You are here

USA

AP1000 reactor projects in the US, the UK and India

Nuclear Monitor Issue: 
#845
8654
08/06/2017
Jim Green ‒ Nuclear Monitor editor
Article

It remains unclear whether the four partially-built Westinghouse AP1000 reactors in the US will be completed ‒ and it will probably remain unclear for some months. Westinghouse CEO Jose Gutierrez said the company is working with the owners of the Vogtle and V.C. Summer nuclear plants ‒ Southern Co. in Georgia, and SCANA Corp. in South Carolina ‒ "to find a long-term solution to complete those reactors".1 Gutierrez said he hopes more reactors get built in the US and that "we hope they do a better job than we did".1

Southern Co. CEO Thomas Fanning said a decision may not be made on the Vogtle project in Georgia until August.2 A decision on the Summer project in South Carolina might be made by the end of June3 ‒ but none of the deadlines associated with the crisis are being met and it's unlikely the fate of the Summer project will be decided this month.

Work is proceeding on the Vogtle and Summer projects, albeit without Westinghouse funding, under interim agreements. The latest agreement to continue work on the Vogtle project expired on June 5 (an agreement extending to June 3 was extended for 48 hours). Presumably there will soon be another announcement extending the interim agreement ‒ or possibly a more significant, decisive announcement on the future of the project. The interim agreement to keep the South Carolina project moving ahead ends on June 26.

Anya Litvak summarized some recent developments in the Pittsburgh Post-Gazette on June 6:4

"On May 16, Westinghouse reached a tentative agreement with Southern Co., the parent of the utility that commissioned the Plant Vogtle AP1000 projects in Georgia. The deal called for Southern to take over responsibility for completing the construction. The two parties were supposed to finalize a path forward by Sunday, but they were still negotiating Monday.

"Parallel discussions are ongoing between Westinghouse and Scana Co., which owns the two AP1000 units under construction at V.C. Summer in South Carolina.

"It has been rumored for months that Fluor Corp. and Bechtel Corp., two of the country's largest engineering and construction firms, might be preparing bids to take over the projects in Georgia and South Carolina. Fluor was brought in by Westinghouse more than a year ago to straighten things out after the nuclear firm's ill-fated takeover of the nuclear construction firm that was previously in charge of that effort, Stone & Webster. Bechtel, according to the recently filed financial statements, has also been on the job since at least January, as evidenced by two "staff augmentation contracts," one at each site."

Westinghouse is expected to break its construction contracts with the owners of the Vogtle and Summer projects but would gladly remain involved in some capacity if asked to do so. The owners must estimate the costs required to complete the reactors and then decide whether (and how) to proceed. Possible funding sources include contractual guarantees from Westinghouse's parent company Toshiba, further government subsidies, and ratepayers.

The extension of a federal government tax credit program has been seen as the most likely way of securing federal support for the Vogtle and Summer projects. The extension could translate into about US$2 billion in funding support for each of the projects. But Congress has not supported an extension to date, and if it arrives it may be too late to save the projects.5

Toshiba is reportedly prepared to pay about US$3.6 billion towards the completion of the Vogtle plant, payable over at least three years. The agreement is not final and is said to be contingent on a similar agreement between Toshiba and the owners of the Summer plant.6 But that US$3.6 billion may not be enough to complete the Vogtle plant.7 Likewise, Toshiba's commitment to pay about US$1.7 billion towards the completion of the Summer plant isn't set in stone, and it may not be sufficient to complete the plant.3

There has been speculation that Toshiba may seek bankruptcy protection in Japan, just as Westinghouse has in the US, which would probably be the final straw for the Vogtle and Summer projects ‒ but it remains nothing more than speculation.3

Another possible source of funding to help complete the reactors would be to once again increase power bills in Georgia and South Carolina. Ratepayers are paying in advance for the Vogtle and Summer projects. Georgia Power had collected almost US$1.2 billion by the end of 2016 to pay for Vogtle.8 Power prices in South Carolina have increased by 20% since 2009 to pay for the Summer reactors3 and at least US$1.4 billion has been collected.9

Public utility commissions would need to approve further rate increases. Numerous increases have been approved as the cost of the reactor projects has escalated time and time again. Ratepayers are fed up, and politicians or commissioners proposing further increases might find themselves out of a job. The Atlanta Journal-Constitution said that funding the two AP1000 reactors in Georgia "may become the most volatile issue of the 2018 campaign for governor, lieutenant governor, Congress, the state Legislature, and perhaps dogcatcher."10

Given the history of state utility commissions repeatedly approving further imposts on ratepayers, no-one would be surprised if power bills are increased yet again. But there is some push-back. Public Service Commissioner Bubba McDonald said Georgia Power should voluntarily stop billing ratepayers for Vogtle costs, and the Public Service Commission has asked the state attorney general's office for advice as to whether it would be legal for Georgia Power to remove the charge.11 In circumstances where existing charges are being challenged, it will be difficult to increase those charges.

Georgia Power spokesperson Jacob Hawkins said the pay-in-advance model "saves customers hundreds of millions of dollars by reducing financing and borrowing costs"11 ‒ but Georgians and South Carolinians have paid over US$1 billion for reactors that may never be completed. Georgians are paying about US$23 million each month ‒ not far short of US$1 million per day ‒ for reactors that may never be completed.12

Kennedy Maize, contributing editor at Power magazine, thinks the projects will be abandoned: "My guess – and it's just that, based on my reading of U.S. nuclear history – is that both Vogtle and Summer eventually will crater. While both utilities enjoy supine state regulators and the ability to earn on construction costs as they are incurred, that will trigger rate shock and political backlash, killing the projects. That's what we saw in the 1980s."13

The Atlanta Journal-Constitution summarized some of that unhappy history: "[C]onstruction of Plant Vogtle's first two reactors had provided a vivid example of the potential complications. Plant Vogtle was conceived around 1970, with an original cost estimate of about $660 million. Construction was expected to take about eight years. Then, Three Mile Island happened. Regulations tightened. Demand for materials and interest rates shot up in the 1980s. Construction took 13 years. The final price tag: around $9 billion."8

AP1000 reactor plans in the UK

NuGen's plan for three AP1000 reactors at Moorside in the UK has descended into farce. Tom Samson, chief executive of the NuGen consortium, insists the project has "100 per cent backing" from Toshiba14 and he is "110% certain" the reactors will be built.15 But Toshiba is 100% committed to selling its stake in NuGen and has no intention of building reactors in the UK or anywhere else ... for reasons that must be all too obvious. The likelihood of the Moorside project going ahead is closer to 10% than 110%. French company Engie recently exited the Moorside project, forcing Toshiba to acquire its 40% stake based on contractual agreements, and previously Iberdrola and SSE exited the project.16

Samson says there is a "universe of options ... to progress this phenomenal project of national significance".14 South Korea's Kepco is the most likely saviour, but South Korean interest in NuGen dates from 2013, if not earlier, yet nothing has been agreed ‒ and the recent election of Moon Jae-in as President may complicate South Korean involvement in NuGen. A delegation from China's State Nuclear Power Technology Corporation (SNPTC) visited the UK in May, reportedly to meet NuGen. The Carlisle News and Star reported that "both organisations have not denied that such a meeting will take place."17 Chinese involvement has raised national security concerns18 that could scupper any such involvement.

