[NukeNet] Economist nuclear power overview

[Diane Farsetta]

http://www.economist.com/science/displaystory.cfm?story_id=9762843

Nuclear power: Atomic renaissance
Sep 6th 2007
 From The Economist print edition
America's nuclear industry is about to embark on its biggest  
expansion in more than a generation. This will influence energy  
policy in the rest of the world

OVER the next few months America's Nuclear Regulatory Commission  
(NRC) expects to receive 12 applications to build new nuclear-power  
reactors at seven different sites. It is preparing to see plans for  
another 15 at 11 more locations next year. These will be the first  
full applications to build new nuclear plants in America for 30  
years. If they are all successful, the number of reactors in the  
country will increase by roughly a third. The output of nuclear  
electricity would grow even more sharply—the new reactors would be  
more powerful than older ones. The new enthusiasm for building  
reactors means America's long-awaited “nuclear renaissance” is about  
to become reality.

Whether it is a leap forwards or a step backwards remains to be seen.  
Since the 1970s, far from being “too cheap to meter”—as it proponents  
once blithely claimed—nuclear power has proved too expensive to  
matter. The problem is finance: nuclear plants cost a lot to build  
but are relatively cheap to run, unlike gas-fired ones, for which the  
reverse is true. So to be profitable they must be built quickly, to  
minimise the period when no revenue is coming in and interest  
payments are piling up on construction loans. Yet America's previous  
generation of nuclear plants was plagued by safety scares, design  
revisions and time-consuming regulatory procedures, which resulted in  
ruinously protracted construction.

America's most recent nuclear plant, at Watts Bar in Tennessee,  
started operations in 1996. But it took 23 years to complete at a  
cost of $6.9 billion; a second reactor at the site has been under  
construction, on and off, since 1973. Another plant, at Shoreham in  
New York, was completed and tested, but never allowed to start  
commercial operations because of local opposition. By the time it was  
decommissioned, in 1994—21 years after construction had begun—the  
costs had exploded from $70m to $6 billion. The local utility was  
able to pass most of this bill on to its customers. Not all energy  
firms have been so lucky: in 1988 Public Service Company of New  
Hampshire became the first American utility to go bust since the  
Depression, thanks largely to the fallout from a much-delayed nuclear  
project.

Even when they were switched on, nuclear-power stations did not  
fulfil their promise. They were supposed to run almost constantly,  
but proved much less reliable. In the early 1970s, for example, the  
average nuclear plant produced power for under half the time. Since  
most utilities had planned to run them flat out to generate enough  
revenue to repay their debts, this poor performance led to further  
financial troubles. And, as anti-nuclear activists complain, all this  
happened despite the government's generous subsidies to help cover  
the costs of developing new designs and building prototypes.

As for safety...

What is worse, nuclear power has a spotty safety record. There have  
never been any catastrophic releases of radiation in Western  
countries. But one did occur in 1986 at Chernobyl, in what was then  
the Soviet Union and is now Ukraine. America came perilously close to  
such a disaster in 1979, when a reactor at Three Mile Island in  
Pennsylvania overheated and began to melt down. There have been  
lesser safety scares and scandals in many countries, including  
Britain, Germany and Sweden. In August an earthquake resulted in  
several small leaks of radioactive material from a nuclear reactor in  
Japan.

The next generation of nuclear plants is said to be very different.  
Firms which make them, such as America's General Electric and  
Westinghouse, and foreign manufacturers like France's AREVA, insist  
that such episodes will soon be a thing of the past. Their latest  
designs, they maintain, are simpler and safer than existing nuclear  
plants. That should make it easier to obtain operating permits, allow  
them to be built faster and be cheaper to run—and so much less risky  
financially. Meanwhile, contractors are said to be getting better at  
building them, the NRC better at regulating them and utilities better  
at running them. Although nuclear power's boosters welcome a  
smorgasbord of new subsidies that Congress has approved to nourish  
the industry, they say that in the long run even this will not be  
necessary because the industry will be able to move forward under its  
own nuclear-generated steam.
Consolidating reactors

America's utilities have certainly warmed to their existing nuclear- 
power plants now that they are running them more efficiently. In the  
1970s, says Colette Lewiner, of Capgemini, a consultancy, even small  
municipally owned firms ordered nuclear reactors, imagining they  
would be no more complicated to operate than their existing power  
stations, except in so far as workers would need uranium to shovel  
into the furnace instead of coal. But they found that they had  
neither the expertise to maintain their new investments, nor the  
scale to absorb all the extra regulatory costs, nor the clout to  
secure fuel and parts at competitive prices. Many ended up putting  
their nuclear plants up for sale.

