ATLANTA -- Can this country's nuclear power industry, down and out in the 1980s, begin its comeback in the 1990s?

As the industry enters its fourth decade, participants and observers seem to think it will.

That view is based on several new developments. First, the surplus energy capacity that flowed from the hectic building of power plants in the 1970s and early 1980s is now almost depleted, forcing planners to once again consider new construction. And just as the debate grows over what kind of new plants to build, nuclear power's toughest competitor, coal-fired generation, has suddenly lost its allure because of environmental concerns.

Equally important, managers of utilities must soon face the need to replace the many aging nuclear plants that will wear out within the next two decades. Finally, President Bush's recent energy plan -- which includes streamlining nuclear regulatory rules and curbing states' power to thwart atomic waste disposal -- provides solid evidence of federal leadership after a decade of relative neglect.

"France, Sweden, and Japan have continued their nuclear programs with good success," said Miles Federman, a managing director of utilities ratings at Standard & Poor's Corp. "I have to believe that with all the worry about fossil fuels and global warming with decommissioning around the corner, and with hints of stronger federal support, there's a reasonable chance utilities could start building plants again by the turn of the century."

If a rebound of nuclear power becomes a reality, construction of a dozen new plants could be under way by 2000, says Garry Krellenstein, vice president of municipal bond research at Lehman Brothers. This could be followed, he says, by an even more significant building boom starting about 2010, when most plants now in service are retired and investors grow comfortable with the next generation of nuclear technology.

Leaders in Nuclear Revival

Public power agencies, of course, would not be the only participants in a renewal of interest in nuclear power. Investor-owned utilities and government owned agencies, such as the Tennessee Valley Authority, would likely lead the way, he says.

But if a renewal does become a boom, says Mr. Krellenstein, municipal power agencies could sell as much as $20 billion of new-money tax-exempt debt in the next 15 years to fund their share of new building. And that amount could be dwarfed by a second wave of financings that would occur if nuclear power -- which now provides 20% of the country's electricity through 112 operating plants -- becomes the energy source of choice in the United States.

Yet even the most optimistic of nuclear power proponents concede that formidable obstacles must be surmounted before utilities commit to new atomic power plants and investors back these enterprises.

With the average 1,200 megawatt nuclear power plant often costing more than $2 billion, the most important hurdle is cost, analysts agree.

In the 1980s, providers of nuclear power generally were not able to offer electricity at a price cheaper than that provided by oil- or coal-fired plants.

"The big advantage of nuclear is its relatively low cost of fuel; its big drawback is the huge capital costs in building plants," says Alan Spen, senior vice president at Fitch Investors Service. "So when the price of fossil fuels slumped in the 1980s, it was very bad news for the nuclear industry."

And if utilities with nuclear plants were financially wounded by the drop in competing fuel prices, they were deciminated by delays in obtaining regulatory approval, Mr. Federman said. As regulators intensified their scrutiny of plants in the 1980s, and the average time to obtain approval lengthened to 14 years, nuclear projects were exposed to a long succession of expensive legal challenges as well as rising costs of labor and materials.

The problem with regulators is part of a larger difficulty the industry has had in convincing the public that nuclear power is a safe and viable source of power, Mr. Federman said.

This difficulty, he said, grew more intense after the 1979 accident at the Three-Mile Island facility in Pennsylvania and the disaster at Chernobyl in 1986. No utility has ordered a new plant since 1978, he noted, and about 30 planned facilities have been canceled.

For the investment community, confidence in nuclear power will continue to be undercut by the 1983 default of $2.25 billion of bonds sold by the Washington Public Power Supply System, Mr. Federman said. This default, the largest ever in the municipal market, occurred when the Bonneville Power Administration, which is WPPSS's sole customer, refused to honor the system's take-or-pay contract.

Any effort to ressure the public, analysts agree, must begin by providing for the permanent disposal of nuclear waste.

The federal government took some steps toward solving this problem when, in 1982, it enacted the Nuclear Energy Waste Policy Act, which imposes a fee of one-tenth of a cent per kilowatt of nuclear power to fund a national nuclear repository. So far, the government has collected $7 billion of the $30 billion needed to build a storage facility capable of holding 70,000 tons of spent fuel.

Unfortunately, use of the Yucca Mountain, Nev., site that the federal government favors has so far been vigorously opposed by the state.

Many in the power industry argue that each of these problems -- cost, regulation, and public acceptance -- is being solved.

The cost of future nuclear plants could be slashed as new technology offers a few standardized designs that are safer as well as more efficient, said Theodore Marston. Mr. Marston is director of advanced nuclear reactors development at Electric Power Research Institute, the electric power industry's research consortium in Palo Alto, Calif.

Mr. Marston said the next generation of new plants almost certainly will be an advanced version of what the industry calls light-water reactors, so named because they use ordinary water as both a coolant and heat-transfer medium. He said a smaller core and simpler, more reliable safety features will cut both building and maintenance costs. With such improvements, even the useful life of a nuclear facility could be extended beyond its current 40-year limit.

Expenses also could be cut by manufacturing modular elements at a factory, rather than custom-building them on site, Mr. Marston said. In addition, the new designs allow for smaller plants -- in the 600-megawatt range, about half the average current size -- enabling utilities to plan a closer fit between supply and demand.

