Saturday, April 18, 2009

Impact of EPA climate policy on nuclear energy

Some nuclear utilities, like Duke, also have major investments in coal-fired plants

uncorkedThe U.S. Environmental Protection Agency (EPA) uncorked its long expected policy statement that formally declares carbon dioxide and five other green house gases to be pollutants that are a threat to public health and the environment.  The action comes in response to an April 2007 Supreme Court ruling related to pollution from cars and trucks.  Government scientists have long been unanimous that these gases caused harm, but the Bush administration bottled up their findings and took no action.

According to the New York Times, EPA said the science supporting  the proposed endangerment finding was “compelling and overwhelming.” 

EPA administrator Lisa P. Jackson (left) said: “This finding confirms that greenhouse gas pollution is a serious problem now and for future generations.” 

LisaJacksonIt is widely anticipated that the action by EPA on April 17 sets the stage for the Obama administration’s international diplomatic efforts aimed at the planned United nations Climate Change Conference (COP15) to be held next December. The U.S. never ratified the Kyoto treaty. It is now expected to fully engage on the global warming issue with all the speed and power of the Starship Enterprise moving at Warp 8.

The legislative battle in the U.S. could easily rival a collision of matter and anti-matter in Congress.  While EPA issued the policy, Ms. Jackson told the NY Times that  the Obama Administration would prefer not to tackle the issue directly with regulations, but rather wants Congress to address it through legislation that would implement programs consistently among the states.  House Democrats called the EPA announcement a “game changer,” (Markey) but Senate Republicans were quick to label the policy a source of “expensive and cumbersome requirements on industry.” (Bond).

Duke Energy out in front on the nuclear energy option

While partisan claims flew back and forth in the press, the nuclear industry was already well on its way to assessing how carbon taxes and/or carbon cap & trade programs would impact the industry. A huge paradox is that some utilities could find themselves in a situation where they were trading with themselves. 

JimRogersDukeA case in point is Duke Energy (NYSE:DUK).  There CEO Jim Rogers (right) said last week the construction of new nuclear power plants would be “the only viable way” for the utility to meet increasing electricity demand.  At the same time, Duke is facing rapidly rising costs for its proposed William States Lee III nuclear power plant in South Carolina. 

Rogers told the Charlotte Observer on April 6 the costs of new coal-fired power plants, with carbon taxes in place, puts them out of reach in terms of cost.  Duke is one of the nation’s largest producers of green house gases from fossil fuel power plants.  The choice is clear.  The utility must meet its customers’ growing needs for electricity with nuclear power plants. 

“The only way we could do it is with nuclear,” Rogers said at the Charlotte Energy Summit. “The higher the price of carbon goes, the stronger the case for nuclear.”

He said a carbon policy without a nuclear energy technology response “is a hallucination.”

In a speech at the Arkansas Clinton School of Public Service on April 7, Rogers said the U.S. must set a cap-and-trade system for green house gas emissions as soon as possible in order to drive investments in emission free power plants, such as nuclear, and in the transmission and distribution networks to deliver electricity to customers.  Duke currently has four million customers in North and South Carolina, Indiana, Ohio, and Kentucky. The last three are “big coal” states with significant mining interests who will not be happy with Rogers’ remarks.

greenhouse_gasesRogers also said that the U.S. could reduce green house gases by 80% by 2050, but only if the federal government sets a national policy, and regulates it.  A state-by-state approach, Rogers, said, would create confusion as well as winners and losers among states. 

More than anything else what Duke Energy’s CEO wants from the Obama Administration is certainty on carbon taxes and cap-and-trade programs. The longer it takes Congress to enact legislation, the longer the utility will have to wait to make new investments in energy generation plants.  It cannot afford to bet wrong on how the legislation will turn out. 

In addition to the obvious financial benefits for nuclear power plants from a cap-and-trade system, Rogers also wants the legislation to provide long-term incentives to upgrade power lines and to support energy conservation measures.  

Rogers said new natural gas plants are not the answer labeling them the “crack cocaine of our industry.”

Future of William Lee nuclear plants depends on carbon policies

In December 2007 Duke Energy filed an application with the NRC for a COL for two Westinghouse AP1000 reactors with combined capacity of 2,234 MWe.  Duke was among the nation’s “first movers” in filing the application being the 4th utility to do so.  Significantly, Duke is relying on TVA’s application for two AP1000s at its Bellefonte site as a reference.  A decision on Duke's license is expected from the NRC in 2012.

