Saturday, September 20, 2008

Microsoft veteran boots up nuclear reactor R&D

A firm focused on patent licensing wants to design a new kind of reactor

high energyIntellectual Ventures of Bellevue, WA, is a high energy operation that gets its revenue primarily from acquiring patents and then enforcing its rights to royalties when others want to license them. When other firms infringe on these patents, the firm sends its lawyers over for a heart-to-heart chat. The Wall Street Journal has two reports this week on the firm's aggressive tactics with high tech computer and communications firms.

What makes the firm noteworthy for the nuclear industry is that in August the Puget Sound Business Journal reported that the firm has shifted gears away from short term returns and, for one project, started an investment with a payoff measured in decades. It hired 30 nuclear engineers to design a new type of nuclear reactor that doesn't require enriched uranium for its fuel.

As advocates of alternative reactor designs know well, that kind of project could take a long time to gain market share. A firm bent on harvesting licensing revenues doesn't usually have that kind of time to wait. Investors want returns within three-to-five years and a cash out strategy. However, one investor has a different mind set. More on this below.

Note to nukes - look up traveling wave reactor. In addition to the energy wave reactor concept, the firm is also in pursuit of reactor design ideas to use thorium as a fuel. [large image] The firm's goal is to develop a reactor which could be fueled in the construction phase and operate without refueling for up to 60 years.

[Edward Teller's paper (PDF file) on the concept for the traveling wave reactor was published in 1997. Hat tip to Kirk Sorensen who hosts an online forum on Thorium reactors that has additional technical discussions.]

Intellectual Ventures seems to have bypassed a variety of options for small reactors because of the focus on nonproliferation objectives as well as economic scale.

A really long run time to payoff?

Even more unusual is that the payoff for this R&D work is likely decades in the future running completely counter to the firm's current business philosophy. The Wall Street Journal summed up the operation this way in an in-depth profile published on Sept 17.

Millionaire Nathan Myhrvold, renowned in the computer industry as a Renaissance man, has a less lofty message for tech companies these days: Pay up. . . . Intellectual Ventures, has secured payments in the range of $200 million to $400 million from companies including telecom giant Verizon Communications Inc. and networking-gear maker Cisco Systems Inc.,

pay now or pay laterThe Wall Street Journal Law blog was even less charitable in its coverage last week quoting Myhrvold's candid comments on his patent licensing strategy verbatin.

Myhrvold told the WSJ that he acknowledges facing resistance from companies he targets for licenses. But his patent inventory gives him leverage to extract settlements without litigation. “I say, ‘I can’t afford to sue you on all of these, and you can’t afford to defend on all these,’” he said.

Heavy hitters at the table

So what is Myhrvold doing funding R&D for a new type of nuclear reactor? Well, for starters 30 engineers at a cost of about $200K each, not counting lab equipment, comes out to $6 million a year. The firm is spending money, but what's is it really up to? A science paper published in February 2008 provides a road map of the firm's ideas.

The reactor concept, which the firm recently publicly presented to the American Nuclear Society, would reduce the need for uranium enrichment and cut the risk of dual use of enrichment technologies to make nuclear weapons. Like all new reactor designs it faces enormous hurdles and a technology "S" curve for adoption that may stretch well into the second half of the 21st century. Only the world's largest philanthropic foundation, which includes Warren Buffet's money, could roll out a project with a rate of return that is measured in decades.

Bill GatesWith Microsoft billionaire Bill Gates (right) pumping in money to the project from his foundation, the project leader at Intellectual Ventures expressed confidence the job can be accomplished in one lifetime. John Gilleland told the Puget Sound Sound Journal, "We have an unusual opportunity to steer things in a way that will do the world a lot of good."

Dr. Gilleland is a powerhouse in the reactor physics field. Anyone who wants to work on the new reactor design will need to be able to keep up with him. It is clear that Intellectual Ventures is going first class when it comes to staffing the project. Here's a quick snapshot of Gilleland's career.

Gilleland served as Bechtel Corp. Chief Scientist and Vice President and Manager of Advanced Energy Programs. From 1987 to 1991, he was U.S. Managing Director of the International Thermonuclear Reactor Program (ITER). During a 16-year tenure at General Atomics, Dr. Gilleland directed the construction of the a test bed for advanced fusion research. He holds a B.S. degree from Yale University and M.S. and Ph.D. degrees in Physics from the University of Michigan.

