Friday, December 5, 2008

Eskom cancels its $12B nuclear tender

"It's too big. We can't do it," says the utility

Eskom logoAnother casualty of the world wide credit crunch in the nuclear industry was recorded Friday Dec 5. Eskom, the troubled South African electric utility, canceled its plans to build two nuclear power plants worth $12 billion.

Bloomberg wire service reports that despite the severe shortage of electricity which has hampered major industries and notched the nation's GDP downward, Eskom gave up trying to raise the money for the project after Moody's cut its credit rating and after South African regulators refused to allow sufficient rate increases to pay for ongoing expenses and expansion of power generation capacity.

In a prepared statement Eskom said . . .

The Board announced its decision not to proceed with the proposed investment in Nuclear-1 project due to the magnitude of the investment. The proposed Nuclear 1 project would have resulted in the construction of the country’s second pressurized water reactor nuclear power plant.

Eskom infrastructureIn a more to the point statement, an Eskom spokesman said . .

“It’s too big, we can’t do it,” Johannesburg-based Eskom spokesman Fani Zulu said. “The bidders were informed after we took the decision at a board meeting yesterday.”

Westinghouse and Areva were to the two bidders who had been competing fiercely for the project. Areva proposed two 1,650 MW EPR reactors, while Westinghouse offered to build three 1,140 MW AP1000.

Areva told the Bloomberg wire servicve the reasons for the “pause” are specific to South Africa, and don’t reflect the general state in the nuclear industry, as shown by efforts by utilities in the U.K. and the U.S. to build nuclear power plants,

Bloomberg reports that South Africa had planned to generate 20,000 MW from nuclear reactors by 2025, more than 10 times the current output. Power demand has risen by 50 percent since apartheid ended in 1994, while government indecision postponed Eskom’s expansion.

For its part Eskom said it remained committed to nuclear energy, but simply could not proceed with it at this time.

Prior coverage on this blog

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Tuesday, December 2, 2008

India enters the nuclear renaissance

Change occurs in the blink of an eye and also over a lifetime

Two months ago when Nitin Pai, the editor of Pragati, a political journal in India, asked me to write an article on that nation's entry into the nuclear renaissance, neither he nor I had any idea it would publish in the context of international turmoil over the terrorist attacks which took place in Mumbai last week.

The most immediate impact in terms of the future of nuclear energy in that nation is that a large official trade delegation from the U.S. sponsored by the U.S. India Business Council, noted in the article, will take place at a later date. The most significant impacts are still in future as reactor vendors update their country risk assessments for doing business in India. [Update - the trade mission took place January 12-16, 2009.]

Pragati is published by The Indian National Interest—an independent community of individuals committed to increasing public awareness and education on strategic affairs, economic policy and governance. BTW - "Pragati is Sanskrit/Hindi/etc for "progress."

A PDF copy of this month's issue is available here.

The online version is also available at the magazine's web site

My article starts on Pg.15. Comments are welcome.

More India nuclear news

World Nuclear News reports 12/02/08 India is proposing to construct a dozen indigenously-developed nuclear power reactors. These units will be supplemented by imported conventional reactors. Overall, WNN reports India expects to build 25-30 light water reactors of at least 1000 MWe by 2030.

Long term, WNN reports, India's atomic energy program envisages its fast reactor program being linked with up to 40 GWe of light water reactor capacity, the used fuel feeding ten times that fast breeder capacity, thus "deriving much larger benefit out of the external acquisition in terms of light water reactors and their associated fuel." Long term, in this context, could be 30-50 years.

Sunday, November 30, 2008

Nuclear engines of job creation

Expansion of federal loan guarantees could create 100,000 jobs

weldingThe Federal loan guarantee program for construction of nuclear power plants, set by Congress at $18.5 billion, could if expanded to cover the entire fleet of 21 proposed new reactors, create nearly 80,000 construction jobs, and more than 17,000 permanent operations jobs over the next 10-15 years.

