Incentives Loom Big in Duke’s Nuke Plan: S.C. And Cherokee County Want Jobs; Feds Want Plants That Don’t Emit Carbon Dioxide

By Stan Choe, The Charlotte Observer, N.C.

Mar. 18–If Duke Power follows through with its proposal to build a nuclear plant in Cherokee County, S.C., it could be in line to get about $15 million annually in local and state tax credits and could claim over $1 billion in federal tax credits over eight years.

Besides safety and environmental concerns, those big dollar amounts are stirring perhaps the most controversy in the country’s drive to a new generation of nuclear plants.

The incentives stem from two hopes:

— State and local governments want to attract the thousands of temporary and full-time jobs a nuclear plant can create.

— The federal government wants to spur construction of plants that emit no carbon dioxide.

But companies need to act quickly to grab some of those federal incentives written in the Energy Policy Act of 2005, some of which are earmarked for the first few plants to come online.

Nuclear critics and opponents remain astonished by the number of dollars going to corporations to build plants they consider dangerous and unnecessary.

“We urge the government to deny Duke Energy federal dollars to subsidize the exorbitant costs of building new reactors,” Public Citizen, a nuclear opponent, said in a statement Friday.

It came a day after Duke announced it had chosen Cherokee Falls as the site for a potential nuclear plant. Duke “should not be given a government handout,” said the Washington-based group, which is also opposing Duke Energy Corp.’s merger with Cinergy Corp. of Ohio.

The high-stakes battle is likely to rage in Washington, Raleigh and Columbia. Utilities, such as Charlotte-based Duke and Raleigh-based Progress Energy Inc., say they need to build big power plants in coming years. They’re forecasting demand for electricity may surpass supply in the next decade.

Companies and some analysts call nuclear the only real option to cover a deficit of available power. It’s cheaper to operate than natural gas-fired plants and emits fewer pollutants than coal-fired plants. The incentives just get companies moving quicker toward an option they would have chosen anyway, companies say.

Building a nuclear plant is expensive: Duke said it could cost between $4 billion and $6 billion to build the proposed plant in Cherokee. Constructing a nuclear plant can be twice as expensive as a coal-fired plant, according to a Standard & Poor’s report issued this year.

It can also be a financial risk, according to S&P.

That’s why the federal Energy Policy Act includes loan guarantees for up to 80 percent of construction for nuclear plants. That should help utilities sway investors’ concerns about potential regulatory or construction hurdles.

“We began our work to look at new nuclear before the Energy Policy act was passed,” Duke spokeswoman Rita Sipe said. “We are pleased that Cherokee County offered the incentives,” she said, adding that it wasn’t something Duke had required. “We’re looking at what we need to do for our customers.”

Federal law also includes an operating subsidy for some nuclear plants built before 2021. The government will give a 1.8 cent per kilowatt-hour credit for electricity created by new nuclear plants, up to 6,000 megawatts and for up to eight years.

For Duke, which is considering building up to two reactors with a total capacity of 2,234 megawatts at Cherokee, that could mean over $1 billion over eight years. The act also includes up to $500 million in insurance for the first two plants, to cover any cost overruns that may occur during construction because of events out of the company’s control.

Locally, Cherokee County Council approved a plan to give Duke about $12 million in annual property tax rebates annually for 30 years, said Jim Inman, head of the county’s economic development board.

The council wanted to get some of the 1,000 construction jobs and up to 800 full-time jobs, Inman said. Cherokee County had an 8.1 percent unemployment rate through the first five months of 2005, the most recent statistics available. The overall state averaged 6.7 percent during the same period.

“The council really wanted to get those jobs in there,” he said. “The county will be getting $12 million a year in taxes, and providing 800 to 1,000 jobs is very attractive.”

The state has also approved job development credits for the plant if it gets built, a spokeswoman for the S.C. Department of Commerce said.

The value of the credits aren’t available yet, as Duke hasn’t said yet whether it will build a plant or how many jobs it will be. But each job could mean a credit of up to $3,250 annually. If there were 800 workers, that could mean about $2.6 million.

Incentives

— About $12 million in annual property tax relief from Cherokee County

— Possibly up to $2.6 million annually from South Carolina

— Possibly over $1 billion over eight years in federal tax credits

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Copyright (c) 2006, The Charlotte Observer, N.C.

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