NuGen has set up a 'strategic review' to assess whether the Moorside project can be revived.19

Meanwhile, David Wright, a director at UK's National Grid, says he is "sure" that the NuGen project will go ahead ‒ his confidence based on discussions with Tom Samson (!). But National Grid recently suspended its £2.8bn (US$3.6bn) project to provide a transmission link to the Moorside site.20

Oliver Tickell and Ian Fairlie wrote an obituary for Britain's nuclear renaissance in The Ecologist on May 18.21 They concluded: "[T]he prospects for new nuclear power in the UK have never been gloomier. The only way new nuclear power stations will ever be built in the UK is with massive political and financial commitment from government. That commitment is clearly absent. So yes, this finally looks like the end of the UK's 'nuclear renaissance'. Not with a bang, nor even with a whimper, but with a deep and profoundly meaningful silence. Not a moment too soon."21

AP1000 reactor plans in India

World Nuclear News reported on June 2 that six AP1000 reactors planned for the Mithi Virdi plant in the Bhavnagar district of India's northern Gujarat state will now be constructed at the Kovvada site in the southern state of Andhra Pradesh.22 But there's precious little chance of AP1000 reactors being built anywhere in India. Both Toshiba and Westinghouse are exiting the reactor construction industry, and it's doubtful whether another company or utility would take over the project.

No binding contracts have been signed. No-one has any idea where the money might come from to pay for the AP1000 reactors. India's liability law remains an obstacle. And public opposition is still a major obstacle ‒ public opposition goes a long way to explaining the decision to abandon the Mithi Virdi AP1000 project and opposition will be keenly felt in Andhra Pradesh.23 That is, opposition will be keenly felt if the Andhra Pradesh project gathers any momentum, which seems unlikely for the foreseeable future.

Nuclear Engineering International reported on May 9 that India has asked Toshiba to offer ways to resolve the issue of reactor sales following the bankruptcy of its subsidiary Westinghouse.24 A firm agreement on AP1000 reactors was meant to be concluded by the end of June 2017, but that deadline will come and go without any agreement. Nuclear Engineering International also reported that India is seeking a loan of around US$8‒9 billion from the US Export-Import Bank to part-fund the AP1000 reactors.24 But there is very little likelihood that the Export-Import Bank will provide the funding.

According to a recent Reuters report, India's Cabinet has decided that foreign reactors will not be bought unless such reactors are already in operation elsewhere.25 Likewise, Sekhar Basu, secretary of India's Department of Atomic Energy, said in May that potential foreign reactor suppliers "have to sort out their financial issues before anything can come on the table" and India "will not buy a reactor unless a plant is operating in their own country."26

Some long-delayed AP1000 and EPR projects may be completed in the next couple of years; but even so, plans for AP1000 and EPR reactors in India will likely be scrapped.

In May, India's Cabinet approved a plan to build 10 indigenous pressurized heavy water reactors (PHWR). That decision clearly reflects doubts about the ability of Westinghouse to deliver AP1000 reactors and French utilities to deliver EPR reactors. The plan for 10 new PHWRs faces major challenges27 but suffice it here to note that the PHWR program has more chance of success than the AP1000 or EPR plans.

Suvrat Raju and M.V. Ramana wrote in The Hindu on June 7:28

"Both Areva and Westinghouse had entered into agreements with the Indian government to develop nuclear plants. Areva had promised to build the world's largest nuclear complex at Jaitapur (Maharashtra), while last June, Prime Minister Narendra Modi and U.S. President Barack Obama announced, with great fanfare, that Westinghouse would build six reactors at Kovvada (Andhra Pradesh).

"The collapse of these companies vindicates critics of these deals, who consistently pointed out that India's agreements with Areva and Westinghouse were fiscally irresponsible. If these projects had gone ahead, Indian taxpayers would have been left holding the bag ‒ billions of dollars of debt, and incomplete projects. This narrow escape calls not only for a hard look at the credibility of those members of the nuclear establishment who advocated these deals for a decade, but for a comprehensive re-evaluation of the role of nuclear power in the country's energy mix.

"Therefore, the government's recent decision to approve the construction of ten 700 MW Pressurised Heavy Water Reactors (PHWRs) deserves to be scrutinised carefully. Strictly speaking, there is little that is new in this decision. A list of all the sites where the PHWRs are to be constructed had already been provided to Parliament by the United Progressive Alliance government in 2012. But delays with the first 700 MW PHWRs already under construction, the changed international scenario for nuclear energy, and the ongoing reductions in the cost of renewable energy all imply that these earlier plans are best abandoned."

References:

1. Rebecca Kern, 25 May 2017, 'Westinghouse to Emerge From Bankruptcy Stronger, CEO Says', www.bna.com/westinghouse-emerge-bankruptcy-n73014451517/

2. Peter Maloney, 26 May 2017, 'Southern CEO: Decision on Vogtle's fate not likely until late summer', www.utilitydive.com/news/southern-ceo-decision-on-vogtles-fate-not-likel...

3. David Wren, 11 May 2017, 'Reports of impending Toshiba bankruptcy raise new doubts about S.C. nuclear project', www.postandcourier.com/business/reports-of-impending-toshiba-bankruptcy-...

4. Anya Litvak / Pittsburgh Post-Gazette, 6 June 2017, ''We, Westinghouse, cannot fail': CEO gives fuller picture of business in new documents', http://powersource.post-gazette.com/powersource/companies/2017/06/06/Wes...

5. Sammy Fretwell, 22 May 2017, 'Could losing tax break sink SCE&G's nuclear project?', www.thestate.com/news/local/article151956352.html

6. Tom Hals and Jessica DiNapoli, 15 May 2017, 'Power plant owners limit Toshiba's Westinghouse liabilities: sources', www.reuters.com/article/us-toshiba-accounting-southern-co-idUSKCN18A120

7. Matt Kempner, 25 May 2017, 'Kempner: Radioactive question looms over Georgia's nuclear mess', www.myajc.com/business/kempner-radioactive-question-looms-over-georgia-n...

8. Russell Grantham and Johnny Edwards, 19 May 2017, 'Plant Vogtle: Georgia's nuclear ‘renaissance' now a financial quagmire', www.myajc.com/business/plant-vogtle-georgia-nuclear-renaissance-now-fina...

9. Sammy Fretwell, 3 June 2017, 'Once-secret records reveal pattern of costly mistakes at troubled nuclear project', www.thestate.com/news/local/article154261279.html

10. Jim Galloway, 26 April 2017, 'The first suggestion of a federal rescue for Plant Vogtle', http://politics.blog.ajc.com/2017/04/26/inside-the-envelope-was-the-firs...

11. Molly Samuel, 6 June 2017, 'Ga. PSC Delays Nuclear Vote, Asks Attorney General To Step In', http://news.wabe.org/post/ga-psc-delays-nuclear-vote-asks-attorney-gener...

12. Pam Wright, 23 May 2017, 'Sinking Into the Vogtle Vortex', http://features.weather.com/us-climate-change/georgia/

13. Kennedy Maize, 20 May 2017, 'Nuclear Farewell?', www.powermag.com/blog/nuclear-farewell/

14. 16 May 2017, 'NuGen chief says Cumbrian new nuclear has Toshiba's '100 per cent' backing', www.newsandstar.co.uk/news/business/NuGen-chief-says-Cumbrian-new-nuclea...

15. ITV, 3 May 2017, 'Exclusive: NuGen CEO 'certain' Moorside will go ahead', www.itv.com/news/border/story/2017-05-03/exclusive-nugen-ceo-certain-moo...

