White House slashing DOE nuclear R&D budget

Energy Secretary Chu sends protest letter to OMB

A President bent on pushing deficit reduction buttons anywhere he can find them has hit a few at the Department of Energy. Earlier this week the Office of Management & Budget tried to cut the Environmental Cleanup program by a considerable amount, but was forced to back off as a result of bipartisan pressure from Congress.

The next candidate for budget slashing at DOE has turned out to be the nuclear energy R&D budget. There is a much narrower constituency for this federal spending in Congress. For instance, Idaho and Tennessee have too many members of Congress on the wrong side of the partisan divide. This political fact of life makes these line items more vulnerable to cuts when appropriations bills come up for committee votes.

According to the Energy Daily for Jan 15, a trusted and credible nuclear industry trade newsletter, Energy Secretary Steven Chu has taken the unusual step of making public a letter of protest he sent to OMB Director Peter Orszag. In it Chu laid out a litany of complaints about budget cuts for a wide swath of nuclear energy R&D spending in FY 2011.

OMB’s direction includes cuts to work on a broad range of large and small nuclear technologies for both light water and fast reactor designs. It also includes a shift to industry in terms of cost sharing. The Energy Daily didn't provide a line-by-line breakdown. However, the newsletter's description of Chu's letter indicates OMB's cuts hit a significant number of programs.

The reason Chu’s action leaking the letter to the Energy Daily is unusual is that the “passback,” or budget OMB tells federal agencies to request from Congress is not a public process. Even more unusual is that the letter came into the hands of the Energy Daily. When a cabinet secretary leaks a letter like this you can bet he is really upset by the hatchet job done to his programs by the budget boys in OMB. In the end, Chu can only submit a budget to Congress that is signed off by OMB.

Mid-term elections drive deficit reduction

President Obama is making a push for deficit reduction going into the 2010 mid-term elections. Congress will be considering the major appropriations bills in the two months prior to the November elections.

The President’s political objective is to stem losses in the House and Senate, which are inevitable at mid-term. The primary tool he has is to outdistance the Republicans with deficit reduction actions.

You can bet your neutron detectors every member of Congress will be working the wring headlines from the process showing how hard they are working to cut the deficit. You can also assume that they will working with equal vigor to protect home state funding.

OMB’s tactic is to cut everything in sight assuming that the tried-and-true scenario described above will once again play itself out. The political practice is to toss the budget tar baby to Congress and let the full House and one-third of the Senate up for election duke it out in the appropriation process. In short, OMB is putting the budget monkey on Congress.

President’s budget does not survive first contact with Congress

The good news for advocates of nuclear energy R&D is that the short-list of items being cut by OMB, and which will appear in the President’s budget sent to Congress by the end of January, is likely to be dead in the water on arrival when it hits Capitol Hill.

The bad news for advocates of any line item, including nuclear energy R&D, is that the competition for funding in 20111 is going to be particularly acute. The nation is facing record deficits and a struggling economy which means lower tax revenues. Something has to give.

Federal entitlement spending, like Social Security, Medicare, and Medicaid, make up a huge portion of the federal budget. These accounts are difficult to control. Like squeezing air in a partially inflated balloon, the pressure moves to discretionary programs. That’s why nuclear R&D gets OMB’s attention. It isn’t because OMB is anti-nuclear. It is because the budget is in the discretionary area of government operations. It is there and it can be cut without impeding critical government spending.

When you get to brass tacks, nuclear energy R&D is far down the food chain when it comes to government budget necessities.

The military will not want for ammunition, rations, or transport. The FAA will continue to be able to provide air traffic control for the nation’s aviation industry. The Centers for Disease Control will fight infectious disease regardless of what happens with nuclear R&D.

Of course, you can say nuclear energy is needed to halt the growth of greenhouse gases, but the response from the White House likely would be a political line about renewable energy technologies like solar and wind, and support for the current fleet of 104 operating reactors. Also, the White House would point to the eventual award of $18.5 billion in federal loan guarantees for fewer than half a dozen new nuclear reactors.

The squeeze play is on. The deficit and the economy are creating conditions affecting the federal budget that have huge implications across all federal spending accounts. Nuclear technologists should not feel singled out. The politically realistic strategy should be to find allies and build as broad a constituency in Congress to save what you can. It is going to be a very rough time for all of the government appropriation bills. If the economy continues to emerge slowly from one of the worst recessions since the 1930s, future budget cycles could bring continued uncertainty over funding for nuclear R&D.

