The Japanese nuclear disaster has chalked up its first major casualty in the U.S.
NRG Energy yesterday announced it will incur a nearly half billion writedown of its proposal to build two new nuclear units at its South Texas nuclear site, recognizing the diminished prospects as a result of the ongoing nuclear incident in Japan.
The Princeton-based energy company’s partner in the south Texas project was Toyko Electric Power Co., the owner of the crippled nuclear power plant in northern Japan that suffered a partial meltdown in the wake of an earthquake last month and subsequent tsunami.
The announcement is not unexpected. NRG previously said its joint venture with the company, Nuclear Innovation North America (NINA), has suspended indefinitely all engineering work and other pre-construction activities at the project.
"The tragic nuclear incident in Japan has introduced multiple uncertainties around new nuclear development in the United States, which have had the effect of dramatically reducing the probability that the South Texas Project 3 & 4 can be successfully developed in a timely fashion," said David Crane, president and CEO of NRG.
In a statement released by the company, Crane said the company continues to believe both in the absolute necessity of a "U.S. nuclear renaissance" and that the project is the best nuclear development initiative in the country.
"However, the extraordinary challenges facing U.S. nuclear development in the present circumstance and the very considerable financial resources expended by NRG on the project over the past five years make it impossible for us to justify to our shareholders any further financial participation in the development of the STP project," Crane said.
The decision was not surprising to analysts.
"This whole argument about a nuclear renaissance has been overblown, more of a media story than an actual event," said Paul Patterson, an energy analyst with Glenrock Associates. He said any future nuclear project in the U.S. faces enormous hurdles, including obtaining massive federal subsidies, overcoming lower natural gas prices, and now the fallout from the Japanese tsunami.
NRG is a diversified power supplier, owning nuclear, coal and other conventional power plants. In recent years, it has bought wind developers, invested in huge solar projects in the California desert, and last fall purchased Green Mountain Energy, an energy retailer that sells electricity to consumers from wind and other renewable sources. A subsidiary, NRG Bluewater Wind, also is seeking to build a wind farm off the New Jersey coast.
Crane also has been an outspoken advocate of cutting greenhouse gas emissions, citing the development of new nuclear units as a way to reduce global warming. It was hoping to become one of the first companies to bring a new nuclear power plant online.
Public Service Enterprise Group (PSEG) also is contemplating building a new nuclear unit, or two, at its facility in Salem County, where there are three nuclear generating stations already. At a shareholders’ meeting, Ralph Izzo, its CEO and president, said nuclear safety will remain "an absolute priority" for the company.
"We are participating in industry-wide efforts to capture all the lessons from the events in Japan and apply those lessons as appropriate," Izzo said.