Saturday, July 4, 2009

AECL future? Who’s really ‘dysfunctional’ in Canada?

It's time for the crown corporation to stop being an Ottawa sucker and act like an Ice Road Trucker

overloadedConservative Prime Minister Stephen Harper may come to regret his blunt language reported in the Economist June 18 in which his spokesman called Atomic Energy Canada Limited (AECL) “dysfunctional.” The insulting language, which will undoubtedly affect at least 30,000 votes in Ontario for the next election, came after a series of calamitous events involving AECL’s repeated failures to keep the flow of medical isotopes moving from Chalk River and a pre-emptive vote of no confidence from Ontario’s Energy Minister over AECL’s expensive bid for the $22 billion Darlington project.

Chalk River and Darlington projects

Buck stops here

The situation has developed in several parts, but all the pieces come together, but not in a cohesive whole, at AECL’s doorstep. The first, and most visible problem, is that ultimately the failures at Chalk River and with the Maple Reactors, while blamed on AECL, in fact represent a failure of political leadership that hits the Harper government with the same force as Harry Truman’s famous characterization of accountability – “The Buck Stops Here.”

For years the Harper government and previous administrations have ignored AECL's calls for replacement of Chalk River, built in the 1950s, with a modern facility. The fact that the isotope business made money hand-over-fist seemed lost on the government. The failure of the Maple Reactor projects is also in reality a failure of political leadership because the government allowed the future of a critical medical service, with global importance, to be turned into a sandbox for scientists instead of a focused project.

The second, and more damaging development relative to AECL’s long-term future, is the action taken by Ontario’s Energy Minister George Smitherman. He suspended negotiations with AECL over its bid for the $22 billion Darlington new nuclear build claiming the crown corporation had failed to adequately sharpen its pencil on price. He also rejected bids by Areva and Westinghouse as being “noncompliant” with the tender. If AECL cannot close a deal on its home turf of Ontario with its new ACR1000 reactor, it is unlikely it will ever sell any for export.

Who will stand behind costs and why?

Smitherman should be forgiven, at least in part, for assuming that since AECL is a creature of the Canadian federal government, and as crown corporation, that it would stand behind any cost over runs on the Darlington project. PM Harper said nothing doing and warned that Ontario should not expect a subsidy for its energy needs. The fact that the liberals in Ontario and the conservatives in Ottawa hate each others' guts has plenty to do with the dysfunctional nature of the lack of an agreement on costs.

medical isotopesAt the same time the Harper government also threw the future of AECL into further turmoil by announcing a plan to split the organization into two parts. The first part, which is the isotope operations, would shut down Chalk River, along with its $7 billion cleanup bill, and perhaps build a smaller, conventional reactor for the lucrative medical isotope business.

In the process, Lisa Raitt, the Harper government’s minister for energy issues, was caught on tape speculating how her career might be advanced by resolving the isotope shortfalls caused by the Chalk River shutdown. She also left sensitive government documents about the Darlington bid at a TV station resulting in the premature release of confidential business information. She offered her resignation, but it was refused and a 20-something aide took the fall. Understandably, Mr. Harper is not going to brand one of his own ministers as being “dysfunctional” even if her behavior clearly merits the label.

The second part of the Harper/Raitt plan is to sell off for whatever it can get for AECL’s nuclear engineering capabilities including services to the global fleet of CANDU reactors. The second step is clearly dysfunctional since it subverts the value proposition of AECL in several ways.

Even a used car salesman would do a better job

used-car-salesmanInstead of supporting AECL to provide a winning bid at Darlington, Harper harried it by calling its history of cost overruns a fiscal “sinkhole.” This is the equivalent of a used car dealer telling a potential customer the ride in question is a “beater.”

In terms of the conventions of salesmanship, there could not be a more “dysfunctional” approach to the problem. It pre-disposed Smitherman to ratchet up the volume on controlling costs setting up all the bidders for failure. Tens of millions in engineering time has been wasted by all three bidders on a dysfunctional process.

