Saturday, July 21, 2012

A long hot summer ahead for SONGS

Both nuclear reactors will remain offline while Southern California Edison works on steam generator problems
 
Movie poster for Chaplin's
Modern Times
The U.S. Nuclear Regulatory Commission (NRC) said in a press statement and report July 19 faulty computer modeling that inadequately predicted conditions in steam generators at the San Onofre Nuclear Generating Station (SONGS), and manufacturing issues that tied back to Mitsubishi, which supplied the units, contributed to excessive wear of the steam generator tubes.

The NRC team also determined that Southern California Edison provided the NRC with all the information required under existing regulations about proposed design changes to its steam generators prior to replacing them in 2010 and 2011.

In effect the NRC said SCE did not mislead the agency about the designs, manufacturing, and installation changes to the steam generators by the manufacturer.

In an effort to identify the causes, the NRC said SCE brought in a large number of outside industry experts, consultants, and steam generator manufacturers, including Westinghouse and AREVA, to perform thermal-hydraulic and flow induced vibration modeling and analysis.

SCE identified “the most probable causes of the tube-to-tube wear as a combination of higher than predicted thermal/hydraulic conditions and changes in the manufacturing of the Unit 3 steam generators, a conclusion with which the NRC team agreed.”

“The changes in the manufacturing resulted in less contact forces between anti-vibration bars and the tubes. The combination of these causes allowed excessive vibration to occur.” 

Function of the steam generator in a nuclear power station
Image: Japan Nuclear Power Training Center

Anti-nuclear groups unconvinced by NRC report
 
Anti-nuclear groups shifted their stance on the plant somewhat in response saying Southern California Edison is paying out millions in replacement fuel costs and rate payers throughout Los Angeles and San Diego may yet see brownouts or blackouts if an extended heat wave overwhelms the now underpowered grid.

Friends of the Earth (FOE) repeated its accusation that SCE deliberately misled the NRC about the changes to the steam generators including the number of tubes and changes to support structures. The groups has issued several reports about the steam generators based on engineering documents it says it obtained from the plant leaked by utility employees.

FOE said in its report that equipment design and manufacturing changes “created a large risk of tube failure” at SONGS.

Separately, Daniel Hirsch, a member of the faculty at University of California Santa Cruz, who is a long-time critic of the nuclear industry, told the Associated Press July 19 “the agency (NRC) is attempting to exonerate itself from blame” for the problems with the steam generators.

He said the NRC claimed there was no wrong doing by the utility or the regulatory agency despite the fact that the “faulty generators caused unprecedented tube damage (early wear) and raised the risk of a serious accident (release of radiation by tube leaks).”

 
Cut away diagram of a Westinghouse steam generator
The units at SONGS were manufactured by Mitsubishi.
For illustration purposes only.

Mistakes in models led to tube problems
 
In a conference call with nuclear bloggers July 20, Southern California Edison (SCE) spokesperson Jenifer Manfre said repairs on the steam generator for Unit 2 would likely be completed before Unit 3. However, she said there is no timeline for restart of the twin 1,100 MW reactors and she predicted they would be out of service for the rest of the summer.

Manfre said that Southern California Edison agrees with the NRC that faulty computer modeling carried out by Mitsubishi was inadequate.

It raises questions about computer model verification and whether the utility had a responsibility to verify Mitsubishi’s numbers before it gave the go ahead to manufacture the steam generator based on the model results.

The NRC said in its report (pg.51) in the restrained language of its engineering staff, “Because of the limited information provided, the team could not determine the validity of the benchmarking of FIT-III.”

“Overall, the team determined that the validation and verification of the FIT-III code did not present overwhelming evidence that this code has been adequately benchmarked.” 

The shortfall in model verification was that "adequate validation and qualification was performed to show compliance to software requirements and that the code could predict flow-induced vibration." 

What it apparently did not do is prove that the model produced accurate results. It is one thing to say that your model can simulate flow in a steam generator. It is entirely another thing to say with certainty that it simulates the flow with precision relative to the reality of the conditions inside a real operating unit.

What a difference a model makes
 
Another of the challenges faced by SCE at SONGS is that the utility must understand why there are differences in tube wear inside the steam generators installed at Unit 2 versus those at Unit 3. SCE  and several other nuclear engineering firms helping the utility understand the problems believe the causes are related to changes from Unit 2 to Unit 3 in design and in manufacturing of the support structures and the tubes themselves.

The critical piece is the computer model used by Mitsubishi underestimated steam flow and other variables, such as vibration wear caused by tube movement and the adequacy of support structures, by a factor of two-to-three times according to the NRC report.

The NRC calculated steam flowed through a tube at 5.2m/sec. By comparison, the Mitsubishi model indicated a flow in the same tube at 2.5 m/sec. It is a major error.

For its part Mitsubishi has not issued a statement on the NRC report and has not made itself available to the media. None of the wire service coverage, nor from major newspapers, include a statement from the company.

New lamps for old
 
Manfre said that three other suppliers of steam generators are working with SCE to develop a new model. The firms include Areva, B&W, and Westinghouse. The new model will help SCE understand what is really happening inside the steam generators and also to specify cost effective repairs.

