Thursday, May 13, 2010

UAE picks site to build four reactors

Transmission distance to the country’s oil industry and the Saudi border were key factors

UAE mapA remote beach at Braka in Abu Dhabi on the Persian gulf about 50 km (31 miles) from the center of Abu Dhabi’s oil industry at Rawis will be home to four new nuclear reactors to be built by a South Korean consortium.

The site is also just 160 km (100 miles) from the border with the Kingdom of Saudi Arabia which is expected to be a prime customer for electricity from the reactors. The sparsely populated region was chosen because it presented few environmental challenges or impacts on nearby populations.

The site was chosen from a short-list of ten alternatives. The evaluation process considered security, seismic conditions, and adequate water supply for cooling. Some of the reactor capacity will be used for desalinization which means the plants will use seawater, rather than fresh water, as a primary resource.

The UAE expects the first plant to be operational by 2017 with 2,000 operations and support staff on site. Construction of roads, and a port jetty with cranes, will begin later this year to support delivery of equipment, materials, and reactor components to the site. The UAE plans to connect the site to a regional transmission and distribution grid to supply electricity to other countries on its side of the Persian Gulf once the reactors are in revenue service.

The UAE is one of the world’s largest exporters of oil, but it has diminishing supplies of natural gas. In additional to growing demand for electricity for its population, the country wants to develop itself as a regional aluminum smelting center that also produces finished goods for export. Emirates Aluminum is one of the world’s largest “greenfield” projects of its kind.

In 2009 Abu Dhabi awarded a $20 billion contract to a consortium of South Korean companies including KEPCO which will supply four 1,400 MW reactors to the UAE. Doosan Heavy Industries will make the reactor pressure vessels, steam generators, and pumps. Other South Korean firms will set up factories to manufacture some of the reactor components in the UAE. Construction of the first reactor is expected to begin in late 2012 following completion of the licensing process with the UAE’s Federal Authority for Nuclear Regulation.

Emirates appoints Chief Nuclear Officer

APR1400The Emirates Nuclear Energy Corporation announced May 3 that it has appointed Joseph N. Jensen, an experienced U.S. nuclear utility executive, as its Chief Nuclear Officer.

Mr. Jensen was most recently Senior Vice President and Chief Nuclear Officer for American Electric Power, responsible for oversight of AEP’s Nuclear Generation Group and D.C.Cook Nuclear Plant in Michigan. He will report to ENEC’s Chief Executive Officer, Mohamed Al Hammadi, and is due to start work in June.

“Joe will be an outstanding addition to our organization, and we are very pleased that he will be joining the team in Abu Dhabi,” Mr. Al Hammadi said. “His commitment to safety, and to human resource development and training, as well as his technical and operations background, make him the ideal fit for the ENEC team.”

As CNO, Jensen, 52, will have full responsibility for the UAE’s proposed nuclear facility’s safety of operations and the protection of public health and safety – beginning in the current design, licensing and site selection phases of the project.

He will also be responsible for creating the organization, policies and procedures to implement that mandate. An important part of this work will be leading the already ongoing work to create a strong nuclear safety culture at ENEC.

Jensen will also serve as the main point of contact with the UAE’s Federal Authority for Nuclear Regulation and other government organizations.

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Anti-nukes wins some lose some in GA, SC, and TN

Litigation abounds over rates and license applications

bird_wormPresident Barack Obama’s support for building new nuclear power plants with federal loan guarantees is not making much headway with the hard edges of the anti-nuclear crowd in the South.

Lawsuits are coming up quicker than robins chasing worms on your lawn after a rainstorm. There’s no clear trend, but lots feathers are flying in state courts.

Georgia law upheld

An environmental group turned out to be too much of an early bird in going to court to stop Georgia Power from raising rates, authorized by state law, to pay for building two new reactors at the Vogtle site. Fulton County Superior Court Judge Wendy Shoob ruled April 16 that the Southern Alliance for Clean Energy cannot seek to overturn the law because Georgia Power hasn’t raised the rates yet to pay for the $14 billion power station expansion.

Shoob wrote in her decision the lawsuit was “premature.” The judge said the environmental group can come back and file their lawsuit next year.

Last year the Georgia State Legislature approved a bill that allows George Power to state collecting $1.6 billion in revenue to cover early costs of building the reactor. The effect of the rate increase is $1.30/month and could rise to over $9 by 2017 which is when the reactors are expected to enter revenue service.