In a press release June 29 Smitherman said the AECL bid was “complaint,” but was too expensive. In order to achieve a workable deal with AECL, he wants the firm to address reactor new build costs as well as the lifetime cost of power. Normally, with nuclear plants, once they have been depreciated, they are venerable cash cows. The key issue is that AECL bid an untried reactor, one that has never been built before, and which is still in the middle of the design process.

How to really handle ‘first-of-a kind’ nuclear new builds

Since no one knows what it will really cost to build one of the ACR1000s, Smitherman turned to the Harper government to share the risk of getting at least one unit into revenue service. His assumption was that whatever cost over runs the Harper government might incur at Ontario, they would make it up in volume with export earnings. The idea is build the first-of-a-kind reactor in Ontario, make it a show piece, and then sell it globally. It was an eminently useful idea and the Harper government turned it down flat.

dysfunctionalThe fact that the Harper government didn’t buy it illustrates an incredible fit of narrow mindedness. It is a classic formula for the wheels coming off any deal between the provincial Ontario government and AECL. Ms. Raitt, the government’s energy minister, told AECL is must build the new reactors at Darlington at a commercially attractive price that would cover all costs. Once that happened, the Harper government said would be happy to reap the export earnings that would follow.

This is also a case of wanting the cake and frosting and both for free. Anyone who knows anything about the nuclear industry also knows that construction of first-of-a-kind reactors always has risks of cost over runs. Developing workable means of sharing these risks can produce success for all parties. Zero sum political posturing, which is what has happened in Canada, has left all parties concerned with giant headaches and bad feelings about their ability to get along.

AECL must manage upwards

What it will take for AECL to succeed is to manage upwards convincing the opportunistic Ms. Raitt and the parsimonious Mr. Harper that it has a plan to put the organization on the right track. It must re-capture its global leadership position for medical isotopes and win the Ontario new reactor bid with the full political support of the federal government.

To do this AECL must mount a national campaign to convince Canada’s voters that it is in the nation’s national interest to revitalize the crown corporation as a technology leader in the global nuclear industry.

ice road truckers It will take business horse sense, technology vision, and real determination to achieve these results. A nation that can convince ice road truckers to brave the winter driving season in the Northwest Territories ought to be able to tackle a few politicians in Ottawa. ACEL has heard the ice cracking underneath its wheels. It should take a lesson from the fact that these truckers wouldn’t be able to do the job if they weren’t some of the toughest guys out there. It’s time for AECL to get tough.

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Short week news stack for 7/03/09

Ameren calls it quits

Ameren switched gears this week asking the NRC to stop its review of the utility’s license application for a new nuclear power plant at Callaway, MO. The action by Ameren probably means the Callaway II new nuclear build is dead. It is an exasperating defeat for pro-nuclear business groups in Missouri. The experience had all the grace and finesse of a state fair demolition derby.

Ameren spokesman Mike Cleary told the St. Louis Post Dispatch on July 2, “We decided it was not prudent to have the NRC continue its review.”

The firm says it is giving up because the Missouri General Assembly refused to overturn a 1976 law that banned “Construction While in Progress” or CWIP. Had the legislature acted in Ameren’s favor, the utility would have been able to recover construction costs while the new reactor was being built avoiding costly interest charges.

The cost of the new reactor was pegged at $6 billion or $3,750/KW. Had it gone forward the utility would have broken ground in 2011 with revenue service available in 2016.

The legislative initiative failed in large part because Ameren failed to understand and respond to rate payer concerns about how it would control costs for the new build. It’s largest customer, the Noranda aluminum mill, actively lobbied against the change to the CWIP ban as did a coalition of anti-nuclear and consumer groups.

Ameren entered the front end of the legislative session with political leaders in both houses championing its cause, but by the end of the session, these same politicians, who took Ameren’s $300,000 in campaign contributions in the last election, were running for cover. The reason was the utility’s initial positions on a broad range of rate payer rights issues. Even the Public Utilities Commission, which is nominally neutral in such matters, came out against the measure as drafted by the utility.

In July 2008 Ameren filed electronically 8,000 pages with the NRC in a license application on which it says it spent $75 million. It is now seeking to recover those costs from the rate base. Ameren will likely sell off its place in line with Japan Steel Works for large forgings for an Areva 1,600 MW EPR. Those contractual obligations, the utility says, are liabilities worth $85 million.

