Electric Power in Florida

This little study got started several years ago because Florida Power & Light and its parent (Next Era Energy) were vigorously lobbying for rate increases and subsidies to support their craving for “Green Energy”. Was FP&L about to go “Green” with energy policies modeled on Spain, Germany, Denmark or the UK? If so Floridians, who already pay more for electricity than the US average might end up challenging Connecticut’s $0.17 /kWh. Two years ago I published a review of solar power in Florida based on the opinions of people who operate major power plants.

My goal was to find out how the electricity generating technologies applicable to Florida compare in terms of economic performance at the plant level, where the real wealth is created. The higher the operating margins, the more wealth is available to pay taxes, reward investors and pay employees. In a better world, high operating margins might even lead to lower consumer prices! In contrast, weak operating margins encourage companies to seek subsidies which inevitably fosters corruption while wasting tax dollars.

The solar power plant shown below covers over 500 acres. The collectors can be seen at the top of this aerial photograph of Florida Power & Light plant located at Indiantown in Martin county, Florida. In the foreground there are two steam turbine plants and on the right side there are four “Combined Cycle” plants. In the center are the connections to the 250 kV and 500 kV transmission lines that deliver 7% of Florida’s electricity:

While I had little difficulty gaining access to the Martin plant, I wanted to visit a nuclear plant given that last year 15% of the electricity in Florida was generated by nukes (cf. 5% by coal fired plants). FP&L operates nuclear power plants at Turkey Point and Port St. Lucie. I wasted an entire year trying to gain access to the St. Lucie plant. Eventually I gave up and switched my attention to Duke Power.

Given that I had served on the Duke university Radiation Safety Committee for many years and was a strong supporter of Duke Power during the Shearon Harris controversy I was not expecting any difficulty, so I wrote to Bill Johnson, the CEO knowing that he is a Duke alumnus. He turned me down flat and refused to see me when I showed up at his office. Roughly a year later he was ousted but he must have laughed all the way to the bank with that $45 million severance! In spite of this setback I was able to spend a week at the the Oconee station, a three unit nuclear plant operated by Duke Power near Seneca, South Carolina.

The most striking similarity between the Indiantown and Oconee plants is the use of lakes as heat sinks. Both plants have lakes with an area of roughly 18,000 acres

Staffing

Here the contrast is stark as nuclear power is more labor intensive than natural gas power. On arrival at the Indiantown plant I could not enter as the main gate was closed and no staff were present. I had to use my cell phone to get someone to let me in! At the Oconee plant I could not enter for quite a different reason. There were too many employees! While the Indiantown plant has a capacity of 3.6 GW the total staff is ~250. The smaller Oconee plant with its 2.5 GW capacity employs 1,400 people including 350 staff for security, many of them armed and dangerous!

	Steam turbine	Combined cycle	Solar	Nuclear
Fuel	Natural gas	Natural gas	None	U235
Plant area (Acres)	180	260	500	340
Operations staff	40	120	20	120
Support staff	8	24	4	1,280
Capacity (MW)	1,652	2,079	75	2,538
Capacity factor (%)	0.85	0.85	0.24	0.85
Thermal efficiency (%)	38	60	38	38
Output (TWH/year)	12	15	0.16	19

The initial problem at Oconee was that they had lost my paperwork. Once that was resolved my car was searched very thoroughly inside and out. The engine compartment was inspected as well as the underside of the car. It reminded me of Belfast during a security crackdown. The 1,280 support staff may strike you as a little excessive. Given that 350 of them are involved in security you may wonder what the remaining 930 do. The answer is that these people are needed to comply with US government regulations. I used to think that UK government’s rules and regulations were Byzantine. Alas, “Uncle Sam” makes us “Brits” look like amateurs when it comes to bureaucracy and red tape. The amazing thing is that “Feather Bedding” hundreds of useless employees does not matter. Nuclear power is so cost effective at the operations level that you could triple the staffing and still make an obscene margin. Staffing levels are not a significant factor except in the case of solar.

Operating margins

In order to appreciate the economic differences between the various technologies reviewed I have scaled the numbers to what they would be for a source generating 1 GW of electricity for an entire year with no down time. It is assumed that the electricity sells for $100 per MWh after deducting 7% for transmission losses.

