WORLD-GENERATION MAY/JUNE 2015 V.27 #2
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PERSPECTIVE
We have 10 reactors – 12,500 mega-
watts – in active licensing now at the
NRC. Obtaining a combined construc-
tion/operating license is a non-trivial
$150 million to $200 million commitment.
Three of these projects are maintaining
their loan guarantee applications with the
Department of Energy – Dominion
Resources’ North Anna 3 project (a sin-
gle-unit ESBWR); Duke Energy’s
William S. Lee project (twin AP1000s),
and Nuclear Innovation North America’s
South Texas Project 3 and 4 (twin
ABWRs).
There is $10.6 billion remaining from
the $18.5 billion in loan guarantee author-
ity originally authorized, after accounting
for the $8.3 billion in guarantees to the
Vogtle nuclear project in Georgia. The
$10.6 billion in remaining loan volume is
clearly not sufficient to cover the needs of
all three projects, and we have urged
DOE to seek additional loan guarantee
authority to cover their needs, if and
when the project sponsors choose to pro-
ceed. It is important that current appli-
cants retain line-of-sight on potential
financing through the loan guarantee
program.
The loan guarantee program
deserves serious attention because it will
become more important, not less, in the
future. With 69 nuclear reactors current-
ly under construction around the world
and 183 new nuclear plant projects in the
licensing and advanced planning stage,
commercial opportunities for U.S. ven-
dors and suppliers are found increasingly
in international markets.
All the major forecasts point to a
major expansion in nuclear energy
around the world over the next 20 years.
The International Energy Agency, the
World Energy Council, and major oil com-
panies like Exxon-Mobil and Royal Dutch
Shell all forecast a doubling of nuclear
generating capacity worldwide in the next
15-20 years, and more than that in a car-
bon-constrained environment.
occurred in generation RFPs:
First, the screening factors needed to
“get in the door”, which will be designed to
show that the team has the necessary
experience and financial capability to
successfully develop the project, if chosen.
In bids that ICF has managed, we call these
“threshold” criteria.
Second, if they pass the first screen, the
evaluation factors would assess the means to
bring this specific project to fruition (e.g.,
how this project would be permitted,
financed, constructed and operated). Even
then, bids could be subject to a “fatal flaw”
dismissal, if their offer is not responsive to
one of the key criteria (e.g., their permitting
plan does not reflect local realities).
In this context, we anticipate that bids
will become more explicit with regard to
the factors and weights being used for anal-
ysis, and their impact on the evaluation.
The evaluation should also become more
reliant on price (or price ceiling) in the sec-
ond step of the two-step process above,
since all of the company-level uncertainties
will have been resolved in step one.
We already see these trends emerging.
In terms of higher weightings on price in
the evaluation criteria, for example, the life
cycle cost bid was just about the only evalu-
ation criterion once the teams were quali-
fied in the Alberta solicitation. A focus on
price puts the developer or JV at more risk
given the uncertainties of actually permit-
ting and building transmission. Even so,
we expect large projects will remain attrac-
tive to bidders due to the size of the proj-
ects (the Alberta winning bid was for
$1.433 billion) and the ability of bidders to
differentiate their bids and be creative in
specifying how they would construct,
finance, operate and maintain, and the
return on equity they are willing to accept.
With regard to being more explicit on
evaluation criteria, the evaluation process to
be implemented in the SPP region will in
fact have this format, as shown below
1
.
1 Note that the total is a maximum of
1100 points, rather than 1000. The 100
points for “participation in planning”
would be awarded to a developer who
Thus, the format and criteria for evaluat-
ing bids in these solicitations will evolve.
Successful bidders will need to respond so as
to maximize their points in the evaluation pro-
cess, without putting themselves at undue
risk by bidding too low for a project that may
end up costing more than anticipated.
What to Expect? We expect to see the
following pathways for the competitive
transmission industry in the next 2-4 years:
•More near-term transmission opportuni-
ties in selected markets, more organized
around solicitations, with:
•More non-incumbent participation
•More financial players and joint ventures
•More targeted lines and substations
opportunities
•More prospects arising from the advent
of EPA regulations
•Both open and closed RFPs for reliability
and congestion, with greater transparen-
cy in the evaluation criteria and a greater
focus on price in the evaluation
•Potential inter-regional merchant oppor-
tunities (Order 1000 has not focused yet
on organizing the inter-regional planning
process)
•More mergers and acquisitions among
transcos, including spinoffs and acquisi-
tions, as some firms decide to refocus on
their core businesses
•Possible utility spinoffs of transmission
•More consolidated resource planning
that synthesizes generation, transmission
and distributed energy resources (DERs)
into a single planning process
The more prepared transmission com-
panies are for this transition, and for the
need to adapt their strategies so that they
are taking a long-term view in addition to
seeking to win near term RFPs and other
projects, the better they will be positioned
for the future.
offers a solution in the planning process
that SPP selects for a solicitation. SPP
has also adopted a feature that other
RFPs have not, and that is the use of an
independent expert panel to evaluate
and assign points in these categories, and
make recommendations to the SPP
Board.
NUCLEAR ENERGY EXPANDS
CONTINUED FROM PAGE 10
WHO GETSTO BUILDTRANSMISSION?
CONTINUED FROM PAGE 14
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