Saturday, November 17, 2007

India's prospects for private sector nuclear plants

Government set to offer new investment opportunities

With the derailed U.S.-India nuclear deal apparently back on the tracks, a uranium industry newsletter is reporting that giant Indian engineering firms are getting ready to build private sector nuclear plants in that country. Until now only the Indian government could build and operate the plants.

Uranium Intelligence Weekly (UIW) (subscription only) told its readers on October 15th, there is interest to build commercial nuclear plants among India's private sector companies. and they are gearing up for a series of major investments in nuclear as soon as the 123 Agreement goes through.

The agreement, which had been placed on a back burner, showed new life this week as left wing parties withdrew their opposition to it. The change of political heart resulted from unrelated domestic troubles that weakened the ability of the Communist Party to influence the ruling coalition.

India's government may take action to allow private firms to build and run nuclear power plants in the country. Until now nuclear power plants in India could only be set up by one public-sector firm, Nuclear Power Corporation of India Ltd. (NPCIL).

Coffee's Ready

The shift in government policy has been brewing for some time. In a presentation to US energy secretary Samuel Bodman last April, Dr. Karit Parikh, a senior government official responsible for nuclear energy, said a proposal to permit private firms to build nuclear plants in India is in the works. As a confidence building measure that the power plants will not close down like Enron owned Dabhol Power Project, the government has agreed to set up lifetime cost-based purchase of electricity from nuclear plants built by the private sector.

India's Atomic Energy Department chairman, Anil Kakodkar, also said in May that the Atomic Energy Act may be amended to permit private-sector players to enter the field. Once these amendments are made, private sector firms and other state-owned firms will be allowed to build and operate nuclear plants in India. He added that India is committed to reprocessing its spent nuclear fuel and completion of the 500 MW Fast Breeder Reactor under construction at Kalpakkam by 2010-2011.

Private sector ready to build

UIW reports that some Indian private-sector companies are ready to build nuclear power plants. These include engineering giant Larsen and Toubro (L&T) and major infrastructure developer GMR Group. Private-sector conglomerates Reliance Energy and Tata are also reportedly interested. India's leading metals miner, Vedanta Resources, sees a market expansion role for itself as a uranium supplier. U.S. companies are keenly interested in the market and so is the French giant AREVA as reported on this blog last Spring.

Electric transmission grid must gear up

India's nuclear capacity, currently at 3,310 MW, provides less than 3% of the country's total installed generation capacity according to the World Nuclear Association (WNA). It has 27 reactors of which six are under construction.

WNA reported nuclear power supplied 15.6 billion kWh (2.6%) of India's electricity in 2006 from 3.5 GWe (of 110 GWe total) capacity and this will increase steadily as new plants come on line. A huge investment in the grid system as power plants come on line is also necessary.

Nuclear deal with India back on the table

Opposition parties lose clout over domestic issues,
and agree to IAEA review

[Update 12/09/07]

The Associated Press reports that there has been a political shift in India that may allow the long-delayed nuclear agreement with the U.S. to go forward. There are still significant barriers to the deal including U.S. political opposition and the views of member states in the Nuclear Suppliers Group.

AP reports that communist parties that support India's ruling coalition have backed off their strong opposition to the nuclear deal with the United States. This change clears the way for the pact after months of high-stakes political games. The Communists, who had threatened to topple the government over the accord, said that the governing Congress party could go ahead with talks with the IAEA, which would need to approve any nuclear agreement.

AP notes that the pact would reverse three decades of American anti-proliferation policy by allowing the U.S. to send nuclear fuel and technology to India, which has been cut off from the global nuclear trade by its refusal to sign nonproliferation treaties and its testing of nuclear weapons.

AP says the reason for the change in the political climate in India is that Communist leaders finally relented after they saw their political standing take a nosedive after weeks of criticism over their response to violent farmers outraged over land rights issues in West Bengal. The Communists are the local governing party there and have taken the blame for mismanagement of the issues. The controversy left the communist parties weaker than they were in September when leaders threatened to withdraw support from the ruling coalition if the nuclear deal moved forward.

Have Yellowcake?

