By now I’m sure most readers here have heard that NRG’s cost estimates to build two new reactors at South Texas Project increased around $4 billion just recently. Apparently quite a bit of the increase was due to a weaker dollar. From the Wall Street Journal:
Dollar weakness helped drive up cost estimates for two new reactors NRG Energy Inc. (NRG) is planning in Texas with Toshiba Corp. An NRG executive said last month the cost of equipment and materials from Japan climbed 13% to an estimated $2.5 billion compared with a 2007 estimate, mostly due to declines in the dollar.
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Currency risk is just one variable for developers. Scana and Southern already have taken steps to eliminate the risk by using dollar-dominated contracts. For other projects, currency fluctuation typically is viewed as part of the larger issue of construction costs. Developers are trying to balance the massive cost and lengthy construction timetable with a tricky outlook for power demand and prices. Additionally, any decision by the U.S. government to place limits on carbon-dioxide emissions could heavily impact the economics of nuclear projects, since reactors become more competitive when a cost is placed on CO2.
It’ll be interesting to see what NRG and Toshiba agree on for the new cost estimates which were asked to be determined by the end of this year.
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