The two reactors still must get their licenses from the NRC before the utility can break ground to build them. According to the review schedule published by the NRC, the licenses could be granted in 2011. A final date for the completion of the licensing process has not be set.

The Southern Alliance argued that the law, which implements the principle of “construction while in progress (CWIP),” is unconstitutional. The group used a variety of invectives calling the rate increase “a public give away” that only benefits the utility’s shareholders.

However, Daniel Walsh, a Georgia State Attorney General, told the Associated Press April 16 that the law is valid and has the objective of spreading out rate increases over a long period of time to avoid “rate shock.”

The Southern Alliance did win a round in Shoob’s court on April 30. The judge ruled that the Georgia Public Service Commission had not properly documented the justification for the reactor in granting the rate increase. The groups want the reactor to be turned into a merchant which would prevent it from raising rates until the reactor is generating electricity. If successful, the outcome could sink the project in terms of its finances.

Georgia Power spokesman Jeff Wilson told the Atlanta Journal & Constitution April 30 the ruling isn’t that significant. “It’s not related to the need for the project. It will continue as scheduled.”

For its part, the George Public Service Commission declined to comment saying they’d ask their lawyers to figure out whether a county judge has really done anything to affect their decisions.

South Carolina rates challenged

coinsA rate payers group called S.C. Energy Users had argued before the South Carolina state Supreme Court that a $438 million rate increase for two new reactors is nothing more than a “slush fund.” An attorney for the group said the contingency fund lacks accountability. The group’s members are large industrial users of electricity. The court did not set a date for issuing a ruling.

Separately, environmental groups argued before the same court state regulators weren’t giving the spending based on the rate increase enough oversight. Friends of the Earth lost their case April 27 when the state Supreme Court upheld a ruling by the South Carolina Public Service Commission that the utility can raise its rates to pay for the $9.8 billion project.

South Carolina Electric & Gas is charging electricity customers 2.5% more per year over the next ten years to help pay for two new reactors at the V.C. Summer power station. An attorney for the utility said allowing the company to recover costs as the plants are being built will lower overall costs.

NRC rejects challenge to future of TVA’s Bellefonte project

An effort by environmental groups, including the Southern Alliance for Clean Energy, to block completion of two partially completed reactors was rejected by the NRC April 3. The groups raised multiple issues including that the reactors sites are not geologically stable and that TVA didn’t adequately maintain the sites over the years before deciding what to do with them.

bellefonte tvaThe NRC rejected these arguments. TVA said in a statement that the decision supports the validity of its reasons to seek reinstatement of the construction permits for the two reactors. TVA has not made a decision whether to rebuild the units. However, it now has a clearer path forward if it decides to ask the NRC to upgrade the construction permit to active status.

TVA is still studying the issue of whether to complete the two reactors or build a single new Westinghouse AP1000 reactor at the same site.

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Wednesday, May 12, 2010

Swift action unlikely on climate bill

President Obama has a better chance with banking reform than he does saving the planet

greenhouse_gasesSen. John Kerry, D-Mass., introduced today a nearly 1,000 page climate and energy bill which hit the Senate floor with a resounding thud. Despite a politically savvy Christmas tree of political appeals to various energy and environmental interests, the proposed legislation has all the chances of passage as the proverbial snowball in the Sahara. Democrats have a better chance of passage of banking reform than they do to limit climate emissions and make some sense out of U.S. energy policy.

The draft bill includes significant measures that promote nuclear energy. The provisions include $54 billion in federal loan guarantees, money for utilities to help them overcome regulatory delays getting reactors built, and measures to speed up reviews of reactor license applications. The bill also contains provisions setting up R&D programs for small reactors and reprocessing of spent nuclear fuel. The sad thing is none of these measures may see ink from the President’s pen given the overall prospects for the climate bill.

Senate Minority Leader Mitch McConnell (R-Ky), which is a major coal state, said the Republicans will fight the bill tooth-and-nail as a tax despite its provisions for revenue sharing with states from offshore oil & gas production drafted by Sen. Lindsey Graham (R-Sc).

Senate Majority Leader Harry Reid (D-Nv.), who’s sudden interest in immigration reform two weeks ago nearly scuttled the bill’s future, said he would not bring it to the floor unless there are enough votes to pass it.

Americans have other things on their minds

Americans generally favor climate change legislation, but it doesn’t show up high in the rankings of what they are concerned about these days. According to a March 2010 Gallup Poll, a bare majority, just 53%, of American’s take the issue seriously and want something done about it.

