The Three Mile Island 1 Restart

ALARA and subsidies have an interesting synergism. Subsidies appear to make nuke cheaper. This gives room for ALARA to drive costs up further. This creates the need for more subsidies. Not clear where this process stops if ever.

But we are seeing it play out in the restart of TMI 1. ALARA pushed variable costs from about 1 cent/kWh should-cost to over 3 cents/kWh did-cost. Then fracking came along, gas price went down, and Constellation closed a fully depreciated plant. Along comes the IRA tax credits, and Microsoft can pay for the non-taxpayer share. Next step will be new regs to insure we need new subsidies.

But the TMI1 numbers don't add up. The reports claim Microsoft will pay 80 million per year for 20 years for all of the plant's power. That's about 11.5 cents/kWh. Constellation CEO Dominguez has made it clear that the IRA tax credits were instrumental in making the deal happen. The tax credits are worth about 3 cents/kWh.

Constellation has indicated it will spend two billion dollars over 4 years on the refurb. If we regard the current plant as sunk (actually it's probably a cashflow drain on Constellation), there is no way I can get the LCOE above 7 cents/kWh and that’s without any subsidy. Here's a sample calculation in which I upper bounded the OPEX and fuel cost.

Two billion USD for a 835 MW plant is $2400/KW. With a firm PPA, this should be a fairly low risk investment. I assumed a discount rate of 6% real. With assured load, I used a capacity factor of 95%, about what the plant was achieving prior to shutdown. $80/lb yellowcake is well above the last ten years average, and equal to recent spot prices. Constellation claims the plant's payroll prior to shut down was $60 million per year. Payroll is the bulk of OPEX. I put OPEX at $200 million per year. I end up with a breakeven price of a little less than 7 cents/kWh.

So why does Microsoft need to pay 11.5 cents/kWh and Constellation need another 3 cents/kWh of our money to make the deal work? Are they saying Microsoft will pay 11.5 cents in pre-tax dollars, and get back 3 cents in post-tax dollars? I don't know about you, but I find it difficult to understand why Microsoft needs my money to diddle in AI. I can come up with a far more deserving charity than Microsoft. If this is a nuclear success, give me nuclear failure.