Washington (Platts)--18Feb2011/509 am EST/1009 GMT

Despite enthusiasm among nuclear reactor vendors and the Obama administration about the potential of small nuclear reactors, some utilities remain to be convinced of their economic viability.

Bill Johnson, CEO, chairman and president of Progress Energy said Thursday the company is unlikely to build small nuclear reactors in the next two decades, even though some vendors hope to make such units commercially available by 2020.

Johnson said it is "an intriguing thought" to build nuclear power plants "on a small scale, plug-in and play, [and] modular" fashion, but he added that "the timetable for that looks more like the 2030s, just given the pace of development."

By then, he said most remaining coal plants will be large units, as Progress is retiring a third of its coal plants, mostly smaller ones, and replacing some of them with natural gas. Johnson spoke at a Platts conference on nuclear energy in Bethesda, Maryland.

"It's going to come down to cost," said Johnson. If a 100-MW plant will have to need the same size security and operating staff as a 1,000-MW unit, he said, "that's going to make it difficult."

Duke Energy has proposed acquiring Progress in an all-stock deal. Johnson would be CEO of the combined company, which would be the largest utility in the US.

At the same conference, officials from the US Department of Commerce and Department of Energy told the audience that the Obama administration sees big potential in small reactors to boost US competitiveness and re-energize the country's manufacturing base. The White House's budget proposal, unveiled Monday, has requested $97 million for the DOE to accelerate commercial deployment of small reactor technologies.

In contrast to Progress's reservation about small-scale nuclear plants, Jack Bailey, vice president of Nuclear Generation Deployment at the Tennessee Valley Authority, said his company plans to be the first utility in the US to build a set of small reactors. TVA is studying the feasibility of beginning construction of up to six mPower modules--125-MW reactors under development by Babcock & Wilcox--at its Clinch River site in 2020.

Bailey spoke at the same conference and said small nuclear units can potentially replace TVA's fossil fuel plants where the existing transmission lines and water use rights could accommodate the transition. Given that small reactors need less upfront capital to build, Bailey said TVA could purchase certain number of units without federal loan guarantees. In comparison, he said, "it's hard to spend 10 to 14 billion dollars at a time for new nuclear generation capacity"--the capital cost typically required to build a large nuclear power unit.

B&W has said it plans to submit an application for the US Nuclear Regulatory Commission to certify its mPower design next year and is aiming to build the first unit by 2020. Company CEO Christofer Mowry, speaking at the Platts conference the same day, said the modular design of mPower would enable the reactor to be built and assembled in a factory and transported by rail to the construction site. Such a concept, he said, would slash construction time and provide cost certainty.

Bailey said TVA is in talks with the DOE to power the Oak Ridge National Laboratory with the mPower units.

DOE has to reduce its greenhouse gas emissions by 2020 to 28% below its 2008 level on all its facilities, including national laboratories, under an executive order President Barack Obama issued last year. Bailey said small reactors can help DOE meet its goal.

--Yanmei Xie, yanmei_xie@platts.com

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