Thursday, March 3, 2011

U.S. new reactor plans snap, crackle, & pop

Progress noted in Texas and Virginia

rice-krispiesThe nuclear renaissance in the U.S. had some tough going in 2010. The low point of the year was Constellation's decision to walk away from the Calvert Cliffs III reactor project over a dispute with the federal government about loan guarantees.

The project may be turning around and there is more good news to report in Texas and Virginia. That said anti-nuclear groups are as active as ever engaging the U.S. Nuclear Regulatory Commission (NRC) in a seemingly endless stream of contentions over licensing issues.

NRG snaps across environmental finish line

NRG Energy (NYSE:NRG) got a boost this week with an announcement from the NRC that it had found no environmental problems that would prevent it from issuing a license for two new 1,350 MW ABWR reactors at the South Texas Project (STP).

The NRC said in publishing of the final EIS is only part of the overall South Texas Project licensing review. The agency staff continues to compile its final safety evaluation report (SER), which will include recommendations from the NRC’s Advisory Committee on Reactor Safeguards, an independent group of nuclear safety experts. The NRC’s final licensing decision will be based on the FEIS and SER findings, along with a ruling from the five-member Commission that heads the agency.

Reuters reports that NRG spokesman David Knox said, "it is a very important and positive step in the permitting process and one that shows the strength of the application."

raising_capitalHowever, Knox went a bit further perhaps sowing some confusion about the status of the utility's application for a federal loan guarantee. He said, ""We are very pleased that the loan guarantee application for STP 3 and 4 has passed an important milestone in that it is now in the interagency approval process."

This does not mean NRG has what is called a "conditional commitment" from the Department of Energy (DOE). What it does mean is that DOE and the Office of Management & Budget are now ready to review DOE's due diligence on the loan application and determining the credit risk premium, which is the fee NRG would have to pay for the loan guarantee.

If the fee is too high, which was the case in Maryland with Calvert Cliffs III, then NRG and its investors might be faced with unacceptable costs. NRG has lined up Tokyo Electric Power (TEPCO) for $125 million contingent on getting the conditional loan guarantee. Also, the Japanese Export Bank is offering credits for the construction project because it involves two Japanese firms – Toshiba and Hitachi.

Making the case for a merchant

The challenge for NRG is to make the case that as a merchant operator, in a deregulated electricity market, it can line up other investors and customers for the plant's electricity.

Reuters reported that last month, NRG Chairman David Crane told analysts that negotiating long-term power purchase agreements remains "a challenge" while the loan guarantee application is pending. CPS Energy in San Antonio reduced its investment profile from 40% of the project to 8% and the City of Austin, TX, pulled out completely. Both city municipal utilities will be customers.

Typically, investors are much more interested in showing up once the utility developing the reactor has the NRC license and the loan guarantee.

The problem for the Obama administration is that having driven off Constellation over the credit risk premium, said to have been 11-12% of $ 8 billion, or $960 million, now faces a similar dilemma with another merchant project.

Credit risk or diplomatic incident?

eiffel-tower Even worse for the White House, the need for EDF to regroup with the Calvert Cliffs Project has undoubtedly annoyed the French government. EDF, which is to build the facility, is a state-owned enterprise. Also, Areva, which is slated to provide the 1,600 MW EPR reactor, is also owned by the French government.

Taken together it follows that OMB didn't just send Constellation packing, it may have also created an international diplomatic incident.

That could happen again if the green eye shaded staff in the Old Executive Office building decide the credit risk premium for NRG's loan guarantee on STP needs to be higher than the utility is willing to pay. Now NRG's investors, which include several heavyweight chunks of the Japanese government, are going to be more than a little annoyed.

The question for the Obama administration, and Congress, which wrote the law setting up the credit risk process, is how many friendly international allies does the U.S. want to annoy before it goes back to the drawing board? New legislation to change the federal funding role for nuclear reactors might be preferable to chasing away investors who are willing to share the risks.

While the diplomatic issues might not cut much mustard with OMB, hopefully someone at the White House is thinking about them. France and Japan have deep pockets and have already shown they want to invest in the U.S. nuclear renaissance. It would be a mistake to chase them off.

Comanche Peak contentions set aside

comanche peakThe NRC's Atomic Safety & Licensing Board has dismissed contentions by opponents who raised nearly two dozen safety and environmental objections to Luminant's plans to build two 1,700 Mitsubishi APWR reactors at the Comanche Peak site.

The panel had previously dismissed 18 of 19 contentions and has now disposed of the last which was related to the potential for a severe radiological accident. Anti-nuclear groups called the ruling "hair splitting," and vowed to continue efforts to get solar and wind projects built in place of the twin reactors.

Victor Dricks, a spokesman for the NRC, told the Ft. Worth Star Telegram that a hearing and decision on a license for the Comanche Peak new build are expected in 2013.

Dominion sticks to its guns in Virginia

stick to your guns Dominion Resources, which wants to build a third reactor at its North Anna site in Virginia, says it will continue to develop the project despite one investor withdrawing from it. Old Dominion Electric Coop, which owns 11.6% of the two operating reactors, said investment in the third does not fit its long term business plans.

