COVERT, Mich. — A nuclear power plant on the shores of Lake Michigan is aiming to make history this fall by becoming the first reactor in the U.S. to restart operations after shutting down to be eventually dismantled.

The effort to restart the Palisades plant near South Haven, which shut down three years ago, is a precedent-setting event that could pave a path for other shuttered reactors to come back online.

But Palisades needs major repairs to restart safely, highlighting the challenges the industry will face in bringing aging plants back to life.

Palisades began commercial operations in 1971 during the early wave of reactor construction in the U.S. The plant permanently ceased operations in 2022, one of a dozen reactors to close in recent years as nuclear energy has struggled to compete against cheaper natural gas and renewables.

The owner of the plant, Holtec International, has said it hopes to restart Palisades this fall, subject to approval by the Nuclear Regulatory Commission. The restart project is backed by a $1.5 billion loan guarantee from the Department of Energy, $1.3 billion from the Department of Agriculture, and $300 million in grants from the state of Michigan.

The Energy Department on Monday approved the release of nearly $57 million from the loan, a sign that the Trump administration supports the project amid the turmoil and uncertainty in Washington over federal funding for projects started under the Biden administration.

But Holtec is facing major repairs to Palisades’ aging steam generators that could delay a schedule the NRC has called demanding. Holtec has disclosed to regulators that its inspections have found damaged tubes in the plant’s two generators, which were installed in 1990.

Those tubes are crucial components that protect public health. If a tube ruptures at a nuclear plant, there is a risk that radioactive material will be released into the environment, according to the NRC. Plant owners are required to demonstrate to the NRC that if a tube does fail, any radiological release beyond the plant’s perimeter would remain below what the regulator describes as its “conservative limits.”

“The NRC is scared to death of steam generator tube ruptures. It’s a very real accident. It’s not a hypothetical,” said Alan Blind, who served as engineering director at Palisades from 2006 to 2013 under previous plant owner Entergy.  Blind, who is now retired, said he supports nuclear power but is concerned about the condition of the Palisades plant based on decades of experience in the industry. 

Palisades is currently in a safe condition, NRC spokesperson Scott Burnell said, as the steam generators are not in use because the plant is shut down and defueled.

Holtec President Kelly Trice told CNBC the company has done a “complete characterization” of the generators and “they are fully repairable.” The company has asked the NRC to complete its review of the repair plan by Aug. 15, but federal regulators are skeptical of the company’s timetable.

NRC Branch Chief Steve Bloom warned Holtec during a Jan. 14 public meeting that the work required to review the plan will “add to a schedule that is already very aggressive.” Eric Reichelt, a senior materials engineer at the NRC, called the schedule “very demanding,” telling Holtec at the meeting that only a few people are available at the regulatory body to do the necessary review work.

The radioactive water that circulates through the reactor and the clean water that boils in the generators do not come into contact with each other. If a tube ruptures, however, the contaminated water mixes with the clean water and radioactive material could be released into the environment through valves that discharge steam, according to the NRC.

Holtec’s inspections found more than 1,400 indications of corrosion cracking across more than 1,000 steam generator tubes at Palisades, according to a company filing with the NRC in October 2024. The tubes have not failed, Holtec CEO Krishna Singh told CNBC in February. Several had corrosion cracking with more than 70% penetration, according to the filing.

Due to the plant’s age, Palisades steam generator tubes are made of an alloy that the industry has since learned is prone to corrosion cracking, according to NRC. Holtec said it is using a technique to repair the tubes called “sleeving” in which a higher quality alloy is inserted and expanded to seal the damage.

“The techniques of repair which we’re using, which is called sleeving, has been done in about 10 plants across the world and in some plants is done every outage, so this is not new, exotic technology,” Trice said. “It is a common repair technique, and we expect it to be done on time and on schedule.”

Holtec’s repair plan is scheduled to start this summer following inspection and testing, spokesperson Nick Culp told CNBC. Holtec can go ahead with the tube repairs on its schedule, but the company does so at its own risk as the NRC will decide whether the repairs meet requirements in the end, Burnell said.

But during the Jan. 14 meeting, NRC branch chief Bloom pushed back on Holtec’s statements that the company’s repair plan is following industry precedent.

“Even though you’re quote, unquote, following a precedent, it’s not exactly, because it’s a different material, different type of sleeving,” Bloom said at the January meeting. The sleeve design that Holtec is proposing for the repairs has not been installed in steam generators before, though it has been used in other heat exchangers at nuclear plants, according to a company filing.