16. Nuclear Free Local Authorities, 4 April 2017, 'As Engie becomes the seventh international energy utility to give up on UK new nuclear build, NFLA say now is the time to move towards a decentralised, renewable energy alternative policy', www.nuclearpolicy.info/news/as-engie-becomes-the-seventh-international-e...

17. Carlisle News and Star, 23 May 2017, 'Chinese investors linked with £10bn Moorside nuclear plant, www.newsandstar.co.uk/news/business/Chinese-investors-linked-with-10bn-M...

18. Matthew Gunther, 15 August 2016, 'Chinese investor in Hinkley Point faces nuclear espionage charges', www.chemistryworld.com/news/hinkley-point-investor-faces-espionage-charg...

19. Cumbrians Opposed to a Radioactive Environment, 17 May 2017, 'NuGen's investment turmoil sparks pylon delay for Moorside new-build', http://corecumbria.co.uk/briefings/nugens-investment-turmoil-sparks-pylo...

20. Jane Gray, 23 May 2017, 'Transmission chief ‘sure' that Moorside will go ahead', http://utilityweek.co.uk/news/Transmission-chief-%E2%80%98sure%E2%80%99-...

21. Oliver Tickell and Ian Fairlie, 18 May 2017, 'Conservative election manifesto signals the end of new nuclear power', www.theecologist.org/News/news_analysis/2988965/conservative_election_ma...

22. WNN, 2 June 2017
http://mailchi.mp/world-nuclear-news/wnn-daily-russia-india-plan-for-kud...

23. 2 June 2017, 'Green clearance for nuclear project in Gujarat withdrawn by NGT, but Govt shifts it to Andhra!', www.dianuke.org/green-clearance-nuclear-project-gujarat-withdrawn-ngt-go...

24. Nuclear Engineering International, 9 May 2017, 'Westinghouse will miss deadline for India deal', www.neimagazine.com/news/newswestinghouse-will-miss-deadline-for-india-d...

25. Geert De Clercq, 3 June 2017, 'France, India to cooperate in fighting climate change', http://in.reuters.com/article/france-india-modi-macron-climatechange-idI...

26. Douglas Busvine, 18 May 2017, 'Foreign suppliers urged to step up as India backs own nuclear design', www.cnbc.com/2017/05/18/reuters-america-foreign-suppliers-urged-to-step-...

27. Dan Yurman, 23 May 2017, 'India Sets New Course for Nuclear Energy with 10 700 MW PHWR', http://neutronbytes.com/2017/05/23/india-sets-new-course-for-nuclear-ene...

28. Suvrat Raju and M.V. Ramana, 7 June 2017, 'Nuclear power: Expensive, hazardous and inequitable', www.thehindu.com/opinion/lead/nuclear-power-expensive-hazardous-and-ineq...

Update on the Toshiba / Westinghouse crisis

Nuclear Monitor Issue: 
#845
4653
08/06/2017
Jim Green ‒ Nuclear Monitor editor
Article

Nuclear Monitor has been covering the Toshiba / Westinghouse crisis in detail, on the expectation that it might soon reach a dramatic resolution, and because we think it is useful to have a detailed record of these momentous developments. The resolution might yet be dramatic but it won't be reached anytime soon. Japanese conglomerate Toshiba and its US nuclear subsidiary Westinghouse are undergoing complex negotiations about restructuring options, including selling profitable parts of their operations to stave off bankruptcy. Decisions on the fate of the four Westinghouse AP1000 reactors under construction in the US are also unfolding slowly.

The best-case scenario from the point of view of Toshiba and Westinghouse is that both companies survive ‒ albeit with some painful downsizing. And they hope that the US AP1000 projects will be completed, though the fate of those projects is largely out of their hands. Even in the best-case scenario (from their point of view), much damage has already been done: the multi-billion-dollar cost overruns with the US reactor projects, and the near-collapse of nuclear industry giants, will have a chilling effect on the global nuclear power industry for decades to come.

Toshiba

Toshiba announced on May 15 that it expects to report a consolidated net loss of ¥950 billion (US$8.6 billion) for the 2016-2017 financial year which ended March 31.1 But the figure was an unaudited projection as the company and its auditor PricewaterhouseCoopers (PwC) Aarata remain in dispute about Toshiba's accounting for cost overruns with the four AP1000 reactors under construction in the US.

Toshiba said it aims to file a financial report with the Tokyo Stock Exchange and Tokyo's Kanto Finance Bureau by the legally required deadline of June 30. But audited figures will not be available ahead of a June 28 general meeting of shareholders. An extraordinary general meeting will be held at a later date to present audited financial figures. "The company expresses its sincere apologies to its shareholders, investors and all other stakeholders for any concerns or inconvenience caused by this situation," Toshiba said in a statement.2

In addition to the unresolved dispute over Toshiba's historical accounting for AP1000 cost overruns in the US, the company is unsure how much it will have to pay US utilities building those reactors, further complicating efforts to accurately assess its financial position. And Westinghouse's Chapter 11 bankruptcy filing further complicates the process. Nikkei Asian Review reported: "The Chapter 11 bankruptcy filing itself also is slowing the process. Westinghouse looks to firm up a turnaround plan in late July, which will confirm the extent of Toshiba's losses. This will let PwC Aarata kick the auditing process into high gear."3

Toshiba's efforts to find a new auditor to replace PwC Aarata have been unsuccessful. Finding a new, second-tier auditor in a short space of time to endorse figures from the past fiscal year, when a large auditing firm has refused to sign off on those figures, has proven to be impossible.4

Thus Toshiba plans to work with PwC Aarata to finalize figures for the March 2016 to March 2017 fiscal year, and then to find a new auditor. Nikkei Asian Review reported: "PwC Aarata has reportedly agreed to audit Toshiba's earnings only under certain conditions, including further investigation into the Westinghouse problems. Ironing out these issues is likely to take some time. Toshiba may submit a request soon to the Financial Services Agency to extend the securities report deadline beyond June. Some company insiders say the final report may not come out until around September."5

One of Toshiba's many problems is that its efforts to sell its lucrative NAND flash memory chip business are being frustrated by joint partner Western Digital. US-based Western Digital announced on May 14 that several of its SanDisk subsidiaries have filed a request for arbitration through the International Chamber of Commerce related to flash-memory joint ventures operated with Toshiba.1

Western Digital wants to increase its stake in NAND but its proposed purchase price is "low-ball" according to Nisha Gopalan, a Bloomberg columnist.6 Gopalan wrote on May 29: "Western Digital has Toshiba over a barrel. It took the Japanese company to the International Chamber of Commerce's International Court of Arbitration, and has refused to allow Toshiba to use its shares as collateral to access a much-needed 700 billion yen credit line. Western Digital has since softened its stance, but the point's been made: There's not going to be a sale unless Western Digital is invited to the party."6

Arbitration between Western Digital and Toshiba could take a year or so.7 But Toshiba doesn't have that amount of time to sort out its current mess. It has to recover its financial situation, and produce audited financial figures, to avoid a stock-exchange delisting that would make the company's current situation much worse and possibly irretrievable. A negotiated settlement over the sale of NAND seems likely.8

In a piece titled 'Toshiba: From nuclear renaissance to nuclear nightmare', market analyst Venkat Subramaniam notes that Toshiba faces "significant risks on a number of fronts – e.g. delisting risk with the TSE [Tokyo Stock Exchange], banks pulling the plug, execution risk with NAND sale, getting auditor sign-off on the accounts, and the very real possibility of crippling additional liabilities on the Westinghouse side."9