That allowed bigger firms to acquire reactors on the cheap, and thus  
to achieve economies of scale and to capitalise on their experience.  
These nuclear specialists have been able to speed up the refuelling  
process, keep shutdowns for maintenance to a minimum and so keep the  
reactors going more of the time. Last year the average nuclear  
reactor in America was in use 90% of the time. Better still,  
utilities have found ways to improve the non-nuclear parts of the  
power station, such as the steam turbines. These so-called “uprates”  
have increased America's nuclear capacity by almost 5,000MW since  
1977, the equivalent of about five new nuclear reactors, according to  
the Nuclear Energy Institute, an industry group. At the same time,  
the NRC has agreed to extend the working life of about half of  
America's nuclear plants for an extra 20 years.

All this has turned nuclear-power plants into virtual mints—as long  
as the bill for construction has been paid down or written off. In  
most of America, the wholesale power price is closely linked to the  
price of natural gas, since gas-fired plants tend to provide the  
extra power required at times of peak demand. So the price of power  
has risen along with that of gas over the past few years, whereas the  
operating costs of nuclear plants have remained relatively stable.  
According to the Energy Information Administration, a government  
agency, the average wholesale power price in 2005 was 5 cents per  
kilowatt-hour (kWh); the Nuclear Energy Institute, an industry group,  
reckons that the average operating cost of America's nuclear plants  
was 1.7 cents per kWh that year. So their margins were almost 200%.

No wonder that utilities are rushing to the NRC with their plans for  
new reactors. But to get any of them off the ground they must not  
only persuade the NRC of the safety of their designs, but also  
convince potential creditors that there will be no repeat of the  
financial meltdowns of the 1970s and 1980s. They point to three  
reasons for optimism: changing conditions in the energy business, a  
streamlining of the NRC's process for obtaining permits and an  
overhaul of construction techniques.

Until recently coal-fired plants seemed to be safer investments. But  
nowadays most utilities expect—and in some cases are calling for— 
Congress to limit emissions of greenhouse gases in the near future to  
temper climate change. Coal-fired plants, which have a working life  
of 40 years or more, spew out globe-warming pollution, whereas  
nuclear ones produce almost no greenhouse gases at all. So coal is  
now subject to a massive “regulatory risk” of its own. Utilities are  
piling into green-generation technologies, such as wind turbines and  
solar panels. But for a constant source of clean power, they have few  
choices other than nuclear.

Meanwhile, to avoid the fiascos of the past the NRC has simplified  
its procedures. It used to require utilities to obtain two different  
licences, the first to build a nuclear plant and after that a second  
licence to start it up. Both applications involved lengthy reviews,  
which culminated in interminable public hearings. New reactors, like  
the one at Shoreham, could be finished at great expense and yet never  
secure an operating licence. So the NRC is combining the two stages:  
utilities can now apply for a single “combined construction and  
operating licence”. Construction need not start—and for most bits of  
the plant is not allowed to—until the licence is issued.

To speed things up even more, the NRC is allowing firms selling  
nuclear reactors to get designs cleared in advance. That way, when a  
utility applies to build a reactor of an approved design, the NRC  
will only need to review the modifications that are unique to its  
site. Westinghouse has already got its AP-1000 model cleared; the NRC  
is in the process of certifying GE's latest design, called the ESBWR,  
and AREVA is about to submit an application for its new offering, the  
EPR.

By the same token, utilities can now ask the NRC to approve a  
location as suitable for a nuclear-power station before they go to  
the trouble and expense of applying for a combined licence. Four  
firms have asked for these “early site permits” and two have already  
received them. Another short cut involves submitting the  
environmental part of a combined licence before the part that deals  
with the design. UniStar, a joint venture between America's  
Constellation and Électricité de France (EDF), filed that sort of  
paperwork in July for a new reactor in Maryland.

The NRC has also made a point of asking utilities about their nuclear  
plans before any applications arrive. This is so it can be sure it  
will have enough staff to handle them—which is how it knows how many  
new plants are in the works. It is hiring about 200 new staff every  
year, and since most of the utilities contemplating nuclear plants  
are in the South, has set up a field office in Georgia to co-ordinate  
with them directly. It is even planning to suggest to Congress  
possible amendments to the relevant laws to reduce the hassle and  
uncertainty of licensing even more.

The process will still be time-consuming: the NRC reckons it will  
need two and a half years to review each application and a further  
year to conduct hearings on its conclusions. Certification of new  
reactor designs might take as long as four years: AREVA says its  
application for the EPR runs to 17,000 pages and fills a small  
bookcase. Nonetheless, the NRC aims to issue its first new licences  
at some point in 2011.

Obstreperous local authorities could still put a spanner in the  
works. It was opposition from county and state officials, for  
example, that finally did in the Shoreham plant. Although they have  
no explicit authority to block a new reactor, local officials can  
withhold permits to use the water from a river for cooling, for  
example, or refuse to co-operate on emergency planning. But utilities  
are hoping to avoid such pitfalls by locating their new reactors only  
in welcoming jurisdictions—preferably next door to existing ones.  
Locals in such places know that expanding existing nuclear facilities  
will bring more jobs and produce more tax revenue. Moreover, they  
have grown accustomed to having nuclear reactors nearby and do not  
find the idea particularly frightening. As Dale Klein, chairman of  
the NRC, puts it, the staff and management of nuclear plants, and  
local residents, all go to church together.

