Proposed 1,600 MW reactor will build on Piketon’s nuclear legacy and help define its future – gaining public acceptance will be a key to success
It is a deal between giants. In the global world of multi-billion dollar agreements between mega-utilities and the continent spanning reach of reactor manufacturers, the announcement in Piketon, OH, this week got a lot of attention worldwide and in southern Ohio.
In addition to being a deal of a lifetime, it is also a potential tar pit of anti-nuclear sentiment created by years of distrust of government and industry actions and inaction over legacy hazardous and radioactive contamination. Anti-nuclear groups immediately focused on the still unfunded project and may seek to leverage negative community sentiment on cleanup issues to impact acceptance of the new reactor project.
If anyone doubted the importance of the contract for the parties involved, Duke Energy and Areva, they needed only to look at the video of the press announcement to see Jim Rogers, CEO of Duke Energy, and Anne Lauvergeon, CEO of Areva, talking into the lens of the television cameras.
Launched on the site of a former uranium enrichment plant in Piketon, OH, about 85 miles east of Cincinnati, the plant will be built by a group calling itself the Southern Ohio Energy Park Alliance. It consists of the site owner, U.S. Enrichment Corp. (USEC)(NYSE:USU), the utility Duke Energy (NYSE:DUK), Areva, the French state-owned nuclear reactor vendor, and Unistar Energy which is a reactor building consortium of Areva, Constellation Energy, and Bechtel.
The way the agreements are expected to work among the various parties are that Duke Energy would be the owner and operator of one or more 1,600 MW U.S. EPR design nuclear reactors supplied by Areva. Unistar would develop the COL license application for the project to the NRC. It could be filed as early as 2010. Bechtel, a Unistar partner, will build the plant and related infrastructure. USEC would lease the site for the life of the reactors and provide all site infrastructure.
Why here why now?
There has been plenty of straight news about the deal, but some questions remain open. For instance, what brought this combination of companies together and why? To answer it start with a look at the site. It’s legacy goes back to the Manhattan Project in World War II when it was used to produce enriched uranium in a gaseous diffusion process.
That process involves massive amounts of electricity which was supplied by TVA. The transmission and distribution infrastructure that brought electricity to the site is still in place. The wires that brought power in can now be used to send power out to an energy hungry Midwest that knows the days of coal-power are drawing to an end.
Duke Energy is right in the middle of that change. While it is one of the nation’s largest nuclear energy utilities, it is also one of the nation’s largest coal fired utilities. In his press statement, Duke CEO Jim Rogers said, “We face the indisputable fact that our nation and our world are transitioning to a low-carbon future.”
He told the New York Times in a telephone interview, “Most of our fleet in Ohio, which is coal-fired, will be retired over the next 15-20 years. We’re going to need to replace it, and this plant will replace that capacity.”
1st in line for a fleet change out
This is the first time Duke and Areva have teamed up on a reactor project. If the project is successful, Areva will be first in line for future orders to replace other Duke coal fired plants. Overall, it is a vision that spans decades and even generations, but it fits the worldview of some who have said that thinking seriously about nuclear energy requires a perspective that spans 100s of years.
The Piketon site is also home to USEC’s new American Centrifuge facility which if completed will produce over 3.5 million SWU of enrichment services a year for the nation’s commercial nuclear power plants. USEC has been on a continuing hunt for investors. Last Fall it let a $1 billion contract with Fluor Corp. to ramp up construction, but by late winter 2009 it had stopped work and laid off almost all of the workers due to cash flow problems.
If USEC can convince investors the reactor project is real, it will be a confidence building measure. After all, a huge, 1,600 MW reactor next door to the enrichment plant is an obvious customer for its services. That may not be enough.
Areva and USEC are currently locked in a competitive battle over $2 billion in federal loan guarantees for uranium enrichment plants. For its part, USEC has said it cannot attract investors without the loan guarantee. Areva is the reactor vendor in Ohio selling reactors so its participation in the project will not affect its capital requirements for other U.S. activities like the enrichment plant in Idaho. That gives it a competitive advantage and a reason to be in Ohio.
Areva’s Eagle Rock Enrichment Facility, to be built in Idaho, will have an initial capacity of 2.4 million SWU, but the company has filed an amendment to its license application with the NRC to double the size of the plant if market demand supports it following start-up in 2014. If USEC's investment strategy fails to materialize, Areva and Louisiana Energy Service, which has also planned to double the size of its plant, will be positioned to pick up the market share left on the table. For its part, USEC is determinined to succeed and has said it will aggressively pursue its business goals.
Public acceptance issues put a bulls eye on the project
Finally, there is the issue of public acceptance of more nuclear facilities at Piketon. The area is controversial with the public. In 2007 citizens groups in the area came out like swarms of angry hornets for hearings held last year when a GNEP facility was proposed for Piketon which is also a nuclear waste cleanup site managed by the Department of Energy.
More than 300 people testified against the GNEP project. Citizens groups have objected to any new nuclear facilities at the site until the current one is cleaned up. The political landscape looks like an alien battlefield with hovering fleets of flying saucers zapping a rouge planet. Or put another way, the peasants revolted coming out, metaphorically speaking, with pitchforks and pruning hooks to drive off what they perceive as an evil influence.
For nuclear energy to be acceptable at Piketon, Duke and its partners will have to put a communications strategy on the ground that differentiates its project from the legacy clean up issues that have enraged the community. Even more to the point, anti-nuclear groups will see the Piketon project as a ripe opportunity to exploit existing high levels of alienation.
On a national scale, anti-nuclear activists like Harry Wasserman are already mounting a rhetorical attack on the project. If the anti-nuclear groups in Ohio, and nationally, can make enough trouble, forcing Duke and Areva to walk away, then they can count coup in a kill and cast doubt on the viability of the nuclear renaissance.
Make no mistake about it, this project is in the sights of anti- nuclear groups which are looking to make an example out of it. It is also an opportunity of a lifetime for Duke and Areva to do something different in terms of on-the-ground and national communications strategy than just roll out a web site and hand out fliers at chamber of commerce breakfasts.
The advantages of the site for the partners in the Southern Ohio Energy Park have produced compelling reasons to want success at that site. The question is whether with all that corporate throw weight whether anyone has thought through the necessary transparency and confidence building measures needed to convince the people of Piketon, OH, that they will benefit from the plant. Real jobs associated with the project, numbered in the 1000s, will not materialize for at least five years. What will Duke and Areva do in the meantime?
Watch the space in Piketon. Everyone else is.
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