A growing number of Toshiba's subsidiaries and affiliates are withdrawing money from the parent company, seeking to minimize risks and appease shareholders.10

Associated Press reported on May 31 that Toshiba is facing 20 lawsuits in Japan filed by banks, individuals, overseas investors and other parties seeking damages totaling ¥50 billion (US$455 million).11

Masashi Goto, a former Toshiba engineer who specialized in nuclear containment vessels, told Associated Press that nuclear reactors can be likened to bedridden patients, who must be cared for and eventually properly buried ‒ an onerous, decades or possibly centuries-long task for the industry. "Even after Fukushima," he said, "Toshiba management did not have the wisdom to change course."11

Westinghouse

Mark Marano, Westinghouse's chief operating officer, said on May 23 that Toshiba has "signalled pretty clearly to the market" that it wants to divest a majority stake in Westinghouse.12 The process of selling Toshiba's 90% stake in Westinghouse "may materialize into the fall, once we get further along in the Chapter 11 process," Marano said.12

But previous efforts to sell Westinghouse have failed and future attempts will be unlikely to succeed unless Westinghouse is sold for a song (Toshiba chief executive Satoshi Tsunakawa said in mid-March that Toshiba might have to pay a buyer to take Westinghouse off its hands13) and/or broken up into bite-sized chunks. There will certainly be bidders for Westinghouse's profitable operations.

Westinghouse says it plans to file a business plan with the bankruptcy court in July, but approval of the plan may have to wait until "some months after" according to company executive David Howell.12

Westinghouse's interim president and CEO José Gutíerrez said on May 24 that the company remains committed to its reactor design business and will pursue future sales with opportunities in China, India, Turkey and the UK.14 That may be wishful thinking, of course.

Westinghouse is working to develop a "more achievable delivery model" to reduce risk, Gutíerrez said.14 The company hopes to remain involved in the nuclear industry in areas such as engineering and procurement, instrumentation and controls, and fuel services ‒ but will no longer take on reactor construction contracts such as the AP1000 projects that have led it to seek bankruptcy protection. "Construction is not our forte, and we certainly have decided from a risk perspective, never to do that again," David Howell said.15

One of the company's problems is keeping skilled staff ‒ and more broadly, the lack of skilled, experienced staff goes some way to explaining the failure of the US AP1000 projects, and the failure of the AP1000 projects will make a bad situation worse. Westinghouse notified around 75 former senior managers in April that it will stop paying their pension entitlements, thus removing a benefit that has helped the company retain top talent.16 Some of the former managers may take Westinghouse to court, Reuters reported on May 25. Former Westinghouse CEO Steve Tritch told Reuters the company may struggle to keep top talent without the plan in place.16

Westinghouse's ability to keep skilled staff was further strained by a lockout of over 170 workers from the company's Newington plant in New Hampshire, and a smaller facility at Pease Development Authority, beginning May 21. Westinghouse wanted workers to sign a new agreement freezing wages for three years and severely curtailing conditions relating to health care, pensions, and severance packages.17 Newington worker and union leader Duane Egan said the union is willing to forgo wage increases but the contract put forward by Westinghouse "strips us of most of our benefits, and we're not agreeable to that."18 The two-week lockout ended on June 5 with a compromise agreement on employment conditions.19

The Newington plant manufactures the reactor vessel barrel and the parts that go into it for AP1000 nuclear power plants. Currently, it is working on reactor vessel parts and coolant pumps that will go into the AP1000 projects in Georgia and South Carolina.18

Further disputes between Westinghouse and other unions are anticipated in the coming months. Union members claim that Westinghouse is trying to bring union employees in line with its non-unionized workers, who have seen their pensions frozen, their severance pay slashed, and their health-care costs increase in recent months.18 Westinghouse has 713 union employees across its operations, according to the company's bankruptcy documents, a small fraction of its total workforce which numbers around 11,500 worldwide.18

Westinghouse is also having problems at its nuclear fuel plant in Columbia, South Carolina. Since finding an accumulation of uranium in an air pollution control device last year ‒ leading to a shut-down of part of the plant for several months ‒ the Nuclear Regulatory Commission has cited one additional violation related to the same piece of equipment. The NRC says it will conduct comprehensive performance reviews annually instead of every two years.20

The problems just keep piling up for Westinghouse. The Pittsburgh Post-Gazette reported on June 6:21

"In new documents, Westinghouse disclosed a litany of lawsuits, including those stemming from its AP1000 construction projects. It also listed conflicts that may at some point lead to more lawsuits, including potential breach-of-contract claims against Curtiss-Wright Electro-Mechanical Corp., whose Cheswick plant makes reactor coolant pumps. Defects in coolant pumps delivered to Westinghouse's AP1000 projects in China and in the U.S. delayed progress there.

"Westinghouse indicated it is mulling an action against its Japanese parent company, Toshiba Corp., for breach of contract. And the company disclosed that it received a subpoena from the U.S. Securities and Exchange commission in March, a year after Toshiba confirmed the federal agency is investigating it for potential fraud around an accounting scandal."

References:

1. World Nuclear News, 15 May 2017, 'Toshiba projects JPY950 billion loss for FY2016', www.world-nuclear-news.org/C-Toshiba-projects-JPY950-billion-loss-for-FY...

2. Toshiba Corporation, 31 May 2017, 'Notice on the Ordinary General Meeting of Shareholders', www.toshiba.co.jp/about/ir/en/news/20170531_1.pdf

3. Nikkei Asian Review, 1 June 2017, 'Toshiba earnings delayed again amid uncertainty over losses', http://asia.nikkei.com/Spotlight/Toshiba-in-Turmoil/Toshiba-earnings-del...

4. Japan Times, 11 May 2017, 'Toshiba gives up finding new auditor for now', www.japantimes.co.jp/news/2017/05/11/business/corporate-business/toshiba...

5. Nikkei Asian Review, 11 May 2017, 'Toshiba keeping current auditor for fiscal 2016 earnings', http://asia.nikkei.com/Business/Companies/Toshiba-keeping-current-audito...

6. Nisha Gopalan, 29 May 2017, 'Western Digital Isn't Going Anywhere, Toshiba', www.bloomberg.com/gadfly/articles/2017-05-29/western-digital-isn-t-going...

7. 15 May 2017, 'Toshiba's U.S. partner Western Digital seeks right to have say in sale of chip unit', www.japantimes.co.jp/news/2017/05/15/business/corporate-business/toshiba...

8. Nikkei Asian Review, 2 June 2017, 'Western Digital CEO to return to Japan, seeking Toshiba deal', http://asia.nikkei.com/Spotlight/Toshiba-in-Turmoil/Western-Digital-CEO-...

9. Venkat Subramaniam, 26 May 2017, 'Toshiba: From nuclear renaissance to nuclear nightmare', http://humblevalueinvestor.blogspot.com.au/2017/05/toshiba-from-nuclear-...

10. Nikkei Asian Review, 17 May 2017, 'Group companies pulling money out of Toshiba', http://asia.nikkei.com/Spotlight/Toshiba-in-Turmoil/Group-companies-pull...