The new model will be run with different variables including steam velocity, temperature, amount of moisture in the steam, and power level of the reactor. For instance, a lower power level of the reactor results in slower velocity of steam and wetter steam.

Buried deep in the NRC report (pg 51) is this conclusion.

“Both the NRC and Mitsubishi ATHOS results were reasonably consistent and strongly suggested that high velocities coupled with high void fraction were primary causal factors in the tube fluid-elastic instability and the excessive wear patterns observed in the Unit 3 steam generators.” 

Plugging tubes for wear
 
The threshold for tube wear that requires a tube to be plugged is 35% Manfree said. It is this level of wear with only a few years of operation in equipment expected to last two decades that has precipitated the crisis at SONGS. The risk of tube leaks and releases of radioactivity into the open air is what caused plant operators to shut down Unit 3 last January. Unit 2 was already shut down for maintenance.

Manfre shared statistics on tube plugged so far which is the most effective way to prevent leaks in tubes that have more than 35% wear.

In Unit 2 just six tubes have more that 35% wear, but in Unit 3 SCE found 381 tubes with more than 35% wear. SCE’s engineer plugged these tubes.

In Unit 2 an additional 504 tubes have been plugged, based on wear problems, as a preventative measure. In Unit 3 another 406 tubes have been plugged as a preventative measure.

Statistically speaking, the number of tubes affected is relatively small for both steam generators. Each steam generator has over 9,700 tubes.

Requirements for reactor restart
 
In terms of restarting the reactors, SCE must prove to the NRC that it understands the safety significance of the tube wear problem, what can be, and has been, done to address the issue, and that the reactors can be operated safely. The NRC in its report listed 10 issues that SCE must address.
and which require additional follow-up:

(1) further review of the adequacy of the plant’s post trip/transient procedure;
(2) review of the adequacy of acoustical alarms used to identify loose parts in steam generators;
(3) evaluation of steam generator retainer bar design for vibration impacts;
(4) evaluation of and control of the Unit 3 divider plate repair;
(5) Unit 3 steam generator shipping requirements;
(6) lack of tube bundle support for steam generators during shipment;
(7) evaluation and disposition of accelerometer data used to measure unusual movement of steam generator shipping packages;
(8) review of the process used by the NRC to approve the plant’s steam generator replacement;
(9) control of manufacturing differences; and
(10) adequacy of Mitsubishi Heavy Industries’ computer simulation modeling.

SCE’s formal response to the NRC report
 
In a press statement issued July 19, SC said that safety not schedule would drive the process to restart the reactors.

"We are committed to continuing to work with the NRC on the steam generator issues and will continue to use conservative decision making as we work on repairs and planning for the future," said Senior Vice President and Chief Nuclear Officer Pete Dietrich. "The number one priority is the safety of the public and our employees."

“Additionally, the commission report states that the steam generator design changes were appropriately reviewed in accordance with the 10 CFR 50.59 requirements, which govern design changes between original and replacement steam generators, noting that the changes at SONGS are common in replacement steam generators today."

"The report also stated that, with the exception of the wear found at the tube retainer bar locations, the wear related to support structures is similar to wear found at other replacement steam generators after one cycle of operation.” 

SCE said it continues to work on its response to the commission’s Confirmatory Action Letter, the formal step in the process of restarting Units 2 and 3. The company will not restart the units until the utility and the commission are satisfied it is safe to do so. 
Southern California Edison by the numbers

The 2,150 MW plant is owned by Southern California Edison with a 78% equity stake. San Diego Gas & Electric owns another 20% equity stake. The utility serves customers throughout southern California including the cities of Los Angeles and San Diego. 
 
On an average day SCE provides power to nearly 14 million people in 180 cities in 50,000 square miles of service area, encompassing 11 counties in central, coastal and Southern California.
Commercial industrial and nonprofit customers include 5,000 large businesses and 280,000 small businesses

To deliver that power, it takes:
· 16 utility interconnections
· 4,990 transmission and distribution circuits
· 425 transmission and distribution crews
· More than 15,500 employees with 24 x 7 coverage

Postscript - Who will pay?

I asked SONGS spokesperson Jenifer Manfre about accountability for the costs of the problems with the steam generators, but she declined to address the issue. As a practical matter, I see the following moving pieces. In terms of financial issues for the parent firm, Edison International NYSE:EIX here are some questions.
  • Fuel replacement costs for the duration of the outage of the two reactors
  • Regulatory inspection and repair costs for the steam generators
  • Whether insurance and to what degree it will cover fuel replacement costs or the repairs
  • Financial liability per contract with Mitsubishi said to be capped at $160 million
  • Whether the California pubic service commission will accept and approve a rate case to recover costs not addressed by insurance
  • Lost revenue from future operations if the reactors have to run at a lower power level
There are others, but these items come to mind as a short list. It would be interesting to know how any of the analysts that follow SCE would see these issues. So far none have issued a "sell" recommendation relative to the problems at SONGS. Keep in mind that investors rarely care about the technical issues associated with nuclear energy utilities.

And insider buyers exceeded insider sales for the last quarter and for the last 12 months. The stock is trading at $46.01 or less than $1.00 against its 52 week high: L:$32.64 H:$46.81

In short, stockholders of Edison International do not appear to have been hurt by the extended outage at SONGS or anticipation the utility will be hit with unacceptable costs.