Fast builders

Utilities are also confident that they can build new reactors more  
quickly than before. Many have already placed orders for the parts  
that take a long time to build. They have also brought in partners  
that have completed nuclear projects on time and on budget in other  
countries. Westinghouse, for example, points to the exemplary record  
of its parent company, Toshiba, in Japan. Similarly, GE has teamed up  
with Hitachi, another respected Japanese nuclear contractor. AREVA,  
meanwhile, looks to the series of successful plants it has built in  
conjunction with EDF in France. All three vendors say they plan to  
save time and money by using as many identical parts as possible for  
the different nuclear plants they build in America—unlike the bespoke  
designs of the past. All this should reduce the time required for  
construction to four years, they say, which would allow the first new  
reactors to enter service in 2015 or 2016.

But bankers are still sceptical. They are worried that when the new  
designs and the NRC's new procedures are put to the test, hidden  
flaws will emerge. After all, the first of AREVA's EPR designs is  
under construction in Finland and is two years behind schedule and  
dramatically over budget. To avoid such nasty surprises, NRG Energy,  
a power-generation company that is applying to build two new reactors  
in Texas, has opted for one of GE's older and already-proven designs,  
even though GE insists that its ESBWR will be cheaper to build and to  
run. Other utilities are planning to build nuclear plants in the  
regulated markets of the South, in the hope that the regulators will  
allow them to pass any cost over-runs on to their customers.

Even so, says David Crane, NRG's boss, banks are simply not prepared  
to lend money to build nuclear plants in America without some extra  
surety. The Energy Policy Act, which Congress approved in 2005, is  
supposed to provide that. It offers four different types of subsidies  
for new reactors. First, it grants up to $2 billion in insurance  
against regulatory delays and lawsuits to the first six reactors to  
receive licences and start construction. Second, it extends an older  
law limiting a utility's liability to $10 billion in the event of a  
nuclear accident. Third, it provides a tax credit of 1.8 cents per  
kWh for the first 6,000MW generated by new plants. Fourth, and most  
importantly, it offers guarantees for an indeterminate amount of  
loans to fund new nuclear reactors and other types of power plant  
using “innovative” technology.

The scope of these loan guarantees is the subject of great  
controversy. Some politicians fear that the costs of the programme  
might balloon; others complain that the Department of Energy, which  
will administer it, is too stingy. Meanwhile, some financial experts  
argue that the rules, as drafted, would not allow issuing banks to  
repackage and sell on the loans in question, making them less  
attractive. There is also some debate about what proportion of a  
nuclear plant's debt should be covered: the act says up to 80% of the  
costs of construction, but that might be sufficient to cover the full  
amount borrowed, leaving banks with no risk at all. Until all this is  
settled, utility bosses insist, new nuclear plants will not get built.
Clearing up afterwards

The fate of America's nuclear waste, which the government has vowed  
to sequester for a million years, is another unresolved issue. In  
theory, the Department of Energy is in charge of looking after it  
all. It requires utilities to set aside a tenth of a cent for each  
kilowatt-hour of nuclear power they generate to help defray the costs  
of transporting nuclear waste to a safe repository and storing it  
there permanently. The only hitch is that no such repository yet exists.

Most countries with nuclear power have determined that the safest way  
to store their waste is underground, deep in the bedrock in air- and  
watertight containers. But no one has actually built such a facility.  
America has got as far as selecting a site for one, at Yucca  
Mountain, a ridge in the middle of a former nuclear-testing ground in  
Nevada. The Department of Energy is planning to submit an application  
to the NRC next year to build a repository there. The NRC, in turn,  
thinks the application will take about three years to review.  
Officials say the facility will be open for business in 2017.

But Harry Reid, a senator from Nevada, has vowed to derail the  
scheme. As it is, Congress has been cutting funding for the Yucca  
Mountain project, which was first proposed in 1978 and has since been  
the subject of several lawsuits. Now that Mr Reid has become Senate  
majority leader the odds of the repository ever getting built have  
diminished.

Meanwhile, nuclear waste continues to pile up in ponds and containers  
at nuclear plants around the country. The NRC monitors these and  
claims that they are safe for the foreseeable future. But Mr Klein,  
its chairman, tactfully hints that it would be prudent for the  
government to find a more permanent solution, especially since it is  
encouraging a dramatic expansion of nuclear power.

Nonetheless, Mr Klein believes that the expansion of nuclear energy  
is now in motion and is unlikely to be slowed down by concerns about  
what to do with the waste. The only thing that could stop a nuclear  
renaissance now, he suggests, is a serious accident at an existing  
plant. Unfortunately, it would not be the first.