11. Associated Press, 31 May 2017, 'For Toshiba, a management meltdown', www.cbsnews.com/news/toshiba-management-nuclear-reactors-chips/

12. Rebecca Kern and Pavel Alpeyev, 24 May 2017, 'Toshiba may seek buyers for Westinghouse starting this fall', www.livemint.com/Companies/AZRedxj8mUfFWFAGY9WPDL/Toshiba-may-seek-buyer...

13. Makiko Yamazaki and Taiga Uranaka, 14 March 2017, 'Toshiba pushes sale of nuclear unit Westinghouse as crisis deepens', www.reuters.com/article/us-toshiba-accounting-idUSKBN16L02X

14. World Nuclear News, 25 May 2017, 'Westinghouse aims for competitive future', www.world-nuclear-news.org/C-Westinghouse-aims-for-competitive-future-25...

15. Rebecca Kern, 25 May 2017, 'Westinghouse to Emerge From Bankruptcy Stronger, CEO Says', www.bna.com/westinghouse-emerge-bankruptcy-n73014451517/

16. Tom Hals, 25 May 2017, 'EXCLUSIVE-Bankrupt Westinghouse ends pensions for ex-CEOs, execs', www.nasdaq.com/article/exclusivebankrupt-westinghouse-ends-pensions-for-...

17. Doug Alden, 2 June 2017, 'Westinghouse workers seek support from State House legislators', www.unionleader.com/article/20170602/NEWS02/170609918/-1/

18. Anya Litvak / Pittsburgh Post-Gazette, 22 May 2017, 'Westinghouse locks out union at New Hampshire plant', http://powersource.post-gazette.com/powersource/companies/2017/05/22/Wes...

19. Jason Moon, 5 June 2017, 'Westinghouse, Union Reach Deal to End Newington Employee Lockout', http://nhpr.org/post/westinghouse-union-reach-deal-end-newington-employe...

20. Sammy Fretwell, 8 May 2017, 'Nuclear-safety concerns linger at Westinghouse plant', www.thestate.com/news/local/article149368179.html#storylink=cpy

21. Anya Litvak / Pittsburgh Post-Gazette, 6 June 2017, ''We, Westinghouse, cannot fail': CEO gives fuller picture of business in new documents', http://powersource.post-gazette.com/powersource/companies/2017/06/06/Wes...

Update on the Toshiba / Westinghouse crisis

Nuclear Monitor Issue: 
#843
4642
10/05/2017
Jim Green ‒ Nuclear Monitor editor
Article

As discussed in Nuclear Monitor #841, Japanese conglomerate Toshiba said on April 11 that there is "substantial doubt about the Company's ability to continue as a going concern". Toshiba's US nuclear subsidiary Westinghouse filed for bankruptcy protection on March 29.

The companies are in crisis because of extraordinary cost overruns building four AP1000 reactors in the US ‒ two each in Georgia and South Carolina. Estimating the scale of the cost overruns is difficult because there is still much work to be done to complete the reactors. A reasonable estimate is that if the reactors are completed, the combined overruns will amount to about US$13 billion.1,2 Estimates compiled by Reuters put the cost overruns ‒ again assuming that the reactors are completed ‒ at US$3.9‒6.7 billion for the reactors in Georgia and US$11.9 for the reactors in South Carolina, a combined total of US$15.8‒18.6 billion.3

Toshiba wants to sell Westinghouse but can't find a buyer, although profitable parts of Westinghouse's operations might be sold off after a company restructure. Toshiba is also restructuring and selling some of its own businesses to avoid bankruptcy. Toshiba said on April 24 that it will establish its four in-house companies as wholly-owned subsidiaries.4 As of October 1, it will split off its Energy Systems & Solutions Company, and the Nuclear Energy Systems & Solutions Division, and transfer them to a newly established company. The other three companies to be established as independent business entities are Infrastructure System & Solutions Company, Storage & Electronic Devices Solutions Company, and Industrial ICT Solutions Company.

The Financial Times reported: "Toshiba is not expected to seek to sell the subsidiaries because the group last month identified that much of the activities done in these four areas as essential to its turnround strategy. But the shake-up will leave the 144-year-old conglomerate, once a proud pillar of the Japanese industrial establishment, as a mere shadow of its former self. Toshiba is planning to sell its Nand memory chip business, the group's flagship technology asset, as well as offload much or all of Westinghouse. The Nand business could raise more than $20bn for the group ‒ and therefore help repair its balance sheet."5

Toshiba's stand-off with its auditor

On April 11, Toshiba's auditor PricewaterhouseCoopers Aarata refused to sign off on Toshiba's financial report ‒ Toshiba reported a net loss of ¥647.8 billion (US$5.7bn) for the Oct. to Dec. 2016 quarter. The main sticking point has been Toshiba's accounting in relation to the AP1000 reactors in the US.

Over the past month, Toshiba has been looking for a new auditor.6 The other three of the Big Four accounting firms are probably non-starters. Deloitte Touche Tohmatsu and KPMG Azsa have past business ties to Toshiba. So does Ernst & Young ShinNihon, Toshiba's previous auditor. Ernst & Young ShinNihon incurred a fine and reputational damage for failing to detect Toshiba's billion-dollar profit-padding scam from 2008‒2014.6

Toshiba is seeking a second-tier accounting firm to sign off on its accounts but the Financial Times reported that only a few such firms have the expertise and the number of auditors needed to handle a group as large as Toshiba.6

Any auditing firm that certifies Toshiba's accounts does so at the risk of damaging its own reputation.

Sacking PricewaterhouseCoopers is not a simple option for Toshiba ‒ it would require shareholder approval.7 Sacking the auditor could unsettle the Stock Exchange, Reuters reported, but Toshiba "is out of attractive options."8

Toshiba has said it will release its figures for the March 2016 to March 2017 fiscal year by mid-May, but that could be extended to June 30. The company says it expects to report a net loss of just over ¥1 trillion (US$8.9bn) for the fiscal year, well over double the estimate of ¥390 billion provided in February.9

Stock exchange listing / delisting

Toshiba faces being delisted from the Tokyo Stock Exchange, an outcome that will be all the more likely if it releases unaudited figures for the 2016‒17 fiscal year (as it did for the Oct. to Dec. 2016 quarter). Delisting would create a new set of problems that would make it all the more difficult for the company to survive ‒ big investors would likely sell their stock, financing costs would increase, more lawsuits from shareholders would be expected, the share price would take another hit (it has fallen by 50% over the past six months) and, as Reuters reported, shareholders would be left with "near-worthless paper".8 Last but not least, the complete collapse of Toshiba would loom as a real possibility.

The Reuters report continued: "There are three hurdles. First, a Tokyo Stock Exchange review has to conclude managers have fixed long-running shortcomings in internal controls. Second, the company must claw its way out of negative equity by March – hence the 2 trillion yen-plus ($18 billion) sale of its memory-chip business. And third, it must file full-year results promptly: ideally by May 15, late June at the very latest."8

A zombie company?

Creditors and investors are nervous. In mid-April, Toshiba lost access to one of its subsidiary's funds after hedge fund Oasis Management went to court to get the subsidiary to take back its cash ‒ ¥87.8 billion (US$771m) ‒ from the parent company.10 If that trickle becomes a flood ‒ and in particular if the banks call in their loans ‒ Toshiba will be doomed.

