Friday, October 8, 2010

Nuclear fabrication vendors waiting for loan guarantees

You can't make stuff if utilities aren't building reactors

This blog post is based on my report published in Fuel Cycle Week V9:N395 on 09/30/10 by International Nuclear Associates, Washington, DC

The annual conference of the Nuclear Fabrication Consortium (NFC) held in Cleveland Sept 21 was a glum affairs for the 100 or so vendors who made the trip.

The consortium, which is composed of some of the nation's largest manufacturers of components for nuclear reactors, listened in stunned silence as a spokesman for the U.S. Chamber of Commerce told them Congress and the Obama administration have most likely punted approval of $25 billion in loan guarantees to the middle of 2011 or later. (Image of reactor coolant pump from World Nuclear News )

A big market hangs in the balance. Speaking during the afternoon session, George Davis, a senior executive with Westinghouse, estimated suppliers of nuclear components, were looking at a near-term potential of $14 billion spread if loan guarantees are awarded soon. That estimate drops like a rock, along with the loss of thousands of jobs, if Congress doesn’t extend the program.

Sales from manufacturing pumps and parts for new reactors won't be spread evenly. The Shaw Group, which owns a 20% stake in Westinghouse, has a 600,000 square foot factory in Louisiana. It is making components that will go into four 1,150 MW AP1000 reactors Westinghouse is building in China. The firm is building a similar factory in China to meet local content requirements for the reactors and for additional work to supply China's enormous nuclear new build.

Westinghouse reactors are slated for sites in South Carolina and Florida. Southern's Vogtle plant, a twin AP1000 site, is now taking delivery of long-lead time components. It is also the only reactor project so far that has gotten loan guarantees.

A sign of the dismal times for other reactor vendors is seen in Areva's decision to push back the start of operations by two years of its 360,000 square foot factory in Newport News, VA. Areva said in August the delay is due to a lack of a decision on a loan guarantee for Constellation's Calvert Cliffs III reactor which will be a 1,600 MW EPR.

Jarret Adams, a spokesman for Areva, told FCW construction started in July 2009, but start-up date is being pushed back.

"We are adjusting our construction schedule to meet our customers’ planning timetables and to ensure we have production capabilities and capacity when our customers are ready for our components.

In the absence of sufficient loan guarantee funding and commitments to qualified applicants, some customers are delaying the start of projects which affects when the heavy components to be manufactured in Newport News will be required."

White House has bigger fish to fry

Nuclear fabrication vendors may be right in feeling their industry, and its jobs potential are being ignored. Karen Harbert, CEO of the Chamber's Institute for 21st Century Energy, (right) told the NFC in a keynote address President Obama and Congress have much bigger fish to fry than worrying about the nuclear industry. Topping the list are an enormous deficit, sky high unemployment, and a rats nest of regulatory issues associated with health care and financial reform.

Harbert also said the U.S. is in "gridlock" when it comes to energy projects.

"If you can't build a solar energy project in the Mojave Desert or six miles off the coast of Cape Cod, then god help us."

Right now, Harbert said, the Department of Energy (DOE) is trying to decide whether or how to award loan guarantees to Constellation Energy for Calvert Cliffs III and NRG for South Texas Project 3 & 4. According to Harbert, the decision is shorting out in the arcane bureaucratic process of "scoring the risk" of the loan guarantee.

Both projects are merchants. Harbert told FCW this means the risk is higher and so is the fee DOE would have to charge for the loan, according to an OMB analysis.

The problem for DOE and the utilities is that if the fee is too high, it makes no financial sense to take the loan guarantee. If the utilities walk away from the loan guarantee, they might also put their reactor projects on hold or cancel them.

"DOE does not want to make a choice," Harbert told FCW. This is a mistake she says.

"The agency needs to fund at least one more new reactor to show the industry the government has confidence in other projects."

Lack of loan guarantees tank metal benders’ prospects

metal fabThe delay in the U.S. nuclear renaissance means business is not good for the metal benders who belong to the NFC. In fact, it is so bad that the CEO of a firm that made major investments last year in new manufacturing capabilities refused to be interviewed by the media. If business was booming, he'd be touting it to attract investors to fund the next round of expansion. He's not.

