A former top strategist for TXU Corp. said the price for power is currently so low that it doesn’t make sense for investors to put money toward building new power plants.
Jonathan Siegler, who left Dallas-based TXU when the company was bought by private investors, is now chief financial officer for Bluescape Resources, a Dallas oil and gas company. Siegler recently told an Austin, Texas, audience at the University of Texas’ Energy Management and Innovation Center that “The signals are that it’s not time to build. With (natural) gas prices coming down, asset values for existing generation are trading well below replacement cost.”
Power generation companies and energy analysts agree that new generation is needed but finding the money for new construction has been difficult due to the economic slowdown and regulatory uncertainty.
The earthquake and tsunami in Japan – and fears of a nuclear disaster there – also have curtailed talk of a nuclear resurgence in the United States.
Siegler, who orchestrated Energy Future Holdings’ (the former TXU) coal plant construction, said EFH has sought licensing for new nuclear reactors but the cost is prohibitive.
“I don’t think there’s a competitive company out there today … big enough to take on a project this big,” he said.
Siegler presented figures showing that regardless of the energy source – coal, natural gas, solar, wind or nuclear – the cost to build new generation outpaces the current price of power.
He presented the following figures for new construction and compared them to current electricity prices - $20 to $50 per megawatt-hour - in the wholesale power market in Texas:
Natural gas: $57 per MW-hour ($67 including cost to mitigate carbon dioxide)
Coal: $63 per MW-hour ($87 including cost to mitigate carbon dioxide)
Wind: $155 per MW-hour
Nuclear: $117 per MW-hour
Solar: $236 per MW-hour
Siegler, who with former TXU executive John Wilder runs a private equity company called Parallel Energy Partners, said investors are looking for signs that power prices will rise before investing in new plants.
Meanwhile, New Jersey-based NRG Energy, which wants to expand its South Texas nuclear plant, has acknowledged it may need to find other investors in that project. NRG CEO David Crane said recently that Tokyo Electric Power Company is “fully occupied” with the nuclear events in Japan and might drop its planned $155 million investment in the NRG project.
NRG already has scaled back design work on the expansion though it continues to seek a Department of Energy loan guarantee for the project. San Antonio, Texas-based CPS Energy, meanwhile, said it has put a hold on its plans to buy power from the project, in which it owns a 7.625 percent interest.
“As we have indicated for months now, we are currently pursuing an array of other clean affordable (power) supply options,” CPS Energy President and CEO Doyle Beneby said in a statement. “When the development of (the new reactors) moves forward again, our present ownership interest will remain unchanged.”
CPS owns a 40 percent interest in the existing NRG nuclear plants in South Texas, which began operating in 1988 and 1989.
The U.S. Nuclear Regulatory Commission has said it will review all existing U.S. nuclear plants and planned projects in the wake of the events in Japan. Crane said a years-long review process could cripple the NRG expansion project.
Atlanta-based Southern Co. recently said the NRC completed its environmental review of two planned reactors near Waynesboro, Ga. The NRC still must complete its review of the reactor’s design along with a safety report.
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