& & &

Hat tip to Lane Allgood at Partnership for Science and Technology (PST) for sharing information on Chu’s protests over OMB budget cuts.

# # #

Oyster Creek under fire over cooling towers

Environmental groups are not giving up on efforts to close the recently relicensed reactor

A coalition of a half-dozen environmental groups, thwarted in their efforts to shut down one of the nation’s oldest operating commercial nuclear reactors, has a new tactic. The groups are pushing the State of New Jersey to require the 619 MW Oyster Creek boiling water reactor (BWR), owned and operated by Exelon (NYSE:EXC), to build cooling towers. The structures would cost hundreds of millions to build.

Exelon said at a NJ legislative hearing on the proposal in December that if the requirement was enacted, it would shut down the reactor. This is exactly the result the environmental groups want to occur.

The environmental groups have a new ally in their quest. It is a proposal to require the cooling towers as part of the reactor’s water quality permit from the state. On Jan 7, Mark N. Mauriello, Acting Commissioner for the NJ Department of Environmental Protection, issued a draft permit requiring the structures. The objective is to obtain by regulation what could not be achieved by legislation.

The Oyster Creek reactor discharges cooling water from its “once through” system into a canal that empties into Barnegat Bay. The reactor uses hundreds of millions of gallons of water a day, but it is not a consumptive use. Environmental groups contend the heated water and biocides used to keep plankton and shellfish out of the reactor’s pipes and pumps also contribute to fish kills in the bay.

Complex issues or political agenda?

The DEP draft permit requirement would change the plant’s use of water to a closed system that would use cooling towers rather than a once-through system. Mauriello has made public statements that the proposal “involves complex issues,” but he believes that the new cooling system “will significantly reduce the amount of water the plant needs.”

He added that the new draft water permit would, if imposed on the plant through the regulatory authority of his agency, “reduce impacts on aquatic life in the bay.” Mauriello has scheduled hearings on the draft permit for February 2010.

Exelon spokesman Joe Dominguez is not waiting for the hearings to make his point about the fiscal impact of the draft proposal to require the reactor to build the cooling towers. He told wire services Jan 7 that Exelon “will have no alternative but to shut the reactor down” if the permit condition is imposed on the plant. He pointed out that in the past NJ DEP had rejected the idea of requiring cooling towers because “they were not cost-effective. “

What's changed is that a lame duck governor, has taken a last, politically-motivated, stab at shutting down the reactor. Gov. Corzine, a Democrat, was endorsed by some high profile environmental groups, but others, notably the Sierra Club, supported an independent party candidate. Last July the Sierra Club ripped Corzine over his environmental record.

The action to impose the draft permit conditions for cooling towers on Oyster Creek can be seen as a move to consolidate support by green groups for the Democrats. The Sierra Club and five other groups, are part of a loose coalition trying to shut down all nuclear reactors in New Jersey.

History of efforts to shut down Oyster Creek

The cooling tower dispute is the latest in a series of targeted attacks by NJ environmental groups on the Oyster Creek reactor. The NRC renewed the plant’s license for another 20 years in April 2009, but only after a contentious effort by the environmental coalition to stop it.

The groups tried one tactic after another including raising issues involving the potential for terrorist attacks, the rigor of the NRC review itself. and corrosion and the age of the plant.

The NRC said in a statement about the renewal of the license, “This has been the most extensive license renewal to date.” The license application was received by the agency in July 2005 and was renewed in April 2009.

Political status of the cooling tower proposal

Mauirello, (right) who was appointed to his acting role by outgoing NJ Governor Jon Corzine, may not continue in that position once Gov-elect Chris Christie takes office Jan 19. Maurillo is a career state employee who joined DEP in 1980.

On Jan 7 Gov.-elect Chris Christie said he was "disappointed" that Gov. Jon Corzine "decided to play last-minute politics" with the environment and economy by proposing to require cooling towers at the Oyster Creek nuclear power plant after four years of inaction.”

"We've had four years here to consider this draft (state) permit and the administration hasn't taken any action on it until the week before the next governor is sworn in," said Maria Comella, his spokeswoman.

Comella said that Christie would meet with stakeholders about the cooling towers after he takes office.

New Jersey is ranked 10th among the states for nuclear energy

Oyster Creek isn’t the only nuclear reactor in New Jersey. Three other reactors provide, with Oyster Creek, about half of the state’s electricity. According to the Energy Information Administration, coal provides another 16% and natural gas provides 30%.