# # #

Thursday, July 19, 2012

Areva and Rosatom cooperate?

This makes sense if put in the context of pending reactor deals

A slice of a pie is better
than no pie at all
Luc Oursel, President and CEO of AREVA, and Sergey Kirienko, Director General of ROSATOM  signed a Memorandum of Understanding July 18 to set up working groups to study ways of strengthening the cooperation between the two groups in the nuclear sector.

This decision is in line with the Franco-Russian intergovernmental declaration of November 18, 2011 calling for closer ties between the companies involved in the nuclear industry in both countries.

The working groups will focus their attention on services to existing nuclear reactors, on the management of spent fuel and on cooperation in manufacturing and supply chain for nuclear island’s components.

Progress with the studies and the analysis of conclusions will be supervised by a steering committee led by Chief Operating Officers of both groups.

Why does this make sense?

On its face the collaboration seems almost implausible because the two firms are rivals for business in multiple venues in the global nuclear markets.
  • Both firms are short listed for two reactors to be built in the Czech Republic at the Temelin site in a project said to be worth $10 billion. Bids are in and the winner will be chosen in 2013.
  • Both firms are competing for a 9 Gwe tender in South Africa which would be worth $36-40 billion. The next round of competitive effort will likely begin in September.
  • Both firms are short listed for a 1,000 MW unit to be build in Jordan as part of an asset swap for uranium deposits.
  • Both firms are committed to building nuclear reactors in China.
  • Both firms are active in India with Russia having completed two 1,000 MW VVERs at Kudankulam in Tamil Nadu and recently sign a deal to provide $3.4 billion in financing the construction of two more at the same site. Areva is expected to sign the deal to build its first EPR in Jaitapur in December.
A scenario or two for the Areva Rostaom agreement 

So why would these firms collaborate? One of the useful ways to look at global nuclear markets is to conduct scenario analyses. These are "what if" thought exercises which assess the pros-and-cons of various plausible market developments.

Scenarios are especially useful when market data isn't complete or there are moving factors that create high levels of uncertainty.  Scenarios are not used to make decisions or draw conclusions about next steps in business planning, but they can create awareness of "what if" possibilities.

If I were Westinghouse, I'd want to conduct a scenario on whether the Areva Rosatom agreement is an effort to carve up the Temelin, South African, or Jordanian deals. After all, for Areva and Rosatom, a piece of a pie is better than no pie at all.

Temelin -
For instance, in the case of Temelin, The Czech Republic has to balance the fact they are inside Russia's geographic and political sphere of influence with the fact they want energy independence from its energy supplies including nuclear fuel. This would suggest a tilt towards Areva or Westinghouse.

On the other hand, an Areva Rosatom cooperative effort might result in the Czech Republic buying its reactors from Rosatom and its fuel from Areva. There are a number of ways to slice the pie, but one that is unlikely is for Temelin to wind up with one Areva EPR and one Rosatom VVER.  CEZ, the Czech state owned utility that will operate the plants, will want both reactors to be the same types from the same vendor.

South Africa - In the case of South Africa, a 9 GWe tender leaves a lot of room for multiple reactors from multiple vendors.  For instance, that amount of power could be split in the form of three 1600 MW EPRs and four 1200 MW VVERs. The wild card in South Africa is that Areva might team up with a state owned nuclear firm from China, for financing, which would match the Russian capability to self-finance. For their part, the South African's are counting on the vendors to finance the deals.


Jordan - As for Jordan, where there is only one reactor in play, it is going to be a winner take all deal for the reactor, but fuel and services might be bid out separately. This is what the UAE is doing with its four South Korean 1400 MW PWRs.  The fuel contracts are offered separately from the components. 

Jordan is hoping to finance the deal with an asset swap for uranium deposits it says are rich enough to pay for the reactor and fuel or at least enough in terms of debt to equity to get the ball rolling.

Saudi Arabia - Lurking in the future is the giant possibility that Saudi Arabia may build as many as 16 nuclear reactors from multiple vendors. It could turn out to be the biggest nuclear deal on the planet and in history.

This is all highly speculative thinking so don't bet the ranch or ever a $20 on the outcome.

Russia Signs $10 Billion Nuclear Reactor Contract For Belarus

19 Jul (NucNet): Russia and Belarus have signed the construction contract for two new Russian reactors (1,200 MW VVERs) in Belarus at an estimated total cost of 10 billion US dollars (about 8 billion euro), state nuclear energy corporation Rosatom has said in a statement.

The twin 1200-megawatt, AES-2006 Russian reactors are to be constructed at Astraviec (Ostrovets in Russian) in the Hrodna (Grodno) region of Belarus.   

Rosatom said about half the $10 billion investment would go to local industries and suppliers in Belarus.  Preliminary construction work at the site began in April 2012. The first reactor is due to be commissioned in November 2018 and the second in July 2020.  The turnkey construction contract was signed July 19 in Minsk.

The AES-2006 reactor, a descendant of the Soviet VVER reactors, is a 1,200 MW Generation III+ nuclear power plant developed by Atomenergoproekt of Saint Petersburg.  

The AES-2006 is being used for the twin-unit Leningrad II nuclear plant, where construction is under way, and the twin-unit Baltiysk (Kaliningrad) nuclear plant, where construction began early this year.  