What's even more interesting is that the project has a top drawer profile at Intellectual Ventures. According to the Puget Sound Journal, Bill Gates is not only putting money into the project, he's also participated in brain storming sessions about the new reactor design. Reportedly, he is interested in reactors as a cheap source of power for the world's poor.

Why a nuclear reactor is not like software

As you might expect there is no shortage of skeptics that Intellectual Ventures is wasting its time and money on the project. Jon Phillips, who works on nuclear R&D at the Pacific Northwest National Laboratory (PNNL), told the Puget Sound Journal, "I wish them luck. It's not like coming out with a software package."

He said that introducing a new reactor design, particularly only that operates on radically different physical principles than a light water reactor (LWR), is a "daunting proposition."

logo jon phillips pnnl"Any time someone starts out on a new idea in nuclear power design, they need to understand the inertia of that marketplace and the regulatory context of that market which is vast."

Phillips points out that reactor designs evolve over time taking advantage of what is known about existing models. He's got a point. All three of the commercial reactors currently in design certification at the NRC reflect that principle. They include designs from the major vendors - Areva, Mitsubishi, and GE-Hitachi. The project at Intellectual Ventures has none of their corporate throw weight behind it.

Phillips is not alone in his skepticism. Denis DuBois, editor of Energy Priorities Magazine also analyzed the firm's R&D program. His assessment is that success is "decades away."

Risk is measured in decades at national labs

boatloadIntellectual Ventures isn't the kind of firm that usually talks about its business investments. However, with a boat load of coverage in the Wall Street Journal and the nuclear cat out of the bag, so to speak, the firm appears to be looking for a higher profile possibly as a recruiting angle.

What it is doing is what national labs usually do, and that is take on R&D projects that have such long lead times that no industrial lab worth its salt would even think about it.

genIV_logoMaybe the Department of Energy should talk to Myhrvold about its plans. Here's why. There is the financial meltdown on Wall Street, and the likelihood that federal funding in 2009 will be turned on its head because of the enormous scope of bailouts to financial firm. if I were a nuclear R&D manager at a DOE national lab, I'd get the next plane to Seattle to talk about joint ventures.

Note to nukes with GEN IV R&D experience - the firm is hiring nuclear scientists and engineers. Check the web site at Intellectual Ventures under careers for job opportunities.

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Friday, September 19, 2008

Two more for Texas at Comanche Peak

Luminant Power goes with dual 1,700 MW Mitsubishi ABWRs

comanche peakTexas-based Luminant Power submitted a combined construction permit-operating license (COL) application to the NRC Sept 19 for two new Mitsubishi APWRs at Comanche Peak. [media kit] Luminant is the third company to file for new nuclear reactors in Texas. The other two are NRG at South Texas Project and Exelon at Victoria county.

The NRC is reviewing MHI's application to have the APWR design certified in the US. It was submitted for review last December. The new units, to be known as Comanche Peak 3 & 4, could begin commercial operation between 2015 and 2020.

Joint venture with MHI

Platts reports that Luminant selected Mitsubishi Heavy Industries' (MHI) US-APWR design in March 2007. MHI and Luminant said they will form a joint venture to cover funding for project development costs. Luminant would have 88% of the joint venture and MHI would have 12%. The Texas firm hopes to control EPC costs by benefiting from MHI's experience. MHI said in a statement about the joint venture that it has built 23 PWR reactors in Japan with a 24th under construction.

Finance and costs

Luminant and MHI will seek official support for financing from the U.S. and Japanese governments. Luminant has submitted a loan guarantee application to the U.S. Department of Energy.

At a rough estimate of $3,500/Kw, the two 1,700 MWe reactors could cost about $6 billion. Improvements to transmission and distribution equipment would add to these costs, but the fact that the new site is at an existing reactor facility could save money too.

Economic impacts of nuclear plant construction

GNPLuminant also released the results of a new economic impact analysis of the potential economic benefits from construction and operation of the new reactors. Ray Perryman, CEO of The Perryman Group, the research firm that conducted the analysis, said,

“If built and operational, the facilities would be expected to directly employ hundreds of people and lead to economic impacts of billions in spending every year as well as thousands of jobs.”