Many think its importance has been exaggerated by the news media and environmental groups. The divide is deeply partisan with Republicans debunking climate science and Democrats, symbolized by former VP Al Gore, doing their best to explain climate science with books and movies.

According to Kiplinger Magazine, a May 2010 poll indicates that what Americans really care about these days is “financial stability.”

The results of the wide-ranging poll also reveal that while the economy is recovering, a staggering 84% of those surveyed are worried about their finances. According to the poll, nearly half, or 43%, said things had gotten worse over the past two years, versus only 18% who said their situation had improved. Related issues include the hollowing out of retirement savings and keeping a job.

Like checkbook issues

chickensBecause pocketbook issues are gut checks for elections, the President and the Senate Democrats need to find a way to connect the climate bill to the issues of jobs and the future of the American economy.

The current presentation of the bill as being necessary to meet our international commitments, saving the planet, and all the other green arguments, are just falling on deaf ears. Americans can’t hear these messages because they’re busy trying to figure out how to make ends meet.

The message from the White House needs to change. Instead of an iceberg for every polar bear in the Arctic, the Democrats need to mobilize their political base with the tried and true slogan of a chicken in every pot.

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Monday, May 10, 2010

NRG inks $280M investment deal with TEPCO for STP

Japanese utility will take an 18% share and provide technical support for construction of two 1,350 MW ABWR reactors

tepcoNRG (NYSE:NRG) announced May 10 a far ranging and ground-breaking deal with Tokyo Electric Power Company (TEPCO) which will become a partner in the construction and operation of two new 1,350 MW reactors at the South Texas Project (STP).

The new investor will add financial stability to the effort. The complex deal involves NRG's parent firm Nuclear Innovation North America (NINA) and Toshiba which is building the reactors.

It is the first time a U.S. utility building new reactors in the U.S. has taken advantage of foreign government export investment credits to help finance the project.

TEPCO, which is one of the largest nuclear power plant operators in the world plans to acquire an 18% stake in STP 3&4 for $280 million.

The Wall Street Journal reported, this is Tokyo Electric's first stake buy in a nuclear power plant project overseas, and "will be a great opportunity to expand (use of) the boiling water reactor technology," Toshiro Kudama, Executive General Manager of Tokyo Electric's International Affairs Department.

Steve Winn, CEO of NINA said,

“TEPCO will be instrumental in helping to secure Japanese financing support through Japan Bank for International Cooperation and Nippon Export and Investment Insurance.”

“In addition to TEPCO’s expertise and investment, having the benefit of TEPCO’s investment grade credit rating in the ownership chain for the project improves the overall credit profile of the project."

TEPCO will invest $155 million through its U.S.-based subsidiary for a 10% share of NINA Investments Holdings’ interest in the construction of two new reactors at STP. The investment awaits a conditional commitment for U.S. Department of Energy loan guarantee which is anticipated for the project. NRG was short-listed by the Department of Energy for loan guarantees, but that list is not a commitment.

The $155 million from TEPCO includes a $30 million option payment to NINA Investments Holdings, enabling TEPCO to buy an additional 10% share of the company for an additional $125 million within approximately one year.

The total cost of the two 1,350 MW new reactors is expected to be about $10 billion. It’s too early in the project to call this a fixed price. While Toshiba has signed an EPC contract to build them, NRG and Toshiba have risk sharing agreements to account for price escalation of certain components and commodities.

North America Nuclear Innovation North America (NINA) is a partnership between NRG Energy (88%) and Toshiba (12%) focused on developing new nuclear expansion projects using Advanced Boiling Water Reactor (ABWR) technology.

TEPCO is an early stage investor

NRG LogoThe new partnership with TEPCO is a surprise in terms of timing because it comes well before the twin-reactor project is to receive its NRC licenses. Last February NRG said it was unlikely to see its share of the project reduced by new investors until the certainty of the NRC licenses was in hand. NRG said the licenses would a a key confidence building measure for new investors. According to the NRC published schedule for the license applications, a decision is due sometime in 2011.

TEPCO's investment, and the anticipated involvement of Japan's export bank, can also be seen as Japanese government support for Toshiba efforts to build ABWR reactors in Texas.

Four ABWR units have been successfully commissioned in Japan. Toshiba has been involved in construction of three of these units and has developed significant operational experience to support them.