"We are moving toward a series of standard designs of this proven technology that will prove more reliable, need less operators, and allow us more time to react to problems than ever before," he said.

Addressing the question of regulation, Mr. Marston pointed out that the Nuclear Regulatory Agency has agreed to reform licensing rules, with a proposal in 1989 to combine construction and operating permits into one step. Enactment of these reforms has been proposed by President Bush and legislation is currently pending in Congress.

To Bob Shaw, senior program manager of high-level waste disposal at the institute, the problem of permanently storing contaminated equipment and spend fuel is also clearly solvable.

"Containers have been developed that can hold nuclear waste almost indefinitely, and we have identified sites where we can safely bury the containers," he said. "I think technically and economically, it [disposal of nuclear waste] is absolutely feasible -- the only real obstacles are political."

Many environmentalists, however, question the utilities industry's claims that the problems facing the nuclear industry are being dealt with.

According to Dan Reicher, a senior analyst at the Natural Resources Defense Council, the political resistance to the disposal of waste alone will prove the undoing of any nuclear revival.

Mr. Reicher, whose group monitors environmental issues, maintained that even with building and maintenance costs slashed, nuclear plants probably are not economically viable when all expenses are considered.

"The cost of the entire cycle of nuclear energy must be taken into account, from front to back end, and that includes disposing of uranium millings, uranium enrichment, building and maintenance, and decommissioning," he said. "When iewed in overall context, I'm not sure it will ever be economical."

He also noted that scientists could make technological breakthroughs in the use of coal or other technologies, making these fuels more efficient energy producers and less damaging to the environment -- and even tougher competition for nuclear power.

"I'm not against nuclear power, per se, but I would love to see the same amount of attention and funding going to energy conservation and alternative energy sources," Mr. Reicher said.

Will Pendulum Swing Back?

Amid the rising swirl of debate over the future of nuclear energy, the mood among managers at both private utilities and public power agencies is one of great anticipation -- and great caution.

"I see the pendulum swinging back to nuclear by the turn of the century, but for us to go that way, we have to be sure it's cheaper than other alternatives -- and I'm not convinced that's true yet," said F.F. Stacey Jr., president and chief executive officer of Oglethorpe Power Corp., an Atlanta-based utility.

Mr. Stacey said Oglethorpe's next plant probably will be a medium-sized coal or oil station, which can be developed at far less cost than the approximately $1,500-per-kilowatt charge now needed to build a nuclear facility. However, he did say he would consider the possibility of a nuclear plant, perhaps in the 600- to 800-megawatt range.

"We are for exploring the options available, but we don't want to be on the bleeding edge in terms of nuclear power," said Graham Edwards, senior vice president for finance at the South Carolina Public Service Authority, a public power agency that is part owner in a number of large nuclear plants. "I seriously doubt we would be the first utility to announce construction [of a new nuclear plant]."

Mr. Edwards said that while the passage last year of the federal Clean Air Act, which limits the use of fossil fuels, would make his authority pause before building a new coal-fired plant, it does not mean the agency will choose nuclear power instead.

"We would want to see a more accepting public, a more favorable regulatory process and design standardization, and a solution to the nuclear waste problem," he said. "Those are a lot of conditions."

Robert Naylor, director of communications for the Connecticut Municipal Electric Cooperative, said memories of the recent public outcry over nuclear power would inhibit his agency from planning to build atomic plants. The cooperative is a joint-public power agency serving 80 utilities in New England.

"Personally, I think that sooner or later, we will be forced to move forward with the building of new plants," he said. "But right now there is still a very strong feeling here of having been stung by events in the 1980s."

Mr. Naylor singled out the region's ill will toward the nuclear industry, caused when public power users were forced to absorb the high costs of a facility in Seabrook, N.H., and the $5.3 billion Shoreham Plan in Coram, N.Y. Although both facilities are operational, they are now idled because of political opposition.

Such an attitude leads even those who predict a resurgence in the nuclear industry to caution that the public power sector is unlikely to lead the way.

"What is needed is for several utilities to get together and lead the way; or for a private venture to be led, say by Westinghouse or General Electric," Mr. Krellenstein said. "The public power agencies are going to be reluctant for a whole host of reasons, not the least because they have to be more responsive politically than other power providers."

But even if public utilities eventually seek funds for new nuclear plants from the municipal bond markets, said Fitch's Mr. Spen, the investment community, after having been burned by the WPPSS default, is going to closely scrutinize any new debt.

"In rating these bonds, we are going to be very, very careful," he said. Mr. Spen said examination of the debt would include analysis of the technology employed, the pricing charged to electric customers, long-term energy demand, and the fit between that demand and the nuclear unit's capacity.

"My gut feeling is that there will be a nuclear comeback in the late 1990s, particularly if there is more support from the federal government, and other fuel prices rise," he said. "But it's also important to remember how precarious an energy source this is in the United States. There could be the wild card of another Chernobyl, or a technical breakthrough in some other energy source, or just plain general resistance on the part of the public to widespread new building of nuclear plants. In that case, you may not see new bonds again for this purpose for a long time."

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