Wednesday, October 24, 2007

Utah divided over nuclear ratepayer risks

Financial issues top the list of concerns

Salt Lake City (Oct 13) -- September is normally a sunny month in Utah, but a legislative working group found itself spending a gloomy week under the capitol’s golden dome pondering the energy future of the state. That future is clouded by harsh realities. Coal won’t last forever and then there are the problems of CO2 emissions and global warming. Nuclear energy looks interesting, but the state’s protracted battle over a proposed site for dry cask storage of spent nuclear fuel has left its mark. The center of the action in September was an interim legislative committee on public utilities. It heard from experts haunted by the ghosts of past financial problems encountered decades ago during the construction of the nation’s first generation of nuclear power plants.

The committee is wrestling with a draft legislative proposal titled, "Recovery of Costs for Nuclear Power Facilities," which is modeled after a Florida law. It shifts some of the financial burdens and risks of nuclear plant development from utility companies and their investors to ratepayers. It would allow a utility to recover the costs of building a nuclear power plant during the construction period instead of waiting for the plant to enter revenue service. One of the principles underpinning the proposal is that ratepayers who benefit from electricity generated by a new nuclear power plant should share the financial risks of building one.

A public hearing on Sept. 19th on the draft legislation, which drew 60 spectators, aired the financial issues and attracted plenty of media attention. The governor weighed in on the issue prompting quick responses from committee members who told him to back off. Two experts on nuclear energy testified at the hearing, and that is where the heavens opened up and rained on the legislative parade.

Financial experts raise doubts

The first expert to testify was S. David Freeman, the former head of the Tennessee Valley Authority (TVA). According to the Salt Lake City Tribune, he told the committee that anyone who tries to tell the Utah legislature nuclear energy is cost effective is "selling you a bill of goods." And that was just for starters.

Freeman is the former head of one of the nations largest nuclear utilities so he came to the hearing with a high level of credibility. He has a history of pointing out the financial failures of the nuclear industry including those of his former agency. Last January he was quoted in the Chattanooga Times saying, “of all the places on Earth that have given nuclear power a shot and failed, the Tennessee Valley has got to be number one.” He told the Utah legislative committee TVA sank billions in the 1970s and 80s into nuclear reactors that were canceled before they were finished due to cost overruns.

Freeman criticized the Utah legislative proposal saying it was "like writing a blank check" with no limits on spending. For their part Utah legislators said they wanted no part of similar financial disaster in Utah. Freeman also said nuclear power plants are potential targets for terrorist attacks and that the lack of a national solution for spent nuclear fuel creates future risks.

Freeman's testimony was mirrored by David Schlissel of Synapse Energy Economics, a Massachusetts consulting firm. Schlissel told the legislators that nuclear industry estimates of construction costs for new nuclear reactors in the range of $2,000 per kilowatt are "very optimistic." He said construction costs are rising and new designs do not have proven cost figures. Schlissel also characterized the draft bill as “overly broad.” He called for more public oversight of nuclear energy incentives.

Synapse Energy is not a disinterested consultant in the energy world. The firm's website lists as clients dozens of anti-nuclear activist groups including Greenpeace, Sierra Club, and the Union of Concerned Scientists.

Schlissel has a point about the cost of new construction. According to Business Week for Oct. 3, NRG's new reactors in Texas will cost about $2,200 per kilowatt of output capacity, which is comparable to the cost of a technologically advanced coal plant that gasifies the coal before combustion.

Fear, Uncertainty & Doubt

Freeman and Schlissel's testimony did a good job of sowing confusion and doubt about nuclear energy among the legislators and they succeeded in delaying a recommendation from the committee to the full legislature.

Even supporters of nuclear power had second thoughts. Rep. Janice Fisher, D-Fruit Heights, asked for a comparison chart of the cost of nuclear energy compared to solar, wind, and fossil fuel sources. Sen. Scott Jenkins, R-Weber, who co-chairs the committee, said that as a result of Freeman and Schlissel’s testimony the committee needs more discussion and will postpone making a recommendation for now. Significantly, they didn’t kill the measure and legislative supporters of nuclear energy said they would revisit the issues raised by the energy experts in the next round of meetings.

