work, preparation of a license application for Nuclear Regulatory Commission (NRC) review, as well as an evaluation of TVA's Clinch River site in Oak Ridge, TN. The U.S. Department of Energy is expected to fund nearly 50% of the total cost of design and licensing which could approach $900 million pursuant to a pending agreement. TVA and B&W would fund the remaining costs.
TVA expects to submit the license application in 2015. In our view, the licensing process should benefit from the NRC's approval last year of the construction and operating licenses for new nuclear plants at the Summer and Vogtle sites. However, delays related to both regulatory approval and implementation are possible, and the political risk to nuclear projects is always high. Commercial operation is not expected before 2022.
Although the near-term economics of nuclear development are questionable, if the resulting design is approved and can be replicated, we believe that it would provide a valuable long-term option for public power and cooperative issuers. These units are likely to be more costly per megawatt of capacity than larger designs, but they will require a much lower investment overall as they will be approximately one-sixth the size and would not require significant incremental research and design funding. This would make them a viable resource option for small to midsize utilities, particularly those that are remotely located with no access to high voltage transmission.
Additional information is available on www.fitchratings.com.
The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.