Dominion told wire services it expects to get a license from the NRC for the third reactor in 2013. Anti-nuclear groups are trying to stop the project saying wind and solar projects should be built instead of the reactor. Dominion's CEO Thomas Farrell said in a statement if the reactor isn't built, it will have to go with coal or gas to meet Virginia's growing energy needs.

Dominion at one time had selected the GE-Hitachi ESBWR reactor as the reference design for its license application. However, in 2010 the utility changed its mind and is now working with Japanese giant Mitsubishi on is APWR reactor. That reactor is now undergoing design certification at the NRC. The NRC review of the APWR is expected to be complete in mid-2012 according to a progress chart on the agency's web site.

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Is USEC a ward of the state?

There’s a whole lot of hand holding going on in the Forrestal building and Valentine’s day was so last February

ACP logoThe Department of Energy, not satisfied with its own due diligence on the pending loan guarantee for USEC’s $3 billion uranium enrichment plant, has hired an outside consultant to probe the firm’s application for weaknesses. The idea appears to be to find and plug any holes in it or DOE’s review.

Then, the theory goes, DOE can take a package to OMB and set the credit risk premium for the conditional commitment for the loan guarantee. This is the fee USEC would pay for the loan guarantee, possibly 2.5% of $2 billion or $50 million, which would be added to the cost of the plant.

An obscure announcement tells a big story

FCW_logo_smallAndrea Jennetta, publisher of Fuel Cycle Week, points out in her “buzz column” for March 3rd, that the newsletter’s staff, in preparing this week’s issue, found an obscure contracting notice about the extra oversight work, justifying a $250,000 sole source agreement with the consultants.

Riding on the award of the conditional commitment is additional investment funding for USEC from Toshiba and B&W. Get it and USEC’s got the cash. Blow it and the investors will not have “happy to see you faces” at the next board meeting.

From a national security perspective, DOE wants USEC to succeed else the Russians will gain more market share selling nuclear fuel to the nation’s 104 reactors. They’re in the U.S. market already. The only question is how much more?

And there is plenty of political pressure on DOE to make the a loan guarantee decision for USEC or justify why it can’t go down that road .

Rob Portman, the new Republican senator from Ohio, got himself on the Senate Energy & Natural Resources Committee which has policy and oversight roles for DOE. He toured USEC last week with his Democratic counterpart Sherrod Brown and then both issued statements of support for the loan guarantee.

DOE has two rabbits in its hat

magicianThere are two rabbits that can be pulled out of the loan guarantee hat.

Rabbit #1: USEC gets the loan guarantee in late 2011. The firm builds the ACF, but it could come in over budget and have teething problems scaling up the technology to full production. Still, it is success for USEC, DOE, and the State of Ohio.

Rabbit #2: DOE sends USEC back to the drawing board with more R&D $$s to get its technology to work right and likely also gets access to DOE's depleted uranium inventory to keep cash flow alive. The gaseous diffusion plant stays open. Congressional oversight hearings always a painful exercise, ensue.

So far DOE has not made a decision on letting USEC re-enrich the UF6 inventory. Separately, DOE made an announcement this week to sell surplus uranium, 450 metric tonnes a quarter, to pay for cleanup of hazardous and radioactive contamination at the Piketon, OH, site by an independent contractor.

Does DOE’s apparent over achievement on behalf of USEC make the firm a "ward of the state?" Read the full story exclusively at the blog of Fuel Cycle Week online now.

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What future for nuclear energy in Eastern Europe?

Delays seen for new reactor projects in the Czech Republic and Romania

delayedThe $25 billion five-reactor new build by state-owned Czech utility CEZ has been pushed back by another five years, according to English language media reports in Prague.

In Bucharest, Romania, wire service reports indicate that the start of work on a $5.5 billion two- reactor project could be delayed past 2017, but that first the government must find new investors willing to take on funding a 49-percent share of the project.

Temelin delayed by another five years

Last October, the Czech government said in an official announcement that detailed bid documents with technical specifications for up to five new reactors at two sites would not be released as planned in December 2010. On February 21, 2011, the government said that the release of technical bid documents would be postponed to the end of this year.

Lower electricity demand in the Czech Republic--and Germany's decision to keep its 17 nuclear reactors operating instead of closing them down--are the key reasons for a delay to as late as 2025 for completion at Temelin and one other site.

Romania suffers setbacks at Cernavoda

The start of construction of two planned new reactors (Cernavoda-3 & -4) at Romania's Black Sea site of Cernavoda could be delayed by at least six years. The reason is because three major European firms, slated to invest in building them, pulled out after Czech utility CEZ sold its nine percent stake in the project in December. Germany's RWE, Spain's Iberrdrola, and French GDF Suez all withdrew from the project in January 2011.

The three firms said in a joint statement that economic and market uncertainties "related to the current economic crisis are not reconcilable with the capital requirements of a new nuclear project."

