Wednesday, February 22, 2012

SMR developers seek investors and customers

First, they have to prove they can build one

This is my updated coverage from Fuel Cycle Week, V11:N460 for 02/16/12 published by International Nuclear Associates, Washington, DC. This is the second of two articles. 

Bike Race Image: Library of Congress
Developers of small modular reactors (SMRs) of both the light water and fast neutron flavors are in a race to get to market. The reason is a hypothetical SMR producing 100 MW electrical, costing $4,000/Kw to build, is not a 'bet the company investment' making it attractive for a mid-size utility.

Further, the revenue from the first one can pay for the next unit, and so on, which is why they are marketed as "modules." Investors in utilities like the idea of step-wise capital spending at a conservative scale relative to market valuation and ramping up a commitment to nuclear energy in stages rather than 1,000 MW at a time.

Key milestones for success by SMR vendors are securing investors to complete their technology, jumping through the NRC's licensing hoops, and booking that all important first customer. SMR developers see themselves primarily as vendors, and not as nuclear reactor utility operators. However, some may wind up in a hybrid role to get their first sale on the books.

What works for refrigerators does not work for reactors

In the old days of American manufacturing process, the first-of-a-kind unit was called a "prototype." As is the case in any product development cycle, the vendor has to prove that the product will work as claimed to meet the needs of the customer. This means building one, or several units, and getting the mechanical gremlins worked out before committing to factory production.

What works for refrigerators does not work for reactors. Even with a much lower cost than their 1,000 MW cousins, SMRs are still too expensive to build one simply to demonstrate that the technology works. However, some of the SMR developers are planning on building all the components of their SMRs in factor settings so that the entire reactor can be shipped via truck, train, or barge to the customer site.

In the case of SMRs, one option is building a first-of-a-kind unit at a customer site with a cost share agreement. Having a slice of the $452 million in DOE money recently announced will help, but only one or two firms will get a seat at the table. For the rest, other arrangements are needed to drive a path to success.

Prototypes at Savannah River Site?

This is where the Savannah River Site (SRS), a Department of Energy site, comes in. Tom Sanders, Associate Laboratory Director for SRS, told FCW he is developing the capability at SRS to host first-of-a-kind commercial development of SMRs of all types for power generation and process heat applications. He welcomes both LWR and fast reactor developers.

Tom Sanders, Ph.D.
Associate Lab Director, SRS
Sanders touts the advantages of SRS for SMRs and some of the firms working on them are listening. For instance, Sanders told FWW, SRS has access to many types of nuclear fuel include spent fuel. It has good infrastructure, potential customers for electric power and process heat, and most importantly, a supportive community.

Sanders, a former president of the American Nuclear Society, headed up its Special Committee on Small Nuclear Reactors in 2009-2011. His vision for SRS as an enterprise, and for SMRs, is that "it is an opportunity to rebuild American exports."

Additionally, he says that without export of nuclear technology, the U.S. will lose negotiation leverage on nonproliferation issues.

Is anyone  from the SMR world listening?

There is interest in SRS. Denver based Hyperion Power, which is developing a 25 MW fast reactor that will uses a metallic uranium fuel and will be cooled by a liquid lead bismuth mix, has established a memorandum of understanding with SRS. Forrest Rudin, VP for Business Operations, says that with the design 90% complete the firm is looking for new investors, a customer, and a place to build one.

The Hyperion design is based on technology developed at Los Alamos National Laboratory. Hyperion has been taking it to commercial scale through a licensing agreement and funding a cooperative R&D agreement with DOE.

Hyperion CEO Robert Prince declined, for competitive reasons, to provide any more details of the firm's thoughts about building its first unit at SRS or anywhere else.

GE-Hitachi (GEH) is also tentatively interested in the SRS site. Michael Tetuan, a spokesman for the firm's effort to build a 300 MW fast reactor called PRISM, told FCW the SRS site "is attractive because of its infrastructure and trained workforce."