India signs $3.4 billion nuclear finance agreement with Russia 

India and Russia on July 17 signed an $3.4 billion loan agreement for Russia to provide funding to build the third and fourth nuclear reactors at Kundankulam in Tamil Nadu. The loan will be repaid over a 14 year period based on sales of electricity from the two reactors.  It covers half the cost of the 1,000 MW VVER reactors which is reported to be about $7 billion.

Based on the agreement, 85% of the components, supplies, and services will be provided by Russian firms. The agreement was signed by India External Affairs Minister SM Krishna and Russian Deputy Prime Minister Dmitry Rogozin.

# # #

Code inside code; Cyber attacks against Iran

The New York Times reveals who did it

cyber_security2In a massive article New York Times reporter David E. Sanger reveals for the first time the details about sophisticated cyberattacks on computer systems that run Iran’s uranium enrichment program.

The attacks, which have been authorized by two U.S. presidents, Bush and Obama, temporarily disabled up to 5,000 uranium centrifuges by sabotaging the software inside the Siemens programmable logic controllers that set the spin rate of the machines.

The cyberattack had two phases. The first program maps networks for infiltration. The second follows the maps to do the dirty work. Specifically, finding the location of PLCs on computer networks in the uranium enrichment plant was essential.

In short, the centrifuges, which operate at over 7,000 rpm, spun themselves to pieces when malware programmed erratic changes in their performance.

cybersecurityAccording to the New York Times article, the cyber software, known as the Stuxnet work, was developed jointly by the U.S. government working through multiple agencies and their counterparts in Israel.

It isn’t clear how successful the cyberattacks have been as tactics. Also, the latest rounds of sanctions against Iran, which include severe reductions on oil sales to Europe, have not resulted in progress at the negotiation table between western powers and Iran.

Read the full details exclusively at ANS Nuclear Café online now.

# # #

Wednesday, July 18, 2012

UAE grants license to build two reactors

Four reactors are planned to supply electricity for manufacturing, general use, and water desalinization

Shovel_break_groundReuters reports that the United Arab Emirates will be the first gulf state to start construction of a commercial nuclear power plant in the region. 

The UAE has committed itself to this energy path to avoid using increasingly scarce natural gas supplies for electricity generation, water desalinization, and industrial development. The UAE has deposits of bauxite which it wants to convert into a finished aluminum goods industry for exports. Smelters and fabrication centers will be significant users of power.

The UAE Federal Authority for Nuclear Regulation (FANR) said in a statement that the license had been granted and allows ENEC to construct two South Korean APR1400 advanced pressurized water reactors.

Emirates Nuclear Energy Corporation (ENEC) has been granted a license to construct two nuclear reactor units at its Barakah site located on the western shore of the Persian gulf in Abu Dhabi. (Map) (Place name defined)

Emirates Nuclear Logo

The license does not allow ENEC to operate the units. ENEC must apply to FANR for a separate operating license.  This process is similar to the U.S. Nuclear Regulatory Commission Part 50 process which requires a construction license to build the reactor and an operating license to run it to make electricity.

FANR director-general William Travers said a comprehensive review of the construction permit application was carried out over 18 months by more than 200 technical experts. 

The review covered topics including the characteristics of the proposed site, the design of the facility, safety analysis, management systems and quality assurance for construction, radiation safety measures, physical protection and safeguards.  The UAE's nuclear regulator said this project would avoid mistakes made in Japan.

FANR logoFANR said the review builds upon an additional assessment by ENEC of lessons learned from the March 2011 accident at Japan’s Fukushima-Daiichi nuclear power station.

That assessment, which was requested and reviewed by FANR as an integral part of the application, demonstrated the robustness of ENEC’s proposed plant. It also resulted in a number of design enhancements for added safety.

"We have tried to learn as many lessons as we could from Fukushima, and we asked ENEC to address the issue in a report, which they did," said William Travers, director general of the Federal Authority of Nuclear Regulation (FANR).

Travers is a former senior official of the U.S. Nuclear Regulatory Commission (NRC) hired by FANR to bring that agency's expertise and best practices to the UAE. ( See PPT Slides: Travers at US NRC on UAE nuclear safety program March 2009 )

Earlier this week ENEC received approval from the environmental regulator for construction of the two units.  ENEC submitted its construction license application for Barakah-1 and -2 on 27 December 2010.  FANR has published the Barakah safety evaluation report on its website.

The project involves four new South Korean PWR type nuclear reactors at 1,400 MW each. The estimated cost, including transmission and distribution infrastructure, is $30 billion. The first reactor is expected to enter revenue service by 2017 with three others to follow at about one a year. The deal was signed in December 2009. Financing will be a combination of export credits from South Korea, bonds offered to institutional investors, and cash from the UAE.

UAE SKorea nuclear deal
Image: Gulf News  Caption: President His Highness Shaikh Khalifa Bin Zayed Al Nahyan with South Korean President Lee Myung-bak in Abu Dhabi on 12/27/09 A South Korean consortium won a deal to build four nuclear reactors for the UAE, beating US and French rivals to one of the Middle East's biggest energy contracts. ____________________________________________________________________

Permanent inspection effort

According to the English language UAE newspaper The National, FANR plans to have an inspection program and a permanent office at Barakah, which is slocated 300km west of the capital.