Neither of the two reactors at the Salem nuclear plant use cooling towers. It is likely that if the state were to similarly impose the cooling tower requirement on them, and all three reactors shut down, the state would lose 2,923 MW of electrical generation capacity.

This is equal to losing 38% of its total electrical generation capacity. It would have a stunning negative impact on the state’s economy. The replacement power would have to be purchased on the spot market and most likely from fossil sources.

Environmental groups who have mounted their sustained campaign to shut down Oyster Creek may not realize it, but, if successful, their victory would be felt far more significantly in the checkbooks of the state’s businesses and residents than in the protection of fish in Barnegat Bay.

The cooling towers proposal is a developing issue. The permit won’t be imposed on Oyster Creek in the closing days of the Corzine administration.

Will reason about the benefit-cost issues of cooling towers prevail in New Jersey? The new governor already has the issue on his radar screen. He’ll need to move fast if he wants to keep the lights on between Philadelphia and New York.

# # #

White House aide speaks up for nuclear energy

Carol Browner says she is talking with the industry

In an public live online chat (video) held Jan 12, Ms. Browner, a top energy and environmental aide to President Barack Obama, finally moved the pointer, relative to nuclear energy policy, on the ship-of-state’s telegraph from dead stop, past stand-by, to slow ahead.

It is a remarkable change from what has looked for some time to be a message of “finished with engines.” The green wing of the Democratic party has forced its message on the White House producing a chilly reluctance to say anything about nuclear energy and its role in reducing the increase of greenhouse gases.

While Ms. Browner made some positive statements during the live chat about nuclear energy, her views are those of a political realist. She must balance the need to push climate change through Congress, with a nuclear energy section, while not making too many waves with the environmental advocates who staunchly supported the President in the campaign. They will be needed in the Fall 2010 mid-term elections.

Reuters reports the White House now wants to engage with the nuclear industry to “understand what they need.” According to Reuters, Browner (right) said the Obama administration wants to help the nuclear industry build nuclear power plants to help diversify U.S. energy supplies and fight climate change.

"We have not built a nuclear plant in this country in a long time but we want to work with the industry to make that happen in the not too distant future."

"The president believes that nuclear needs to be a part of our energy future," Browner said. "If you believe as we do that climate change is a serious problem ... then you need to be open to what are all of the ways in which we can produce energy in a clean manner."

Leadership needed to navigate rough seas ahead

These are helpful statements to advance the President’s energy agenda to include nuclear energy. However, work is needed to close with three major challenges ahead and all involve passages through rough political waters.

First, the federal loan guarantees for $18.5 billion are still locked up in a bureaucratic budget dispute between DOE and OMB. It will take someone with Browner’s influence inside the White House to clear it up. Nuclear utilities need commitments for them to bring investors to the table and soon. Within the next 18 months more than a dozen new reactor projects will get their NRC licenses.

Second, Energy Secretary Chu has still not named the members of a blue ribbon commission to study how to deal with spent nuclear fuel. One of the likely reasons is that highly qualified people approached by the government don’t agree that Yucca Mountain should be taken off the table. A blue ribbon commission with heads nodding north & south isn’t likely to be credible with the industry or Congress.

This is another place where someone with Browner’s political astuteness could be useful. Opening dialog about spent fuel reprocessing, and the use of MOX fuel in light water reactors, would be a good way to add technically credible options to the debate.

Third, Congress needs to pass a climate bill with a strong nuclear energy section in it. It would need to include a doubling of the loan guarantees from $18.5 to $37 billion, something Energy Secretary Chu has called for in recent statements. Again, leadership from the White House can make a difference.

The rest of the world is way ahead of the U.S. The U.K. France, Italy, Japan, and China are making major commitments to building new nuclear power stations. Ms. Browner says “we are continuing to engage the rest of the world” on climate change. This is a good policy, and now that it includes nuclear energy, perhaps the U.S. will move to take its place among the nations of the earth in this realm as well.

Prior coverage on this blog

• 12/30/09 - Four fearless futures for nuclear energy in America
• 08/12/09 – Obama’s energy policy needs nuclear energy
• 07/17/09 – Senator Lamar Alexander’s speed run on nuclear energy
• 05/25/09 – G8 Energy Ministers endorse nuclear energy

Dominion weighs choice of reactor design

Utility will review responses from the industry for third reactor at North Anna site

With billions of dollars weighing in the balance, Dominion (D:NYSE) is following the principles of the “prudent investor” in making up its mind which nuclear reactor design to reference in a license application to the NRC.