Ameren still has to figure out what it will do about its next base load electric generation plant. While the current recession may put a crimp on growth in demand for electricity, by 2018-2020 the utility is going to need those 1,600 MW in one form or another. A federal carbon tax and cap-and-trade program, if implemented in 2010, will by 20178 surely make coal a very expensive choice.

Japanese utilities fade on MOX use

japanese-sunsetJapanese utilities confirmed to NucNet that their program to spin up the use of MOX fuel at 18 nuclear power plants has been delayed by at least five years. The Japan Atomic Industrial Forum (JAIF) announced that the Federation of Electric Power Companies made the decision on June 12.

The key reason is that the start of operations of a MOX fuel fabrication plant by Japan Nuclear Fuels has been pushed back from October 2012 to June 2015. The plant is is still scheduled to break ground in 2009, but this date itself is two years behind schedule. Construction of the plant at Rokkasho in Aomori prefecture is also opposed by a broad swath of local government groups. In Japan these political entities have standing to block such projects.

The original plan was for 11 Japanese utilities operating 18 nuclear plants to start using MOX fuel by April 2010. The delay will likely increase costs to Japanese ratepayers as the country is in a world wide race to secure uranium for nuclear fuel.

Paradoxically, Japan developed its plans for a plutonium fueled electric utility industry in order to get out of competition with China for Middle Eastern fossil fuels. Now with the focus on global warming, and China’s massive commitment to building new nuclear power plants, MOX fuel seems to like a plausible competitive advantage. The strategy will only work if the Japanese can extricate themselves from endless bureaucratic delays.

MHI to get Comanche Peak order?

MHI nuclear logoOne bright note for Japan’s nuclear industry is the Bloomberg wire service reported on June 28 that Mitsubishi Heavy Industries (MHI) is said to be on the verge of receiving an order for two of its new 1,700 MW Advanced Pressurized Water Reactors (APWR) from Luminant, a Texas based private equity owned nuclear utility. The order, expected to be worth approximately $6.3 billion, would be for Luminant’s Comanche Peak plant.

Luminant is in an unusual position in the Federal loan guarantee program. It is in the 5th position relative to four firms that are short-listed for the loan guarantees. If one of them drops out, they move up. The APWR reactor is still undergoing design certification review at the NRC.

Meanwhile, Bloomberg also reports that MHI will double the number of its employees in the U.S. to 200 people. Additional employment growth is forecast if the order to Luminant goes through. Construction could begin sometime in the 2011/2012 timeframe with revenue service set for 2020 at the latest.

China sets new nuclear energy goal at 86 GWe

chinese-dragon-mosaicChina is reportedly revising its plans for new nuclear power plants. A new estimate, still be be made official by the government, calls for 86 GWe of nuclear generation capacity. This is a nearly 10 fold increase from its current capacity of 9 GWe.

According to the China Daily for July 2, an English language newspaper, the plan "will call for the government to accelerate nuclear power development in coastal provinces and autonomous regions, namely Liaoning, Guangdong, Zhejiang, Fujian, Guangxi, Jiangsu, Shandong and Hainan," the sources said.

In order to achieve the goal, the government will also set up a "reasonable number of nuclear power plants in inland provinces in Jiangxi, Anhui, Hunan and Hubei", the anonymous sources said.

According to an assessment by World Nuclear News, the plan for 86 GWe would place China’s eventual build at second rank globally behind the U.S. fleet which is now at 100 GWe but ahead of France at 63 GWe and Japan at 46 GWe. These rankings could change over time depending on how the other nations pursue nuclear energy as a response to global warming.

There is some skepticism as to whether China has the internal manufacturing capability to build the equivalent of seven more 1200 MW plants by the end of the next decade. The country will likely have to build its own large forgings plant, which would be a multi-billion dollar endeavor. Also, it will have to train at least 300-500 nuclear engineers a year for at least ten years. The need for skilled crafts people capable of delivering nuclear grade concrete and steel fabrication services will be a serious challenge.

China National Nuclear Corp, the biggest nuclear power operator in the country, China Guangdong Nuclear Power Holding Co Ltd and China Power Investment Corp, the parent company of the Hong Kong-listed China Power International Development Ltd, are currently the only players in the nuclear power sector. How they will meet the demands for people and materials will be interesting to see.