He added that the PRISM reactor is designed to burn plutonium which Tetuan says "makes it a candidate for the Department of Energy's plutonium disposition program."
DOE is currently building a MOX fuel plant in nearby Aiken, SC, to process 34 tonnes of weapons grade plutonium and turn it into the equivalent of 1700 PWR MOX fuel assemblies.

However, according to NNSA, the DOE organization responsible for the MOX plant, plutonium disposition will eventually involve "hundreds of tonnes" of the material. NNSA says on its website that "denying access to plutonium and HEU is the best way to prevent nuclear proliferation among rogue states and terrorist organizations."

GEH has also proposed the PRISM reactor for similar use by the U.K. Nuclear Decommissioning Authority (NDA) which has a similar mission of plutonium disposition and for the same reasons as NNSA. It's possible PRISM's prospects are better on the other side of the pond.

U.K. climate change chief science adviser David MacKay called the GE PRISM reactor "a very elegant idea." A spokesman for the NDA is quoted as saying that the earlier report in the Guardian that the agency had rejected the PRISM proposal "is completely without foundation."

Light water reactor developer NuScale has a toe in the water in terms of interest about SRS, but has made no commitments. Bruce Landry, VP for Marketing, told FCW his firm is talking to SRS.

"We are providing guidance on what is required to develop an SMR project on the site."

General Atomics challenges TerraPower's design

GA plans to deliver the RPV for its SMR by truck
Not to be left out of the picture, General Atomics, based in San Diego, is developing a 240 MW fast reactor called the EM2. Senior VP for Energy & Advanced Concept John Parmentola told FCW that his firm has a tangential link to SRS. It is setting up a Center for Transformational Nuclear Technology at the University of South Carolina with the objective of producing engineers who can take its EM2 plant design to commercial success.

Parmentola says the EM2 SMR works along the same lines as the 1000 MW TerraPower's Traveling Wave reactor, "except that there is no shuffling of fuel elements."  Also, The General Atomics design is one-fourth the size of the TerraPower 1000 MW concept.

He says the innovative fast reactor design uses 12% enriched uranium to start the fission process with depleted uranium or spent fuel at the core. The reactor breeds outward creating PU-239 over a 30-year period. Neutron reflectors and a proprietary geometry complete the design. Additional challenges include new materials for fuel cladding and remote handling tools for managing the core for fuel change out.

The objective, Parmentola says, is to produce an SMR that can produce electricity at $0.06/Kw. He added that General Atomics will likely have to build eight units for customers before the costs get down to the point where power is produced at the target rate. And he says that his firm isn't alone in that scenario. Everyone, even the LWR guys, will have issues with ramping up manufacturing of reactor components, getting the fuel right, as well as issues surround materials, licensing, and public acceptance.

Parmentola says some of the LWR competitors will have initial costs of electricity generated of $0.10/Kw, but he also notes that everyone in the SMR business will have start-up costs higher than natural gas. Getting on par with natural gas on price and speeding up construction in terms of time to market are the two competitive advantages of SMRs Parmentola says his firm has as its targets for success with customers. The faster an SMR reactor design can get into revenue service, the more likely a customer will order one.

Whether he would build the first unit at SRS, or anywhere else, isn't nearly so important as getting the cost curve down to the right price for electricity by the eighth. What Parmentola and his competitors might really be looking is a way to get the cost curve down to giving gas a run for its money by the second or third unit.

DOE's 2013 budget flatlines support for new nuclear tech

Its' a dark time for expectations of new funding for nuclear reactor technology. The Obama administration's budget request to Congress for DOE's nuclear energy programs for fiscal year 2013 reflects it.

Here are a few highlights of the Obama administration's financial plans for nuclear energy R&D. The 2012 figure is the amount appropriated by Congress for the current fiscal year that ends next October and the 2013 figure is the amount requested by the President.
  • SMR licensing support is cut by $2 million from $67 million in 2012 to $65 million in 2013. 
  • Advanced reactor R&D and development is slashed by $41 million from $115 million in 2012 to $74 million in 2013. 
  • Fuel cycle R&D is nicked $9 million down from $186 million in 2012 to $175 million in 2013. Of this amount $60 million is allocated to implement recommendations of the Blue Ribbon Commission.
So what does it mean for SMRs? In a word, not much has changed from 2012. It will be an uphill battle for SMR developers of all types. A presidential budget request is just that - a request. It is not a decision.

