Leftover parts and pieces of two partially built nuclear reactors that were abandoned in central South Carolina two years ago are the definition of what economists call a “sunk cost.” They have already been paid for — to the tune of billions of dollars — and that money is gone.
So are the millions of dollars that Santee Cooper, a partner in the doomed nuclear project with SCANA, which is now Dominion Energy, has spent protecting those parts and pieces from the elements since 2017.
Sunk costs are common, of course, and not inherently problematic. But humans have a tendency to behave irrationally when it comes to making new decisions after putting money into something that turned out to be a bad investment.
Santee Cooper hopes to claw back some of its bad investment by selling the leftovers. Officials with the state-owned utility think they could get hundreds of millions of dollars at market value.
This week, Santee Cooper terminated a contract with Westinghouse dating back to 2008 in an attempt to gain control over that material. But Westinghouse, the company that designed the reactors that were under construction in South Carolina, isn’t likely to give up that easily.
For Westinghouse to claim ownership of equipment bought and paid for by Santee Cooper is preposterous on its face. But Westinghouse, or more specifically the private investment firm Brookfield Business Partners that now owns Westinghouse, holds a key advantage.
The Westinghouse parts sitting around in Fairfield County are only really useful in other Westinghouse reactors. There are a few of those still planned or under construction around the world, but Westinghouse obviously has a lot of leverage in terms of making a deal for a sale with Santee Cooper.
And Westinghouse will presumably hold that leverage even if Santee Cooper rightly wins the legal battle over ownership of the nuclear parts.
To that end, Westinghouse offered to sell $8 million of equipment to Southern Co., which is building new reactors in Georgia, and set that money aside to potentially share with Santee Cooper pending the outcome of the ownership dispute.
Santee Cooper turned down that deal.
Unfortunately, there are still outcomes in which Santee Cooper could walk away with nothing but a useless pile of reactor parts — its sunk costs. And sadly there are fewer potential outcomes in which the utility gets a fair price for those pumps, generators and piles of steel.
It’s understandable that Santee Cooper would put up a fight, given that the utility ultimately owes about $4 billion for its share of the failed reactor project. It’s also important to avoid flawed sunk-cost thinking.
The reactor parts in South Carolina are worth nothing without a buyer willing and able to purchase them. If Santee Cooper can get anything for those parts, even if it means forking over some cash to Westinghouse, it should consider taking a deal if one is offered.
A few million dollars is worth a lot more than zero, even if the fair value owed Santee Cooper — and its roughly 700,000 direct and indirect electric customers statewide — is much higher.