The BBC outlined three possible outcomes for Toshiba.11 Firstly, it might become a zombie company like Sharp, TEPCO and many others: loss-making or insolvent companies that should be allowed to fail, but continue to operate because of lenient creditors. The second ‒ and most likely ‒ option is a break-up of the company (the strategy that is already playing out with Toshiba's plan to sell its memory chip business). The third possibility is a complete collapse of Toshiba. "If the chip sale falls through, more accounting irregularities emerge or the banks decide to call in their loans, then all bets are off," BBC business reported Leisha Chi said in an April 16 article.11

Might Toshiba file for bankruptcy protection?

Southern Company, which hired Toshiba subsidiary Westinghouse to build two nuclear reactors in Georgia, is concerned that Toshiba will apply for protection from creditors and relieve itself of the guarantees made on Westinghouse's behalf, sources have told the Wall Street Journal.12 A Toshiba official reportedly said the best way to save the company could be a filing under Japan's corporate reorganization law, which is similar to US Chapter 11 bankruptcy protection legislation in that it seeks to allow a company to stay in business by relieving it of some obligations. The Toshiba official said the move could free Toshiba of its obligations to Westinghouse and its customers, including its obligations to provide funding to complete AP1000 reactors under construction in the US.

However a Toshiba spokesperson said: "At this moment, we do not have any thought or intention of seeking protection under corporate-reorganization proceedings."12

The Wall Street Journal reported:12

"A Japanese chapter 11-style filing is only one of several scenarios Toshiba could choose. It presents several downsides: Suppliers could take a hit, hurting the broader economy, and shareholders could be wiped out ‒ though Toshiba's shares are already in danger of being delisted in Tokyo because of accounting problems that emerged in 2015. But the filing would strengthen Toshiba's balance sheet and could allow it to keep its profitable memory-chip business, the Toshiba official said ‒ relieving Japanese government concerns about technology leaks to Chinese or other competitors. A person familiar with Southern's thinking said Japanese creditor banks have significant leverage in deciding what to do with Toshiba, and that their loans would come ahead of other obligations. "We are not first in line," this person said."

Westinghouse and the AP1000 reactors in the US

Westinghouse filed for Chapter 11 bankruptcy protection on March 29, listing assets of US$4.3 billion and liabilities of US$9.4 billion among about 35,000 creditors.13

Westinghouse said on March 29 it would no longer spend money on the Vogtle (Georgia) and Summer (South Carolina) AP1000 projects, but reached an agreement with the utilities involved to allow them to pay costs to continue the projects during a 30-day interim period while decisions on the future of the projects are made. That 30-day period was later extended until May 12 for the Georgia project and June 26 for South Carolina.14

Between April 7 and April 20, about 30 vendors asked Westinghouse to return US$35 million in materials and products ordered for the four reactors in Georgia and South Carolina before the company filed for bankruptcy protection.15 No doubt other vendors have done likewise since April 20. Many Westinghouse suppliers received letters saying that their invoices for work performed or products supplied before the bankruptcy protection filing could not be paid at this time.16

Westinghouse plans to complete a restructuring plan by the end of June 2017 and a new business plan by the end of July 2017. The aim is to ring-fence the four AP1000 reactors. Gavin Liu, Westinghouse's president for Asia, said the "rest of the Westinghouse business, the healthy part, which is new plant construction, fuel, service, decommissioning ‒ we anticipate an ownership change."17 Liu noted that there has been "high interest from the financial community" in the profitable parts of the company's operations.17

Toshiba would like to sell Westinghouse and keep its profitable businesses ‒ but must instead sell profitable businesses to cover the debts from Westinghouse's nuclear projects. Westinghouse, in turn, would like to rid itself of the US AP1000 reactors projects and keep its profitable operations but must instead sell profitable operations to cover debts from the reactor projects.

No amount of ring-fencing will make the AP1000 problems go away. According to Westinghouse, an additional US$4 billion is required to complete the four reactors (US$2.5 billion in Georgia and US$1.5 billion in South Carolina).13 That figure may be an underestimate. Southern Co. CEO Thomas Fanning has said the company needs at least US$3.7 billion needs to complete the two reactors in Georgia ‒ possibly more.18,19

If the additional costs can be kept to US$3.7 billion, Southern Co. hopes that funding from Toshiba will suffice to complete the reactors in Georgia.19 Of course, those hopes could be dashed if Toshiba seeks protection under Japanese corporate reorganization laws.

Southern Co. subsidiary Georgia Power is also trying to convince the Georgia Public Service Commission to allow it to recoup further costs from ratepayers in Georgia, but the Commission appears reluctant.19 Georgian ratepayers have already been paying for the construction of the two AP1000 reactors since 2011, based on provisions of the 2009 Georgia Nuclear Finance Act.20,21

Tax credits and loan guarantees

The AP1000 reactors in Georgia and South Carolina need to be operating by the end of 2020 to be eligible for a US$18/MWh federal production tax credit. For the South Carolina project, the tax credit would amount to a government subsidy of about US$2.2 billion.22 Relaxation of the 2020 deadline for the tax credits is shaping as an important determinant of the future of the four reactors given the receding likelihood of completing the reactors by then. South Carolina Electricity & Gas recently said it is re-evaluating its timeline for completion of the two reactors in that state because of Westinghouse's "historical inability to achieve forecasted productivity and work for efficiency levels" and in light of Westinghouse's bankruptcy filing.23

The extension of the tax credits is "absolutely imperative" to the AP1000 projects and "next-up U.S. nuclear projects" according to David Blee, executive director of the US Nuclear Infrastructure Council.24 However an attempt to include a relaxation of the 2020 deadline in a government spending bill recently failed.25 Congressional leadership is reportedly delaying the issue until lawmakers take up tax reform later this year24 ‒ but that could be too late to save the AP1000 projects. Republican senator Lindsey Graham said: "I'm not going to sit on the sidelines and watch the nuclear industry be destroyed. For three years, we've been trying to get these tax credits extended. ... The reactors that are being built are very much at risk."24

If the Vogtle project in Georgia collapses, the federal government is on the hook for US$8.3 billion in loan guarantees. Ryan Alexander, president of Taxpayers for Common Sense, said:26

"The Title XVII program at the Energy Department provides broad authority for it to guarantee loans for early commercial use of advanced technologies if there is a "reasonable" prospect of repayment by the borrower. Loan guarantees are like cosigning a loan. The government (taxpayers) are on the hook for repayment of the loans if the borrower defaults.

"Building a nuclear reactor – two nuclear reactors – is expensive and risky. The amount of risk represented by a particular loan guarantee is measured in the project's "subsidy cost." The higher the risk, the higher the cost that gets assigned to the guarantee. You would think a loan guarantee for a nuclear power plant – the riskiest project of all – would be assessed a pretty high price. It should have been. But the Energy Department guaranteed at least $6.5 billion of the $8.3 billion total at a cost of $0. That is, it recorded no potential liabilities for its guarantee of more than $6 billion in loans for the construction of two nuclear power plants. ...

"While this might mean huge losses for taxpayers, the real tragedy is that financial entanglement with the project could have been avoided altogether. It's not clear what the Department of Energy can do now to mitigate the potential for losses. In the end, the Vogtle mishap could be a very expensive way to learn what we should have known all along – the federal government cannot ignore risk when taxpayers' money is on the line."

The plan for AP1000 reactors in the UK

NuGen was established in 2009 as a consortium between Engie, Iberdrola, and Scottish and Southern Energy. After various twists and turns, Toshiba had a 60% stake in NuGen and Engie the remaining 40% by the end of 2013. In 2014, NuGen announced plans to build three AP1000 reactors at Moorside, near Sellafield in the UK. But Engie has exercised its contractual right to force Toshiba to buy its 40% stake. Toshiba wanted to sell its 60% stake ... and now wants to sell its 100% stake.

