Despite price overrun, TVA going ahead with Watts Bar 2 nuclear project

The Tennessee Valley Authority (TVA) board of directors voted unanimously April 26 to go ahead with completion of the Watts Bar 2 nuclear reactor unit although it will take longer and could cost up to $2bn more than predicted a few years ago.

TVA earlier this spring said completing the Watts Bar 2 unit in Tennessee will cost between $4bn and $4.5bn and the job won’t be finished until late 2015. In 2007, the TVA had expected it would cost $2.5 bn – which caused some critics to dub the project “a two billion-dollar mistake.”

TVA CEO Tom Kilgore said while the project costs “big money,” it is still worth doing. Kilgore said TVA regrets being wrong on the costs, but “we missed it. Nobody likes to miss, but we missed it.”

TVA said in a news release that “the most likely estimate” is $4.2 bn. The revised figure comes after a seven-month “top-to-bottom analysis” of the construction project. During a press conference that followed the board meeting, Kilgore said he shouldered part of the blame.

Much of the blame for the delays and cost overrun has been assessed to former managers who have since been replaced. “We do have a new leadership team,” Kilgore said. Mike Skaggs became the new leader of the nuclear construction project in August 2011. During the April 26 board meeting he said that his team is ready to complete the project.

In endorsing the Watts Bar 2 completion, TVA board members stressed they were requiring that the board be kept fully updated on the progress at Watts Bar.

Ex-TVA leader urges new look at nuclear project

A former TVA official and others urged the TVA board of directors to reconsider their ambitious nuclear power building program in view of the Watts Bar 2 problems.

“Revisit your decision on Bellefonte and even Watts Bar,” one-time TVA Chairman David Freeman said during the public comment portion of the meeting. Freeman was alluding to two never-finished nuclear reactors that the federally-owned utility has decided to complete.

“Take a look at your load growth. Take a look at what’s happening with the price of natural gas,” Freeman said. The ex-TVA official and others suggested that energy economics have changed significantly since the authority did its last big resource plan.

Natural gas and wind energy could go a long way toward addressing TVA’s new power generation needs, various speakers said. Others spoke in support of completing the unfinished reactors as a non-emitting source of baseload generation for decades.

One speaker also said that the current critics of greenhouse gas emissions from coal will soon turn their advocacy efforts toward natural gas.

Greeneville Light and Power General Manager Bill Carroll said it would be a mistake to assume that natural gas will be cheap forever. Don’t be surprised to see natural gas “becomes the next target for the anti-carbon crowd,” after they turn their attention from coal, he said.

TVA, meanwhile, said it is seeking a well-balanced portfolio among nuclear, coal, hydro and natural gas.

TVA officials said the 800-MW combined-cycle gas plant at John Sevier station near Rogersville, Tenn., is nearly complete and should start operating mid-year. It will replace some of TVA aging coal generation.

TVA also authorized a 10-year, $298m contract for construction of new dry cask storage and nuclear spent fuel management. The contract is with Holtec, a firm that TVA had stopped doing business with some years back. Now, however, Holtec has “appropriate corporate responsibility measures in place” and was eligible for a June 2011 request for proposals from TVA.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.