Rep, Michael Noel, who co-chairs the committee, was upset with the testimony and its outcome. He said, “We got sandbagged,” he said, and called Freeman’s talk “pretty goofy.”

Sen. Scott Jenkins, who also co-chairs the committee, said he was disappointed with Freeman’s testimony. He said, “It’s most old stuff,” and pointed out the nuclear plants Freeman worked on were built decades ago long before the NRC standardized the regulatory process. However, Jenkins told me he was interested in Schlissel’s testimony about reactor construction costs.

Noel added that next week the committee will hear from Nils Diaz, the former chairman of the Nuclear Regulatory Commission, on the new combined construction and operating license, and, from Dave Hill, a nuclear scientist from the Idaho National Laboratory, who will talk about international nuclear fuel programs. Both legislators said witnesses for the committee are selected by legislative staff.

Jenkins and Noel told me it may be difficult to get a bill on to the legislative floor with a strong recommendation from the interim committee. Jenkins said, “We might get a sense-of-the-committee type of measure.”

Governor’s opposition “unfortunate”

Controversy always seems to love company, and the nuclear energy issue in Utah got plenty of it as a result of the legislative hearing. Hesitation in the legislature over nuclear energy was mirrored later that week by Governor Jon Huntsman Jr. who said the spent fuel issue is a "deal breaker" as far as new nuclear plants are concerned. He later qualified his remarks saying he would support nuclear energy in Utah if the spent fuel issue could be resolved at a national level. Then he said nuclear energy would be an option for future generations. One interpretation is that the governor is all for nuclear energy as long as no one tries to build a reactor in Utah during his term in office.

Rep. Michael Noel, R-Kanab, who co-chairs the committee on the House side, told the Deseret Morning News

it is "unfortunate" that the governor opposes nuclear energy. Noel, who sees nuclear energy as a critical piece of the state’s energy portfolio, says critics need to be realistic about how to meet growing demand for electricity.

"The only way we can meet our [energy] needs is through nuclear power. We think in order to meet the base loads that we need in the next 30 years that nuclear has got to be part of the portfolio."

He adds that the amount of spent fuel from a nuclear reactor in Utah is "miniscule," and he says it is unfair for the governor to compare it to the proposed spent nuclear fuel storage site on the Goshute Indian reservation. Noel concluded that it is "disingenuous" for the governor to oppose construction of a nuclear power plant in Utah while allowing the state to buy electricity generated by one in Arizona.

Noel said that few companies are willing to risk time and money to get approval for a new nuclear power plant, "unless they know they can pass the costs along to ratepayers."

Noel isn’t alone in his response. Rep. Aaron Tilton, R-Springville, told me he supports offering financial incentives to utilities to build nuclear power plants in Utah.

"The legislature is very supportive of nuclear energy. If the governor understands the issue thoroughly, he'll probably take a more moderate position on nuclear power." In a political shot across the governor's bow, Tilton said, "I think the governor would do well to explore the issue some more."

For his part a spokesman for the Governor told Rep. Noel he felt the governor had been “misquoted” in the press and asked for a meeting to smooth over political differences.

While Gov. Huntsman was trying to make peace with the legislature, he told a Blue Ribbon Panel on Global Climate Change he wants the state to increase its use of solar and wind power. He ran into opposition on the panel from the state’s largest energy producer, Rocky Mountain Power. The utility objected to government interference with its investment strategies. Even the Sierra Club representative on the panel recognized that reality telling a Salt Lake City radio station, “we need the power company’s input.” The panel will submit its final report in November.

