UniStar Nuclear Energy, a joint venture led by Baltimore-based Constellation Energy Group, moved a step closer to building several new nuclear reactors yesterday with the signing of a deal with Pennsylvania's second-largest utility owner.
PPL Corp. has asked UniStar to prepare a license application for a reactor to be built near Berwick, Pa. The application will be filed with the U.S. Nuclear Regulatory Commission by the end of next year. Though electricity from the project wouldn't come to Maryland, it would help bolster the regional power grid.
The deal marks an important milestone for UniStar in its quest to lead a revival of the long-dormant U.S. nuclear industry. Allentown, Pa.-based PPL becomes the fourth power company to align with UniStar - the number company officials said they needed to make the financial case to move ahead with the projects. The others are AmerenUE, Alternate Energy Holdings Inc. and Amarillo Power.
Two additional reactors are being considered by Constellation - one at its Calvert Cliffs nuclear station in Lusby and the other at its Nine Mile Point facility near Oswego, N.Y. The Calvert Cliffs plant would be built adjacent to two existing reactors. Without PPL and the others joining UniStar to help spread costs, it's likely the Calvert Cliffs plant would never be built.
"We're very certain we will have at least four that will go forward ... and make our business model more certain," said George Vanderheyden, president of Baltimore-based UniStar.
UniStar's business model calls for building a number of reactors based on the same design, right down to the wallpaper and carpeting. The standardization is expected to streamline the licensing process and allow UniStar to buy heavy steel forgings and power generators in bulk. Lowering the price is critical given the difficulty in financing new nuclear plants, each of which is expected to cost $4 billion or more.
UniStar is a joint venture between Constellation and Electricite de France SA, Europe's biggest power producer.
The company is marketing the U.S. version of a 1,600-megawatt reactor designed by Areva SA of France, the world's largest nuclear-plant builder. One megawatt is roughly enough to power 1,000 typical homes.
Proponents contend nuclear power plants could play a critical role in alleviating a projected energy shortfall in Maryland, while also helping to lower electricity rates. In a recent report to lawmakers, consultants hired by the state Public Service Commission concluded that a new reactor at Calvert Cliffs would benefit consumers by injecting a major source of low-cost electricity into the grid. However, the report projected that a new reactor wouldn't be in service until 2017 - long after the state is expected to run short of power.
The PPL deal came a day after UniStar was buoyed when Congress passed a budget bill that provided $18.5 billion for loan guarantees to support development of new nuclear plants. Constellation has said the guarantees are essential in order to finance its proposed projects. That view has been supported by Wall Street bankers, who remember the high-profile losses and bankruptcies the industry suffered in the late 1970s and early 1980s.
"That certainly is going to provide a confidence booster to Wall Street ... that they can move ahead and kick-start the industry with these first new plants," said Mitchell Singer, a spokesman for the Nuclear Energy Institute, an industry trade group.
UniStar is expected to file a completed license application for the proposed Calvert Cliffs project by March. It filed a partial application in July. Four other companies - Tennessee Valley Authority, Dominion Resources Inc., Duke Energy Corp. and NRG Energy Inc. - have filed completed applications with the NRC.
UniStar and the others are in a race to be among the first so they can take advantage of federal tax breaks and the loan guarantees provided in the 2005 energy bill. Neither Constellation nor any of the other companies working with UniStar has committed to building a reactor. But Vanderheyden said a decision could come within a year or two now that Congress is making progress on the issue of loan guarantees.
The proposed PPL reactor would be built near the company's existing Susquehanna nuclear power plant.
William Spence, PPL's chief operating officer, said the company would not build the plant without finding a partner. Vanderheyden said UniStar may be interested in taking partial ownership of the plant. Industry experts say such arrangements are common because few companies can afford to risk so much money on a single project.
"I think in reality this is probably a good prototype of what these arrangements will tend to look like," said Roger Gale, an industry consultant based in Washington. "It's a way to spread that risk ... and get the project rolling."