MidAmerican finds nuclear doesn’t make sense without CO2 rules

MidAmerican Energy won’t be building a nuclear unit in Iowa anytime soon and will be refunding much of the public money collected to help it finance a nuclear feasibility study in the state.

The MidAmerican Energy Holdings (MEH) subsidiary said June 4 that it would be “premature” to pursue development of any major power plant in Iowa, including a nuclear option.

The company also said that while there are potentially acceptable nuclear power sites in Iowa, and small modular reactors have much to offer, the time is probably not right for nuclear until  “carbon emissions are constrained or taxed.”

The company’s announcement culminates a nuclear review process that has been underway since 2010. The nuclear study had brought much attention to Muscatine, Iowa, where the company had acquired rights to much local farmland for a potential major power plant site.

MidAmerican also said that new nuclear technology on the horizon will offer significantly enhanced safety capabilities.

The assessment was submitted to the Iowa Utilities Board on June 3. Because MidAmerican Energy managed costs and completed the assessment ahead of schedule, the company has requested the IUB approve a plan that allows MidAmerican Energy to refund $8.8m of the funds collected from its Iowa customers and to stop collecting the half-percent charge for the assessment, effective July 1.

That’s three months earlier than planned cut-off date. The refund and elimination of the half-percent charge for the nuclear assessment will result in a slight decrease in Iowa customers’ bill amounts starting this summer, the company said.

In 2010, MidAmerican Energy worked with state regulators, the Office of Consumer Advocate and political leaders to enact a law that authorized an assessment of nuclear generation potential in Iowa. The assessment began in 2010. Since that time, MidAmerican Energy identified various sites that met rigorous nuclear regulatory requirements throughout the state and eventually narrowed the locations to two sites for additional testing. In fall 2012, soil and environmental assessments were taken in Fremont and Muscatine counties to assess land suitability in the event a determination was made to develop a generation facility.

“Based on the assessment’s results, no land in Iowa will be purchased by MidAmerican Energy at this time to develop a nuclear generation facility,” the company said.

MidAmerican Energy’s land options in Fremont County will expire, and the company will not pursue an extension on its land options in Muscatine County. The two rural residences that MidAmerican Energy currently owns in Muscatine County will be put up for sale later this year.

MidAmerican Energy will continue to assess and review all sources of generation, the company said, pointing to its plans for adding more than 1,000 MW of new wind power.

Study was launched amid much talk of CO2 cap-and-trade

The nuclear picture seemed to look brighter when MidAmerican first launched its review. After all in July 2009 the House of Representatives had passed American Clean Energy and Security Act – commonly known as the Waxman-Markey cap-and-trade bill for CO2.

With the potentially significant compliance costs for carbon emissions from Iowa’s fossil fueled electric generation, Iowa Office of Consumer Advocate, legislators and other stakeholders supported the adoption of state legislation to assess if nuclear generation would be viable in Iowa in a carbon constrained environment.

Under a significant CO2 regime, nuclear generation in Iowa could potentially offer better economics than natural gas combined-cycle units, the report noted.

Following a detailed site selection process, a site in Muscatine County appears suitable for nuclear generation deployment; no conditions that would be expected to make this site un-licensable or economically unfeasible were identified after an initial assessment. However, significant additional analysis and submittal of an Early Site Permit application to the Nuclear Regulatory Commission (NRC) would be necessary to confirm the site can be licensed; a process that would take years and could cost an estimated $50m.

MidAmerican likes what it sees regarding the potential of small modular reactors. “However, the NRC certification of the designs may take well into this decade to complete,” MidAmerican said.

MidAmerican also hired NERA Economic Consulting to help it analyze things. NERA looked at scenarios for carbon pricing, economic growth and gas supply fluctuations in making its decision.

MidAmerican Energy Holdings is part of the ever-growing Berkshire Hathaway corporate family, headed by investor Warren Buffett. On May 29 MidAmerican announced plans to acquire Las Vegas-based NV Energy (NYSE:NVE) pending the needed approvals. MidAmerican already owns the PacifiCorp electric utility company.

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.