If the agreement goes through it will allow India to buy Yellowcake from Australia, which puts it in direct competition for the resource with China. The Chinese government is committed to a massive program of building new nuclear reactors and has ordered six so far this year. It is likely to order two AREVA EPRs later this month.

Before the deal is signed, it still has to be approved by the Nuclear Suppliers Group, a group of nations that export nuclear material. NSG members are not happy about the pact. According to nonproliferation groups in the U.S., the German Government reportedly expressed concern about the impact of the proposed U.S.-India nuclear deal on worldwide efforts to prevent the spread of nuclear weapons and has asked India to sign the Comprehensive Nuclear Test Ban Treaty (CTBT).

German Chancellor Angela Merkel went to New Delhi in October and, the Hindustan Times reported that Indian Special Envoy and former Foreign Secretary Shyam Saran was told by German officials, "We want India to contribute to strengthening international non proliferation system." [Hat tip to Nukes on a Blog] India has not signed the CTBT and has been criticized for seeking the benefits of the treaty, e.g., access to the NSG, without having to adhere to the requirements of the international agreement.

The whole deal has set off a series of rounds of high stakes diplomacy. There will be lots of developments by India and it supporters to complete the deal before the Bush administration becomes so much of a lame duck that it loses the ability to get the agreement approved by Congress.

Update 12/09/07

In some diplomatic tap dancing the primary negotiator for the U.S. - India agreement, Nicholas Burns, said that the United States does “not foresee” its civil nuclear energy agreement with India “being reopened by either side.” He made the statement in Singapore on Dec 3rd in an interaction with a group of journalists.

“The 123 Agreement is finished, it’s done; it’s completed. It just stands to be approved finally by both governments. The U.S. would now need to wait for India to make a final decision on putting the safeguards agreement forward.”

What Burns appears to mean is that the language of the agreement will not be renegotiated to suit the political aims of domestic parties in India or, for that matter, in the U.S. Noting that it was entirely up to the Government of India to navigate the “internal politics” over the issue, he emphasized that Washington had “always felt that this civil nuclear deal is in the best interests of both countries.”

Mr. Burns said: “It is part and parcel of a new effort to try and elevate the U.S.-India relationship to a strategic partnership. We are confident that this deal should go forward.”

Tracing the dynamics of the potential process at the Nuclear Suppliers Group “to support international change[s] to treat India in a more fair and effective manner,” he expressed the hope that a final vote in the U.S. Congress could take place sometime at the beginning of 2008.

He said: “Then, this deal will be finished. It will be a start, because it will deliver India from its isolation in the civil nuclear field for the last 35 years. It will give India extraordinary economic and technological benefits. It will allow us to have a more equal relationship with India, all of us in the international community, not just the United States but all of us."

Last October Burns said the Indian government should work fast to round up support at home because 2008 will be a difficult year to pass legislation through the U.S. Congress. An election year is "never a good time'' for lawmakers to ratify a major new accord, he told the Council on Foreign Relations in New York on Oct. 23.

Burns may have been speaking in Singapore, but part of his intended audience was in Washington, DC, where skeptical members of the House and Senate want to put new provisions into the agreement. Their primary aim is to curb the potential for proliferation of India's nuclear technologies to other nations. India has not signed the Nuclear Nonproliferation Treaty which is a deal breaker for some members of Congress.

Wednesday, November 14, 2007

China pushes plans for 200 Mw HTGR

The Pebble Bed reactor gets a commercial boost

Interfax reports from China that country will launch a new program to develop high temperature gas-cooled reactor (HTGR) a government official said at an industrial forum in Beijing this week.

Cao Shudong, a senior official with China's Atomic Energy Agency, said at the China Nuclear Power Summit 2007 organized by Lnoppen that the Chinese government will officially start the project in 2008.

According to Cao, a 200-megawatt modular HTGR power project will be jointly developed by China Huaneng Group, China Nuclear Engineering and Construction Corp. and Tsinghua University. The project is scheduled to be completed by 2013.

Main commitment is to third-generation reactors

Earlier this month Chinese offiicials told Forbes the country is committed to a massive investment in nuclear energy. China's nuclear power target of 40,000 megawatts of capacity by 2020 will be met, and probably exceeded, said Cao Shudong, director of system engineering at the China Atomic Energy Agency.