About 5,000 workers from more than 10 nations already live at the site, where signs are posted in English, Arabic and Korean.

A massive concrete batch plant, capable of making 600 cubic yards of concrete an hour, has been used for the construction of two villages housing the workers and will now be put to use to make the foundations of the reactors.

“We will have the first concrete pouring,” said Jun-Yeon Byun the chief nuclear officer of Korea Electric Power Corporation (Kepco), the lead company in the contract. “I’m very happy.”

Workforce development

UAE reactor operators (Enec)Nuclear Engineering International Magazine reported in May that a joint UAE/South Korean program graduated its first class of nuclear reactor operators.  A similar report appeared in World Nuclear News (see WNN image right).

The program, which is being delivered by ENEC’s training partner Westinghouse Electric Company, is part of comprehensive training to prepare the students to attain Senior Reactor Operator (SRO) Licensure/Certification.

“Highly knowledgeable, safety-conscious and skilled reactor operators are essential to the safe and reliable operation of the UAE’s first nuclear energy facility”, said ENEC’s Deputy Chief Nuclear Officer Ahmed Al Mazrouei.

WNN reported ENEC expects to require more than 2000 workers by 2020, with a target of 60% being Emiratis. The company currently employs more than 400 people, 60% of whom are from the UAE. More than 170 Emirati students are currently sponsored under Enec's scholarship programs.

More reactors soon plus fuel to run them

ENEC is expected to submit license applications for two more reactors by the end of 2012. Also, fuel contracts for the reactors are expected to be completed this year. Australia and Russia are reported to be on the short list of countries for this part of the supply chain.

The UAE signed an 1-2-3 agreement under the U.S. Atomic Energy Act with the United States in early 2009. It gives up its right to enrich uranium domestically and to reprocess spent fuel. This agreement is considered to be a "gold standard" for nonproliferation and helps promote the concept of international fuel banks.

Note on Water desalinization in UAE

The UAE will use reverse osmosis plants located near employment and population centers. Power from the nuclear reactors will support their operation.

water desalinization tech

Image: City University of New York

# # #

Duke Progress merger punts plans for six new reactors

It will be a a long time before the combined utility needs to build any new reactors or replace any units in its fleet

This is my updated coverage from Fuel Cycle Week V11:N480 July 12, 2012, published by International Nuclear Associates, Washington, DC. 

Dry ice, which is the sold form of
CO2, evaporates at room temperature
Uranium producers should not expect initial core orders from post-merger Duke Energy for any of the six 1,150 MW reactors planned by pre-merger Duke (NYSE:DUK) and Progress Energy, for at least the next decade—if ever.

It appears the nuclear renaissance is evaporating in the new utility's service area like a chunk of dry ice on a hot summer day.

Just prior to the closing of the merger, Progress delayed the start of two new reactors at a greenfield site in Levy County, Florida, by three years to 2025. The cost of the units has spiraled into the stratosphere, now coming in at $19-24 billion which includes an “all in” cost of new transmission and distribution infrastructure.

Consumer groups and the Public Counsel of the Florida Public Service Commission are convinced the units will never be built and oppose any new rate increases under the state’s CWIP law to pay for licensing work.

Meanwhile, Duke is unlikely within the next decade or longer, or ever, to build two new reactors at Progress’s Harris site in North Carolina, stating that electricity demand in its market is far down from pre-recession levels. The future of the Lee plant is also a question since Duke has stated it is interested buying a 500-MW equity share in Scana’s new AP1000s in South Carolina.

Worse for Duke is that it is now the majority owner of the troubled Crystal River reactor, with its broken containment structure and expected repair costs of well over $1 billion. Those costs will now be borne by Duke’s shareholders.

Johnson Out, Rogers In

This is a big merger. The new Duke Energy has a market capitalization of $49 billion and total assets of over $100 billion. It serves 7.1 million customers in North & South Carolina, Florida, Indiana, Kentucky, and Ohio. Total operating revenues in 2011 for the two firms were $23.4 billion.

On July 2, the day the merger closed, the stock closed at $69/share. On Wednesday July 18 trading opened at $66/share against a 52-week range of $50.61-$77.13.

Duke and Progress closed on the deal July 2 in which Progress, including its debt, became a wholly owned subsidiary of Duke Energy. Duke CEO Jim Rogers is CEO of the combined entity, a switch from the merger plan which saw Progress CEO Bill Johnson leading the new utility.

Less than a day after the deal closed on July 3, Johnson was voted out by the new board of directors, his fall softened with a $44 million golden parachute that includes $10 million in cash. Three senior Progress executives quit in protest over the ouster, including the company’s chief financial officer, Mark Mulhern. The sudden CEO swap gave Progress shareholders and the regulatory commissions in North and South Carolina a whiskey tango foxtrot moment.

The Wall Street Journal reported July 10 that Standard & Poor’s put the company on its CreditWatch list with negative implications, citing “puzzlement over the executive change.”

On Monday Rogers testified before N.C. regulators that the board of the combined company found Johnson’s management style autocratic and didn’t think it “was appropriate or transferrable to leadership of the combined company.”

The board was also worried about disappointing earnings at Progress, he said, and the poor performance of the company nuclear plants, including Crystal River.