It is a presidential election year with the entire House and one-third of the Senate up for a vote. Also, many incumbents are mindful of the fact that public approval ratings for congress in general are in the single digits making a "throw the bums out" spirit stronger than usual.

The turmoil surrounding decisions about federal funding will be more intense than usual and that means nothing should be taken for granted - especially the numbers in the President's budget. Competition for nuclear R&D dollars is way down the priority list for a deficit minded Congress that yet seeks to prove to voters they matter for something.

How get more juice for SMRs?

Smart SMR developers seeking federal support for their segment of the nuclear industry will likely take a page from the playbook of defense contractors by showing members of the key appropriations subcommittees in the House and Senate how jobs and tax base in their districts and states will grow from investments in SMR R&D.

They might also show how the value and jobs linked to supply chains for units costing $400-to-800 million add to the economic mix.

In the House Rep. Mike Simpson (R-Idaho) sits on the House Appropriations Committee, which could support advocacy for the NGNP and SMRs in general, but no representatives from South Carolina also serve on the committee.

That said Idaho National Laboratory Director John Grossenbacher has noted that the first unit of the NGNP is not likely to be built in Idaho, but rather at a customer site possibly under a cost share agreement with the government. No site has been selected and it is too early in the development cycle to speculate on one.

An industry consortium that includes some petrochemical firms interested in process heat applications, called the NGNP Alliance was pivotal last year in boosting federal funding for the NGNP line item.

There's a better opportunity for funding support for SMRs at SRS on the Senate side where South Carolina's Lindsey Graham, a Republican, sits on the Senate Appropriations subcommittee on Energy & Water. His role there could be pivotal in supporting SRS lab director Tom Sanders' vision for the site and the likelihood prototype or full scale SMRs would be built there.

As to whether he'll use his influence depends on the answer to the question he undoubted posed to SRS management which is, "who else besides you thinks this is a good idea?"
Right now there definitely are a few hands in the air. Will be oars in the water as well? That remains to be seen.

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6 comments:

Mr._Ed said...

I believe that you present a reasonable overview of the general thinking associated with SMRs today. However, much of the received wisdom appears to be merely optimistic arguments aimed at capturing scarce R&D dollars and not necessarily based on a true belief that manufacturing/construction jobs and capturing economic markets are a readily achievable reality.
One argument that you note: “The reason is a hypothetical SMR producing 100 MW electrical, costing $4,000/kW to build, is not a 'bet the company investment making it attractive for a mid-size utility” holds only if you’re looking at the size of the capital investment; however, it is not necessarily a cost-effective investment as compared to other means of electrical power generation today viz. the Combined Cycle Gas Turbine because there is no definitive economic consensus that there is. Proposals for the construction of a domestic SMR would be difficult to justify before a public utility regulator whose focus is on what’s best deal for the rate payer today.
The manufacture of the overall hardware and its performance of the commercial SMR may be simple to envision and would seem to be a relatively simple scaled down version of a mature LWR from an executive point of view. However, this may come from a misconception based on years naval reactor operating experience using compact reactors. Key differences in the design, behavior, and experience of commercial SMR nuclear fuel will not be similar its counterpart due to requirements unique to military operations and just making smaller versions of LWR fuel are too simplistic based on the interaction of heat generation an coolant flow. As every nuclear fuel vendor knows the design of its fuel is an extremely complex undertaking fraught with issues overcome through years of experience. The ability of the fuel to operate without failure is key to the cost effectiveness of the operation of any reactor.
Hopefully, both political and utility decision makers will take a more sober view and question many of the optimistic assumptions being presented to them on as you say “… how jobs and tax base in their districts and states will grow from investments in SMR R&D.”