	ONE GIGA-WATT YEAR ($ = Million US dollars)
	Steam turbine	Combined cycle	Solar	Nuclear
Area (acres)	128	147	27,778	158
Annual sales	$815	$815	$815	$815
Fuel cost	$382	$242	$0	$66
Labor cost	$5	$12	$200	$97
Operating margin	$428	$561	$615	$652

The first thing to notice is how compact natural gas and nuclear power plants are. Solar on the other hand requires ~200 times more space even without making allowance for energy storage. All these technologies produce good margins from operations. Nuclear power generates the largest margins but one needs to remember what it costs to construct nukes. A modern version of the Oconee station would have two Westinghouse AP1000 units (2,234 MW), costing roughly $8 billion. So how much did the Oconee station actually cost when it entered service in 1973? The answer is $500 million. Its operating licence was recently extended to 2033. Our hypothetical Oconee II would need to set aside more than half ($800 million) of its annual operating margin to amortize the cost of construction. This translates into a huge competitive edge for “Old Nukes”.

Do nukes have to cost that much? Currently there are AP1000s under construction in the People’s Republic of China for $2 billion each or half of what a similar installation costs in the USA. It is thus inevitable that the PRC will soon have a fleet of shiny new nukes while the USA clings to its shabby “Old Nukes”. I see this as a metaphor for excessive regulation destroying innovation and with it the prosperity of our children.

The Martin solar plant cost $476 million even without any provision for storing energy. Scaling this to an average output of 1 GW(e) gives a cost of $26 billion, more than five times what a comparable nuclear plant would cost in the USA. Thus such installations make no economic sense. Only where governments offer huge subsidies can one expect to see solar power on a large scale.

At the retail level where I live, electricity costs $0.10 per kWh or $100 per MWh:

	PER MW-HOUR
	Steam turbine	Combined cycle	Solar	Nuclear
Annual sales	$100.00	$100.00	$100.00	$100.00
Fuel cost	$46.88	$29.69	$0.00	$8.06
Labor cost	$0.63	$1.50	$24.55	$11.95
Operating margin	$52.49	$68.81	$75.45	$79.99

So where do all these numbers come from? Like the IPCC, I use models. My model is a single page spread sheet based on information given me by people who run those power plants. Because the top management of FP&L and Duke Power refused to cooperate I never got to look at their records and so some assumptions had to be made made:

Loaded staff cost	$150,000	per year
Transmission loss	7.0	%
Retail price	$0.10	$/kWH
Nuclear fuel cost	$7.50	/MWH
Natural gas price	$5.00	$/1000 cu. ft.

Discussion

The lowest cost electricity comes from “Old Nukes”, so the easiest way for a utility company to keep prices down is to apply for extensions for their existing reactor licenses and upgrade these reactors wherever possible. Even though the economics of “New Nukes” are attractive in spite of excessive regulation there is no hope of a rapid build up of nuclear capacity on the lines of the Messmer plan in France 40 years ago. The political clout of Greenies is still sufficient to block the licensing of new sites for nuclear power plants in most of the USA. Until that changes the best one can hope for is adding units on existing nuclear sites.

As an FP&L customer I was agreeably surprised by the company’s latest ten year plan which makes significant investments in two of their four “Old Nukes” all of which have received 20 year license extensions promising cheap electricity for many years to come. Two “New Nukes”, Westinghouse AP1000s, known as “Turkey Point 6 &7” are planned for around 2022. Solar only contributes 0.16% of the total power generated as no new investments are included:

More than half of FP&L’s output will continue to come from natural gas while the nuclear power share will rise from 15% to 25% of the total. Coal will remain at ~5%. “Other” includes biomass and imports from other suppliers.

Given that Next Era Energy, operates huge solar installations in California it is significant that even though Florida has plenty of sunshine there will be no massive FP&L roll out of solar power.

So why all that lobbying for “Green Energy” and rate hikes? My guess is that Next Era Energy was doing what all large companies do by going after all the corporate welfare available.  While solar is not quite dead in Florida, the government in Tallahassee is displaying admirable reluctance to repeat the Spanish fiasco.