While some ratepayer groups and investors have called on the North Carolina Utilities Commission to roll back its approval of the merger, there is little precedent for it to do so.  The Commission continues to call executives from both companies to testify on exactly what they knew and when about the executive changes and the condition of the Crystal River reactor.

The Nuclear Side

On an aggregate level the merger creates the nation’s third largest nuclear fleet of operating reactors (see sidebar, above). Prior to the merger, Duke had seven reactors and Progress five. According to Nuclear Regulatory Commission numbers, those 12 reactors total 11.3 GWe in operating generating capacity, or about 19% of the new utility’s 58.2 GWe power total. Put another way, Duke Energy now has more nuclear generating capacity than Sweden.

 Duke does not own 100% of all the reactors in its fleet. Based on ownership, Duke controls 9.5 GWe of nuclear generating capacity.

According to Duke spokesperson Tom Shiel, the firm owns 91.87% of the troubled Crystal River plant.

The new Duke Energy has plans to build a total of six Westinghouse AP1000 reactors at three sites on the books. However, the firm is in no rush to start much less complete any of them.

The current recession, which began officially in 2008 and seems to have no bottom, crushed economic growth in the utility’s service areas, especially manufacturing, and flattened demand for electricity.

At the same time, domestic production of natural gas is priced at historic lows, less than $3/Mbtu, and is expected to remain at that level for a long time.

It is unlikely there will be construction starts for any of the new reactors until the utility sees long term gas prices north of $6 to $8/Mbtu. On the other hand, a case in favor of moving ahead may include the fact that both North and South Carolina are regulated markets with CWIP laws in place.

Replacement of aging coal plants facing expensive pollution upgrades could also be an incentive to build the reactors. However, the utility may have alternatives if the price of gas stays low enough over the long term. Another choice, after 2020, may be swapping out coal fired boilers with SMRs in the range of 100-300 MW each.

South Carolina, which is smack in the middle of Duke’s service area, has become a hotbed of development work on small modular reactors. Scana, which is building its own twin AP1000s, has signed agreements in principle to take power into its grid from any SMR that gets licensed and built at the federal Savannah River Site, where several vendors are starting work.

Crack Up at Crystal River

Damaged concrete at Crystal River
After the Duke-Progress merger was announced last January, there was speculation that the repairs to the damaged concrete containment structure at Progress’s Crystal River reactor in Florida, which are expected to cost over $1 billion, could be a deal breaker.

That didn’t happen, but investors have questioned whether repairs to the plant are worth the price tag. Also, conflicting media reports indicate it is unclear how much and when Duke learned about the repair costs at Crystal River and the true scope of the problem. The reactor has been shut down since 2009.

An anti-nuclear group, NC Warn, issued a press release on June 14 in which it reports, from anonymous sources, that Duke’s board of directors ordered an independent engineering study of the situation at Crystal River.

According to NC Warn, the study, which is said to have involved a team of several dozen experts, came to conclusions that cast the case for repairs in negative light. Jim Warren, a spokesman for the group, told FCW he believes the source is a group of investors worried about the effect of the repair costs on the finances of the new combined firm. Warren said that one concerns could be that Duke knew more than it disclosed about the repair costs but went ahead with the merger anyway.

Duke spokesman Tom Shiel told FCW “we are certainly evaluating the plant just as we would any other asset.” He dismissed allegations by NC Warn about Duke’s pre-merger review.

Subsequently, the Tampa Bay Times reported the Duke board reviewed an independent assessment of the situation at Crystal River on June 25. The report has not been made public, but may come out in hearings called by the North Carolina Utility Commission about the merger's switch in CEOs.

Progress has claimed the repairs, and a 20-year license extension due in 2016, provide a better return on investment, and no debt, compared to building new reactors. Progress maintains in a rate deal it inked with the Florida Public Service Commission earlier this year that it can repair Crystal River and have it back in service by 2014. An engineering study being conducted by Progress expected to spell out repair steps and costs is due by the end of 2012.

Another deadline is looming for the Crystal River plant and that is its NRC license expires in 2016. If the utility cannot repair the containment structure by then, it is unlikely the regulator will approve a license extension.

J.R. Kelly, the Public Counsel for the Florida Public Service Commission, told the Tampa Bay Times July 5 that he thinks Progress should decommission Crystal River and build a natural gas power plant in its place. Kelly has also been outspoken that Progress should cancel its plans to build the Levy County reactors due to their escalating costs.

By the Numbers: The New Duke

The Duke-Progress merger creates a fleet of 12 reactors, making the new Duke the third largest in the nation behind Exelon and Entergy.

The combined total generating capacity of the units, according to the Nuclear Regulatory Commission, is 11.3 GWe. Duke’s ownership shares of the reactors is 9.5 GWe.

Significantly, except for Crystal River, all of the reactors have completed their NRC license renewals.
The earliest plant to be retired is Robinson 3 in 2030 and the latest is the Harris reactors in 2046.

Four of the reactors have licenses that expire after 2040.

It is going to be a long time before Duke needs to replace any units in its current fleet.