By comparison in the U.S the Nuclear Energy Institute (NEI) sees only four-to-eight new nuclear power plants being built in this country by 2020. The same capacity issues face the U.S. nuclear industry.

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Thursday, July 2, 2009

In Congress July 4, 1776

We hold these truths to be self-evident . . .

trumbull-large1

John Trumbell's painting "Declaration of Independence" was placed in the Capitol Rotunda in 1826.

The original Declaration of Independence was signed on July 4, 1776. Here are the opening lines of text.

When in the Course of human events, it becomes necessary for one people to dissolve the political bands which have connected them with another, and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature's God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.

That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, --That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed.

But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.--Such has been the patient sufferance of these Colonies; and such is now the necessity which constrains them to alter their former Systems of Government. The history of the present King of Great Britain is a history of repeated injuries and usurpations, all having in direct object the establishment of an absolute Tyranny over these States. To prove this, let Facts be submitted to a candid world.

& & &

Blogging on nuclear energy topics will resume next week. Enjoy a safe and happy fourth!

Sunday, June 28, 2009

GE-Hitachi briefs Congress on PRISM reactor

Objective is to turn spent nuclear fuel into an asset

ANLWestPRISM is GE’s proprietary name for the Integral Fast Reactor, a design that was developed in Idaho by the nuclear scientists at Argonne West (ANL-W), a field office for Argonne National Laboratory located on the Arco desert 26 miles west of Idaho Falls, ID. In 2005 ANL-W was merged with the Idaho National Laboratory (INL)

There has been a a series of coincidental developments in the past two weeks that brought this technology into the spotlight.

Eric Loewen, who worked on reactor designs for sodium cooled reactors (large graphic) in Idaho, and now is a senior scientist with GE-Hitachi (GEH) in Wilmington, NC, talked with the news media about the technology last week.

At the same time, Lisa Price, a senior VP at GE Hitachi, testified before the House Science and Technology Committee encouraging lawmakers to support R&D needed to complete the technology for recycling nuclear fuel.

At the annual meeting of the American Nuclear Society, held in Atlanta, GA, the science organization awarded engineer Charles Boardman the prestigious Cisler Medal for his decades of leadership in the development of GEH’s “Generation IV” PRISM reactor technology.

This week venture capitalist Steve Kirsch published a long and very detailed article online at the Huffington Post on the history of the IFR reactor design and operational work at ANL-W interviewing many of the principal scientists who worked on the project including John Sackett and Charles Till.

Eric Loewen

LoewenEric Loewen (right) briefed a group of reporters this week on PRISM, which is GE-Hitachi’s name for the IFR design. He explained the benefits of the technology is that it burns spent nuclear fuel and in the event of a problem simply shuts down safely due to the way the reactor uses heat and its liquid sodium metal coolant. Here’s a link to a set of Loewen’s slides to the Virginia chapter of the American Nuclear Society from 2007 which provide additional details on how the reactor works.

Loewen told the media the PRISM reactors can be build in small modular units of about 400 MW each. They could be very attractive to owners of existing coal plants because they could replace the boilers while using the same turbines, condensers, and grid infrastructure that are already there. You would need a new control room, but Loewen says the total investment is still a lot less than a brand new plant.

Loewen is adept at telling the nuclear industry story. In 2007 he briefed a group of Wall Street investment bankers leading off with this line, “We’re burning dead dinosaurs at an extraordinary rate.”

So far no one has built or tested a PRISM reactor which brings up to the testimony by Ms. Price.

Lisa Price

GE_logoAs the White House and U.S. Congress create a new national strategy for managing used nuclear fuel, GE Hitachi Nuclear Energy (GEH) is encouraging lawmakers to support the research and development necessary for recycling nuclear fuel.

Testifying before the U.S. House of Representatives’ Science & Technology Committee, Lisa Price, a GEH senior vice president, briefed lawmakers on GEH’s proposed Advanced Recycling Center (ARC). The concept offers a timely solution to the industry’s most significant public policy and environmental challenges by turning used nuclear fuel into an asset.