Sites for new projects in Zhejiang, Jiangsu, Liaoning, Fujian, Guangdong and Guangxi, all on China's coast, have been selected, and by 2009, Shandong's Haiyang project and the Sanmen facility in Zhejiang will be ready for construction, he said.

The Chinese government previously released its plan for the development of the nuclear power industry up to 2020, confirming plans to lift total capacity to 40,000 megawatts, or 4 pct of total capacity. Another 18,000 megawatts will be under construction by that time.

Wire service reports indicate Areva's long-delayed order from China to build two new-generation EPR nuclear reactors will be signed on November 25 during a visit by President Nicolas Sarkozy and will be worth a total of over $5 billion.

NY Times reports on Pelindaba break-in

Western news media finally notices there might be a problem

[Updates 12/13/07 & 12/20/07 below]
*** Earlier blog post with details of the attack here. ***

After rattling around the South African press for five days and some coverage by various blogs, including this one, Majikthise, and Danger Room at Wired, the break-in and shooting at South Africa's nuclear plant at Pelindaba got some ink in the New York Times.

The NYT reports,

"One week after the most serious attack on a nuclear installation in recent memory, the government of South Africa is largely mum about who was behind it, how they broke in or why."

The rest is a crisp summary of what's known. The Times report is a good start.

Six unanswered questions about this incident

Here are six questions that remain unanswered. They are mostly rhetorical since no one expects the South African government to be very forthcoming at this point.

1. Was Gerber in the reactor control room or the emergency services control center, which are two entirely different facilities at any nuclear plant? An Emergency Operations Center (EOC), which is where Gerber was reportedly attacked, doesn't have control of a reactor nor access to fissile materials. What's there that made it a target? What were the gunmen really after? Gerber was off-shift, but made it clear he was expecting trouble. What did he know before the attack? Was the EOC the key to disabling the security systems for the most sensitive part of the plant, where HEU is stored?

2. News media reports from South Africa seem to agree the first group of gunmen grabbed a computer, but later dropped it. What's on the computer? Most likely they just popped out the hard drive which is a lot easier to carry. Who has the computer now and what's on it?

3. What was the target of the second set of gunmen? If there were two attacks, then it is plausible there were two related targets, like a binary weapon, which if you combine them make something very destructive. Intruders at a former nuclear weapons plant are not looking to make off with lunch proceeds in the canteen cash register. They want something very badly, something which perhaps is so dangerous in its own right that its very existence may be denied by government authorities.

4. Most nuclear facilities have layers of security, not just an unarmed guard with a clipboard at a gatehouse. These layers involve a combination of armed guards on patrol, closed circuit TV, various types of sensors that alarm if disturbed by sound, vibration, or interruption of a laser beam or electric circuit, etc. So if any of these alarms sounded, how did at least four of the eight intruders make it all the way to the EOC and why did they go there?

5. What's left over from South Africa's nuclear weapons program that is still stored at Pelindaba? Highly enriched uranium (HEU) is too heavy to haul away with just four strong men. You need forklifts and trucks, plus lots of time. What about high speed electrical switches, nuclear weapons computer codes, other types of intellectual property, etc.?

6. Because nuclear facilities are "hardened targets" patrolled by a guard force with automatic weapons, rank amateur criminals go elsewhere to places, like convenience stores, banks, and gas stations. Put another way people who want to steal gold knock over jewelery stores in shopping malls not Ft. Knox. Only a trained group, armed themselves, and with a specific target, would tackle the security systems of a former nuclear weapons plant. Who sent them and why?

Update 12/13/07

No other major media organization has reported on the Pelindaba break-in since the New York Times story. I exchanged email with a reporter from the Washington Post who decided the story was not newsworthy. That's an editorial judgment on the newspaper's part so I can't argue with it.

The paper's focus is mostly on inside-the-beltway politics and the U.S. presidential election. The Post did report on a South African police action that stopped a planned robbery of an armored car carrying cash. All 11 gunmen involved in the attempted robbery were killed by police gunfire.

