Sunday, August 31, 2008

TVA's destiny revealed at Bellefonte - Part II

It enters uncharted territory by asking NRC for reinstatement of the licenses for two unfinished nuclear reactors [Update 09/13/08]

Bellefonte 1 & 2The Tennessee Valley Authority (TVA) has asked the Nuclear Regulatory Commission (NRC) to reinstate the licenses for two partially completed reactors at its Bellefonte site near Scottsboro, GA. The Knoxville News reports the first-of-a-kind request could result in the restart of construction at the two partially completed nuclear reactors.

In 1974 the NRC granted construction permits for two B&W 1,263 MWe PWRs, but by 1988 due to increasing costs TVA stopped work with Bellefonte 1 at 88% completion and Bellefonte 2 at 54% completion. TVA now says that the units are needed to meet increasing base load demand. TVA already has licensing efforts underway on the new Bellefonte 3 & 4 reactors which are designated as Westinghouse AP1000s.

According to the Birmingham News for Aug 2, Jack Bailey, TVA's vice president of nuclear generation, said at a forum in Scottsboro earlier this year that Units 3 and 4 could cost up to $9 billion or about $4.5 billion each. At 1,200 MWe that works out to about $3,800/Kw as a ball park figure. This number is significant as described below.

The rising costs of construction materials and the need to meet new base load demand are the key factors driving TVA's exploration of completing the two mothballed units. What's not clear is whether TVA plans to consider completing Bellefonte units 1 & 2 in lieu of units 3 & 4, building all four units, or some other option. TVA said it has not yet made a decision on whether to actually finish the two units or any other option.

Ashok Bhatnagar, TVA Senior Vice President of Nuclear Development, said, "Reinstating the construction permits will help TVA understand the regulatory requirements and to evaluate the feasibility of using Units 1 & 2 to meet future base load power demand." His 2007 presentation on TVA's nuclear future is a 'must read' to get insights into the agency's plans and direction.

Permit conundrums confound the regulators

nrc logoTVA's actions came as a big surprise to the NRC. Agency spokesman Ken Clark told the Knoxville News the request to reinstate the permits is "unprecedented."

"In my recollection nobody has filed to reinstate a construction permit. The NRC staff will have to make a decision whether or not the process will have to start all over again."

Clark said the agency isn't rattled by the request, but it has to sort things out. He said the NRC has a process for reviving permits and also has some discretion in these matters as well as a precedent from a Texas case.

Joey Ledford, an NRC official in Atlanta, told the Knoxville newspaper he was unsure how long it would take for the agency to make up its mind on which way to proceed. The reason, he said, is that no one at the agency can recall getting a request like this one.

Other issues include elements of the new permit application for units 3 & 4 such as cooling towers, water intake, as well as the transmission and distribution infrastructure. "We assumed units 1 & 2 had been canceled," Clark said. He also noted that when the NRC considered the environmental impacts of units 3 & 4, they assumed units 1 & 2 would not be running. The answers to these issues will also drive costs and ultimately TVA's decision whether to proceed with the old units, the new ones, or both.

Back of the envelope earned value calculation

The Tennessean reported on Aug 28 that Tom Kilgore, TVA CEO, and Bill McCollum, TVA COO, told the TVA board of directors they don't have a cost figure at this time on what it would take to complete the two reactors or how the agency might share costs with investment partners.

McCollum added that the types of reactors being considered could come in at $5 billion each if built new. Kilgore reportedly told the TVA board there is great value in the work done so far on the two reactors especially when you consider what it would cost to put in concrete and steel for them at today's prices.

calculatorThe agency said it has budgeted $10 million over the next 18 months to evaluate the potential for completing the two older units. A quick back-of-the-envelope estimate suggests that the cost to complete the two units could be $3.6 billion at a minimum. Here's how that figure breaks down.

Assume for the sake of discussion that the two older units can pass the regulatory hurdles and that construction can be restarted. If one also assumes a construction cost of $3,500/Kw, and credits the past work at this price, the cost of the additional work looks like this (table below by the author).

The assumptions are that the same power ratings are expected at completion as were specified in the original design. If you think the price/Kw should be higher just create a spreadsheet like this one and plug in your own number.