The relationship between NRG and TEPCO isn't new. Since 2006, TEPCO has been acting as technical consultant and has provided the benefit of its experience achieved in developing, constructing, commissioning and operating the Advanced Boiling Water Reactors (ABWR) to the project. TEPCO also will continue to contribute to the essential task of training the highly skilled workforce which will build and operate STP 3&4.

NRG said that assuming the two new reactors receive their NRC licenses from the NRC, and the project gets the anticipated loan guarantee commitment from the DOE, construction is expected to begin in 2012, with one reactor coming online in 2016 and the other in 2017.

TEPCO seen as value-added partner

In addition to assuming up to 20% of the capital cost of the project, TEPCO will fund and commit a team of commercial and engineering employees to NINA to assist in project execution and project oversight.

The company CEO praised TEPCO to the rooftops. David Crane, CEO, said:

“TEPCO has brought two advanced technology nuclear units online, on time and on budget and literally wrote the book on training the workforce for Advanced Boiler Water Reactor technology”

“Their ownership participation in STP will be invaluable to the technical and financial viability of the project and will help ensure that STP 3&4 is part of the vanguard of new advanced nuclear projects in the United States. The success of the coming American nuclear renaissance is essential if we are to meet our country’s zero emissions, zero carbon and energy security objectives.”

New investors for old

CPS energy logoWith this initial transaction, TEPCO would hold a 9.2375% interest in STP 3&4, bringing NINA’s share to 83.1375%, and leaving CPS Energy’s share at 7.625%. TEPCO would also be responsible for 10% of all STP expansion capital costs and up to 20% of these costs if the company exercises its option to increase its ownership to 20% of NINA Investments Holdings’ interest in the STP expansion.

TEPCO would then own approximately 18% of the project itself, or roughly 500 MW of carbon emission-free generation, enough to power about 400,000 households.

NRG had at one time lined up CPS Energy to take a 40% share of the project. A series of miscommunications, and opposition in San Antonio to rate increases needed to pay for the investment, produced a near total withdrawal of the municipal utility from the project. The utility will still be a major customer. Last February NRG’s parent firm NINA settled a legal dispute with CPS Energy that cleared the way for the San Antonio utility to support NRG’s application for loan guarantees.

The City of Austin, which was an investor in the first two reactors at STP, withdrew from all investment in STP units 3&4. Anti-nuclear forces convinced the city council it would be stuck with debt from uncontrolled cost escalation similar to the city's experience with the first two units, which were built by a different company in the 1980s. However, like CPS Energy in San Antonio, Austin’s municipal electric utility will also be a customer for the electricity from the two new reactors.

NRG emphasized in its statement May 10 it is using TEPCO’s expertise to insure the reactors will come into revenue service on time and within budget. The City of Austin may well pay a price in terms of higher rates as a customer, than as an investor, because of the anti-nuclear stance of its municipal utility.

American jobs from DOE loan guarantees

finish the jobIn addition to U.S. loan guarantees, NINA is seeking to diversify financing by actively pursuing additional loan guarantees through the Japanese export credit agencies. NRG said that if approved, DOE loan guarantees would cover an amount roughly equal to the investment in U.S. labor and U.S.-sourced equipment and commodities including steel, concrete, and many of the components for the reactor.

The Japanese loan guarantees would cover the Japanese investment in advanced nuclear expertise and equipment not available in the U.S. Two of the the key components will be the reactor pressure vessels which can only be forged by Japan Steel Works.

This statement about loan guarantees and jobs may be stimulated by a desire of NRG to assure nervous government officials and Congress that federal loan guarantees won’t wind up shipping U.S. jobs to Japan.

To emphasize this point, NINA recently announced an agreement for the Building and Construction Trades Department (BCTD) of the AFL-CIO to provide skilled union labor to construct STP 3&4.

According to NRG, approximately 6,000 people will work up to 25 million hours to build the new units, which are located about 100 miles southwest of Houston in Matagorda County, Texas. The expansion now directly employs approximately 750 U.S. workers across five states and plans to employ an additional 400 in 2010.

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Sunday, May 9, 2010

India tries again on nuclear liability law

Opposition remains strong against American business interests

India US nuclear dealControversial legislation to establish monetary liability limits in case of a nuclear energy accident was introduced to the Indian parliament last week for the second time. Last March Prime Minister Manmohan Singh had to withdraw the bill due to strong opposition. The measure is a crucial element of an agreement with the U.S. to open Indian markets to U.S. firms.