A second nuclear industry group also has some numbers on the substantial state level job gains from new nuclear construction. The American Council on Global Nuclear Competitiveness, a nuclear energy trade group based in Washington, DC, said total job creation in Texas from all three new nuclear plants, including Luminant's was on the order of 47,100 jobs. The primary sectors of the economy benefiting from job creation are construction and manufacturing.

Texas is second only to South Carolina in job creation and total combined economic benefi among 12 states with new reactor construction scheduled in the next decade. [09/15/08 presentation slides - PDF file]

Harnessing Texas wind energy

wind-turbine-flagHere is an interesting fact. Luminant is the largest purchaser of wind based energy in Texas and the fifth largest in the U.S.

Shell WindEnergy Inc. and Luminant announced in July 2007 a joint development agreement for a 3,000 MW wind project in the Texas Panhandle and to work together on other renewable energy developments in Texas.

& & &

Luminant is a subsidiary of Energy Future Holdings. A group of investors, including Kohlberg Kravis Roberts and Goldman Sachs, own Energy Future Holdings.

Comanche Peak is located near Glen Rose, TX, southwest of Dallas. There are two 1,215-MW PWRs operating at Comanche Peak.

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Reaching across the generation

A group of 16 young professionals talk to their peers about nuclear energy

cleanenergyamericaIf you are a young person age 18-35 and you want information on nuclear energy, where do you turn? The answer is you hit Google looking for people your age who know something about it. Starting this month what you'll find is an exceptional group of 16 young men and women who work in the nuclear industry.

A new project called Clean Energy America (CEA) is comprised of young engineers and scientists who volunteer their time to participate in a range of events on energy issues before campus, civic and professional groups. These folks are on the south side of age 35 and all are exceptionally well qualified to talk about nuclear energy because they work in the industry.

This is a terrific idea because the reality check is that there is no difference in generations on one key point. If you are looking for authenticity and a no BS point of view, you talk to someone your own age. It offers young people something else that is just as important, and that is role models of success, for men and women, in the nuclear industry.

reactor coreAs the up and coming leaders in their field, Clean Energy America speakers will play a crucial role in the nuclear industry and in the nation's energy industry as a whole. Some work day to day in nuclear power plants as nuclear and design engineers. Other speakers have backgrounds in finance, law and mining.

Their leadership skills are shown by a variety of roles at the chapter level in the American Nuclear Society and similar organizations. More importantly, they are the generation which will inherit the earth including the challenge of global warming.

The program seeks to make students aware of career opportunities in the nuclear energy industry. The program utilizes traditional and new media outlets to reach a large audience and generate greater awareness of nuclear energy.

nei logo Clean Energy America is sponsored by the Nuclear Energy Institute (NEI). More information can be found on the well designed CEA website. It offers lots of information, a blog by the 16 participants in the program, and a calendar of events. For questions or to arrange an interview, contact Allison Sparks, 703-740-1755 or email her: allisons [at] cleanenergy4america.org

In addition to this project, NEI also sponsors Clean & Safe Energy with world class speakers and multi-media materials for everyone.

Hat tip to Dave Bradish at NEI's blog.

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Detroit Edison files for Fermi III

The utility has a lock on the rate base which will pay for construction

Anthony Earley jr DTE Energy (NYSE:DTE) CEO Anthony Earley, Jr. (left), is an executive who believes in his product and the economic future of his customers. His company's commitment is so strong that this week it filed an application with the NRC to build a $10 billion new nuclear power plant near the existing Fermi II facility in southeastern Michigan about 30 miles from Detroit.

Roller CoasterWorld financial markets have been on a wild roller coaster ride over the past week, and the uncertainties of when or where it will end have sent investment banker running for cover. It takes real guts to go forward with a $10 billion nuclear reactor in the face of the nation's worst financial crisis in three decades. DTE has some advantages that make it much less subject to the effects of the gyrations on Wall Street.

DTE Energy filed its application with the NRC one day after the Michigan State Legislature enacted a law that locks in the rate base. It limits the ability of 90% of the state's residential customers from shopping for electricity. The law also has provisions that limit the ability of large electricity consumers, like auto plants, from shifting their business from DTE to independent power producers. The lock on the rate base for residential and industrial customers insures DTE Energy will have the revenues to build the plant.

