New U.S. chief for EDF has work cut out

November 29, 2010|By Jay Hancock

If politics are trending in favor of new American nuclear plants, economics aren't. Republicans who favor a nuclear expansion oppose the only methods likely to make it work: a carbon tax or a cap-and-trade scheme for permits to emit carbon dioxide.

In case EDF Group's decision to sink millions more into its American project didn't convince you that the French company is serious about building U.S. nuclear plants, the appointment of Eric Bret as its American chief just might.

Bret takes over in January as president of EDF Inc., the company's Chevy Chase-based U.S. unit, EDF said Monday. He was unavailable for an interview, a spokeswoman said. But he doesn't seem like the kind of guy you would appoint to a placeholder job. Or who would take one.

At 52, he's in the prime of his career, the deputy vice president of the generation fleet for EDF, France's huge, state-controlled electricity company. His American assignment: find a U.S. nuclear-development partner to replace Baltimore's Constellation Energy and revive the stalled attempt to build a third reactor at Calvert Cliffs on the Chesapeake.

Bret and the rest of the French might find reason to be optimistic. Nuclear energy is one area in which President Barack Obama has said he could cooperate with Republicans.

"There's been discussion about how we can restart our nuclear industry as a means of reducing our dependence on foreign oil and reducing greenhouse gases," Obama said after Republicans took control of the House in November elections. "Is that an area where we can move forward?"

Republican voters favor nuclear energy more strongly than Democrats, Gallup polls show. Promoting nuclear power was a key feature of the bill Republicans offered as an alternative to Democratic energy and climate-change legislation.

Building 45 reactors by 2030 was part of Arizona Sen. John McCain's goals when he was the Republican presidential nominee two years ago. Now that McCain has fended off challenges from the right to be re-elected, he could again push nuclear power as a partial solution to environmental challenges and energy dependence.

Republican Sens. Lamar Alexander of Tennessee and Lindsey Graham of South Carolina are both nuclear energy fans, as is incoming House Speaker John Boehner of Ohio.

It's conceivable that bipartisan momentum for nuclear energy could revive the Calvert Cliffs project, which suffered a huge setback after Constellation pulled out in October. The $10 billion enterprise hinged on federal loan guarantees that Constellation argued were too expensive.

Here's a fantasy scenario for how the project gets revived: Republicans and Democrats agree on overhauling the loan-guarantee program. EDF, with the keen political sense that comes from answering to government owners, signs Exelon Corp. as its new U.S. partner.

The largest U.S. operator of nuclear power plants, Chicago-based Exelon has made big deposits in the Obama favor bank. Exelon executives and other employees were among Obama's biggest supporters before the 2008 election. Maybe — maybe — an EDF-Exelon partnership and politically greased, sweetened loan guarantee could recharge the Calvert Cliffs project.

But if the politics are trending in favor of new American nuclear plants, the economics aren't.

The Republicans who favor a nuclear expansion oppose the only methods likely to make it work: a carbon tax or a cap-and-trade scheme for permits to emit carbon dioxide. Fossil fuels are still so abundant that new nuclear reactors are likely to be money-losers unless oil, coal and natural gas are penalized for their contributions to climate change.

Alexander has said he might be open to a cap-and-trade regime that included only electricity plants, according to Congressional Quarterly. (This might be similar to the Regional Greenhouse Gas Initiative, a weak cap-and-trade scheme for power plants in Maryland and nine other states.)

But that's a long shot, even in a lame-duck session of Congress. Given the dozens of new Republican representatives who not only oppose carbon penalties but question the widely accepted existence of human-caused climate change, it's out of the question next year.

Even Exelon doesn't have the political influence to make new nuclear plants viable without a carbon penalty. Exelon boss John Rowe has said new nuclear plants are uneconomical unless carbon emissions cost $25 a ton and natural gas gets much more expensive. Even if EDF, parent of Electricite de France, connects with Exelon or some other partner, building a reactor in a regulated market with guaranteed revenues may look much more attractive than a project in deregulated Maryland.

EDF looks serious about its American foray. But even Henri Proglio, the company's chairman and CEO, and Eric Bret's boss, seems to be hedging his bets. "To say we have an unconditional American dream would be a tad too much," Proglio told The Wall Street Journal last week. "Of course we would like to be a proper nuclear power operator there … but it won't be our top priority."

jay.hancock@baltsun.com

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