A reprieve for Calvert Cliffs?

Our view: Constellation-EDF settlement keeps hopes for nuclear expansion alive, but lack of national energy policy still blocks new reactor

November 01, 2010

The agreement reached Tuesday between Constellation Energy Group and EDF Group giving the French company full ownership of a proposed expansion of the Calvert Cliffs nuclear plant may have kept the project alive — but perhaps only barely.

The episode certainly produced its share of international corporate drama, from Constellation's threat to exercise an option that would force EDF to buy the company's non-nuclear assets at an inflated price to EDF's effort to put a notorious shark (pardon, an aggressively inquisitive attorney) on Constellation's board. But in the end, Constellation got a big pot of money and EDF got Constellation's stake in the Unistar nuclear development company, and with it a foot in the door to any U.S. nuclear power revival — if the French company can find an appropriate U.S. partner.

What does it all mean for Maryland? In the immediate future, not much. EDF or no EDF, Calvert Cliffs 3 is not likely to move forward under current market conditions and current U.S. policy toward greenhouse gases. An argument for nuclear that touts its low price to generate power and low emissions is seriously undercut when electricity prices are falling and Congress can't pass an energy bill, or an administration can't offer more favorable loan guarantees.

But that's the short term, and a lot can happen in a year. It's was just 12 months ago last Saturday that the Maryland Public Service Commission approved EDF's investment in Constellation as a kind of bailout of its previous bailout from investor Warren Buffett.

Today, Constellation is on much more solid financial footing. Baltimore Gas and Electric Co. ratepayers are facing lower electricity bills, thanks to a glut in the natural gas market. Even if the economic recovery picks up steam, BGE is better positioned to respond than it was several years ago, thanks to planned power lines (the Potomac-Appalachian Transmission High-line or PATH through Western Maryland is expected to go on line next year), and other proposed smart grid upgrades.

Brownouts and blackouts simply aren't on the near horizon. And if a problem arises, a natural-gas-powered plant (like the one Constellation has already proposed at Perryman in Harford County) could be built in as little as 18 months.

But the bigger concern is longer term. As early as next year, the U.S. Environmental Protection Agency may be ordering states to reduce their output of greenhouse gases. Coal-fired power plants like those that generate much of Maryland's electricity supply are an obvious target. Natural gas may be cleaner burning, but it still produces carbon dioxide.

The next Congress might not support controversial cap and trade policies, but its members are also likely to be gridlocked, with fewer political moderates available to offer compromise. Whether conservative Republicans can force the EPA to back off (or whether a White House chastened by interim election results chooses to do so) is uncertain at best.

This much is clear: Climate change is too great an environmental threat not to take action, and nuclear power needs to be part of that solution. But a $10 billion project doesn't get done unless the market — and government — demand it. That leaves the fate of Calvert Cliffs 3 not just in the hands of EDF but in Washington's.

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