By filing now DTE also maintains eligibility for up to $400 million in federal tax credits. Most of the cost of the new plant will be paid for by customers so the tax credits will lower their bills for electricity. The cost of the plant depends on commodities like steel and concrete.

enrico fermiThe review by the federal regulatory agency will take about four years and construction will take another six years. If all goes well Fermi III, named after the Nobel Prize winner Enrico Fermi, will enter revenue service by 2020.

The Detroit Free Press reports that DTE Energy submitted 17,000 pages of documentation to the NRC. The paperwork consumed more than 100,000 hours of work over the past two years. The actual application is submitted in electronic form on CDs.

The application is based on a GE-Hitachi ESBWR reactor that produces 1,500 MWe. It is 33% larger than Fermi II. That reactor design is still under review by the NRC, but GE is said to be pushing hard to complete the process in order to bid on projects in the U.K.

Prior coverage on this blog

  • Fermi III is focus for energy politics
  • Michigan's DTE plans Fermi III

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Thursday, September 18, 2008

Buffet buys Constellation

Turns 'make v. buy' on its head

Warren Buffett, who gave up on his plans to build a greenfield nuclear power station in Idaho, opted today to buy an entire nuclear utility - Constellation (NYSE:CEG).

The utility owns and operates the Calvert Cliffs site and more importantly is aligned with EDF and Areva (Unistar) to build a fleet of EPRs across the U.S. Constellation has five reactors at three nuclear plants: Nine Mile Point and R.E. Ginna in New York, in addition to Calvert Cliffs in Maryland.

Constellation has also announced plans for Calvert Cliffs 3 and a third unit at Nine Mile Point, both to to be built by Unistar. A COL was filed with the NRC for Calvert Cliffs 3 last January. A COL is expected for Nine Mile Point later by the end of 2008. Both projects will build American versions of Areva's EPR.

The deal to buy Constellation will be done through Buffet's MidAmerican Energy Holdings of Des Moines, IA, for cash of approximately $4.7 billion, or $26.50 a share. It's a bargain at this price considering the amount of nuclear generation capacity he got for it. In 2005 Florida Power & Light offered $12 billion for the company in a deal that did not go through.

The firm's stock dropped like a rock in recent weeks, because of credit problems with its energy trading business, which put it in Buffet's sights. The stock had been trading at twice the price Buffet paid for it just a month ago.

He beat out a plan by Electricite de France to add $500M to its stake in Constellation. The firm had previously acquired a 9.5% interest in Constellation. The two firms have a joint venture in any case, but on the U.S. end Mr. Buffet's MidAmerican is now calling the shots. What's interesting is that he also now has a tiger by the tail with Unistar's plans for new builds.

The Bloomberg wire service has a detailed financial analysis of the situation.

The Wall Street Journal Environmental Capital blog also has some comments and a vigorous discussion in response.

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Tuesday, September 16, 2008

Nuclear energy discussion group at WSJ

To invest or not to invest in nuclear energy, that is the question

I've created a nuclear energy discussion group at the new community pages of the Wall Street Journal. You must be a subscriber to the online edition and register with your real name. I hope to see you there. Blogging will continue here free to all as always.

Click here >>> Wall Street Journal community page on nuclear energy

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Sunday, September 14, 2008

German greens reject nuclear fund for renewables

Maybe they want a better offer than $56 billion?

GNPGerman Chancellor Andrea Merkel and her conservative Christian Democrats (CDU), think they have a plan to save Germany's nuclear power plants from being shut down. It is to extend their life by diverting some of the profits from the sale of electricity into a fund to buy down the higher costs of wind and solar power. The plan would generate euro 40 billion (US $56 billion) over a period of 20 years.

However, Social Democrat Environment Minister Sigmar Gabriel, speaking for a broad coalition that include the country's green groups, rejected the plan calling it "a return of the nuclear industry." The greens may want a better offer or the initial rejection may be just a negotiation ploy. Either way, it shows just how contentious things are. Even when really big money is on the table, the greens are sticking to their principles at least for now.