Duke also applied with the Public Utility Commissions of North and South Carolina to incur “nuclear generation pre-construction costs” of $70-160 million for the Lee plant.  Both agencies approved the requests.

GNPIn November 2008 Duke raised the cost of the twin reactor project  to $11 billion. It told the state regulatory agencies that while the firm has not put in place final EPC contracts with firm, fixed prices, the estimate is subject to change. 

Significantly, one of the key factors is the outcome of climate change legislation that will be moving through Congress this year.  Other factors are capital financing costs and whether loan guarantees will be available to cover 100% of the loans and 80% of the total costs.

Loan guarantees are a two-edge sword for carbon policies

Duke has applied for loan guaratnees but did not make public its inhouse assessment of the impact of a carbon tax or cap-and-trade program on the loan guarantees.  It could be a two-edged sword. On one hand, offering the loan guarantees would lower financing costs for new nuclear power plants and the eventual cost of electricity from them once they enter revenue service. On the other hand. having loan guarantees available could impact a cap-and-trade program by reducing incentives for utilities to offer competitive swaps in response to offers from coal-fired plants.  Perhaps even more problematic for a utility like Duke, it could find itself doing swaps with itself since it has both coal and nuclear plants.

It is still too early to predict how the EPA policy and eventual legislation from Congress will turn out.  On balance, carbon taxes and cap-and-trade programs should benefit the nuclear industry because coal-fired plants will be looking for ways to reduce the financial impacts of federal policies.

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Wednesday, April 15, 2009

GNEP drifts off into limbo

No final resting place for once hugely ambitious program

GNEPA UK nuclear energy trade journal reports that the U.S. Department of Energy has pulled the plug on the Global Nuclear Energy Partnership or GNEP program once and for all. There had been several previous reports that the program was dead followed by almost comical explanations that it was still alive. This time it looks like it is the real deal.

Not that it had much of a life . . . Congress repeatedly kicked the much maligned program to the curb and cut its funding to the bone almost from the very start during the first Bush Administration.

Early on the prestigious National Academy of Sciences said there was no science basis for the program and urged DOE to put its eggs in the basket of reviving the civilian nuclear energy industry. Congressional hearings, anchored by GAO reports, surfaced neglect of more promising nuclear R&D initiatives while DOE struggled with GNEP.

According to Nuclear Engineering International, DOE will shelve the programmatic environmental impact statement (PEIS) without filing a record of decision. The lack of a decision on sites effectively terminates the program. In the meantime, the once visually attractive GNEP web site, at least for government work, has apparently disappeared perhaps to be stored in the same GSA warehouse in Dayton, OH, as the Ark, as found by Indiana Jones, and the Roswell flying saucer wreckage.

What a waste of community spirit

In Idaho, where over 700 people turned out at a public hearing to support the program with its massive public works focus on nuclear fuel reprocessing and fast reactors, Lane Allgood, a local development official, said he knew the end had been coming for some time. "What a waste," he said after recalling all the effort the Partnership for Science & Technology, and the community, put into supporting GNEP.  However, not all was lost. The nuclear city of Idaho Falls, ID, won a huge prize in 2008 which is Areva's $2 billion 'Eagle Rock' uranium enrichment plant.

Dead as a doornail

At the US Department of Energy a spokeswoman confirmed that Global Nuclear Energy Partnership has been canceled.


"The Department has already decided not to continue the domestic GNEP program of the last administration," said DOE deputy press secretary Jen Stutsman in a statement on April 15.

"The long-term fuel cycle research and development program will continue but not the near-term deployment of recycling facilities or fast reactors. The international component of GNEP is under interagency review."

The announcement comes less than a month after the end of the public comment period on GNEP's draft Programmatic Environmental Impact Statement. In all it involved a reported 14 public hearings and a comment period that was extended by 90 days because of intense public interest, although in some places the intensive interest was really intense opposition.

For example, people living near sites in Illinois and Ohio turned out in record numbers, but with tar and feathers, metaphorically speaking, for anyone who supported these locations. DOE is said to have received about 15,000 comments for a site selection process that involved 13 sites in 11 states with two sites here in Idaho.

The termination of the program means that most of the paper generated by the agency will wind up in the shredder. The PEIS will not likely ever get a record of decision and all those glossy handouts will have to be recycled.  There is probably relief in Vienna, Austria, at the offices of the IAEA which had good reason to see GNEP as a Bush Administration counter move to development of an international fuel bank.