Reactor construction never began and likely never will. In April 2017, NuGen said it has put its application for development consent on hold and is "undertaking a strategic review of its options following shareholder and vendor challenges".27 The consortium has written to suppliers to warn them it will have to cut spending, and also plans to order staff who have been seconded to the project from other companies to return to their employers.28

Toshiba (and the British government and others) are hoping that South Korean utility Kepco will buy a stake in NuGen (Toshiba presumably hopes Kepco will buy its entire 100% stake). Kepco has been considering buying a stake in NuGen for some time, but a deal has not been struck. Kepco may prefer to build its APR1400 reactors rather than Westinghouse AP1000 reactors, which would delay the project by several years: the APR1400 design has not been approved by UK regulators whereas the AP1000 design recently received approval.

Some see Kepco's purported interest in building its own reactor technology as a bargaining chip to use in negotiations. Kepco might agree to build AP1000 reactors ‒ or to be the engineering, procurement, and construction manager of Westinghouse-built AP1000 reactors ‒ on the condition that Kepco supplies expensive items like steam generators, turbines, pumps, and other system components.29

A Hinkley Point-style guaranteed 'strike price' per kilowatt-hour might make the project attractive for Kepco, but still the question remains: where will the capital costs for the three-reactor project ‒ which could amount to US$20 billion or so ‒ come from? One pro-nuclear commentator suggests that the project could be revived with a guaranteed strike price plus UK government-issued bonds covering the capital costs.29 The commentator also recommends following through on BREXIT in order to prevent any challenge under EU legislation to the subsidies required to get the Moorside project off the ground (Austria and others challenged the Hinkley Point subsidies).

NuGen chief executive Tom Samson said in early May that the project faces "significant challenges" and that direct government funding is one option on the table. He said: "We already have tremendous support from the government, we look for all opportunities to secure funding for the Moorside project and the government's involvement is one of those areas we'll continue to explore."27

Plans for AP1000 reactors in India

A. Gopalakrishnan, a former Chair of India's Atomic Energy Regulatory Board, has written an opinion piece in The Hindu strongly criticizing plans to contract Westinghouse to build six AP1000 reactors in India.30

Gopalakrishnan wrote:30

"India must not enter into a contract involving billions of dollars with an American company that has already declared bankruptcy. ... Westinghouse going into bankruptcy causes much larger problems than just the financial consequences. With the bankruptcy filing, no creditors will come forward to lend the approximately $7 billion needed to bankroll the India project in the first phase. During the time of the Barack Obama administration, India had hoped to get a U.S. Export-Import (Exim) Bank loan for the Kovvada project. But with Donald Trump assuming the U.S. presidency and Westinghouse perilously in the red, there is little chance that the new American administration will favourably consider an Exim Bank loan for an Indian nuclear project to be technologically executed by a bankrupt U.S. company. Even if the Trump administration is willing, the project is definitely not in the interest of the people of India.

"From personal contacts, I understand that senior and mid-level Westinghouse managers and technical staff have already started looking for other jobs. The company will find itself hard-pressed to handle the completion of the eight AP1000 reactors for the U.S. and China that it is committed to, let alone competently take on and complete a new two-reactor project in Kovvada. Besides, six-eight years from the start of construction, which competent Westinghouse engineering team will be around to help India start up these reactors and provide periodic assistance thereafter? ...

"In view of these difficulties, it is best to completely keep away from agreeing to purchase the Westinghouse AP1000 reactors. In fact, the current status of world energy technology does not warrant the inclusion and consideration of nuclear power of any kind in the energy basket of our nation."

Dr Vijay Sazawal, a former Westinghouse employee who is now a member of the Civil Nuclear Trade Advisory Committee of the US Department of Commerce, also urged caution.31 He said: "Basically, Westinghouse has backed out of the contracts in place [in the US] and will renegotiate contracts with those utilities which will have to bear previous cost overruns on their projects. So both Westinghouse and a new potential customer like NPCIL in India will have to be very careful in their financial negotiations in order to ensure that Westinghouse does not back out of its legal and financial obligations if it hits a road bump as it has in its four nuclear power plants under construction in the US and China, with all four plants having exceeded their original cost and schedule commitments."

References:

1. 17 April 2017, 'The Westinghouse Bankruptcy: Test for Chinese Investment in US Infrastructure', www.ippreview.com/index.php/Blog/single/id/405.html

2. Tom Hals / Reuters, 3 May 2017, 'Westinghouse, CB&I spar in court over $2 bln merger dispute', www.reuters.com/article/us-toshiba-accounting-westinghouse-cbi-idUSKBN17...

3. Tom Hals and Emily Flitter, 2 May 2017, 'How two cutting edge U.S. nuclear projects bankrupted Westinghouse', http://uk.reuters.com/article/us-toshiba-accounting-westinghouse-nucle-i... and see also http://fingfx.thomsonreuters.com/gfx/rngs/TOSHIBA-ACCOUNTING/010040WY1YE...

4. World Nuclear News, 24 April 2017, 'Toshiba creates subsidiaries 'to maximise value'', www.world-nuclear-news.org/C-Toshiba-creates-subsidiaries-to-maximise-va...

5. Kana Inagaki, 24 April 2017, 'Toshiba to restructure to protect core businesses', www.ft.com/content/780ae574-28df-11e7-9ec8-168383da43b7
6. Kana Inagaki, 2 May 2017, 'Brave is the auditor that takes on Toshiba's accounts', www.ft.com/content/d5709622-2ef8-11e7-9555-23ef563ecf9a
7. Intellasia, 28 April 2017, 'Toshiba plans to replace auditor PwC after earnings impasse', www.intellasia.net/toshiba-plans-to-replace-auditor-pwc-after-earnings-i...

8. Quentin Webb, 26 April 2017, Unaccountable, www.breakingviews.com/considered-view/toshiba-axing-pwc-would-be-ugly-bi...

9. BBC, 14 Feb 2017, 'Toshiba chairman quits over nuclear loss', www.bbc.com/news/business-38965380

10. 16 April 2017, 'Toshiba: loses access to unit's cash after hedge fund sues', www.4-traders.com/TOSHIBA-CORP-6493713/news/Toshiba-loses-access-to-unit...

11. Leisha Chi / BBC, 16 April 2017, 'Can Toshiba escape the clutches of corporate Japan's zombie hordes?', www.bbc.com/news/business-39585758

12. Takashi Mochizuki, Mayumi Negishi, and Kosaku Narioka, 9 May 2017, 'Toshiba partners brace for possible bankruptcy filing', www.wsj.com/articles/toshiba-partners-brace-for-possible-bankruptcy-fili...

13. World Nuclear News, 28 April 2017, 'US industry on tenterhooks over Westinghouse: NEI', www.world-nuclear-news.org/C-US-industry-on-tenterhooks-over-Westinghous...

14. Augusta Chronicle, 3 May 2017, 'Too important to fail', http://chronicle.augusta.com/opinion/editorials/2017-05-03/too-important...

15. Kristi E. Swartz, 20 April 2017, 'Vendors line up to demand returns from Westinghouse', www.eenews.net/energywire/2017/04/20/stories/1060053327

16. Anya Litvak, 28 April 2017, 'Westinghouse battles trust issues with vendors, customers and employees', http://powersource.post-gazette.com/powersource/companies/2017/04/27/EQT...