Several U.S. wire services picked up the NYT coverage, but to date the majority of the coverage has been in the South African press despite allegations of efforts by the government to suppress it. The impetus for the attack and the objectives of the people who carried it out remain a mystery.

Update 12/20/07

The Washington Post runs an OP ED piece on the break-in by Miach Zenko, from Harvard's Belfer Center. It's a good overview of South African media coverage, and he has a theory about the separate missions of the the two squads of four men each. I spoke to him by phone today [12/20/07]. Here's his scenario.

The first group of four attackers, Zenko says, had the mission of further disabling security systems at the plant so that the second group, also of four men, could attain another objective which was inside the interior security perimeter. However, the second group was detected almost immediately by plant guards who opened fire, so the second group never made it to their target. This is the reason the first group left essentially empty handed. They weren't supposed to take anything, just disable alarms and scram. Zenko doesn't have any idea what the target might be and the South Africans, if they know, still aren't talking about it.

Note that Zenko's OP ED in the Washington Post lays out his view that the attackers were after fissile materials of some kind, possibly HEU. However, when I asked him if they planned to carry it off in knapsacks, he agreed weight and lead shielding might be a problem. It takes at least 60 pounds of HEU to make a nuclear bomb, but that's just the start. Extremely sophisticated electronics, high order of craft with metallurgy, and work with shaped explosives is required and involves a high order of expertise.

Zenko's explanation also offers a reason why the first group attacked the Emergency Operations Center, which on its face has nothing of value to steal, but which is apparently a strategic target because reportedly it housed controls for plant security systems. Wrap it all up and what you have is a sophisticated attack that exploited inside knowledge of the nuclear facility.

Also, Zenko notes there is no truth, according to his South African sources, to the allegations that were immediately reported in the media after the incident, that Anton Gerber was doing anything but his job even though he was off-duty at the time of the attack. Gerber is more or less the hero of the incident because he drove off several of the attackers single-handedly in a fight inside the Emergency Operations Center and sounded the alarm despite being shot by one of them. He survived his wounds.

Finally, Zenko makes a good point in his close in the Post opinion piece. It is worth repeating here.

"Indeed, the essential ingredients required for making a nuclear weapon exist in more than 40 countries, in facilities with differing levels of security. Unfortunately, there are still no binding global standards on how to secure nuclear weapons and weapons-grade nuclear material. In the absence of sustained political leadership from the world's nuclear powers to develop, agree to and implement effective nuclear security standards, armed attacks such as the one at Pelindaba could become commonplace."

# # #

New cost estimate for Moab tailings

Contract work is underway [Update below]

The cost of cleaning up the uranium tailings along the Colorado river near Moab, UT, got a lot higher this week. The U.S. government said the cost rose by $200 million to $835 million Don Metzler, a DOE official, told the Salt Lake City Tribune it is "a realistic estimate." He declined to say what caused the increase.

The Energy Dept. plans to remove 16 million tons of uranium tailings from the site. Earlier this year DOE awarded a $98 million contract to EnergySolutions to begin the first phase of cleaning up the site shipping the tailings by rail to a 250-acre landfill located 32 miles away in Crescent Junction, UT.

EnergySolutions will perform design and installation of a tailings removal waste handling system, and initial tailings movement and operations to relocate the Moab tailings and associated wastes to a disposal facility near Crescent Junction, Utah. The contract performance period is through September 2011.

At $16/ton rail shipping costs alone will be at least $256M or 31% of the project’s cost under the new estimate. Using these numbers, the $98 million contract will move about 1.9 million tons of tailings or about 12% of the total volume at a rate of about $52/ton.

Uranium operations began at the site in 1956. Atlas Minerals bought the plant in 1962 and processes uranium ore at a rate of 1,400 tons/day until 1984. It filed for bankruptcy in 1998 and the NRC license lapsed in 2001 at which time it was transferred to DOE as a result of Congressional action that also started the cleanup program.

Metzler said there has been some progress already. He said 19,000 pounds of U3O8 had been recovered along with 225 tons of Ammonia. At $91/lb the recovered U3O8 is worth $1.73M. Kudos to the government for progress so far and more to come.