The good news is that the Obama Administration can start with a clean slate and not have any wreckage from the previous administration's efforts to craft a western style nuclear fuel cartel hampering its policy initiatives. Obama hasn't said much about nuclear energy so far, and he may even have a blind spot about it. This has been frustrating for the industry which in any case had little use for GNEP and won't fret a bit about its demise.

However, earlier this month in a speech in Prague, the President called for an international nuclear fuel bank. How that concept will play out remains to be seen. There are lots of playersin trhe public and private sectors enriching uranium for paying customers. One thing is certain, and that is from the White House perspective, the GNEP program has been given the proverbial "don't let the screen door hit you in the back on your way out" exit line. Bye bye.

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Tuesday, April 14, 2009

Bloomberg bombs on uranium story

Wire service confuses yellowcake with weapons grade uranium

Bloomberg wire service put its foot in the bucket on April 14 with a muddled story about how Lehman Bros had an "inventory" of 500,000 lbs of yellowcake or uranium oxide commonly known by its chemical symbol U3O8. What set people on edge on both sides of the Atlantic was this aside deep in the article.

"A supply of 500,000 pounds of yellowcake is just “slightly” less than the amount needed to make one bomb, or fuel one nuclear power reactor for a year, if the latest enrichment technologies are used, said Gennady Pshakin, an Obninsk, Russia-based nonproliferation expert."

Now the question is this - what is a reference to bomb making doing in an article about Lehman Bros. and its bad business decisions? Even more to the point, the uranium is stored in Canada, not Russia. 

The reference in the Bloomberg article to the yellowcake inventory and its potential use in making a nuclear bomb appears to be an unfortunate effort to sensationalize an otherwise dull story about bad business decision making in a down vector commodity market.

How did a bank wind up owning uranium?

There is only one way Lehman Bros. would have wound up with the uranium, and that is a failed effort to take advantage of record high prices in 2007.  Normally, utilities buy uranium directly from mines and retain title through all processing steps which result in delivery of nuclear fuel to the reactor. Banks do not, as a rule, buy uranium nor take title to it.

Here's an example of how uranium deals usually work.  In the news April 14 is a report by Platts that "financially troubled uranium producer Denison Mines" reached a proposed agreement with Korea Electric Power Corp for the utility will buy 20% of Denison's U3O8 production and acquire about 58 million common shares of Denison, or a 19.9% stake in the company, for C$75.4 million (US$62.1 million).

Platts also reported that the company will provide for deliveries beginning in 2010 with minimum deliveries of 510,000 to 690,000 pounds of U3O8 per year from 2010 to 2015. 

According to the Bloomberg story, Lehman acquired its uranium “under a matured commodities contract” and plans to sell it when the market improves “to realize the best prices,” CEO Bryan Marsal said.  

Here's a translation - a speculative position in uranium couldn't be liquidated at a profit before the firm went bust, and selling the stuff at $40/lb isn't going to make the people managing the bankrupty proceedings very happy so we'll wait.

Fast with the facts on a slow news day

Bloomberg's mistaken logic that an inventory of yellowcake equates to bomb making needs correction.  The yellowcake is not weapons grade material and cannot be used to make a bomb directly. To make a bomb, first the uranium must be enriched to 80% U235. Next the metal must be machined and then fabricated with great precision.  The material cannot be exploded without specific types of detonation mechanisms. You can read all about it in comic books on the Internet. Note to wonks - yes, the use of neutron reflectors will lower the level of enrichment needed to make the bomb, but that's not my point here.

The usual path for yellowcake in the case of the inventory under the control of Lehman is to enrich it 3-5% for fabrication into commercial fuel for civilian reactors that generate electricity.

In the handing out of laurels (good job) and hardlys (foot in bucket), Bloomberg gets a “hardly” for its gratuitous use of bomb making comparisons where they do not belong.

NY Times ‘DealBook’ uncritical of the article

The NYT ‘Dealbook’ picked up and referenced the Bloomberg bomb angle apparently without thinking through the implications of the article. In an apparent effort to be funny, the NYT Dealbook asked, “Is it time to add Lehman Brothers to the list of undeclared nuclear states?” It referred in the headline to “Lehman’s (Literally) radioactive assets.” On a slow day this is the stuff of pun making.

Once the NYT column decided to play in Bloomberg’s sandbox, things went downhill. Contrary to the anti-nuclear nonsense that appeared in the comments section at the NY Times 'Dealbook" web page on the same day, there is little likelihood the Russians will acquire the Lehman Bros yellowcake and sell it to Iran.

