$1.355 billion awarded to Carbon Free Power Project, but will local municipalities still be on the hook?

ST. GEORGE — The U.S. Department of Energy has approved a multiyear cost-share award of $1.355 billion to the Carbon Free Power Project for the development and construction of a 720 megawatts electric NuScale power plant, which will be the first NuScale small modular nuclear reactor project in the United States.

The Carbon Free Power Project is a special purpose entity owned by Utah Associated Municipal Power Systems, more commonly known as UAMPS. The power plant will be located at the department’s Idaho National Laboratory site near Idaho Falls.

Washington County municipalities participating in this project include Washington, Enterprise, Hurricane and Santa Clara, while Parowan and Paragonah will be participating in Iron County.

LaVarr Webb, a spokesperson for UAMPS, told St. George News that the first module will be ready in 2029, and the rest will be set in 2030, with full operations in 10 years. How this will affect the price of energy for residents is not “precisely determined,” he said, but it’s expected that the public power agencies will continue having affordable electric prices for their rate-payers.

Webb said UAMPS is projecting that the price of the electricity provided by the Carbon Free Power Project will be “the same as the price of a natural gas plan,” especially when blended with the price of intermittent sources, such as wind and solar.

This type of project is much different than the larger nuclear power plants.

“These nuclear modules will be built by NuScale in a factory, located in Oregon, and then shipped on a truck to the Idaho site, where they will then be put underground in a pool of water.”

A total of 12 modules will make up the plant, he said, adding that each reactor module is about one-seventh the size of a regular reactor.

“They will be much safer, more affordable, and it represents a new generation of nuclear,” Webb said, “and really that’s why the DOE (U.S. Department of Energy) is supporting this project because the DOE wants to see America begin a new generation of nuclear energy because it is carbon free and will help climate change.”

While nuclear energy is not classified as renewable, it is classified as clean because it does not emit carbon or pollution. Additionally, unlike wind or solar energy, nuclear energy provides capacity. The 12 small modular reactors in the project will provide the flexibility to ramp up and down as needed to follow load and complement intermittent renewable supply.

Cross Section of NuScale Reactor Module | Image courtesy of UAMPS, St. George News

Dave Imlay, director of the power department for Hurricane City, told St. George News that once implemented, this project will provide an estimated 52% of their total energy needs. The energy will come down existing transmission lines, so no new construction is needed.

Imlay said they have been comparing the cost difference between a natural gas power plant to the cost of a nuclear power plant to provide the most cost-efficient energy possible to residents.

“It’s virtually impossible to build a coal fire power plant at this time, and natural gas is still available and still available to build, but there is environmental risk that comes with that.”

Imlay echoed Webb’s comments that they don’t yet know how this will affect the cost for residents.

“Whether it’s going to be extremely inexpensive or extremely expensive, you’re looking into a crystal ball 10 years out,” he said. “And the forecast is that power prices will be high, and capacity especially will be high.”

In order to move forward with this project, Imlay said UAMPS has a cost per megawatt hour that the project must fall under.

“That price target is what a natural gas power generating plant would cost per megawatt hour,” he said, adding that if the Carbon Free Power Project can’t meet the price target, “UAMPS may decide to build a natural gas generating plant instead.”

Hurricane signed to become a participant of the project in September 2015 at a 5,000-kilowatt level and signed a power sales contract for 5,000 KW in March 2018. Since then, Hurricane has increased its participation to 14,122 KW, Imlay said.

Nuclear energy from the project will be one of many energy resources in Hurricane’s portfolio to supply energy needs for the city.

According to a recent press release issued by UAMPS, this $1.355 billion award, allocated over 10 years, is characterized as a “funding vehicle” to advance the project as funds are appropriated by Congress.

Artistic rendering of NuScale reactor Module comparative size | Image courtesy of UAMPS, St. George News

“This will help ensure that the levelized cost of energy target price of $55 MWh can be achieved at a level of risk UAMPS can manage,” the release stated.

That price makes the Carbon Free Power Project competitive with other nonintermittent dispatchable energy sources like combined cycle natural gas plants – but without greenhouse gas emissions. It will ensure long-term affordable energy to UAMPS member participants while avoiding exposure to greenhouse regulation and compliance costs.

The award also demonstrates the U.S. Department of Energy’s commitment to accelerate the decarbonization of electrical generation nationwide and globally, the release stated, and to support stable, carbon-free electrical supply to complement intermittent renewable energy.