Six Reactors Waiting for Customers

Levy The plan by Progress to build two new AP1000s on Florida’s west coast now sees operations starting in 2025 at a cost of $19-24 billion. This is a three-year delay and a cost increase of $2 billion from previous estimates filed with the Florida Public Service Commission. With these changes, it is clear Progress is in no hurry to finish the licensing process. Yet, Levy County is the only one of the three new build projects to have an EPC contractor in place.

Harris  Plans by Progress to build two new AP1000s at the Harris site in North Carolina indicate completion dates of 2026. Progress said earlier this year that it does not see a need for more than 25% of the 2,200 MW of power that the units would provide, given vastly decreased electricity demand. These units are the least likely to ever be built by the new Duke Energy utility.

Lee  Prior to the merger, Duke Energy said it would complete two new AP1000s sometime after 2020 at the William States Lee III site in South Carolina. It is unclear where this project stands. Duke has held talks with Scana about buying a 500 MW equity share of the two new AP1000s being built at the V.C. Summer station in South Carolina, which could further postpone plans for Lee.

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Tuesday, July 17, 2012

Areva still can’t finish the Finnish reactor

Disputes with the customer are at heart of delays

delayedFrench State-owned nuclear giant Areva, which has more than its share of troubles these days, is in hot water again in Finland – again.

The first and flagship nuclear construction project in Europe of the 1600 MW EPR reactor at Finnish utility TVO’s site at Olkiluoto isn’t likely to start until 2014. It was originally scheduled to begin revenue service in 2009.

TVO, which stands for Teollisuuden Voima, has a new dispute with Areva and its consortium partner Siemens over getting ready for the start up process. TVO told news wires that there has been slower than expected progress with installation of automated systems. The statement wasn’t more specific than that, but could refer to the startup and shakedown trials of the reactor’s digital instrument and control systems. 

For its part, Areva responded with a public statement that the utility isn’t ready for start up citing problems with staffing and management organization as critical issues.

So on one hand TVO is saying Areva has problems completing the construction work. On the other hand, Areva claims TVO hasn’t moved fast enough for operational readiness, which can be a long process. Training operators and getting ready to run the plant needs to be started way before fuel is loaded.

In a nod to expected arbitration expected to settle cost issues, Areva said TVO is the plant operator and has the responsibility to address operational readiness.

The public statements by Areva are the latest in a string of public and contentious disputes with TVO. Areva has also had difficulties with the Finnish nuclear safety agency over construction progress reviews. Some of the issues have emerged as a result of claims by Areva the agency is not up to speed to handle a project of this size and complexity.

However, Areva has also had problems with subcontractors unfamiliar with nuclear quality assurance requirements which drew the attention of the regulator.

Changing of the guard at Stuk

Jukka LaaksonenWhile Areva has had its share of regulatory issues with the Finnish nuclear safety agency, it also has had to deal with changes in leadership there.

Last February former Finnish nuclear safety chief Jukka Laaksonen (right) was hired by Rosatom, the Russian nuclear energy company.

Laaksonen, who retired in early 2012 as Director General of Finland’s Radiation and Nuclear Safety Authority (STUK), in April 2012 took the post of deputy director of Rosatom Overseas in Moscow.

In his new post Laaksonen is responsible for the technical side of nuclear exports. His task will be to make sure that international and national safety standards are met in the projects.

According to English language Finnish media reports, Laaksonen was approached in June 2011 about the job. He is quoted as saying he does not plan to market Russian nuclear technology to Finland.

Laaksonen worked for STUK from 1974 until his retirement. The new Director General, Tero Varjoranta, took over in February 2012.  So far Areva hasn’t had any of the kinds of public disputes with the safety agency it experienced with his predecessor.

Cost of delays in dollars and lost sales

mediation-arbitration-agreement-settlement-bindingEarlier this year an international arbitration court ordered TVO to pay Areva $157 million related to previous delays in the project. The project could wind up costing as much as $6 billion, or more, which makes the judgment more of an annoyance than a penalty.

The repeated delays in completing the 1,600 MW European Pressurized Reactor (EPR) has been a source of stress for Areva. Its ability to sell the high powered unit to other customers has been affected by the problems with the Finnish project.

Industry analysts believe that Areva lost the bid to South Korea to build four new reactors for the United Arab Emirates, in part, due to delays and cost issues in Finland. That lost sale may also have been one of the factors that caued then CEO Anne Lauvergeon to lose her job last year.

Areva is building two EPRs in China where the work is proceeding without the kinds of issues that afflict the Finnish project. It has bid a smaller 1,000 MW version of the EPR for a project in Jordan.

Areva is also competing for projects in the Czech Republic and South Africa promoting the full size EPR for these sites. The new delays at the Finnish site could influence contract awards in pending reactor deals. Areva’s high profile protests over fault about the delays in Finland might be seen by some as defensive relative to these other bids.

A challenge for Areva is that while it is seeking market share abroad, the new Socialist government may be yanking the rug out from under it at home. French Prime Minister Jean-Marc Ayrault said July 3 that the government is committed to reducing its reliance in nuclear energy to generate electricity. He said the government would invest in renewable energy technologies and reduce the share of nuclear energy in the production of electricity from 75% to 50%.

Areva is under pressure from another part of the French government. In June Andre-Claude Lacoste, the head of the Autorite de Surete Nucleaire said that competition in global nuclear markets was forcing bidders to offer unrealistically low prices. He said the pricing trends are “unsustainable” for vendors. He warned Areva not to get caught up in “dumping” or compromising safety to close a deal.

