Entergy says nuclear remains costly

HOUSTON Tue May 25, 2010 12:51am BST

Entergy Corporation Chairman and Chief Executive J. Wayne Leonard answers questions during the Reuters Energy Summit held in Houston May 24, 2010. REUTERS/Richard Carson

Entergy Corporation Chairman and Chief Executive J. Wayne Leonard answers questions during the Reuters Energy Summit held in Houston May 24, 2010.

Credit: Reuters/Richard Carson

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HOUSTON (Reuters) - Entergy Corp (ETR.N) Chief Executive J. Wayne Leonard said on Monday that building new nuclear plants remains too costly and will prevent many utilities from participating in the fledgling nuclear renaissance in the United States.

"Utilities do not want to take that risk," Leonard said at the Reuters Global Energy Summit in Houston. "It's risk we don't control."

New Orleans-based Entergy suspended two license applications filed with the Nuclear Regulatory Commission for proposed new reactors to be built either in Louisiana or Mississippi in 2008 after being unable to negotiate a favorable construction contract.

While a few U.S. companies are moving ahead to develop new reactors, Leonard said that to make the economics of nuclear work for Entergy, he would need to see "double-digit natural gas prices and carbon blow-out prices" starting at $25 per ton and escalating toward $50.

Congress has been debating legislation that would set a price on carbon emitted into the atmosphere.

Nuclear vendors don't want to assume the risk of a cost overrun and have put construction costs too high for most companies, Leonard said. "You have to have a darn good reason at those prices to build," he said.

As part of the Obama administration's plan to reduce dependency on foreign oil, create jobs and cut greenhouse gas emissions, the president in February awarded the first Energy Department loan commitment of $8.3 billion to a group led by Southern Co (SO.N) to build a nuclear plant at the Vogtle nuclear plant in Georgia.

Other projects competing for DOE support include an NRG Energy-led (NRG.N) venture in South Texas, Constellation Energy Nuclear Group LLC's CEG.N project in Maryland and SCANA Corp's (SCG.N) proposed plant in South Carolina.

Leonard described Entergy's four-state territory is seeing only slow growth for power and the region has a multitude of merchant gas-fired plants from which to buy power.

"Everybody's going to price the risk differently," Leonard said. "When we price the risk appropriately ... the numbers just don't work."

"I've wondered how Southern -- how anybody -- makes the numbers work. Sitting on the outside looking in, they have some reason we don't see," he said.

Without nuclear power and a way to capture and sequester carbon dioxide from existing coal-fired plants, Leonard said the U.S. will have a difficult time reducing CO2 emissions.

Nuclear power plants generate about 20 percent of U.S. electricity and emit none of the heat-trapping CO2 that comes from coal plants.

Leonard, an early believer in the danger of global warming, said he obtained a commitment from Entergy's board to pursue a climate change policy and to reduce the utility's CO2 emissions before joining the company in 1999.

Legislation to address climate change must be done efficiently and affordably, said Leonard, who supports the American Power Act introduced by Senators John Kerry and Joe Lieberman.

"We think it has a good chance of passing, if not this year, next year," he said.

(Reporting by Eileen O'Grady; editing by Carol Bishopric)

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