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Will a Shift to Nuclear Power Increase Energy Costs?

An Indiana bill would pave the way for the state to set guidelines for nuclear power usage. While the energy is touted as clean and reliable, many worry that it will increase costs for customers.

(TNS) — Indiana's energy future is up for grabs. Coal, though still the predominant energy source in the state, is on the decline. Natural gas, also a greenhouse gas-emitting fossil fuel, is looking to dethrone its predecessor. And renewables such as solar and wind, while growing in Indiana, are still trying to find their footing.

But now there's a new kid on the block: Nuclear energy.

A new bill this legislative session creates a framework for Indiana "to move into the world" of nuclear energy, said Sen. Eric Koch, one of the bill's main authors and chair of the Senate Utilities Committee. Koch proposed Senate Bill 271 along with Sen. Blake Doriot, R- Goshen.

The bill isn't aimed at just any type of nuclear energy, but at what are called small modular reactors, or SMRs. These reactors are a new technology and, as the name suggests, are much smaller and more flexible than their mammoth relatives.

They are so new, in fact, that there are currently none operating in the U.S.

The bill does not say that Indiana will build such a plant, proponents said. Rather, it sets guidelines for state regulators to consider such a project if a utility wants to build one. Supporters say the new reactors could replace retiring coal plants and help supplement renewables.

"This topic is exploding across the world right now," Doriot said during Thursday's utilities committee meeting. "Nuclear energy is a clean energy," he said, adding that evidence will "show us how safe it is, how reliable it is and how the footprint is so small."

But skeptics are concerned that the bill shifts the cost of this expensive technology to consumers. There have been cost overruns for nuclear projects in other states and there are a lot of unknowns about how the technology will work and what will happen to the dangerous toxic waste left over.

"These are an unproven technology," said Kerwin Olson, executive director of consumer advocacy group Citizens Action Coalition. "Let's have the industry prove that they are safe and cost effective before we provide financial incentives to them and put the costs on the backs of ratepayers."

The utilities committee passed the bill by a vote of eight to two. It now heads to the full Senate.

Nuclear Energy in Indiana

In a way, the bill is simple. It tells the Indiana Utility Regulatory Commission, the state's energy and utility regulator, to create rules for looking at SMR proposals. It lays out things that must be considered, such as whether the utility shows it plans to get all necessary approvals and licenses from the appropriate groups including the Nuclear Regulatory Commission.

SB 271 says the state should also consider if the SMR would be replacing the generation of a retired coal plant as well as be located on the same site of a former coal plant.

Proponents say the technology could be used to repurpose coal plants, many of which have been retired or will be in the coming decades. SMRs can help maintain the tax base for those communities and provide a new form of employment for many of the workers.

"They have the connections, a perimeter is established and a workforce that could easily be trained and transferred," Koch said.

The bill does one other thing: It adds SMRs to a list of what counts as clean energy projects in Indiana. That addition would make utilities that invest in nuclear reactors eligible for certain financial incentives.

Small modular reactors are very similar to coal energy, said Marc Nichol with the Nuclear Energy Institute, the industry trade association.

"But instead of burning coal," he said, "they're splitting an atom."

Water or some other material such as salt or gas is still used to cool down the technology. Unlike nuclear plants of old, which can produce around 1,000 megawatts in a single unit, each individual SMR unit would create roughly 75 megawatts of power. The idea is that multiple units could be combined in one place to produce a few hundred megawatts.

Being smaller — around 15 feet wide and 75 feet tall, according to one expert — much of the equipment for the reactors can be produced in a factory and then assembled onsite like a puzzle. That makes for much easier construction, Nichol said.

The U.S. Navy has used SMR technology to power their submarines for decades, according to a retired Navy admiral who testified during the committee hearing. And many countries within the European Union as well as the United Kingdom are now looking to nuclear energy and SMRs to meet their climate goals.

A representative from the U.S. Department of Energy said during the meeting that the federal government is working to bring small modular reactors in the U.S. out of the research and development phase into actual construction — all part of its initiatives to address climate change.

The federal government has made more than $5 billion available to help push these projects, particularly for what are called demonstration projects that help show the potential of a technology.

"The DOE expects advanced reactors to play a significant role in the transition to clean energy," said Alice Caponiti in the department's Office of Nuclear Energy. They want to make nuclear energy more affordable to construct, she added, and more efficient to operate and maintain.

The Power of Nuclear Energy

Much of the world has been turning away from nuclear energy, with its large and aging plants and a legacy of some severe meltdowns. But now there is renewed support, Christopher McMichael with the National Conference of State Legislatures testified during the meeting.

Some governments and big companies believe the technology is the answer to carbon-free energy, and many states are supporting nuclear development through a variety of methods. Those include incorporating nuclear into clean energy standards, removing restrictions on building nuclear energy or providing mechanisms for cost recovery and construction financing.

"Considering the nuclear policy landscape and renewed support for nuclear, SMRs are a hot topic within that," McMichael said.

