Westinghouse Electric has filed for Chapter 11 bankruptcy. The bankruptcy filing may signal the death of the nuclear power industry in the United States. Westinghouse Electric – a subsidiary of Japan’s Toshiba Corporation since 2005 – has four large nuclear power reactors under construction in the southeast United States. The plants, located in Georgia and South Carolina, have experienced huge cost overruns. Those cost overruns have forced Westinghouse Electric into Chapter 11 and are projected to cost Toshiba some $3 billion in losses in its most recent fiscal year. And some $9 billion in total losses.
Also at risk are $8.3 billion in U.S. loan guarantees.
When public utility regulators in Georgia and South Carolina approved the construction of Westinghouse’s new AP1000 reactors back in 2009, it was meant to be the start of a renaissance in U.S. nuclear power. But fracking created a flood of cheap natural gas from shale. Without a carbon tax, the direct cost of natural gas is lower than nuclear power. And then in 2011 the Fukushima nuclear accident in Japan squashed any enthusiasm for nuclear power and demonstrated that nuclear safety was kind of an oxymoron.
In fact, Fukushima caused U.S. regulators to ratchet up the safety requirements on the proposed reactors. Those increased safety demands by U.S. regulators and higher-than-anticipated costs for labor, equipment and components generated huge cost overruns. Absent federal intervention, it appears unlikely the four new reactors will ever be completed.
So now Westinghouse is in Chapter 11, and Toshiba may have to sell it memory chip manufacturing operations to buy its way off the tar baby of Westinghouse. No one knows who will complete the four nuclear reactors, or when. No one even knows ow much it would cost to complete them. The default on the loans that partially financed construction will likely fall into the laps of rate payers in Georgia and South Carolina. It’s hard to see the current federal administration – and especially the new Secretary of Energy, who wanted to abolish the federal agency, if only he could remember its name – Secretary Rick Perry dong anything constructive. President Trump has extensive experience in Chapter 11, but achieved his results by screwing his creditors. In the case of Westinghouse, the U.S. is the creditor, to the extent of at least $8.3 billion. No help there.
These kinds of catastrophic construction debacles leave financial scars. It will be a very long time before anyone attempts construction of a nuclear reactor in the United States when the last guys wound up in bankruptcy. Westinghouse Electric is likely toast; it hopes to survive as a servicing company for the industry, but that’s a shrinking market as the licenses of existing reactors expire.
The future of the industry was problematic anyway. Chernobyl and Fukushima have made the technology radioactive (sorry) and the issue of nuclear waste remains unresolved and increasingly dangerous. Now it’s financially disastrous, too. It’s WPPSS (ronounced “whoops”) with another order of magnitude.
No technology in WC’s memory has carried more promise and ended up more of a disaster than nuclear energy.