Constellation Energy's decision this last week to not build a nuclear reactor after all in Maryland was a big shock to its partner EDF, which had been banking on the alliance to serve as its wedge into the U.S. reactor market, and to the market itself.
Constellation's reason for pulling out was the high fee the Energy Department proposed to charge for extending a Federal loan guarantee to cover the project, estimated at $10 billion. DOE and nuclear regulators had come under fire from influential nuclear critics like former NRC commissioner Peter Bradford for extending loan guarantees on excessively soft terms, at growing risk to U.S. taxpayers.
There's no gainsaying that nuclear construction projects are looking riskier all the time, especially in the United States, where many factors have conspired to spoil dreams of a big nuclear renaissance: declining energy demand since the onset of the global economic crisis (down 4 percent since 2007 in the States); plummeting natural gas prices (down almost half from what they were a few years ago); collapsing prospects for enactment of a U.S. climate bill (which would have raised the costs of fossil-fuel-generated electricity); and soaring reactor construction costs (with EDF's current reactor 40 or 50 percent more expensive than originally billed).
An analysis in the Financial Times deems Constellation's decision "strategically devastating" for EDF--but also potentially helpful in the long run, because France's national utility already was widely believed to have been putting too much money on its losing U.S. bet.
POSTSCRIPT, Oct. 14: It's being reported today that EDF, attempting to keep Calvert Cliffs alive, is offering to either buy out Constellation's stake in the project or assume all project development costs until construction begins. It wants Constellation to drop a contractual option that could force EDF to buy up to $2 billion in conventional generation assets from the U.S. energy company.