Anyone who thinks that nuclear energy is not headed for a major league revival needs to take a look at the price of uranium and the multi-billion dollar investments in uranium enrichment facilities in Ohio and New Mexico needed to make nuclear fuel.
The issue is clouded by a request from the Ohio plant's operator for a windfall of free uranium from the government at a time when the price of the metal (U3O8) has soared from $7/lb in 2001 to $120/lb this month because of demand from current and new nuclear reactors. Some in Congress see the request as a bad deal because the firm, USEC, has "not demonstrated fiscal responsibility."
USEC breaks ground on new plant in Piketon, OH
USEC began construction last week of its American Centrifuge uranium enrichment plant in Piketon, OH. The Nuclear Regulatory Commission (NRC) granted a construction and operating license for the plant in April. The company plans to begin commercial operations in late 2009 with full operations targeted for 2012. The new plant could cost between $2.5 and $3.0 billion when completed and fully operational.
USEC operates the only uranium enrichment facility in the US at the gaseous diffusion plant in Paducah, KY. The new plant in Piketon, OH, is expected to use much less electricity. This week USEC also signed a five year contract with the Tennessee Valley Authority (TVA) for the Paducah plant to "manage the risk of rising prices." USEC said in its first quarter earnings statement that the cost of electricity had a negative impact on profits.
There's ain't no such thing as a free lunch
Meanwhile USEC has asked the government to transfer title to it of 25 million kilograms of uranium hexafluoride which is sitting at the Paducah plant. The New York Times reports,
"furious lobbying has broken out over who should end up with the prize, which will eventually end up as nuclear reactor fuel after being run through an enrichment plant. And though the material’s market value has been estimated at $750 million to $3 billion, USEC has been vocal in making its case saying it deserves the uranium — without paying a cent for it."
USEC makes the case that the government should give the uranium to the firm for free. Some of the uranium is left over from the atomic weapons Manhattan Project of the 1940s. USEC says the title to the metal could be changed with the stroke of a pen and insure the new plant, which badly needs investment capital, would be American owned.
USEC request called a "bailout"
Rep. John Dingell (D-Mich), who is chairman of the House Energy and Commerce Committee, calls the request for $3B in uranium a "bailout," and charges the USEC "squandered resources in multimillion-dollar golden parachutes, stock buybacks, and dividend payments that frequently exceeded their earnings." The company denied the charges.
Dingell asked the General Accounting Office (GAO) to give Congress an assessment of how to deal with the surplus uranium. But just before Dingell sent the GAO request, USEC President John Welch , who is a formidable power in the nuclear industry, wrote Dingell saying use of the spent uranium would last no longer than 4 years. After production costs, the net value of the enriched uranium could range from $750 million to $1 billion, Welch said. The company says it needs help from private investors, the government or both to fund the new plant at Piketon, OH.
What's interesting about Dingell's efforts to put controls on who gets the uranium and how is that over the years his political campaign contributions have come from major nuclear utilities and USEC itself. Is Dingell's protest just window dressing to avoid the appearance of a giveaway or is he really biting the hand that feeds him? The nuclear utilities would very much like to see the price of uranium go down.
USEC lacks investors, but faces new competition
According to the New York Times for 05/29/07, USEC says it does not have investors lined up for the new plant. The NYT also reports that USEC's future is uncertain and, if it is broken up and the assets sold off, the same issues about free uranium could be raised by the next firm to run the plants.
There's competition for USEC's plants and it lives right here in the US. The NRC issued a license in June 2006 to a European consortium to build a uranium enrichment plant in New Mexico. Urenco, a consortium owned by British Nuclear Fuels Ltd., the Dutch government and several German utilities, plans build a plant nearly identical to one operating in the Netherlands.
It will use centrifuge technology that requires only about 5 percent as much electricity as plants using gaseous diffusion systems, which have been used in the United States since World War II.
The New Mexico plant is scheduled to start enriching uranium in 2008, said Marshall Cohen, vice president of the consortium's American subsidiary, Louisiana Energy Services. It will reach full capacity in 2012 or 2013, Mr. Cohen said, and could be expanded later if new nuclear reactors are ordered.
At $1.5 billion, it is the largest civilian nuclear project in the United States in about a decade. It will be built near Eunice, N.M., not far from the Texas border.
With regard to USEC's request, the Urenco consortium has also asked for a piece of the action in terms of using the government's uranium. The sticking point will be whether giving the uranium away will depress the price of the metal and discourage investments in new uranium mines.
The government's decision about what to do with the surplus uranium will inevitably include a debate over the impact on USEC. Whether the company can make the case for new investment in its Piketon, Oh, plant, fueled by free uranium, remains to be seen.