The release continued to say that energy from the project will replace electric generation from coal plants that are nearing the end of their life cycles. Combined with UAMPS renewable projects, this project will enable many members to completely decarbonize their energy portfolios.

Douglas Hunter, UAMPS CEO and general manager, acknowledged his appreciation for the “tremendous vote of confidence” for the project.

“It is entirely appropriate for DOE to help de-risk this first-of-a-kind, next-generation nuclear project,” Hunter said in the press release. “This is a great example of a partnership with DOE to lower the cost of introduction of transformative advanced nuclear technology that will provide affordable, carbon-free electricity all over the country and the world. This project is much bigger than UAMPS itself.”

Hunter said UAMPS members are especially supportive of the project because it will complement and enable additional intermittent renewable energy, especially wind and solar, that are being added to member energy portfolios.

“The ideal world for utility companies and their customers, and the most cost-effective, are portfolios containing a high percentage of low-cost renewables, backed up by stable, carbon-free nuclear energy that is available 24 hours a day, 365 days a year.”

Taxpayers Association says funds are ‘not guaranteed’

A press release was issued Tuesday by the Utah Taxpayers Association regarding the Department of Energy award of $1.355 billion. The association said this does not change the projected costs or risks for cities that remain in the small modular nuclear reactor program.

“DOE’s announcement only says that they ‘could’ provide these funds but they are not guaranteed,” the statement said. “It would be subject to congressional appropriations from year to year. And UAMPS would have to spend the money first and hope that DOE will be able and willing to reimburse them.”

The association went on to say that the news of the award should not prevent more cities from withdrawing from the project, just as Logan, Lehi and Kaysville – which made up approximately 16% of the subscriptions – had previously done. The budget for this project has ballooned from $3.6 billion in 2017 to now more than $6.1 billion.

Even if the award from the department were to materialize in full, the statement continued, UAMPS member cities will still be on the hook for more than $4.7 billion under current project budget estimates, which are likely to continue to increase.

The association said they do not believe municipal power companies should be taking the financial risk that is built into this project by essentially acting as venture capital investors bearing the risk of cost overruns and delays. The potential risks far outweigh the benefits.

“If small modular reactor power produced carbon-free power at a competitive cost in the future, private industry would bear the risk to develop it. Municipal power companies could instead look to purchase power from such a project upon its completion without acting as a seed investor.”

According to the association’s statement, the best case scenario for participating cities is that they will someday – estimated to be after 2029 – get market rate power. The worst case scenario is a commitment at the next three phases of $19.9 million, $658.4 million and then $4.7 billion that could leave ratepayers and possibly even taxpayers of these municipalities holding the bag.

Subscription levels to the project have reportedly been a key indicator of the projects’ appeal and potential success or failure. The statement cites the stagnant level of subscriptions at only 30% – where it has remained for quite some time – saying it is a clear indication of why the project’s risks are too high and why cities should withdraw.

On Tuesday, the Murray City Council held a public hearing, and the council voted unanimously to withdraw from the project, becoming the fourth Utah city to do so this fall, joining Logan, Lehi and Kaysville.

Remaining cities have until Oct. 30 to withdraw. Otherwise, the next phase of the project begins, and cities that do not actively withdraw are automatically committed to significantly larger financial obligations, according to the statement.

“If this technology is as promising as is claimed, private investors or major utilities with much deeper pockets will support its development and these small Utah cities and towns can buy the power after the technology scales up and is market competitive.”

The Utah Taxpayers Association asserts that they have no position on nuclear power. Rather, their stated concerns revolve around the history of financial failures of similar power projects and the financial risk to ratepayers and taxpayers.

The complete list of Utah municipalities participating in the Carbon Free Power Project include: Beaver City, Blanding, Bountiful, Brigham City, Enterprise, Ephraim City, Fairview City, Fillmore City, Heber City Light & Power, Holden Town, Hurricane City, Hyrum City, Kanosh Town, Monroe City, Morgan City, Mt. Pleasant City, Murray City, Oak City, Paragonah Town, Parowan, Payson City, Santa Clara City, South Utah Valley Electric Service District, Spring City, Washington City and Weber Basin Conservancy District

Copyright St. George News, SaintGeorgeUtah.com LLC, 2020, all rights reserved.

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