It is a fact that Russia delivered commercial nuclear fuel to Iran’s Busher reactor in December 2007. The Russians are in it for the money, and they plan to take the fuel back. Also, spent nuclear fuel is a very poor material for making nuclear weapons. Here is a report from the LA Times

“Moscow’s Foreign Ministry insists that Russia won’t allow the fuel to be diverted. “All fuel that will be delivered will be under the control and guarantees of the International Atomic Energy Agency for the whole time it stays on Iranian territory.”

“All our processed fuel is to be returned, gram by gram,” said Sergei Karaganov, chairman of the Council on Foreign and Defense Policy in Moscow. “It was actually kind of a political lever more than an actual concern that our fuel could be used for weapons,” he said. “It can’t be used for weapons under any circumstances. This is a fact of life.” 

I might add that it is also a fact of physics.

Megatons to megawatts

Insofar as it relates to Lehman Bros and their yellowcake, the Russians derive most of their nuclear fuel to be used in civilian nuclear reactors by blending down highly enriched uranium (HEU) from weapons and selling it to the US through the “Megatons to Megawatts” program.

About 50% of all the nuclear fuel currently used in US reactors comes from this program. Put another way, 10% of all US electricity is generated with nuclear fuel that came from Russian weapons grade materials. Short and sweet — the Russians are very unlikely to be interested in Lehman’s yellowcake.

More likely, the Lehman yellowcake will be sold when the price of U3O8 rises to about $60/lb and it becomes worthwhile to ship it from Canada to France or the US for enrichment and then eventually on to fuel fabrication.

Also, more likely, the yellowcake will be sold off in batches rather than in one large sale. Currently, at $40/lb the 500,000 lbs of uranium oxide are worth $20 million. This is chump change for a firm used to transactions marked in billions of dollars.

It is not easy for the public to be realistic about such things, but it is even harder with articles like Bloomberg’s and the NY Times’ uncritical acceptable of the wire service story.

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Sunday, April 12, 2009

Kashiwazaki Kariwa ~ world’s largest nuclear plant remains offline

Tokyo Electric Power seven-reactor 8.2 GW site is still shut down

tepco_logoBloomberg Wire Service reports the world’s single largest nuclear plant, which supplies 13% of all the electricity in Japan, remains closed even though repairs following an earthquake two years ago are complete. The reason is the political landscape is still experiencing significant aftershocks. Reuters reports that the most recent reason local political leaders are giving for refusing to agree on re-start is a fire which occurred in a warehouse on April 11.

The problem for Tokyo Electric Power (TEPCO) is that it is the 9th fire since the plant was closed following the July 2007 magnitude 6.8 earthquake that resulted in a minor radioactive release into the Sea of Japan and the dislodging of stored LLW containers.

Technical damage minor

The actual damage caused by the quake was quite minor considering its force. There was a transformer fire that was quickly put out and a small amount of water spilled from a used nuclear fuel cooling pool.

According to press reports, at the time of the quake, three of seven reactors, units 3, 4 and 7, were in operation. Those reactors shut down safely when the earthquake took place. Unit 2 was in the process of starting operation, and all systems shut it down automatically as well.

Units 1, 5 and 6 were not operating as periodic inspections were being carried out. The tremors caused 1.2 cubic meters of water to spill from the used nuclear fuel cooling pond of unit 6. TEPCO said the water contained 90 kBq of radioactivity, and had drained from the plant building to the sea in accordance with environmental regulations. The cooling pond itself was undamaged.

TEPCO overturned_drums_containing_low_level_wasteIn addition, TEPCO said hundreds of drums of low-level radioactive waste (LLW) in the plant's solid waste storage facility fell from position (right). The lids of dozens of these were found open. LLW is typically composed of paper, filters, contaminated clothing, maintenance debris, and tools. LLW is not particularly dangerous and there was no reported release of radioactivity from the plant due to the dislodged drums.

TEPCO has subsequently published a detailed explanation of major events, damage, and the extent of contamination. There was no damage to any of the seven reactors, their containment buildings, or power generation equipment.

Political fallout remains despite clean inspections

What ramped up political opposition to re-start of the plant is that TEPCO initially rejected outside help to assess damage to the plant. However, Regional Governor Hirojiko Izumida forced the issue and had a team of experts survey the plant for radiation releases. The team reported the plant was safe, but the basis for future mistrust had been established by the incident. Outside inspectors were allowed in to look at the damage a month later.