Update August 2008

Tuesday, November 13, 2007

Moody's - Nuclear plant costs may double

The "all in" total could be $6,000/Kw!
[updated 12/01/07, 12/17/07]

In a report issued to clients last month Moody's Investors Service said the outlook on on new U.S. nuclear generation is "a sensible if risky path. Moody's looks on nuclear generation as a critical component in the US' current supply mix. Currently, Moody's views the average credit rating it has on the regulated utilities with nuclear generation at the Baa-level, or low investment grade. According to the NRC, there are approximately 12 companies developing 17 Construction and Operating License applications for 31 new reactors.

There's not much new in the report, especially for those who follow the industry. However, for Wall Street, which still may not be used to the idea of the capital requirements for a nuclear power plant in the current era, the report offers some welcome news and some cautions. The first one is a whopper.

The rating service also said the cost of new plants may double. In the report, "New Nuclear Generation in the United States: Keeping Options Open vs. Addressing an Inevitable Necessity," Moody's said that the potential reactors could cost as much as $6,000/kW of capacity to build.

Moody's said it expects new plants to cost $5,000-$6,000/kW of capacity to build, compared with market estimates of $3,000-$4,000/kW of capacity. It noted that a proposed American Electric Power integrated gasification combined-cycle coal-fired power plant in West Virginia is expected to cost $3,500/kW of capacity.

NRG's two new plants in Texas are estimated to come in at a much lower price closer to $2,000/Kw. So there is a considerable gap between NRG's current estimate as a "first mover" and the costs that could be encountered by plants that come in at later dates. That said rapidly rising costs for steel and concrete could change things considerably over time.

Moody's said that, when assessing the cost of a new plant, it is concerned with the "all-in costs" of the facility, adding in capitalized interest, other owner's costs – such as site preparation — and transmission upgrades. It compared its assessment of the costs to the difference between the basic purchase price of a house and the "all-in" price including the cost of appliances, furnishings and landscaping.

Moody's said it believes that "many of the current expectations regarding new nuclear generation are overly ambitious," citing the amount of time it will take to bring new plants online and under estimating the cost of building the new reactors.

Moody's believes nuclear generation is a "critical component" in the energy supply mix, it said, but it does not believe more than one or two new nuclear plants will be online by 2015.

Moody's foresees five potential areas of bottleneck for construction of new nuclear generation: lead times for "ultra heavy/ultra large" forgings, especially given the lack of forges around the globe capable of the work; large manufactured components; engineering resources; logistics; and labor. These last items are on everyone's list and are also the things that must be keeping nuclear utility executives awake at night.

The one bring spot is that the demand for large forgings and other nuclear power plant components, such as turbines, will stimulate new suppliers to bring manufacturing capabilities to the market. For instance, Alstom is planning a new turbine plant for the U.S.

Update 12/01/07

One reader who works in the nuclear industry, and closely tracks nuclear plant construction costs, call me last week to dispute Moody's numbers. The analyst said his team has identified a "mid-point" of construction costs at approximately $2,400 Kw. The "low"point" is about $1,850/Kw and the high is just over $3,000/kw. None of their numbers come anywhere close to $5-6,000/Kw reported by Moody's. This midpoint number would bring in a 1,000 MWe plant at $2.4 billion in current dollars.

I've encouraged the analyst to contact Moody's and exchange information with their analysts, and to find out how the financial services firm derived their estimates. I've also encouraged the analyst to seek permission to formally release his numbers, with his organization's imprint, so that the information is open for discussion. If he reports back I'll update the blog with a new post.

Update 12/17/07

Alstom announced its new turbine plant for the U.S. French engineering group Alstom announced that it will spend over $200 million on constructing a new facility in the USA for the manufacture of steam turbines, gas turbines, generators and related equipment for use in US power plants.

The new facility in Chattanooga, Tennessee, will supply new steam turbines for both fossil fuel and nuclear power plants, as well as retrofitting existing steam turbines.

In November, Alstom announced that it had been selected by UniStar Nuclear Energy (UNE) to supply at least four 'Arabelle' half-speed turbine generators for UNE's planned fleet of nuclear power plants in the USA. Alstom plans to manufacture turbines for UniStar at the new Chattanooga facility.