Rising steel prices and interest rates could push the cost of the NuScale Utah project to $100/MWh, but support remains
- Rising steel prices and interest rates are driving up the projected cost of power for the 462 MW small modular reactor project planned by Utah Associated Municipal Power Systems, several municipal utilities reported.
- Previous cost estimates called for the project to generate electricity at a price of $58/MWh, but at least one municipal utility said project developers told it prices could range from $90/MWh. MWh at $100/MWh. The Utah project consists of half a dozen 77 MW reactors, developed by NuScale, with the first expected to come online in 2029.
- The price hike likely means the UAMPS project will miss certain engineering, procurement and construction criteria allowing participants to renegotiate the price they pay or abandon the project, experts said.
Overview of the dive:
Of the 48 UAMPS members, 27 have signed on to buy power from the Carbon-Free Advanced Nuclear Power Project, or CFPP, as the Utah project is known. In recent months, these municipal electricity providers have learned costs are likely to increase.
“It was like a punch in the gut when they told us,” Scott Hughes, electrical manager for Hurricane City Power, said at the Oct. 5 board meeting.
The Idaho Falls Electricity Board discussed price increases at its October meeting, according to its minutes, and City of Washington Department of Electricity Director Rick Hansen , told its board on Nov. 1 that the project would “probably fail” the economic competitiveness test.
Costs above $58/MWh could allow participating utilities to drop or renegotiate the terms of the CFPP.
Hughes told the Hurricane City Power Board that the new cost projections take into account about 30% savings from the Cut Inflation Act, which includes billions in tax credits to support energy projects. ‘clean energy. Otherwise, the cost of the project could be $120/MWh, he said.
But with the project’s start date seven years away, material costs and interest rates could come down, Hughes added.
“The next question is what are we going to do instead?” He asked. “Or if the project fails, what are we going to do? There are not many options.
If other cities pull away, the project “could fail anyway,” Hughes said.
“They didn’t say 100%, but it’s most likely going to cause the [enginnering, procurement and construction] failure contract, which gives us a way out,” he said.
UAMPS spokesperson LaVarr Webb said the developer is reviewing all project costs. Final figures are not yet known, but the costs of the project have increased, mainly due to inflation and rising interest rates, he said.
UAMPS is considering ways to reduce project costs and reduce risk to participating members, Webb said. The project remains on schedule to begin construction in 2026 with initial power generation three years later, he said.
Webb said prices are rising for all energy projects. At their October meeting, members of the Hurricane City Power Board discussed further project price increases and whether $100/MWh would still be a good price for CFPP power. Chairman of the board, Mac Hall, said he would be prepared to pay the increased costs because of the guaranteed distributable energy he would provide.
At the November board meeting, Hughes said it appeared support for the project remained steady among attendees and some previous attendees had shown renewed interest.
Webb said project participants “will likely have the option of exiting the project” after cost estimates are finalized.
Of the 462 MW, the NuScaleName should produce, 116 MW have been subscribed by UAMP members, Webb said. “UAMP works with outside utilities to take the balance. Productive discussions are underway with a number of utilities,” he said.
Pricing estimates for CFPP have varied, according to Scott Williams, nuclear policy analyst at HEAL Utah, who opposed the CFPP project. Initial cost estimates were $65/MWh and were lowered to $55/MWh before rising slightly when some project developers abandoned the project, he said.
Last chance to leave
The last chance for project participants to abandon CFPP is likely to be 2024, according to the Nuclear Regulatory Commission’s review of the project, Williams said.
“If the participants don’t take that off-ramp, they’re locked in and whatever happens to the cost of building after that, you know, then they’re in it, like Vogtle and Summer in the Southeast,” said Williams, referring to the development of two new nuclear reactors that each went billions over budget. The South Carolina summer project was eventually canceled.
If the CFPP project isn’t able to attract more subscribers and costs continue to rise, Williams said, “there comes a time when … the project won’t be awarded to a bondholder “.
The CFPP project could be in trouble if it can’t attract new customers, especially as there is talk of cutting federal support, said Edwin Lyman, director of nuclear power safety at the Union of Concerned Scientists. “I think it will all depend on what Congress does, if they’re willing to bail out the project, if more customers drop out,” he said.
The Department of Energy in 2020 approved a multi-year cost-share award of approximately $1.4 billion to help demonstrate NuScale reactors at the Idaho National Laboratory. Funding that must go through an annual appropriations process in Congress may have run into a problem in the Senate this year.
“There is a Senate bill that appears to be diverting some of NuScale’s funding,” Cowen analyst Marc Bianchi noted during NuScale’s third-quarter earnings call on Monday.
“We are currently working on both sides of the Hill on credits to continue to secure and then to ensure that this technology in our project at CFPP progresses,” said NuScale President and CEO John Hopkins. “The feedback we’re getting from both sides of the Hill is very positive, so we’ll see what the end result will be. But we are working diligently on it, as we do every year.
CORRECTION: We clarified in the second point that the developers of the carbon-free energy project provided the new energy cost estimates to the project participants.