Paul Wick said...

Excellent comment: "however, it is not necessarily a cost-effective investment as compared to other means of electrical power generation today viz. the Combined Cycle Gas Turbine..."

Natural gas is today selling at a loss in the U.S. There is a huge glut on the market due to the "gold rush fever" engendered in the shale gas segment. This glut may help with creating the illusion that there is a huge "100 year" supply of gas. an illusion being "pumped out" by the PR departments of Chesapeake Energy, Exxon et al. But an illusion it nevertheless appears to be according to the research presented in the links below, authored by geologists and engineers. And so, if the supply is not one hundred, but only ten years, as these authors tend to think, what impact will this have on gas prices when the present supply glut "vaporizes"? Gas prices will obviously skyrocket. Obama's State of the Union message touted the "100 year" gas supply myth. It seems likely he is misinformed, not lying. Are utility decision-makers similarly misinformed when they bet on gas prices remaining low into the future? Or are their decision-making processes biased against even considering the long-term consequences of investing in gas turbine infrastructure? Aside from the insanity of burning a finite resource to generate electricity, when essentially infinite nuclear resources can do it better, it is really stupid to yoke the ratepayers to the long term consequences of soaring gas, and therefore, electricity, prices.


Links exposing Natural Gas "100 Year" Supply Fraud:

http://oilprice.com/Energy/Natural-Gas/End-of-the-Boom-The-True-State-of-the-Shale-Gas-Industry.html

http://www.slate.com/articles/health_and_science/future_tense/2011/12/is_there_really_100_years_worth_of_natural_gas_beneath_the_united_states_.html

http://www.smartplanet.com/blog/energy-futurist/the-questionable-economics-of-shale-gas/243?tag=content;siu-container

http://www.smartplanet.com/blog/energy-futurist/everything-you-know-about-shale-gas-is-wrong/341

Engineer-Poet said...

I think the hype of natural gas is rational disinformation on the part of the coal industry.  If coal plants are idled because of new NG plants, the inevitable rise in NG prices in a few years lets them say "Oops!  Good thing we still have all this coal, isn't it?"  If coal plants are idled because of nuclear reactors, they're done for at least 50 years if not permanently.

Mr._Ed said...

While I agree that the significant reduction in estimated US natural gas reserves last year could affect the prospects for generating electric power cost effectively in the long run, it doesn’t preclude making cost effective investments using limited resources, such as natural gas, in the near term. Utilities have been making these type of decisions based on their due diligence and will continue to be motivated by competition in the marketplace in an environment subject to regulated returns while trying to strike a balance between satisfying their customers and their investors. Also, we know from experience that price increases in limited resources stimulate further exploration and the development of technology to more efficiently extract that resource. I would think that it’s too early to write natural gas off based solely on the confusion created by an apparent mishandling of data between government agencies last year. Certainly this type of bungling is another example of why caution and reasoned judgment is needed in the energy sector especially when striking out in new directions such as development of the SMR.

Restating my original remark, my hope is that political and utility decision makers will take a more sober view and question many of the optimistic assumptions being presented to them concerning the development of SMRs. My comments are not meant to put a damper on the development of nuclear power but to caution the direction of that development given a severely limited Federal budget for R&D. The SMR has been pursued in an arguably similar form with the South African pebble bed modular reactor and it failed to complete construction. China has built an operating prototype but it has not gone to market.

Engineer-Poet said...

I'm not sure what you mean by "striking out in new directions" with SMRs.  SMRs are essentially steps back toward the pilot-scale and mobile reactors which have been in service for 60 years or more.  The S-PRISM is a smaller step from the EBR-II than previous model of GW-scale reactors.

The PBMR is a very different beast and it's not too surprising that it failed against such well-established competitors.

Mr._Ed said...

Please see my initial post concerning remarks associated with my statement: "However, this may come from a misconception based on years naval reactor operating experience using compact reactors."

Regards, Ed