The issue about loan guarantees is so crucial that even incentives to improve the ability of vendors to serve the nuclear market are non-starters. For instance, a conversation with several vendors about the possibility of tax incentives to cover some of the costs of recertifying for N-Stamp status indicated little interest in pursuing it without clear signals of improving demand.

One vendor, who would not speak for attribution, told FCW that his firm saw little value in the idea if the government can't get loan guarantees out the door.

"What the point?" he said, " If we don't have any orders."

Small Modular Reactor vendor owns his supply chain

The only people in the room who were upbeat were vendors of small modular reactors (SMRs) who don't need the loan guarantees to build the plants. Fabrication firms which have plans to scale up to meet the demand from multiple 1,000 MW plants might find cold comfort in the SMR world.
mpower smr

John Ferrara of B&W said that his firm is vertically integrated owning the supply chain for components and fuel fabrication for its 125 MW mPower LWR.

"We're not limited by Japan Steel Works," Ferrara told FCW. "We’re factory built, not stick built like 1,000 MW plants. The key to revenue for a utility is modular expansion as demand builds rather than putting up a single large plant."

Ferrara said the mPower 125 MW reactor will use conventional LWR type fuel enriched to less than 5% but with a four-year fuel cycle. The units will take 36 months to build and can be shipped by rail or barge to a customer site. The first units are expected to be in operation at a customer site by 2019.

Ferrara said B&W has a cost target of $4,000/Kw for its new SMR. Two potential customers are TVA and First Energy. Last July TVA said it is interesting in the mPower reactor and pledged support for the licensing process. An executive with First Energy told FCW that the firm is providing user requirements to B&W.

First Energy sees potential in SMRs

Asked about the potential use of SMRs, Don Moul, an executive with First Energy, told FCW that building new 1,000 MW reactors ranks third in choices for his utility. The fastest return on investment will come from uprates followed by investment in SMRs.The small reactors would allow the utility to add capacity as demand occurs without having to bet the company on a single large plant. Building a new 1,000 MW plant is much further in the future and far more problematic mostly for financial reasons.

Moul said that First Energy is in exploratory discussions with B&W about its mPower 125 MW SMR, but that no decision has been made to acquire one.

Fuel fabrication for NGNP

NGNP logoThe future fabrication requirements for fuel for a high temperature gas cooled reactor are being developed right now in testing at the ATR in Idaho. Tracy Albers, a scientist with GrafTech International, based on Parma, OH, told FCW a graphite-moderated, helium-cooled reactor will be built for a commercial customer in the next 10-15 years.

Graphite is being used because it can withstand the 800 C outlet temperature. The Idaho lab is working on the design of the Next Generation Nuclear plant (NGNP), which is taking a lot longer than some advocates expected.

Westinghouse pulled out of the $40 million "bake-off" for competing designs last May leaving General Atomics as the sole provider of a conceptual design. The Department of Energy is scratching its head trying to figure out where to go from here.

Albers told FCW there is no technological decision for NGNP yet, but fuel qualification is moving ahead smoothly at the Idaho National Laboratory.

"The first tests just completed a 19% burnup rate. We used 300,000 Triso fuel particles with no failures."

The fabrication challenge Albers said will be to produce billions of particles for a fleet of the 300 MW small modular reactors.

Hans Gouger, a nuclear scientist at the Idaho lab who spoke at the NFC conference, told FCW one of the uses of NGNP could to make liquid fuel from coal.

"With one of these plants you can get a lot of gasoline from a ton of coal. NGNP might help Americans keep their cars."

Other uses for process heat from this SMR are expected to include the petrochemical industry for a wide range of industrial products.

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SteveK9 said...

This is sure a depressing story. Especially when you see plans in China for a 6 EPR unit plants, for example.

Anonymous said...

Areva is closing on a deal to build two of six planned reactors in India. So far, it only has a commitment to build two in China.