TXU Sheds Coal Plan,Charts Nuclear Path
Expansion Efforts Include Large Plants in Texas;
Rivals Likely to Follow
By REBECCA SMITH
April 10, 2007
TXU Corp. has scrapped plans to build a large fleet of coal-fired power plants in Texas but hasn't altogether abandoned its expansion efforts. Instead, it hopes to build the biggest nuclear-power plants in the U.S.
TXU has shifted its focus to nuclear power at a time when three other organizations -- NRG Energy Inc., Exelon Corp. and Amarillo Power -- have said they, too, may build nuclear plants in Texas. If all the plans materialize, Texas could have more reactors than any other state in a decade's time, built in a deregulated market where missteps would be borne by shareholders or the federal government, not residents and consumers. Before deregulation, ratepayers would have been on the hook for any blunders by the power companies and might have had to pay higher electric bills as a result.
• The Situation: Texas power producer TXU hopes to build the biggest nuclear plants in the U.S.
• The Background: Nuclear power has gained favor because it doesn't emit greenhouse gases.
• What's Ahead: Texas could be a proving ground for the expected nuclear-power renaissance.
Texas could provide a proving ground for the expected nuclear renaissance because developers will proceed only if the economics appear bulletproof. That is because utilities in Texas no longer have monopoly territories. If customers don't like one supplier's price, they can pick another.
Nuclear power has gained favor because it doesn't rely on fuels that emit global-warming gases, like coal, or have volatile pricing. But cost overruns and accidents in decades past put development on the back burner until recently. Nuclear energy provides roughly 19% of the nation's power; coal provides about half.
At 1,700 megawatts apiece, the reactors selected by TXU, designed and manufactured by Mitsubishi Heavy Industries Ltd., of Japan, would be half as big in terms of capacity as the Westinghouse Electric Co. reactors at TXU's Comanche Peak nuclear plant, 80 miles southwest of Dallas. Company officials hope economies of scale will render the reactors capable of making electricity more cheaply than other reactors.
Executives for Mitsubishi said they believe their plants can be built in the U.S. for $1,500 per kilowatt of capacity, about 40% less than some other industry estimates, giving customers a shorter period of time before their investment is in the black. "It's at the low end of what everyone has been talking about," said Craig Nesbit, spokesman for Exelon's nuclear unit. "I'd say a lot of ears would perk up, if that happened."
TXU wants two to five new reactors, but that is subject to change. TXU's directors accepted a $32 billion buyout offer in February from a private-equity group led by Kolhberg Kravis Roberts & Co. and TPG, formerly Texas Pacific Group. If TXU is taken private, the new owners might alter TXU's investment plan. As part of that agreement, TXU agreed to cut back on its planned construction of coal-fired plants, unpopular with local residents and environmentalists.
NRG, of Princeton, N.J., wants to add two 1,350-megawatt reactors to its South Texas Project, which has two units currently, at an estimated cost of $3.5 billion apiece. Exelon, of Chicago, is hunting for a site able to meet tough criteria for safety, water and transmission access. It expects to have narrowed possibilities to two sites by summer. Because Texas is poorly interconnected with other states and electricity demand is rising briskly, the state will need much more generation in coming years unless it embraces conservation measures.
TXU's pact with Mitsubishi, announced last month or after the buyout, could face bumps. Mitsubishi's reactor design -- the U.S. Advanced Pressurized Water Reactor -- hasn't been certified for U.S. use, unlike reactors from General Electric Co. and from Westinghouse, controlled by a consortium led by Japan's Toshiba Corp.
[Reactors on the Rise]
Nor does TXU have permission to build yet. Both Mitsubishi and TXU say they are working on the necessary applications to submit to the Nuclear Regulatory Commission in 2007 and 2008, respectively. TXU wants a new reactor in operation in 2015.
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