Bellefonte table

These numbers illustrate a way to think about the costs and are not an engineering estimate. The numbers in the table do not include contingencies for unknown technical risks, which could be as much as 15% of the total project cost ($8.4B) or about another $1.3 billion for both units. This would bring the total cost of completing both units to $3.6 billion. This number is important to put things in perspective because critics of the plan have some wild estimates that far exceed it.

Critics cite debt as a reason not to proceed

While TVA's management was mulling over whether to revive the first two units, several critics of the agency voiced concerns about costs and TVA's current debt load. Gary Morgan, of Concerned Citizens of Scottsboro, Ala., told the Tennessean on Aug 22 that TVA's debt from other energy projects is already too high. He estimated the cost of completing the two older units at $12-18 billion. Morgan did not provide a basis for his estimate. Morgan's number is three-to-five times greater than the back-of-the-envelope estimate. It seems more like he pulled a very large number out of the air and then waved it around like a red flag. Morgan said he was concerned that if these prices turned out to be the case that TVA "could go insolvent." Morgan said his group wants revival of the licensing process stopped until more information is available on costs.

bredlStephen Smith, Director of the anti-nuclear Southern Alliance for Clean Energy, told the Chattanooga Times Free Press on Aug 23 that reviving the two old reactors "would be a money pit." He said his group doubted the two units could be finished at a "reasonable cost," but like Morgan he didn't put a number on what he considered to be "reasonable."

Lou Zeller, science director of the Blue Ridge Environmental Defense League, didn't even bother with numbers. He just threw a slider pitch to the press telling the Birmingham News that TVA is making a big mistake by gambling on the future of energy economics. "We think TVA is doubling down on its bet," he said.

In response to these criticisms, Bill McCollum, TVA COO, said, "We intend to thoroughly explore potential power supply sources to determine the best and most cost-effective methods of meeting future power needs. That includes energy efficiency and demand reduction. as well as new generating units as the demand for power grows."

Full speed ahead on licensing efforts for units 3 & 4

Bellefonte 3 & 4 sketch While TVA was exploring uncharted territory with the NRC licenses for units 1 & 2, it continued work with the NuStart consortium to pursue a combined construction and operating license (COL) for two Westinghouse AP1000s for units 3 & 4 which would add approximately 2,300 MWe to the agency's generating capacity if built. The COL was submitted to the NRC in October 2007. A decision is expected in 2011. TVA is also completing Unit 2 of the Watts Bar nuclear reactor at Spring Valley, TN.

TVA's Ashok Bhatnagar told the Knoxville News the agency sees nuclear energy as an increasingly economical option for power generation needs.

"First and foremost we do feel that we need new base load generation capacity about every five-to-seven years. Our thinking is that nuclear is the best product to put out there into the future."

If carbon taxes and carbon tax-cap-and-trade programs are enacted by the next Congress, the price of burning coal, which is a major fuel source for TVA, will sky rocket. The only relief will come from investments in fuel sources that do not emit greenhouse gases such as carbon dioxide. Wind and solar will not meet the demands of TVA's customers for electricity. Nuclear energy has a place at the table at TVA. The key question is how many places the agency will set at Bellefonte.

Update 09/13/08

Forbes reports via the Associated Press that three anti-nuclear groups are trying block plans to restart work on TVA's unfinished Bellefonte Nuclear Plants, Unit 1 & 2, in northeast Alabama.

The Blue Ridge Environmental Defense League, the Bellefonte Efficiency and Sustainability Team and the Southern Alliance for Clean Energy asked federal regulators to suspend a request by the Tennessee Valley Authority to renew construction permits at Bellefonte.

The groups say TVA hasn't addressed the possible environmental impacts of completing the units at Bellefonte.

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Prior coverage on this blog

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1 comment:

Anonymous said...

Another important factor that should be considered here is TIME. IT will likely take alot less time to get these already issued construction permits back then to get a COL for units 3&4. It will also presumable take less time to build than 3&4 since all the concrete is poured.

Not to be too pessimistic about the next generation designs, but given as they have never been built there is CONSIDERABLE uncertainty on how long they might take or what they might cost. Several plants similar to Bellefonte 1&2 have been built and are currently operating which provide a reference model for this type of unit (just hope they don't follow the TMI version of starting one of these up :p).