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NRG lobbies city to buy more nuclear power

Wednesday, January 19, 2011 by Josh Rosenblatt

NRG Energy is in full lobbying mode, trying to convince Austin Energy to sign on to an agreement to receive more of its electricity from the South Texas Project nuclear power site. Though the public utility turned down an earlier proposal to invest in the construction of two new nuclear units at STP in Matagorda County, NRG representatives are hoping the city will agree to purchase some of the power that will flow out of those units.


NRG Director of Communications David Knox thinks Austin Energy turned down his company’s initial offer to invest in the construction of the two new units (STP 3&4) because of the risks involved. Those risks, he said, won’t be a part of the new agreement. “This is risk-free because it’s purely a commodities contract at a fixed price,” he told In Fact Daily.


Under the terms of the agreement, NRG would supply nuclear power to the city at a fixed price for 40 years. NRG would tailor the contract to fit the utility’s needs. Austin Energy currently gets 400 megawatts of its approximately 1100 MW base load from the STP 1&2 nuclear units.


Knox and NRG Advanced Technology Initiatives President Juan Garza believe it’s the fixed price of the proposed “purchase power agreement” that would make it so valuable for Austin. While it’s true that NRG is projecting a price of 8-8.5 cents per kilowatt-hour for Austin Energy, as compared to 5.5 cents for natural gas, the price of gas is bound to go up over the next 40 years, said Knox, whereas the price of nuclear energy for the city will stay stable.


“About 10 years ago, natural gas was about $3-5 per million BTU and it was never going to go up,” said Knox. “After hurricanes Katrina and Rita, it was up to $15 and never going to go down. Now it’s $3-5 and never going to go up again. There’s a trend here: Gas is volatile. And if we put all our eggs in one basket we are going to suffer at some point in the future.”


“Natural gas is very cheap and plentiful now,” said Garza. “The question is: How much do you want to hedge that long-term price? Our price will never fluctuate.”


Concerns about environmental safety are probably as big an impediment as price when it comes to nuclear energy making further headway into Austin. After NRG released the results of a poll earlier this month showing that 75 percent of Austinites favor purchasing more power from STP when they learn that nuclear plants don’t produce carbon emissions, Tom “Smitty” Smith of government-watchdog group Public Citizen told In Fact Daily that claim is misleading, “The generation of nuclear energy – what goes on in the reactor – is carbon-free, but the mining, refining, and disposal of the waste emit significant amounts of carbon,” he said. (See In Fact Daily, Jan. 7, 2011)


Knox said that Smith’s claims are right but that, when the building of the plant, the generation of the power, and the mining and refining of the fuel are all taken into account, nuclear ranks with solar and wind energy in terms of carbon emissions. “Nothing is carbon-free, but with nuclear you make so much power that on a megawatt basis, its emissions are right up there – or right down there – with wind and solar,” he said.


“We can’t continue to keep putting the amount of carbon that we’re putting into the atmosphere and expect a good outcome,” said Garza. “The only effective way I’ve been able to find to reduce the amount of carbon is nuclear energy. A combination of nuclear, renewables (solar and wind), and natural gas is the future of the industry around the world.”


In order to secure a federal loan guarantee for the construction of STP 3&4, NRG will need to get a considerable portion of the units’ 2700 megawatt capacity under contract. “It gives the federal government confidence that there will be steady cash flow,” Knox said. Austin Energy would get to choose how much energy it would receive from the new nuclear units.


“We didn’t come in with a pre-cooked solution for the city,” said Garza. “It’s not the way we want to work. We want to work with Austin Energy and the Lower Colorado River Authority and hopefully San Antonio to make a deal that works for each of them.”


He said his company hopes to receive a Memorandum of Understanding from the city in the next few weeks describing the process to be used for negotiating any agreement. After that NRG hopes to get the loan guarantee from the Department of Energy next year, followed by a permit from the Nuclear Regulatory Commission. If all goes well, Garza said, customers would start receiving their new nuclear energy between 2016 and 2018.


Garza said Austin Energy’s point person on NRG issues is Chief Operating Officer Cheryl Mele. She could not be reached for comment yesterday.

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