Reuters and the Financial Times of London report that the plan is an effort to stop an effort to close 17 nuclear power plants by 2021 which supply one-third of Germany's electricity. The paradoxical outcome of that plan, which is pushed by the greens, would be to require Germany to build more coal-fired plants with the accompanying release of greenhouse gases. It would also expose Germany to increased reliance on politically fragile supplies of natural gas from Russia. Green groups, which appear to be fixated on reducing consumption of electricity, have argued thboxofrocksat wind and solar energy are all that is needed once the nuclear plants are shut down.

The battle over the future of these nuclear power plants will be at the heart of the federal elections in Germany which take place in September 2009. If you think South Africa has a problem with its GNP going in the ditch with brownouts from the lack of electricity, wait until you see Europe's largest economy take a tumble if the greens get their way. It's a battle for political power and the greens have staked out a position that is fundamentally hostile to nuclear energy under any arrangement. Their plan is dumber than a box of rocks, and that's being kind.

Merkel's point man on saving the nukes

Germany's minister of economics and technology, Michael Glos, is the point man for Merkel's drive to save the nuclear power plants and Germany's economy. Last week he told World Nuclear News, "there is no way out of coal and a lifetime extension of nuclear energy."

He pointed out that when the plan to phase out the nuclear plants was crafted the price of oil was $28/barrel. Now it is $110/barrel. He told WNN,

"Longer lives for existing nuclear power plants mean a long-term, lower-priced, safe and climate-friendly power generation. It would be simple and inexpensive to extend the lives of nuclear power plants."

However, he drew the line at building new nuclear power plants saying that was not on the table. What the CDU is putting forward, according to Reuters, is a concrete proposal to take some of the earnings from the country's current nuclear plants and pay for above-market rates for solar and wind power. Reuters reports that the main companies operating the nuclear plants, E.ON, RWE, Vattenfall, and EnBW, have agreed in principle to participate in the plan in return for keeping the nuclear plants open.

Privatize the grid?

powerpylonWhile all this was going on, one of the big utilities, Vattenfall, told Reuters, it is thinking of selling off its transmission and distribution network. The issue of privatizing the grid, which could affect the price of renewables, has a lot of challenges, The firm's CEO Lars Goran Josefsson said,

"First we've got to see if there are respectable investors, which will invest long-term in the grid, and second whether there's a decent price. There are plenty of interested parties, including private equity companies."

He added the creation of an independent national grid company, bringing together all main power companies' networks, would be difficult. One of the reasons he's considering the plan is that a recent court ruling in Germany determined that the firm overcharged for use of its grid by euro 50 million (US $76 million) and that the money must be paid back. This appears to be a regulatory issue over rate-of-return.

Josefsson also endorsed the idea of buying renewable energy with profits from nuclear power plants. Reuters reported Josefsson told Berlin's Tagesspiegel newspaper that his firm would consider investing more in renewable energy if it were allowed to run its German nuclear power stations for longer.

"We can discuss this. But it has to be market-oriented ... any restriction to energy markets makes things more expensive for customers."

Goran is an advisor to Chancellor Merkel on climate change issues, so his move may be another signal about how she plans to tackle energy issues in the upcoming election. Without putting too fine a point on it, every electricity transmission and distribution network in Germany would benefit from having an extra $56 billion in renewable energy over the next two decades to sell to customers. The country's GNP would benefit from having that energy available to it.

Political pressures will drive the nuclear decision

Bear on power lineThe CDU plan is not likely to be implemented during Merkel's current term, but it is grist for the political mill. More likely, it will be the centerpiece of her government's drive to insure the country does not run out of electricity or energy.

Merkel has one other problem, one Germany shares with other European nations. It is how to achieve more independence from supplies of natural gas from Russia. The Russian bear has flexed its energy muscles in policy disputes with its immediate neighbors turning off supplies when it feels it is not getting its way on the international front. It would be in Russia's interests for Germany to shut down its nuclear reactors and have to buy more natural gas for peak power.

* * *

Watch this space. The future of Germany's economy and Europe's depends on what happens to those nuclear power plants. That's what's at stake.

On the net

Prior coverage on this blog

  • Merkel swings for the fences to preserve nuclear plants
  • A tectonic shift in Germany's nuclear energy politics
  • Europe's G8 giants divided over nuclear energy

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