State Ownership vs Private Development After Nuclear's $9 Billion Failure

Nine billion dollars spent. Zero kilowatt-hours produced. The V.C. Summer nuclear expansion didn't just fail as a project—it exposed a fundamental structural contradiction: private development incentives fundamentally misaligned with public energy needs. As New York directs its state power authority to develop at least 1GW of advanced nuclear capacity and Wisconsin allocates $2 million to study optimal SMR locations, utility executives face a critical decision: pursue traditional private developer partnerships or explore state-owned models that promise better alignment but introduce new execution risks.

Misaligned Financial Incentives Behind the $9 Billion Lesson

V.C. Summer's financial structure created perverse incentives that virtually guaranteed failure. South Carolina's Base Load Review Act allowed SCANA to raise rates for construction costs before project completion, effectively transferring financial risk from shareholders to customers. When construction problems mounted, SCANA executives concealed delays from regulators while continuing to collect rate increases—a pattern that eventually led to fraud charges and prison sentences for executives.

This created a classic stakeholder mismatch: SCANA executives optimized for short-term earnings reports, regulators focused on procedural compliance rather than outcomes, and ratepayers—who bore the actual financial risk—had the least decision-making authority. State ownership doesn't eliminate these tensions, but it consolidates accountability under a single governance structure.

International comparisons reveal the performance gap: South Korea's state-owned KEPCO builds nuclear plants at roughly a quarter of the costs in the UK, with the UAE's Barakah project demonstrating remarkable efficiency improvements across its four units. Each subsequent unit was delivered faster than the previous one, creating a learning curve that private, one-off projects simply cannot achieve.

Navigating the Regulatory Labyrinth

The NRC's licensing process remains a formidable barrier regardless of ownership model. However, state agencies can potentially streamline regulatory processes through coordinated government support. New York's approach includes structured coordination between NYPA and the Department of Public Service—integration that was notably absent in South Carolina, where inadequate oversight from the Office of Regulatory Staff contributed to V.C. Summer's failure.

The challenge for state-owned models lies in maintaining sufficient independence between development and oversight functions while leveraging their natural alignment. Even with improved regulatory pathways, state agencies must address significant technological expertise gaps.

Building Technical Capacity to Address Expertise Gaps

The U.S. nuclear workforce faces critical challenges, with nuclear engineering graduates decreasing by 25% from 2012 to 2022, while demand is expected to grow from 68,000 to over 200,000 workers by 2050. This expertise gap is particularly acute for state agencies without established nuclear operations.

When Westinghouse—V.C. Summer's primary contractor—filed for bankruptcy in 2017, it triggered the project's collapse, revealing how concentrated nuclear expertise had become in a few private companies. State-owned models must develop robust technological capabilities through strategic partnerships and workforce development programs.

The critical question for deployment: who actually bears the financial risk when nuclear projects falter, and how does ownership structure change this calculus?

Strengthening Supply Chain Resilience for Implementation

The U.S. nuclear supply chain has deteriorated dramatically, with major commercial original equipment manufacturers exiting the industry over the past three decades. Since 2010, the U.S. has lost its majority position in nuclear-qualified manufacturing, creating significant vulnerabilities for any deployment model.

Recent challenges include project delays and shutdowns due to counterfeit items and obsolescence of technology. State-owned enterprises can potentially leverage greater procurement power and longer planning horizons to rebuild supply chains, but must balance standardization with innovation to avoid supply chain rigidity.

Implementing Financial Safeguards for Ratepayer Protection

The most damning aspect of V.C. Summer's failure was that South Carolina ratepayers had already paid $540 million toward the project at abandonment and continued paying increased rates despite its termination. By controlling both the financing mechanism and regulatory oversight, state-owned models can potentially overcome the misaligned incentives between private developers, regulators, and ratepayers.

Capital costs account for at least 60% of the levelized cost for new nuclear plants, creating a front-loaded risk profile that traditional project finance mechanisms struggle to accommodate. State-owned models can implement various mechanisms to protect ratepayers, including long-term power purchase contracts and loan guarantees, which help mitigate revenue risks while maintaining cost discipline.

Balancing the Risk Portfolio

The state-owned model represents a fundamental shift in nuclear deployment strategy, not merely a different financing mechanism. For utility executives evaluating nuclear investments, the key is recognizing that ownership structures create different risk profiles across financing, regulatory, expertise, supply chain, and ratepayer protection dimensions.

As the Department of Energy opens applications for up to $900 million in funding to support SMR deployment, the optimal approach likely involves hybrid models that leverage state ownership's financial stability while addressing expertise gaps through strategic private partnerships. New York and Wisconsin's initiatives offer real-time case studies in whether state ownership can finally break the deployment barriers that have stalled nuclear's contribution to grid decarbonization.

The $9 billion V.C. Summer failure wasn't inevitable—it was the product of a flawed ownership structure that misaligned incentives. State-owned models offer a potential solution, but only if they can successfully navigate the expertise and supply chain challenges that come with public sector implementation.