This topic first popped up in Indiana during a meeting last year of the state's 21st Century Energy Policy Task Force. The task force was initially created a few years ago to make recommendations on Indiana's energy future, and the focus of an October meeting shifted to SMRs.

During that meeting, an executive for the parent company of Indiana Michigan Power pointed to the potential of SMRs for its Rockport coal plant near Evansville that is set to retire in 2028. The political action committee for I&M's parent company, American Electric Power, donated $2,500 to Koch and $1,000 to Doriot last year.

Doriot said during the utilities committee meeting that "renewables are fantastic, but they are not infallible." Their energy production can be intermittent and increasing wind and solar power complicates the job of utilities to provide electricity for customers. That's where modular reactors can come in.

Nichol said they want SMRs to work with renewables, not replace them. The nuclear reactors can provide what is essentially baseload power that is available 24/7 and year-round, thus adding reliability.

The fact that they are smaller and in modular units has several benefits, according to proponents. SMRs are easier to quickly ramp up and down to meet changing electricity needs because some units can stay down while others are running.

They also take up a much smaller footprint, depending on how many reactors are installed at a site.

The SMRs are also safer because they are smaller and much of the equipment can be built in a factory, Nichol said. "If you make them smaller, that also decreases the risk because that makes them simpler."

Steven Breeding with NuScale Power, an Oregon company designing SMRs, echoed that thought. He said SMR designs integrate emergency back-up systems that reduce the likelihood of accidents. And because they're smaller, the safety zone should there be an issue is much smaller — about a 30 acre radius instead of one that is 10 miles for the large nuclear plants.

The power from these plants could go onto the grid, or be used for individual purposes such as a hospital. Some business advocates believe SMRs could also help attract new commerce to Indiana such as data centers, crypto currency mining and electric vehicles — all which say they want clean power.

Shifting Risk to Customers

Still, some lawmakers, consumer groups and environmental advocates say they aren't convinced. There are too many unknowns, they say.

They don't necessarily have issues with studying whether nuclear energy truly can be cost competitive and waiting to see how some of the demonstration projects work. The issue, Olson said, is the financial incentives the bill offers by adding SMRs to the list of clean energy projects.

"There is nothing today stopping a utility from asking the IURC for permission to build a nuclear reactor," Olson told IndyStar. "SB 271 isn't a discussion on whether nuclear should be part of the future, it's about shifting all that risk onto customers."

Olson is particularly concerned that utilities would be able to start charging customers for construction of the reactors before they have even connected to the grid or produced any electricity. This is a process known as "construction work in progress," or CWIP. Normally utilities are only allowed to charge for the costs of plants that are in service and producing electricity to meet customer needs.

CWIP helps utilities build power plants that are otherwise difficult to finance because they are not cost effective, Olson said. Hoosiers are familiar with this mechanism: It was used during the construction of Duke Energy's Edwardsport coal-to-gas plant. Customers had to pay more than $400 million before the facility ever came online. It was nearly $2 billion over-budget when it was built and has underperformed since it opened in 2013, with repeated outages and costly repairs.

Koch maintained during the meeting that the bill does not allow for CWIP and utilities would have to go through a rate case for cost recovery of the SMRs . He declined IndyStar's requests for comment.

But the financial incentives available to clean energy projects include "timely rate recovery" through an "adjustable rate mechanism." Olson believes utilities could use that to increase bills before the plant was completed and without a rate case.

That's not unlike what has happened in some other states that have pursued nuclear energy.

In South Carolina, ratepayers are paying $9 billion after officials pulled the plug on a nuclear project — all there is to show is a hole in the ground. In Georgia, the price tag for two new reactors that was first estimated at more than $14 billion has now climbed past $30 billion, according to the latest reports. Both units will also be more than six years late in coming online.

While neither of these plants were the same SMR technology, they both were relying on modular-type reactors and factory-made components.

The first SMR demonstration projects are not expected to come online until the end of the decade. One of them is from NuScale Power to be built in Idaho. That project received design approval from the Nuclear Regulatory Commission last year, the first for any such project. The project has already extended its timeline and doubled its cost estimate to more than $6 billion.

NuScale's Breeding said he estimates these projects can take more than seven years from start to finish. That includes selecting a site, getting the necessary approvals and constructing the reactors.

With that in mind, Olson said he thinks Indiana should wait and see how the industry progresses.

"What's the hurry?" he asked during the committee hearing. "We believe this is an enormous leap of shifting costs onto ratepayers." He said he sees nuclear energy as a "false solution to climate change that is pouring money down the rabbit hole."

Caponiti with DOE said the agency hopes that by funding and studying these projects as they come online, they will be able to learn from them and bring costs down. The energy department also is working on a solution to safely and permanently store the hazardous radioactive waste that is produced from nuclear power.

Several lawmakers and environmental advocates raised concerns about the toxic byproduct. Caponiti said the DOE has taken the first steps to establish both temporary offsite storage and a permanent disposal site.

The lawmakers who opposed the bill — Sens. Shelli Yoder, D- Bloomington, and Jean Breaux, D- Indianapolis — said they are fascinated by the technology and see the potential. But they still have questions and feel there are too many unknowns.

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