Fitch: US Nuclear Power Growth Prospects Uncertain

NEW YORK--()--The recent failure of modular construction to deliver lower prices and shorter timelines will likely keep a cap on U.S. nuclear development into the mid term, Fitch Ratings says. However, the U.S. Environmental Protection Agency's Clean Power Plan, along with the rise in federally funded nuclear power research, could yield growth factors longer term.

The total cost to complete the Vogtle nuclear power plant expansion has risen to approximately $14.5 billion. Similarly, construction costs for the new units at the V.C. Summer plant have risen to approximately $12.4 billion. Both projects are approximately three years behind schedule. They are using a modular construction technique and technology developed by Westinghouse, the AP1000 PWR, which was designed to be less costly and faster. Four AP 1,000 reactors under construction in China have also experienced cost overruns and delays. In our view, the change in expectations about this technique could join other forces in keeping expansion down.

Last year, the U.S. Energy Information Administration forecast that nuclear generation will drop by approximately 10,800 MWe by 2020 on the low cost of natural gas and an expected lack of growth in electricity demand. In our view this number could grow if more plant operators find upgrades and local political pressure too costly to continue operations.

These pressures shut Dominion Resources' Kewaunee plant, Duke Energy Corp.'s Crystal River plant, Edison International's San Onofre plant, and Entergy's Vermont Yankee plant. Exelon's Oyster Creek is scheduled for retirement in 2019. Approximately eight additional merchant units, with an aggregate capacity of 6,334 MW, are also at risk of early retirement.

By comparison only five new units are currently under construction and a license has been issued for one other, according to a report published last month by the Nuclear Energy Institute. Although a further 10 units are under active Nuclear Regulatory Commission review, their status remains uncertain. Plant age could also play a role in preserving current generation. Of the 99 nuclear units in operation, 73 have received 20-year license extensions beyond their original 40-year operating licenses. An additional 19 applications for license extension are pending and the remaining units are likely to be filed over the next several years.

However, several federal government initiatives could reverse these pressures. One was issued this month. The U.S. Environmental Protection Agency's Clean Power Plan credits new nuclear power plants and upgrades to existing ones towards compliance. Various Department of Energy loan programs also provide inexpensive funding and liquidity. U.S. Energy Information Administration estimates that energy subsidies and research support have been in the billions, annually. In our view, these measures could slow the decline in nuclear power generation if they are continued for the long run.

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.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contacts

Fitch Ratings
Dennis Pidherny
Managing Director
U.S. Public Finance
+1 212 908-0738
or
Shalini Mahajan
Managing Director
Corporate Finance
+1 212 908-0351
or
Rob Rowan
Senior Director
Fitch Wire
+1 212 908-9159
or
Media Relations:
Alyssa Castelli, New York, +1 212-908-0540
Email: alyssa.castelli@fitchratings.com

Contacts

Fitch Ratings
Dennis Pidherny
Managing Director
U.S. Public Finance
+1 212 908-0738
or
Shalini Mahajan
Managing Director
Corporate Finance
+1 212 908-0351
or
Rob Rowan
Senior Director
Fitch Wire
+1 212 908-9159
or
Media Relations:
Alyssa Castelli, New York, +1 212-908-0540
Email: alyssa.castelli@fitchratings.com