U.S. prospects dimmed

Prospects in the U.S. have dimmed with none of the four projects where the EPR is the referenced design expected to break ground this decade. Low natural gas prices in the U.S. also provide strong competitive pressures in deregulated states.

In Missouri, where Ameren was once pursuing construction of a new reactor using the 1600 MW EPR design, that utility has now opted, in principle, for a 225 MW small modular reactor from Westinghouse.

A huge contract, in excess of $ 1 billion, to provide engineering and construction services for TVA’s Bellefonte completion project in Alabama has been pushed back at least three years due to unrelated delays in completing the Watts Bar II project.

In Spring 2012 TVA reorganized the Watts Bar II project, located in Tennessee. It revised the cost estimate by adding $2.3 billion to it, and will now complete the reactor in 2015. TVA’s board has set a policy that work cannot start in earnest on completing the construction of Bellefonte until fuel is loaded in Watts Bar II.

Lithuania to hold vote on Ignalina

Lithuania’s government will hold a non-binding vote in October on whether to proceed with construction of a new nuclear power station at Ignalina. The government hopes the referendum will bring out support for the project on the grounds of energy security and jobs.

However, anti-nuclear groups see it as an opportunity to kill the project especially if the outcome of parliamentary elections held the same day elect candidates opposed to it. Polls show the public split down the middle on support for a new reactor.

Center left parties, which oppose the reactor, are shown in pre-election polls to be in the lead for now. Their supported favor a “green party” type energy agenda focused on so-called renewable energy technologies including solar and wind.

Critics of this policy accuse the greens of wanting to turn back the clock on greater industrialization and finished goods exports.

Also, they point out that renewables will need Russian natural gas to maintain base load power and keep transmission lines humming when the wind isn’t blowing and at night. The Russians, they point out, have used natural gas supply as an instrument of foreign policy to keep former Iron Curtain countries in line with its interests.

In June Parliament voted by a narrow margin to approve construction of one GE-Hitachi 1,350 MW ABWR reactor. The design is well understood globally and is unlikely to suffer from first of a kind engineering or construction delays.

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Sunday, July 15, 2012

Mid-Year Report to Readers

This blog is now in its fifth year of operation
blogging
At the halfway point in 2012, according to Google Analytics, the blog has has 161,349 page views for the period 01/01/12-06/30/12.

For the same period, there have been 71,059 visits of which 47,177 were unique visitors.

Top locations for visitors
Countries
US         41,494
UK          3,763
Canada      3,722
India       2,433
Australia   1,481
Germany     1,153
France        854


States

CA    4,876
NY    2,572
MA    2,385
TX    1,889
WA    1,843
PA    1,822
VA    1,794
FL    1,789
OH    1,696
MD    1,457


Top Blog Posts: January to June 2012


These numbers are recorded by Google Analytics after a post rolls off the top position or landing page.  Blog readership runs between 300-500 visits a day and a post may stay up on the top position from three-to-five days. 

2,938    Debunking some nuclear nonsense takes on fantastic claims that the spent fuel pool at Fukushima reactor 4 will cause a world wide catastrophe.

One of the favorite rhetorical strategies of people who seem to want a disaster to occur is to total up the mass of material at a nuclear site and then make the assumption that all of it will blow up through some mysterious and unspecified mechanism spewing its contents far and wide. This is a great stuff for a B- movie on the SciFi channel, like an imaginative idea for a script of Mega-Shark meets Atomic Octopus, but it doesn't match reality.
http://djysrv.blogspot.com/2012/04/argh-debunking-some-nuclear-nonsense.html

1,678    Nuclear start ups are unusual until you realize that the developers don't intend to actually build anything, just license the designs. Two MIT PhD. candidates have started one.
http://djysrv.blogspot.com/2012/04/nuclear-start-ups-have-stretch-goals.html

1,253    A letter from the NRC to South California Edison lays out the conditions for restarting two 1,100 MW nuclear reactors at the San Onofre Nuclear Generating Station (SONGS) that have been shut down since January because of problems with steam generators.
http://djysrv.blogspot.com/2012/04/nrc-sets-condiitons-for-san-onofree.html

1,161    The development of turbines running with super critical carbon dioxide offers new opportunities for efficiency to developers of small modular reactors.
http://djysrv.blogspot.com/2012/05/supercritical-co2-turbine-being.html

948    Developers of small modular reactors have to prove to investors they can actually build one.
http://djysrv.blogspot.com/2012/02/first-they-have-to-prove-they-can-build.html

A note on comments


It has long been the practice of this blog not to accept anonymous comments.  This practice will continue without change.

All comments are moderated for the usual reasons and especially to remove spam. Civil responses will be approved usually within 24 hours.  

I realize some people just want to offer a correction. In the case of corrections, once it is verified, I'll just do it. If you submitted anonymously, there is no way I can acknowledge your effort. I appreciate the update just the same.

I'm happy to acknowledge corrections when there's enough information in the comment to know who I'm talking to. You can identify yourself in the body of the comment along with organizational affiliation if any.

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I’m ambivalent about using Facebook on a routine basis because of its privacy practices and the limited reach of posts that appear there.

How to contact me


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