The sleeves are made of an alloy that has not shown signs of cracking in U.S. or international plants, according to the filing. The component has a service life of no more than 10 years, the filing said. Culp said testing and analysis of the sleeves “support the expectation of longer-term performance.”

The issues with the tubes raise the question of whether the aging steam generators should be replaced, an expensive project that Palisades’ previous owners knew would be necessary at some point but never tackled.

Consumers Energy, for example, sold the Palisades to Entergy in 2007 for $380 million in part due to “significant capital expenditures that are required for the plant,” including the replacement of the steam generators, according to a filing with the Michigan Public Service Commission.

Consumers Energy assumed that the generators needed to be replaced in 2016, according to the filing. Entergy, however, did not replace them after purchasing Palisades. The utility found that purchasing new generators would make the plant economically unfeasible, said Blind, who was engineering director at Palisades during that time.

“They felt that with their expertise that they could prolong the remaining life, which is exactly what they did up until they shut it down,” Blind said.

Entergy closed Palisades in May 2022 and sold the plant to Holtec to take over its dismantling. But Michigan Gov. Gretchen Whitmer in a letter to the Department of Energy pushed to keep Palisades open, citing the jobs supported by the plant and the need for reliable, carbon-free power. Backed by the governor’s office, Holtec first applied for federal support to restart Palisades two months after it closed.

On Feb. 15, 2000, operators at Indian Point Unit 2 received a notification that a steam generator tube had failed, according to the NRC’s report on the incident. Consolidated Edison issued an alert and shut the plant down, the regulator said. It would stay closed for 11 months while the cause of the rupture was investigated and the condition of the four steam generators was analyzed.

The rupture resulted in “a minor radiological release to the environment that was well within regulatory limits,” according to an NRC task force report. The incident “did not impact the public health and safety,” according to the report. Still, the NRC slapped Con Edison with a red citation, the most serious violation, after determining the leak was of “high safety significance.”

The leak was contained and there was no evacuation of neighboring communities, but authorities in Westchester County at the time were deeply worried about the risk to the public, said Blind, who was Con Edison’s vice president of nuclear power at Indian Point during the incident.

“We had contained all of the radioactive water, but they were so scared that they were very close to closing all the schools,” said Blind. “They weren’t going to let the children come to school in the morning until they saw how this all played out. It’s all very serious.”

The leak proved costly for Con Edison. The utility replaced the four steam generators at an estimated cost of up to $150 million, according to company filings from the time. The bill would have been higher had Con Edison not had replacement steam generators already on hand. The utility had owned replacement generators since 1988 but had not installed them. Con Edison also paid more than $130 million in charges associated with the 11-month outage at the plant.

Blind said Con Edison decided to replace the steam generators at Indian Point to reduce the risk that there would be another tube rupture when the plant restarted.

“We were a publicly traded company,” Blind said. “And it came down from the board, it said we can’t live with this uncertainty.”

The utility sold Indian Point Units 1 and 2 to Entergy for $502 million in 2001 under a deal that also included gas turbine assets. The sale was under consideration before the tube rupture. Con Edison estimated an after-tax loss of $170 million from the Indian Point sale, according to filings from the time.

Blind said the stakes of the planned Palisades restart are high for the entire nuclear industry. Demand for nuclear power is growing again in the U.S. as states, utilities and the tech sector seek more reliable, carbon-free power. The renewed interest has been referred to as a “nuclear renaissance” after years of reactor shutdowns in the U.S.

Constellation Energy, for example, is planning to restart its Three Mile Island plant in 2028 subject to NRC approval. Constellation has said the steam generators at the plant have undergone inspection and maintenance and are in good condition. NextEra Energy announced in July 2024 that it is evaluating whether restarting its Duane Arnold plant in Iowa is feasible.

An incident at Palisades “would be devastating for the entire industry,” Blind said. “There would be calls for rethinking this renaissance idea,” he said.

Holtec’s Culp said the sleeves used to repair the steam generators at Palisades will be continuously monitored, inspected and subject to regulatory oversight while they are in service. The plant employs multiple layers of defense “to protect our workforce, community, and environment,” he said.

NRC inspectors will observe Holtec’s repair activities as they are implemented and will ensure the steam generators meet all the requirements for safe operation, Burnell said. “This includes making sure that the public and the environment are protected from radiological concerns,” the NRC spokesman said.