Friday, November 28, 2008

Exelon bids goodbye to GE Hitachi ESBWR

Advanced reactor design is out of the running for Victoria, TX, site

bailing outGE Hitachi's latest product offering, an "economic simplified boiling water reactor" (ESBWR) was dropped this week from further consideration for Exelon's planned greenfield nuclear reactor site at Victoria, Texas, 118 miles southeast of San Antonio.

The Wall Street Journal had a snappy lead in its coverage of issue. It said, "GE Hitachi Nuclear Energy has a problem with its latest nuclear reactor; getting someone to build it."

Exelon (NYSE:EXC) had proposed to build two of the giant 1560 MW reactors at the new location. The main reason is that the lagging design certification process at the Nuclear Regulatory Commission (NRC) resulting in a ranking for the Texas project at the bottom of the heap for eligibility for Department of Energy federal loan guarantees.

Thomas S. O'Neill, Exelon's VP for New Plants, was direct and to the point in a company press release. He said, "We are seeking improved eligibility for federal loan guarantees, which is critical to the advancement of this project."

Exelon spokesman Craig Nesbit was more specific, if that's possible, in a statement he made to the WSJ as reported by Reuters.

"We believe the Victoria project fell into the lower tier largely because of the uncertainty of the ESBWR design. We had no chance of getting loan guarantees with the ESBWR."

Exelon's statement was confirmed to Reuters by the Department of Energy. A government spokesperson said that applicants were given the results of the preliminary screening of loan guarantee applications. The spokesman pointed out that one of the selection criteria is the time to market for reactor technologies.

Company officials also told the Chicago Tribune . . .

The ESBWR remains in "the early design phase," Exelon said, and an internal analysis the company conducted over the summer indicated that other reactor technologies could provide the Texas project with "greater commercial and schedule certainty."

NRC reportedly unhappy with GE Hitachi

unhappyThe switch by Exelon to another reactor is designed to select a technology that has the best chance of getting early design certification by the NRC. According to a report in the Wall Street Journal, the NRC has been unhappy with the quality of the information provided by GE Hitachi which has caused delays in the review process. The NRC's web page for the ESBWR does not indicate a schedule nor completion date for the reactor's design review process.

Exelon chose the ESBWR in November 2007 as it prepared to spend $23 million to submit a combined operating and construction license (COL) which it filed in in September 2008. That's a relatively low cost. Ameren's COL application filed ith the NRC in September for an Areva EPR cost a reported $42 million.

World Nuclear News pointed out the EBSWR relies on gravity to operate "passive safety systems" that are considerably less complex, and therefore cheaper to build, than existing plants with cooling systems that require active pumps and valves.

Other utilities that have "referenced" the ESBWR in their applications include; Entergy for Grand Gulf and River Bend, Detroit Edison for FERMI III, and Dominion for North Anna. No one has actually placed an order for the reactor. See the NRC's web page on COL applications on file for links to each of these applications.

GE Hitachi told the WSJ it is has approached Exelon about using another reactor, the ABWR, for the Victoria site. According to GE, four ABWR units are in operation in Japan and another three of the 1,350 MW units are under construction in Taiwan.

Unlike Westinghouse and Areva, GE Hitachi has not booked any sales in mainland China. Also, the firm has pulled out of the bid process in the U.K. and Turkey albiet for different reasons in each country. In the U.K. GE Hitachi said it wanted more time to complete the design certification process for the ESBWR. In Turkey GE Hitachi was in good company with all other bidders, except Russia's RosAtomexport, in pulling out of a contentious bid process that isn't over yet.

Next steps for Exelon

For its part, Exelon said it will complete its review of available reactor designs and make a decision in early 2009. Exelon officials did not say how much it would cost to revise the COL application now on file with the NRC.

Exelon has pointed out that the shift in reactor technology does not imply that it has made a corporate decision to actually order a reactor and build one. That decision, the company says, will likely occur in 2010.

hostile-takeoverThe Chicago-based firm, which is the largest nuclear utility operator in the U.S., also said that the decision to switch reactor technologies at Victoria, TX, does not affect its hostile takeover effort for NRG (NYSE:NRG) which operates the South Texas Project and is building two new reactors there. NRG has rejected Exelon's efforts in sharply worded letters. In response, Exelon has taken its bid process directly to stockholders.

Both companies have seen their stock hammered by the current downturn on Wall Street. At 10 AM Friday November 28, NRG stock had opened at $23.10 against a 52-week range of $45.78-$14.39. Exelon's stock opened at $55.60 against a 52-week range of $92.13-$41.23.

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2 comments:

Pete said...

I would be interested is seeing some discussion on what is happening with the the COL and Design Certification (DC) applications. Specific questions include:

Does the AP1000 Rev ## DC have problems? The reason I did not give a number is that back in 2007 Westinghouse submitted Rev. 16, and all of the reviewing to date has been for Rev. 16, but in Sept., they submitted Rev. 17 and the NRC web page on the DC now has an asterisk, noting that the schedule is under review. The old schedule showed SERs (with open items) targeted to be issued in early 2009. Is this target in jeprody?

Granted, the situation is not as bad as with the ESBWR, where the published schedule was essentially erased, but I don't know enough to tell if the AP1000 situation is routine or serious.

Also, what happens to COL applications that reference the Rev. 16 DC?

A more general question is why are so few utilities going for early site permits (ESPs). Bellefonte didn't, and the COL for Units 3 and 4 appears to be hung up over a hydrology issue. It would seem that the issue would have turned up and perhaps have been resolved by now if they had sought an ESP.

djysrv said...

This post is really about the ESBWR. I know that Westinghouse has come back in to the NRC with a set of design updates. However, if you look at the number of plants that have referenced the AP1000 in their COLs, it is clear it is the market leader for domestic U.S. Also, the firm has orders to build four of them in China. The next market will be India where the going will be much tougher. See my prior blog post on Russia's deal for four 1,000 MW units inked earlier in November.