In August 2007 an inspection team from the IAEA said in a report damage to the nuclear plant appeared to be “limited and less than expected” from such a strong quake. Subsequent IAEA reviews confirmed the initial findings.

A Japanese safety commission last month approved structural improvements to the facility designed to strengthen its ability to withstand the shock of future earthquakes. Local government approvals are all that stand between shutdown and restart. That’s going to be a very tough sell.

Local government power that would make Vermont green with envy

To see what is going on in Japan consider that the state legislature in Vermont, which is seeking to usurp the federal power of the NRC over the relicensing decision for Vermont Yankee, would love to live and work in Japan. In that country, regional and local government officials have what amounts to veto power over re-start and so far they are wielding it.

Mostly, they are afraid that if they give the go ahead for restart, and there is another incident, a fire, or a spill, that they will be blamed for it even though it took place at the plant. The issue will be that they gave permission for reactor operations to re-start. The good news is on April 11 the mayors of Kashiwazaki city and Kariwa town both signed off on the safety improvements. The problem now lives at the next level of Japan’s government structure. The bad news is a fire the same day in a TEPCO warehouse may have created new tensions between the utility and the public.

The fire on April 11 could complicate TEPCO's efforts to convince local authorities that all safety issues have been addressed and there were no problems to restarting one of the nuclear reactors. Kyodo news agency quoted a local official in Niigata prefecture as saying: "The timing is just bad, and it's hard to say this won't have an influence” on re-starting the reactor.

Hirohiko Izumida governorNiigata Provincial Governor Hirohiko Izumida (right) reported told Japanese news media sources he feels that plant is now secure, based on scientific and engineering evidence, but he wants a far-reaching public consensus because, no surprise here, local opposition to restart still runs high. Given his previous experience with TEPCO, his caution seems real enough.

In a move designed to provide political air cover for approval to re-start Unit #7, a 1,356 MW ABWR, Izumida reportedly will ask the regional general assembly to get involved in the situation. This tactic is apparently designed to spread the blame around if things go wrong with the plant at a later time. It seems to be a case of what hanging together so none, especailly the regional governor, hang separately.

Why ask the regional assembly?

Asking the regional assembly to get involved could drag out the consensus building process. In Japan consensus among the group is a powerful force for shaping political decision making. The fact that the regional governor is tossing it over the transom to the regional assembly is not a good sign for restart of TEPCO’s reactors.

This next step also represents an opportunity to put real risks v. risk perception into perspective. The situation brings to mind a dumb teen horror story from summer camp. In it a group of young campers arrive at a remote cabin late on a stormy night. As they light a fire and settle in, a voice booms out, “if the log falls we all die.” Naturally, the campers are terrified, but they screw up their courage and seek out the source of the voice. A few more repetitions of the dark warning leave everyone quivering with fear. Hands shake as wavering flashlights probe the darkness.

Imagine their astonishment when they discover the thunderous voices come from two spiders, perched on a toothpick, overhanging the pit in the outhouse. The moral of the story is that risk is relative to the perceptions of the person facing it and to the consequences of an event. If the regional assembly could hear that story, what would they do?

There are two possibilities in terms of next steps. The first is that TEPCO will have yet another fire, or something more serious, which will give regional political leaders all the ammunition they need. Second, TEPCO will figure out how to build confidence in the region to support restart of its reactors. In the meantime, there are significant consequences that are resulting from the long-term shut down of the reactors.

TEPCO suffers loses and pollutes the air

greenhouse_gasesTEPCO, which is the largest electric utility in Asia, posted its first annual loss in 28 years last March and forecast a loss of 45 billion yen ($450 million) for 2009 because of the cost of buying fossil fuel at peak prices while the Kashiwazaki Kariwa station remains shut down. By ramping up fossil plants to replace lost generation capacity from nuclear, the utility is also pumping millions of tons of green house gases into the atmosphere.

TEPCO’s seven nuclear units at Kashiwazaki Kariwa account for approximately 13% of all the electricity generated in Japan. It began operation in September 1985. In 1997 all seven units were in commercial operation with a total capacity of 8,212 MW, and as a result, this power station has become the largest nuclear power station in the world.

TEPCO owns 17 nuclear reactors, 10 in Fukushima Prefecture and 7 in Niigata Kashiwazaki Kariwa, and the total capacity is 17,308 MW. Nuclear power is considered as a base load energy and it accounts for approximately 40% of TEPCO's total electricity output across the nation.

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