At one time the utility said it preferred the ESBWR design from GE-Hitachi, but the two firms were unable to come to terms on the cost of building one. Since then, Dominion has opened the process to consider designs from other firms including Westinghouse and Areva.

The choice to set aside the ESBWR was not an easy one. Once a utility references a reactor design in its license application to the NRC, changing it has considerable dollar signs attached to all the new engineering information. Also, it pushes back the date the NRC will complete the review of the license application.

Still, if a firm is not being able to close on risk factors, and define explicit terms and conditions for sharing risk, then the ink does not dry on the engineering, procurement, and construction contract for the project.

Risk factors defined

Risk factors fall in three broad groups. The first are firm, fixed costs. Get them right, and everyone makes money and their bonus. Missing the mark can ruin careers and company balance sheets.

The second area involves shared risks. Here suppliers and customers agree that a certain amount of change in price is inevitable for commodities like steel and concrete. Everyone watches the market closely to avoid surprises.

The third area is where the reactor comes in. The vendor, in this case, GE-Hitachi, needs to have a complete designs right now to the last nut, bolt, fastener, valve, and pump seal. Otherwise, it can’t tell a customer what it will cost to build one.

The problem for a utility like Dominion is that it must tell the public utility commission what it plans to charge the rate base for the electricity from the new reactor. If it can’t come to terms on the cost of building one, it can’t make a case for its rate package nor tell investors and rate payers how things will turn out on the balance sheet nor what it will charge for electricity from a new reactor.

Because GE-Hitachi was at the time still submitting new information to the NRC as part of the reactor design process, it couldn’t tell Dominion what the costs would be for the new reactor. The lack of a fixed design prevented the vendor from making an agreement on costs with a customer. The NRC has published a schedule that calls for completion of the reactor design certification process for the ESBWR in mid-2011.

The ESBWR has some appealing design features which could help control costs. For instance, it uses 25% fewer pumps, valves, and other common components. However, Dominion wasn’t the only nuclear utility to step back from the ESBWR. Exelon and Entergy also reconsidered their use of the reactor in their license applications for new nuclear power stations and for the same reason as Dominion. Exelon and Entergy have since opted for up-rates of existing plants in the near term rather than building new reactors.

Gentlemen start your engines

Last year Dominion opened up the choice of a new reactor at North Anna to competition. Richard Zuercher, a spokesman for Dominion, told a newspaper in Fredericksburg, VA, Jan 4, the company has gotten credible responses from other reactor vendors. However, he also said the firm will take its time making a decision. He said it could be the middle of 2010 before it completes its review.

For its part, GE-Hitachi told the newspaper it is proposing both its ESBWR and the slightly less powerful, but fully certified, ABWR to Dominion. As far as the competition is concerned, Areva’s new EPR is also in still in the design certification process and the Westinghouse AP1000 is getting an update to the safety review of its previously certified design.

Dominion is looking a decade into the future when the electricity from the new reactor will be needed by its customers. Insuring a degree of cost certainty over that time frame is a daunting task which is why the utility is carefully considering its choices.

# # #

Exelon keeps options open for Texas reactor project

Texas sized uncertainties loom in the near-term

Sometime in the next three months Exelon (NYSE:EXC) will file an Early Site Permit application with the NRC. The review process will take about two years. The action will keep the nuclear utility’s options open to eventually build a new nuclear power station near Victoria, Texas. The firm is also retaining its water rights in the region.

Craig Nesbit, a spokesman for the company, told the Victoria Advocate Newspaper in late December the action doesn’t mean the firm has made a decision to move forward with the project. Because of the current economic downturn, which could have lasting effects on demand for electricity, Nesbit says, the firm is taking a wait and see approach. Eventually, the economy will come back. Nesbit says that when it does, Victoria will see the firm build one or possibly two reactors there.

Exelon has plenty of reasons to want to hedge its bets. The firm has had a bumpy ride in Texas. First, it initially chose the GE-Hitachi ESBWR reactor design for the Victoria site. It had to set that idea aside when the Department of Energy gave as yet uncertified reactor a low rating on Exelon’s application for a loan guarantee. Second, Exelon engaged in a year-long quest for a hostile takeover of NRG, which is building two new reactors at the South Texas Project. NRG successfully fended off the bid.

Still, Exelon remains interested in building new nuclear power plants in Texas. It just has to overcome a few Texas-sized problems like U.S. economic woes, unpredictable demand for electricity, and a lack of federal loan guarantees which the firm says are the key to successfully financing the project. If there is a second round of loan guarantees, which is on the legislative horizon, Exelon will likely be coming forward to apply for one.

# # #