Bay City, Texas, complex will add 2,500 MW. (Photo courtesy of South Texas Project )

A New Jersey-based power developer is bidding for industry leadership with a $16-billion construction program to add 10,500 MW of new generation capacity, including the country’s first new nuclear reactors in more than 30 years as well as three of the most advanced clean-coal plants in the country.

NRG Energy, Princeton, N.J., informed the Nuclear Regulatory Commission in June that it intends to build two Advanced Boiling Water Reactors by 2015 or sooner. The company’s comprehensive repowering initiative aims to increase capacity from California to Connecticut over the next 10 years with the two nuclear units, three gasified-coal units, two traditional pulverized-coal (PC) units with full back-end controls, at least one gas-turbine combined-cycle plant, and at least two wind farms. click here to view chart

Forecasts of market shortfalls are driving the massive investment, says David Crane, NRG’s president and CEO. “Reserve margins are getting tight in all of our core markets, especially if you take into account the lead time for the types of plants we are talking about building,” he says.

The company plans to build two Advanced Boiling Water Reactors totaling 2,700 MW at the South Texas Project. The General Electric-designed reactor was the first Generation III reactor to go online anywhere in the world. Three now are operating in Japan and two are near completion in Taiwan.

NRG could lead the industry also with its plan to deploy integrated gasification combined-cycle technology. Experts consider IGCC to be the best available coal-based technology, but it is very expensive and relatively unproven. NRG has announced plans for three 752-MW IGCC plants, one each in New York, Connecticut and Delaware. A combination of high natural gas prices and environmental restrictions led to NRG’s decision to build them, Crane says.

“The only solid-fuel technology that can be used in the Northeast is IGCC,” says Crane. “There are some people who believe that they might be able to permit a PC plant in the Northeast, but we don’t think that’s practical. We do not think it’s money well spent trying to do that.” Considering the massive cost-uncertainty of natural gas, says Crane, IGCC is not as expensive as it seems.

NRG wants to be the first generator in America to install a new nuclear plant because of significant financial incentives provided by the current energy policy. “There are three advantages to being first: a production tax credit that could be as much as $18 per MW-hour, a federal loan guarantee program on the debt raised to build the plant and standby support, which means that if the government suspends your construction, there is a federal insurance policy that covers your policy until you are able to restart,” says Crane.

NRG chose the ABWR because it was the most effective way to be first while assuming the least possible technology risk. The risk of having to take on unanticipated engineering work is minimized because there are multiple facilities either operational or under construction, he says.

“They are looking at cost certainty, schedule certainty, experience base of the [original equipment manufacturer], recent newbuild experience with the OEM,” says Peter Wells, director of marketing for GE Power’s nuclear business, Atlanta, Ga.

The ABWR design is fully certified by the Nuclear Regulatory Commission. The only modifications that might be made to the design are those based on the operating experience in Japan, says Wells. Any such modification would be primarily optimization adjustments that would be weighed against the amount of time they would take to receive approval from the NRC, he says.

Many see NRG’s move as a potential first step in the nuclear industry’s touted “renaissance,” but some see it as part of a mad dash to bag federal subsidies while they are available. “There are a number of people that are maneuvering to get the money that the government is offering for new reactors,” says David Lochbaum, director of the nuclear safety project, Union of Concerned Scientists, Cambridge, Mass. “There is probably only enough money to cover two plants. Right now there are 18 or 19 people jockeying for position, which shows that the plants are not economical without massive government subsidies. I’m not sure if there are enough subsidies for reactors three through seven to make them economically viable.”

Lochbaum says a new reactor needs to cost less than $2 billion for 1,000 MW to be cost-effective. “The TVA is spending $1.8 billion to bring a reactor at Browns Ferry out of retirement, which shows that the new reactors are not economical enough,” he says.

Dan Keuter, vice president of nuclear business development, Entergy Nuclear disagrees with Lochbaum’s analysis, pointing out that with fuel cost of natural gas currently at $56 per MWh, new nuclear plants that produce power at or below $50 per MWh will be highly competitive. “TVA is opening the third unit at Browns Ferry because they already have two units in operation,” which means that there will be much less operational costs once it is up and running, says Keuter. “The AP1000 [reactor design by Westinghouse Electric Co., Monroeville, Pa.] and the ESBWR [by GE, which is still in development] are very competitive with coal and natural gas and that’s not taking future carbon restrictions into account,” he says. The major subsidies are to defray potential one-time-only initial costs, says Keuter. “Going forward, a new plant will probably cost $1,400 per kWh. That’s cheaper than IGCC, which  is the only type of coal plant that you should build from a pollution standpoint.”

IGCC’s technology risk doesn’t worry Crane either. “The parts of the technology that we see as not yet having been demonstrated are the combination of already-proven technologies. As we talk about the plants we are speaking to the potential [electricity] buyers. We are telling them that it might take a while to get the technology up to speed and full reliability and the contracts should reflect that,” he says. Despite its confidence in the technology, NRG will not take any excessive financial risks. “We won’t build without a long term off-take permit,” he says. Crane also expects to receive some sort of incentive in the near future to encourage the construction of IGCC plants, potentially in the form of long-term power purchasing agreements with the states.

NRG is not forsaking gas altogether, though it is limiting its expansion in the supply-constrained Northeast to four smaller peaking plants. But in California, the company still embraces gas-fired plants. The repowering program calls for four gas plants with a combined 1,875 MW of baseload and peaking capacity. The  company also plans to add at least 180 MW of wind power.

NRG will also add a new gas plant and pulverized coal plant in Texas, which will produce 500 MW of peaking/intermediate power and 800 MW of baseload power respectively.

A pulverized coal plant and a fluidized petroleum-coke plant at the company’s New Roads, La., Big Cajun power complex will complete NRG’s current expansion plan. The new plants will provide a combined baseload capacity of 1,005 MW and will be equipped with scrubbers to ensure compliance with impending federal restrictions on sulfur dioxide, oxides of nitrogen and particulate matter.

The impending regulations, which will be in force in 2010 and 2015, are partly responsible for NRG’s approach to the repowering initiative, says Crane. The other driver, currently very much the wildcard, is carbon dioxide. While the current administration has not moved to tighten CO2 regulations, its tenure expires in two years and all of the major candidates for the next presidential election favor tighter restrictions, he says. Finally, ethical considerations come into play. “If there are clean alternatives available, it’s our ethical responsibility to use them. We see global warming as on par with safety,” says Crane.