TVA Building Watts Bar 2 and Building Up the Tennessee Valley

Here’s some good news:

The Tennessee Valley Authority board in the US has approved continuing with construction of the second generating unit at Watts Bar Nuclear Power Plant located on the Tennessee River near Spring City following a revised estimate.

The estimate presented to TVA in early April, revealed the project requires an additional $1.5bn to $2bn to complete, bringing the total cost to complete the unit at nearly $4.5bn, with the most likely estimate of $4.2bn.

Now, it may seem counterintuitive to splash out that kind of money – one might call it the fixed cost issue. The fixed cost of building a large industrial plant – much less a nuclear facility – is fantastically high, at least if one is trying to raise the money for it in a fairly short time. But the variable costs of running the plant are relatively low. If the plant runs for 40 years – as the current generation has done – and then goes another 20 years – then that plant cost can generate electricity quite economically even given the fixed costs involved in building the plant.

Here’s a 2011 assessment of how that works out:

• Advanced nuclear  - $113.90 per megawatt hour
• Advanced coal with carbon capture and sequestration - $136.20 per megawatt hour
• Solar PV - $210.70 per megawatt hour
• Offshore wind - $243.20 per megawatt hour
• Onshore wind - $97 per megawatt hour (though Southeastern states such as Tennessee are not good candidates for this.)
• Solar thermal - $311.80 per megawatt hour.

And that takes into consideration that renewable energy sources have relatively low fixed costs. That’s not a case of putting the fix in for nuclear energy – there are economics plusses and minuses for any energy source.

Electric companies have to balance the need to make money with the more important need of providing electricity to everyone regardless of financial wherewithal. Nuclear energy and coal have always provided a strong argument here – expensive fixed costs, very low variable costs. If nuclear has an edge over coal, it’s that it doesn’t produce carbon emissions.

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To me, it is even more interesting that TVA continues to pursue economic development in the Tennessee Valley. This was one of its missions after its creation during the great depression and its seems only appropriate to build on its good work during the great recession:

In keeping with its economic development mission, TVA is enhancing the Valley Investment Initiative, an incentive program that rewards industries that commit to locate, stay and invest in the Valley region, Thomas said.

“Beginning in 2009, companies participating in the Valley Investment Initiative have announced five-year plans to invest a total of $8.2 billion in their operations, keep 55,000 jobs in the region and create another 17,000 jobs. Those jobs represent almost $16 billion in wages for Valley residents and communities.”

So if you have a business idea that requires a little light manufacturing, there you go. You provide the structure, TVA the infrastructure.

Watts Bar. Unit 1 has been on-line since 1996 and supplies electricity to about 750,000 people. Unit 2 is the one TVA will now be completing.