The Salt Lake City Tribune weighed in with an editorial about the hearing on Sept. 23rd with a sweeping assertion that “all discussions about nuclear power plants should be shelved.” The editorial dismissed Huntsman's opposition based on the spent fuel issue. Instead, the paper wrote the reason nuclear energy should be set aside is “the staggering cost . . . up to $2 billion to bring a new plant online."

Based on Schlissel’s numbers, that $2 billion price tag buys you a 900 MW plant, which is the same size as the proposed third unit at the coal-fired Intermountain Power Plant near Lynndyl, UT. The plant’s construction is now on hold based on objections from California cities over global warming issues. Sponsors of the coal plant in Utah and Idaho have sued the Los Angeles Department of Water & Power over its opposition to the third unit.

Is Utah gambling with ratepayer dollars?

Huntsman's anti-nuclear stand was praised by Vanessa Pierce, director of HEAL, a Utah environmental group. She said opening the door to construction of a nuclear power plant in Utah would "jeopardize the success" the state has had in stopping spent fuel from other states from being shipped to Utah. She said it takes too long to bring a new nuclear power plant online, and for the amount of money involved, other energy technologies like solar and wind could be brought online a lot sooner. She also criticized the draft Utah bill in terms of financial risks and drove her point home by accusing Rep. Noel of "gambling with ratepayer dollars."

Piece had a completely different take on Freeman’s testimony. She told me the impact on the legislature “was profound,” and “painted a sobering picture” of the costs of construction for a new nuclear power plant. She asked, “why should rate payers be asked to insure a nuclear power plant when we don’t do that for coal plants?” She emphasized, “subsidies make my blood boil.” Piece said her assessment is that without a bill from the committee, it is doubtful that a nuclear power plant will be built in Utah.

Robert Ball, who leads a ratepayer group, told panel the only utility in the state that would qualify under the new legislation would be the parent company of Rocky Mountain Power. He said the draft bill "socializes the costs and privatizes the profits" of nuclear development.

Socialism and gambling don’t travel far in the free market atmosphere of Utah’s nominally conservative political climate which may be why critics used these concepts in their comments on the draft legislative proposal. Despite all the heat generated by the hearing, legislators said they would continue their work on the bill later this month.

Sunday, October 21, 2007

AREVA has China deal

Long delayed contract for two reactors to be signed Nov 25th

Forbes reports via AFP that AREVA's long-delayed order from China to build two new-generation EPR nuclear reactors will be signed on Nov 25 during a visit by President Nicolas Sarkozy and will be worth a total of $7 to 9 billion for all parts of it.

Under the deal, AREVA will also supply China Guangdong Nuclear Power Corp with fuel for the plants for a period of over 20 years worth $2.84 billion.

Reportedly, the French state-owned utility EDF will finance the agreement, taking a stake of 35-40 pct in a new company to build and operate the plant. This is unusual because China usually self-finances its energy projects.

Two new AREVA EPRs, which are 1,600-megawatt reactors, will be built at a new location, Taishan, near Hong Kong. The reactors in the deal are said to be worth $5.67 billion.

The reactors had originally been planned for the Yangjiang nuclear plant in the southern Guangdong province, but domestic CPR-1000 reactors were eventually chosen for this site.

AREVA said it will set up an engineering joint venture with a Chinese partner as part of the anticipated order.

The company denied rumors last July that the deal was canceled, and it has been playing catch-up since Westinghouse inked a deal with China for four AP1000 reactors last year. The competitive edge for Westinghouse reportedly was that it will transfer reactor technology to China as the plants are being built. For its part China is said to want to boost the power of their version of the AP1000s to 1,250 MWe once the first four are built.

The IAEA estimates China and India will be the global leaders in nuclear power usage in 20 years. By 2020 China plans to hike its dependence on nuclear power to 40,000 megawatts, while India aims to reach 20,000 MW.

IAEA deputy director general Yury Sokolov said at an IAEA symposium on nuclear power plant management in Shanghai, "In China, in India, you have very definite plans for increasing the nuclear capacity six to 10 times for 20 years, this is really fast growth. The growth of the world is not so fast."