If approved this time, the legislation would provide protection to suppliers against legal action if their equipment was involved in a nuclear accident in India. The bill would limit the liability of a nuclear power plant operator to 5 billion rupees or $110 million. Critics claim this figure is so low that it effectively exempts firms from any accountability.

U.S. firms maintain the bill is essential because unlike France’s Areva or Russia’s Rosatom, they don’t have sovereign immunity. With stockholders to protect, U.S. firms need to have liability limits especially if a local operator using their equipment causes the accident.

The Indian government does not command a majority in parliament. Opposition members from the Bharatiya Janata Party and the Communist Party claim they have the numbers to block the bill. Their focus of opposition is that passage would allow American firms to enter the Indian market. Their opposition is more of an ideological issue than anything else designed to thwart any agenda item of Singh’s majority party coalition.

Greenpeace is also in the picture urging Indian legislators to vote against the bill. The group issued a statement said it wants the designers of the plants to be held accountable even if the accident is the result of operator error. This position illustrates a more widespread political view of wanting to shift all liability regardless of fault to reactor vendors.

G.E. Hitachi plans Indian manufacturing center

Passage of liability limits would position G.E. Hitachi to carry out agreements it inked year with NPCIL and Bharat Heavy Industries to collaborate to build ABWR and ESBWR reactors. G.E. Hitachi also inked a nonexclusive deal to source large forgings from Larsen & Toubro which is building a facility that can handle steel forgings up to 600 tons. Once operational, it will compete head-to-head with a similar facility now operated by Japan Steel Works.

Westinghouse also has plans to build new reactors in India once the liability issue is resolved by the government. it has signed similar nonexclusive agreements with NPCIL and Indian heavy manufacturing firms.

India has plans to expand its current 4 GW of nuclear energy to 60 MW by 2030. Last December S.K. Jain, managing director of NPCIL, told the Economic Times the first five new reactor sites are being acquired and that construction will begin in 12-18 months.

As for the opposition to the liability bill during the first round, Jain reportedly said, “There will always be those who are never satisfied. It is a noisy democracy. I don’t see a major problem.”

One of the reasons members of parliament may find to support the bill is that is will create jobs and the electricity from the reactors will promote economic development. Like its competitor Westinghouse, G.E. Hitachi has agreed to “localize” manufacturing up to 70% of components creating thousands of jobs across India. The firm also has plans to establish a nuclear components manufacturing center to export nuclear technologies with the competitive factor being India’s lower labor costs.

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Finland to build two new reactors

Russian neighbor seeks energy independence with nuclear energy

finland nucler locationsFinland’s parliament is expected next month to approve government requests for authorization to proceed with two new proposals to build nuclear reactors in that country. The country’s political leadership based the request on two objectives – achieving energy independence from natural gas supplied by Russia and reducing greenhouse gas emissions.

According to wire service reports, Finance Minister Jyrki Katainen said, “This [proposal] makes Finland 100% self-sufficient in energy. It provides Finnish industry electricity at an affordable cost.”

Electricity consumption in Finland is the highest in Europe, twice that of Germany, due to extreme cold that affects much of the country during the long winter. Finland’s current nuclear reactors provide 2,700 MW of electricity or about one-third of electricity demand. A new reactor being built at Olkiluoto will provide another 1,600 MW. The new reactors will add between 2,500 and 4,300 MW depending on the design chosen through competitive procurement. The designs being offered range in size from 1,000-to-1,700 MW.

The government will grant permits to two consortiums composed of Finnish companies and European partners. A total of 63 firms are reportedly planning to be involved in the projects. Two sites in the northern half of the country are being considered for new reactors to stimulate economic development.

Cost over runs and schedule delays at Olkiluoto-3, which is the country’s fifth reactor and is being built by Areva and Finnish utility TVO, apparently did not deter the government from going ahead with the new reactors. At the plant currently under construction, Areva has set aside 2.3 billion euros for unanticipated costs.

Opposition to the planned construction of two new reactors came from Finnish Green Party and Environmental Minister Anni Sinnemaeki. She objected that the new reactors would be “dangerous” because they are “based on foreign technology.”

Her comment flies in the face of the fact that last year Russian natural gas reportedly cost the country 365 million euros and fueled 75% of the nation’s imported electricity which is two-thirds of total electrical demand. It appears the opposition has a selective view of the “dangers” of imported energy technologies.

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