“The nation faces a choice today: We can continue down the same path we have been on for the last 30 years, or we can lead a transformation to a new, safer and more secure approach to nuclear energy,” said Price, GEH Senior Vice President for the Nuclear Fuel Cycle and CEO of Global Nuclear Fuel LLC.

“We need an approach that brings the benefits of nuclear energy to the world while reducing concerns about nuclear waste.”

GEH is offering the ARC, comprised of a “PRISM” sodium-cooled reactor, combined with an electrometallurgical or dry nuclear fuel recycling facility. Approximately 95% of the material in used nuclear fuel from light water reactors is considered untapped energy that could be used to generate electricity in different kinds of next-generation nuclear reactors, such as GEH’s “Generation IV” PRISM design.

GEH’s proposed ARC system would permit much of this remaining used fuel to be recycled in the PRISM reactor to generate additional electricity. As a result, utilities also could reduce the amount of used fuel that needs to be stored on-site.

GEH’s technology offers important non-proliferation advantages because it employs a different method of recycling used fuel compared to other proposed technologies or existing reprocessing systems, Price said.

Charles Boardman

prism reactorThe American Nuclear Society (ANS) announced June 16 it has honored engineer Charles Boardman with the prestigious Cisler Medal for his decades of leadership in the development of GEH’s “Generation IV” PRISM reactor technology.

“Charles Boardman’s commitment to the development of advanced nuclear reactor and fuel recycling technology could provide significant benefits for the United States for many decades to come,” said ANS President William E. Burchill.

“Recycling would address one of the challenges raised by the resurgence of nuclear energy, retrieving large amounts of energy from used fuel and greatly reducing radioactive waste.”

The ANS awarded Boardman the Walker Lee Cisler Medal during the organization’s annual conference in Atlanta. The ANS is a not-for-profit, international scientific and educational organization covering nuclear science and technology. The Cisler Medal recognizes leadership in the field of “fast reactor” technology and its potential applications for power generation.

Steve Kirsch

This article published online at the Huffington Post is a long read, but it is well worth your time if you want to know the science history of the IFR. It includes interviews with some of the principal scientists and agency officials who worked on the technology before it was cancelled in the mid-1990s. There are plenty of links to source materials. Access is free but you must register to post comments.

kirsch_steveKirsch (right) is an unusual author for this topic because he is a successful venture capitalist, entrepreneur, and businessman who has no background in nuclear energy. His article has somewhat of a “booster” flavor to it because he has little patience with government bureaucracy.

One of the people Kirsch interviews is Ray Hunter, a former high level official at the Department of Energy. Now retired, Hunter offers a frank assessment of why reactor technologies with promising futures, like the IFR, get shuffled aside in the agency.

In the mid-1990s I was a project manager at the Idaho National Laboratory working on development of new programs for the lab. Hunter was hired by the lab as a consultant to develop these ideas both in terms of market research and for use in a business plan. I worked with Hunter and found him to be a straight shooter who had a unqiue outlook on the art of the possible in government energy programs. Here’s what he wrote about that experience.

“The main reason that nuclear energy development is so screwed up in DOE is that critical elements e.g. nonproliferation, waste, and nuclear R&D are in separate organizations all reporting to the Secretary. It requires real head knocking to integrate the pieces to have a rational program and there is no one in DOE sufficiently interested in nuclear to perform this task.”

“The Lockheed-Martin Idaho Technology Company (LMITCO) contracted with me to prepare a projection on the future of nuclear energy and technology and a possible role for the INEEL in this future. Following interviews with LMITCO employees and contacts with DOE program offices, universities, industrial organizations, and foreign entities; a report was provided that identifies potential nuclear energy opportunities for INEEL. These opportunities are germane today.”

What he’s talking about is the IFR reactor design. Kirsch writes that although the IFR was cancelled in 1994, it has popped up repeatedly in evaluations of future reactor R&D by DOE’s Generation IV R&D program and both the Russians and Chinese are intensely interested in the technology.

Read the rest of Kirsch’s article not only for the fascinating history of a missed opportunity, but also for the potential to recover what was lost and to complete its development as a commercial product.

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