Sunday, May 17, 2009

Nuclear energy news roundup for 05/17/09

Possible bid award for Ontario reactor project – or not?

AECL SymbolThe Toronto Globle & Mail reported on May 15 that the Ontario government has selected AECL to negotiate a multi-year, multi-reactor $22 billion deal with the provincial government. Since AECL is still a crown corporation, the government in Ontario finds itself in the unusual position of arm wrestling over price with the Canadian federal government.

However, the news of the award was disputed by “Infrastructure Ontario” which is offering the tender and which purportedly makes the final decision. Diane Flanagan, a spokesperson for the agency, told the Globe & Mail a winner bidder has not been chosen and that evaluation of the bids is still underway.

There may be a reason for the delay. According to the newspaper, George Smitherman, the Ontario Deputy Premier in charge of the tender, reportedly has “sticker shock” for all three bids – from AECL, Areva, and Westinghouse.

The Globe & Mail says he apparently didn’t get the memo from Ontario Premier Dalton McGuinty who reportedly told the ‘Infrastructure’ agency on May 15 to begin negotiations with AECL.

This is where the newspaper and the agency go off the rails in their respective stories about whether the contract was awarded or not. The paper says AECL has the award, but the everyone else except the top guy says they don’t.

Uncertainties will plague the award to AECL

volcano ash cloudA key issue in the negotiations is how to control cost overruns. The last time AECL built reactors for the Ontario government, the costs soared into the stratosphere like so much volcanic ash to the tune of $12 billion. That debt is still being paid off.

This time the Ontario government wants a firm, fixed price contract with the winning bidder. A nod to AECL will require cost control guarantees from the Harper government that will stand up to potential changes that will be sought by future administrations if costs get out of control again.

While provincial officials tried to sort out who was saying what, Areva Canada, one of the bidders, told the Globe & Mail AECL’s reactor, the ACR1000, hasn’t completed design reviews at the Canadian Nuclear Safety Commission and no one can predict what building one will cost.

Another factor adding uncertainty to AECL’s ability to complete the job is that the Harper government in Ottawa has been sitting on a banking industry review of the feasibility of spinning off AECL to private investors to rid the government of both liability and future costs associated with the nuclear reactor organization. So far the evaluation of AECL’s assets and prospects has been kept secret. One exception is that the Harper government did say it would exclude the Chalk River isotope reactor from any spin off due to cleanup liabilities at that site.

Italy moves closer to new nuclear build

magicianReuters reports that Italy’s senate, the upper house of the parliament, approved restart of the government’s commitment to nuclear energy.

Under the legislation, the Italian government now has to develop a nuclear safety commission, select sites for reactors, develop rules for management of spent fuel, and develop compensation measures for communities which, in the densely populated country, do not want the plants.

Italy closed down its nuclear plants two decades ago following the Chernobyl accident. It has since come to regret that action as it now depends on coal and imported natural gas and has some of the highest electricity prices in Europe in a country has has a lagging economy.

The earliest new deal for a reactor will likely be a 12.5% stake that one of Italy’s major utilities will take in a new Areva EPA being built in France. Italian authorities have said that if all goes well with the new government agencies, a new reactor site in Italy could break ground as early as 2013, but some have disputed that speedy result saying given Italy’s fractious politics, it could be 2020 before construction starts on a domestic plant. It could take some real political magic to meet the earlier date.

In the meantime, Italy is talking with Russia about importing more natural gas to meet its energy needs. Critics of that move have pointed out Russia is not a reliable fuel supplier given the experience of the Ukraine last winter when it displeased the Kremlin as part of a dispute over gas prices and the Russians turned off the pipeline.

Germany’s nukes position for post-election decisions

German KnightReuters reports the nuclear power industry in Germany, facing the possibility that a “green” slate could win the September 2009 election, is positioning itself to respond to that contingency.

If it happens, the left-leaning greens will shut down all 17 of Germany’s nuclear power plants by 2021 and seek to substitute a combination of energy conservation, wind, solar, and natural gas energy sources in their place. Seven of the nuclear plants would be shut down immediately.

The four nuclear utilities are trying to figure out what political price they would have to pay to extend the life of the plants beyond 2021. They are also trying to educate the German public what the shutdown of the reactors would mean to the economy and the environment.

The utility group, called the ‘Atomic Forum’ told Reuters through its spokesman Walter Hohlefelder, that the change sought by the Social Democrats (SDP) would result in a lost of 20% of baseload power for the nation as a whole impacting industry, business, and household use of electricity.

China’s new nuclear build has growing pains

China nuclear core buildAn analysis of China’s nuclear energy sector by Dow Jones Newswires on March 17 paints a picture of an aggressive drive for nuclear power challenged by a lack of expertise both technically and in terms of management as well as future issues associated with reliable supplies of uranium.

According to the report, China also has an artificially low rate structure for electricity that makes it difficult for new nuclear plants to recover their costs even in a “state-owned” environment. It appears you can only cook the books in some many different directions before it catches up with you.

smokestacksAnother “disincentive” is the lack of a carbon emissions control program, or carbon cap-and-trade, which would shift new investments in power plants from coal to nuclear. China’s coal interests are just as opposed to the new nuclear build there as the the U.S. coal industry is opposed to new reactors being built by TVA.

There are four nuclear plants in operation in China that generate about 9 GW of electricity. This is about the same amount of baseload power from nuclear as is installed in Sweden which has a much smaller population and economy. China has plans to build at least 11 more nuclear reactor stations, some multi-unit, to generate 50 GW which would raise the market share to about 5% of total energy requirements.

The nuclear industry in China is remarkably fragmented for an economy run by centralized state planning. It has three state owned utilities and two independent power producers. In addition to an indigenous 1,100 MW reactor design, China’s utilities are buying reactors from Russia, France, and the U.S. at a breathtaking pace. However, actual construction progress is said to be hampered by delays in deliveries of large reactors components and labor shortages of nuclear engineers and skilled crafts.

China’s uranium supply challenges

Uranium export from AU China has five active uranium mines which meet less than a third of the country’s needs. It has inked major deals with Kazakhstan, Russia, Nambia, and Australia to import supplies. The imports come at much higher prices than domestic supplies which will affect the price of electricity. While some supplies from African nations may be unreliable, China has also sought deals in Canada.

The current price of uranium on the spot market is in the mid-$40 range. Dow Jones predicted it could reach $55/lb which would cause some shuttered mines, including a few in South Africa, to reopen due to the high price. This might temporarily stabilize world supplies, but Dow Jones also predicted that the price would continue to rise in response to worldwide construction of new nuclear reactors.

The impact on China of increasing costs for uranium imports will likely be an increased cost to generate electricity from nuclear power. Even with the government balancing act between costs and rates, the government will likely have to increase its subsidy to consumers or pass along the extra costs.

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1 comment:

Jason Ribeiro said...

Very interesting news about China. I suspect they won't have too much of a problem recruiting and training new engineers to keep pace with their build out program. They do have time to train a lot of people by the time more plants come online. As you say -- Growing Pains, but I applaud their effort.