Read the full story of the slide backward in eastern Europe’s nuclear renaissance exclusively at ANS Nuclear Cafe online now.

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Wednesday, March 2, 2011

Canadian Institute: 2nd Nuclear Symposium

Blog_150x150The Canadian Institute’s 2nd Nuclear Symposium will provide you with the essential information you need to secure a bigger stake in the future of the Canadian and global nuclear industry. Hear from an outstanding panel of experts on the policies, projects and practices that will shape the road ahead.

Highlights from this must-attend conference include:

· Key regulatory implications of the civilian nuclear treaty between Canada and India

· Maximizing the potential of the uranium supply chain in Asian markets

· How small nuclear reactors will impact the Canadian nuclear landscape

· ROI comparison between investments in nuclear and natural gas power

· Details from the largest nuclear waste management and dismantling project in the U.S.

… and much more (see Agenda)

Don’t miss this great opportunity to hear from and network with leading industry experts, including:

Organization of CANDU Industries (OCI), Atomic Energy of Canada Limited, Torys LLP, Aecon Nuclear, EnergySolutions Inc., CIBC World Markets, Bruce Power, Ontario Power Generation and more

Register today and reserve your spot by calling 1-877-927-7936 or online at www.canadianinstitute.com/nuclear

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Monday, February 28, 2011

Three more states weigh in for nuclear energy

Legislative action taking place in Missouri, Indiana, and Iowa

bid cover sheet The promise of carbon emission free electricity may be realized in three states that previously had few prospects for pursuing it.

On Feb 23 a Missouri House committee endorsed legislation that would allow utilities to charge customers for a portion of the costs of building a new nuclear power station.

On Feb 21 an Indiana Senate committee gave a green light to encourage utilities to build new nuclear reactors and to recover some of the costs while the plant is being built.

In Iowa a Senate committee heard testimony from a utility executive that a small modular reactor design might make sense for the next nuclear plant in the state.

These actions come as the Obama Administration introduced a Department of Energy budget for 2012 that calls for an additional $36 billion in federal loan guarantees. At the same time, the Nuclear Energy Institute released public survey results showing 71% of people in the U.S. support use of nuclear energy in the nation’s energy portfolio.

Missouri shows the way

Missouri show meBy a vote of 21-2 the Missouri House Utilities Committee reported out a bill that will let power companies investing in a new reactor recover some of the costs of building it while construction is in progress.

If enacted into law, the measure could significantly reduce the financing costs of a second reactor at Ameren’s Callaway site in central Missouri. A 1976 bars such practices.

Last November with the support of Missouri Governor Jay Nixon, a group of utilities including Ameren and a half dozen others announced they would seek an early site permit for the second reactor. While consumer groups, and large industrial electricity users, oppose the bill, it appears the utilities have taken to heart their legislative loss on a similar measure in 2009.

William Baxter, Ameren CEO, told wire services there would be no request for an increase in rates for a new reactor until the early site permit was granted by the NRC and the Public Service Commission had conducted a review of the costs of the new power station.

Indiana seeks energy to grow

indianaDespite strong opposition from environmental groups, senior citizens, and rate payers, an Indiana Senate Committee voted 6-2 to approve a legislative measure that would allow utilities building a new nuclear reactor to recover the costs while it was under construction.

State Sen. Beverly Gard said during a heated and long hearing that people need to be realistic about energy.

“You want power,” she said, “It is not going to fall out of the sky for free.”

There are no nuclear power plants in the state. Construction on one in southern Indian was abandoned in the 1980s after huge cost overruns. The Indiana Energy Association told the news media none of its members have plans to build a new reactor in the near future.

Sen. Brandt Hershman, one of the bill’s sponsors, said it is needed to make the state attractive for nuclear energy. And Stan Pinegar, president of the Indian Energy Association, agreed that without changes to the law, it would be very difficult to built a new reactor in the state.

The bill also has measures that benefit coal plants which derive their fuel from the state’s abundant reserves. These measures were criticized by environmental groups such as the Sierra Club who said they would stifle investment in alternative energy projects like wind and solar.

Iowa may pursue small modular reactors

mightymouse William Fehrman, president of Des Moines based MidAmerican Energy, told an Iowa legislative committee in January that construction of a small modular reactor (SMRs), e.g., one with less than 300 MW, might be an answer to the question of how to meet the state’s future energy needs. He said the utility is “taking a serious look at them.”

He cited two advantages. The first is the lower cost. At $4,000/Kw a 125 MW plant would cost $600 million compared to the capital outlays required for a 1,000 MW plant. Also, he said that the SMRs, when built in modular fashion, can go off the grid one-at-a-time without impacting state-wide electricity supply.

In meantime, the Iowa legislature is also considering a measure that would allow a utility building a new nuclear reactor to recover costs while it is under construction. Iowa is currently studying the impact on rates of such a change in the law. The two-year study will be completed in Fall 2011.

Iowa has one nuclear reactor. It is the Duane Arnold 580 MW BWR, completed in 1975, and located near Cedar Rapids, Iowa.

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