Every reactor construction project generates, conservatively, about 3,500-4000 construction jobs over a four-to-eight year period. Once built, every new reactor produces 400-700 permanent, high paying jobs which cannot be outsourced overseas and which remain in the community for upwards of 40-60 years. Not all new reactor projects will begin at the same time, but it is clear from the current list of license applications at the NRC that we are looking at the potential for 15-20 years of building activity worth $180 billion.

There's another benefit. Economists measure the "job multiplier" effect of payrolls from new business activity. Assuming, again very conservatively, that every new job generated by nuclear power plant construction produces another 1.5 jobs in the region around the plant, the outcome of nearly 100,000 new jobs is another 150,000 jobs created by the payroll of the first group.

Nuclear supply train is leaving the station

A third kind of economic benefit is the jobs created by demand for construction materials and nuclear plant components. Example include manufacturing of nuclear plant components at places like the joint ventures of Areva and Northrup in Virginia and Westinghouse and Shaw in Louisiana. Each of these new plants are worth over $300 million. Uranium enrichment plants are now being built or planned in New Mexico, Idaho, Ohio, and North Carolina. Each of these facilities are worth over $2 billion, and the one in New Mexico, already under construction, just announced it would double its capacity.

controlroomIn short, federal insurance for the loans to build nuclear power plants are themselves engines of job creation which will produce payoffs for the next two decades and permanent results for a lifetime.

This is the 'Green Economy' at work

On Oct 2 The U.S. Department of Energy (DOE) announced it received 19 applications from 17 electric power companies for federal loan guarantees to support the construction of 14 nuclear power plants in response to its June 30, 2008 solicitation.

The applications reflect the intentions of those companies to build 21 new reactors, with some applications covering two reactors at the same site. All five reactor designs that have been certified, or are currently under review for possible certification, by the Nuclear Regulatory Commission (NRC) are represented in the applications.

Using a 'back-of-the-envelope' approach to calculating job creation, if Congress were to expand the loan guarantee program for the $122 billion in new construction represented by these applications, the results look like this.

  • 21 reactors X 3,500 construction jobs per plant equals approximately 74,000 jobs lasting four-to-eight years at each reactor site.
  • 21 reactors X 700 permanent operations jobs per reactor equals about 15,000 jobs that cannot be outsourced and which remain in their respective communities for 40-60 years.

green economic growth

The incoming Obama administration is planning a major economic stimulus package to begin shortly after it takes office. Action by Congress to expand the DOE loan guarantee program to accommodate all current applicants would be a quick path to creating enormous benefits for job creation and reduction of greenhouse gases. It fits Obama's plan for a "green economy."

Loan guarantees are self-financing

The Federal government is not paying for new reactor construction with loan guarantees. The program is a confidence building measure that provides insurance for investors for 100% of the loans and 80% of the cost of the reactor. It is not subsidy and its it not a handout.

Utilities which apply for the loan insurance pay $200,000 in fees just to get in the game, another $600,000 to get detailed consideration, and a fee equal to one-half of 1% of the total coverage. For loans to build a $5 billion plant that comes out to $25 million and there is an annual "maintenance fee" of about $400,000. The government's intent is to cover the program costs of the loan guarantee program, which could last at least 15-20 years, without impacting tax payers.

The benefit of the program is that by providing loan insurance for the reactor construction costs, e.g., the "full faith and credit" of the federal government, investors will have the confidence to provide funding for new reactor construction. There is no other way to build nuclear power plants to power our economy and reduce the rate of growth of greenhouse gases.

Note to Readers

This blog post is an expansion of ideas discussed on Rod Adam's Atomic Podcast #114 on November 22, 2008. I am grateful to him for bringing up the subject and for inviting me to be on the Internet radio program.

We assumed during the discussion that NEI and other advocates of nuclear energy are already thinking along these lines. Comments from readers pointing to current examples of this type of thinking are welcome. Contrary views are welcome. I would especially like to receive brief text descriptions and web links that I can append to this article. News items are also welcome.

Links to Comments (in order received)

  • John Fleck at Instain (Albuquerque Journal) disagrees and explains his reasons
  • Rod Adams at Atomic Insights offers an update on his thoughts

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