17. Reuters, 28 April 2017, 'Westinghouse says will operate normally in Asia, Europe despite Chapter 11', https://finance.yahoo.com/news/westinghouse-says-operate-normally-asia-0...

18. Power Engineering, 4 May 2017, www.power-eng.com/articles/2017/05/southern-company-requests-3-7-billion...

19. Kristi E. Swartz, 5 May 2017, 'Tug of war in Ga. over who controls Vogtle's fate', www.eenews.net/energywire/2017/05/05/stories/1060054108

20. Anne Maxwell, 8 May 2017, 'Georgia Power profits off Plant Vogtle construction despite cost overruns, delays, and contractor bankruptcy', http://wjbf.com/2017/05/08/georgia-power-profits-off-plant-vogtle-constr...

21. Georgia Watch, 'Protect Georgia Power Customers from Massive Cost Overruns', www.georgiawatch.org/issue/protect-georgia-power-customers-from-massive-...

22. David Wren, 27 April 2017, 'SCANA exec: Nuclear plant completion could hinge on extension of federal tax credits', www.postandcourier.com/business/scana-exec-nuclear-plant-completion-coul...

23. World Nuclear News, 8 May 2017, 'Summer plant construction progress continues', www.world-nuclear-news.org/NN-Summer-plant-construction-progress-continu...

24. Andrew Follett, 5 May 2017, 'Congress Gears Up For Showdown Over Billions In Nuclear Tax Credits', http://dailycaller.com/2017/05/05/congress-gears-up-for-showdown-over-bi...

25. Kristi E. Swartz, 4 May 2017, 'Southern turns to D.C. for help to finish reactors', www.eenews.net/stories/1060054028

26. Ryan Alexander 6 April 2017, 'The High Cost of Ignoring Risk', www.usnews.com/opinion/economic-intelligence/articles/2017-04-06/westing...

27. ITV, 3 May 2017, 'Exclusive: NuGen CEO certain Moorside nuclear development will go ahead', www.itv.com/news/border/2017-05-03/exclusive-nugen-ceo-certain-moorside-...

28. John Collingridge, 30 April 2017, 'Toshiba mothballs Cumbrian nuclear power project', www.thetimes.co.uk/article/toshiba-mothballs-cumbrian-nuclear-power-proj...

29. Dan Yurman, 8 April 2017, 'A Modest Proposal to Save NuGen's Moorside Nuclear Project', http://neutronbytes.com/2017/04/08/a-modest-proposal-to-save-nugens-moor...

30. A. Gopalakrishnan, 31 March 2017, 'Say no to Westinghouse', www.thehindu.com/opinion/op-ed/say-no-to-westinghouse-india-must-not-ent...

31. PTI, 30 March 2017, 'Westinghouse bankruptcy unlikely to impact Indo-US N-deal', www.financialexpress.com/india-news/westinghouse-bankruptcy-unlikely-to-...

Will AP1000 reactor projects be completed and will more be built?

Nuclear Monitor Issue: 
#841
4633
12/04/2017
Jim Green ‒ Nuclear Monitor editor
Article

Eight AP1000 reactors are under construction around the world: four in China and four in the US. All of them, in both China and the US, are about three years behind schedule.

A Chinese nuclear engineer told nuclear lobbyist Michael Shellenberger in 2015: "People felt we paid full price for a half-completed design." The result, Shellenberger writes, was three years of delay, higher costs, and a deteriorating relationship between China and Westinghouse.1 Likewise, the 2016 World Nuclear Industry Status Report noted that the AP1000 projects in China have suffered construction delays and cost overruns, design changes and equipment failure.2

Nonetheless, the four AP1000 reactors in China will very likely be completed.

Whether the four AP1000 reactors in Georgia and South Carolina will be completed is now subject to a 30-day "assessment period" according to Westinghouse.3 Work is continuing during the assessment period.

Costs to complete the four reactors could amount to approximately US$8.5 billion.4 The combined cost overruns for the four reactors amount to about US$11.2 billion and counting.5

Stephen Byrd from Morgan Stanley anticipates that the total costs of the plants in Georgia and South Carolina, if completed, will be about twice Westinghouse's original estimate.6

An April 2 article from the World Nuclear Industry Status Report website summarizes the situation:7

"The outcome for the U.S. AP1000 projects is more dire, and abandonment is an explicit option. In the case of the Vogtle project in Georgia, Stan Wise, chairman of the state's Public Service Commission, pointed out that it is "possible ... that Plant Vogtle just doesn't get finished at all. It's a real hit and a real blow to something that we felt like was going to be the very best possible energy choice for Georgia maybe even into the next century". But he also went on to talking about the changes in the energy landscape since the Vogtle plan was initially approved, "with natural gas getting very cheap, and technologies like solar power and batteries improving" and declaring: "If I'd known any of this a decade ago we would have gone a different way".

"[South Carolina's] SCANA chief executive Kevin Marsh, on the other hand, was more bullish: "Our commitment is still to try to finish these plants. That would be my preferred option. The least preferred option, I think realistically, is abandonment". But he has also said that SCANA will evaluate various options during the coming 30 days, including:

  • continuing with the construction of both new units;
  • focusing on the construction of one unit, and delaying the construction of the other;
  • continuing with the construction of one and abandoning the other; and
  • abandoning both units.

"Independent analysts have pointed out that not abandoning the project right away could result in "the chaos of bankruptcy and reorganization [leading] to a long period of project restructuring uncertainly and more spiraling costs".

"If either of those projects are abandoned, they would join the ranks of the forty nuclear new-build projects ‒ including 12 Westinghouse reactors ‒ that were abandoned in the United States between 1977 and 1989 at various stages of construction (see Global Nuclear Power Database for details8). At the time, several utilities went bankrupt."

No other reactors are under construction in the US and there is no likelihood of any new reactors in the foreseeable future. The US reactor fleet is one of the oldest in the world ‒ 44 out of 99 reactors have been operating for 40 years or more ‒ so nuclear decline is certain.

Will any other AP1000 reactors be built around the world?

In 2015, then Westinghouse chair Danny Roderick said he was "pretty confident" in achieving Westinghouse's goal of winning orders to construct 64 AP1000 reactors worldwide over the next 15 years.9 As recently as November 2016, Westinghouse said it had plans to build 30 AP1000 reactors around the world, and Roderick said the company was "very much in the running ... to get up near 50 units over the next 15 to 20 years in China."10

Those expectations have gone up in smoke.

China

An April 2 article from the World Nuclear Industry Status Report website states: "The idea that Westinghouse might get any more contracts to build nuclear reactors in China seems doubtful, to say the least. As Lin Boqiang, director at the China Center for Energy Economics Research at Xiamen University told Bloomberg News: "The only way Westinghouse can win contracts in China is to demonstrate they can build reactors quicker and cheaper than anyone else in China's market and win hearts with actions, not words. Westinghouse so far hasn't demonstrated such abilities.""11

UK

Toshiba received notice from French company Engie on April 3 that it had exercized its right under a joint agreement to require Toshiba to purchase Engie's 40% stake in the NuGeneration (NuGen) consortium that planned to build three AP1000 reactors at Moorside in the UK.12 NuGen is "facing some significant challenges", Engie said. Engie anticipates payment of approximately ¥15.3 billion (US$137.5 million) from Toshiba for its stake in NuGen.12

Once the transaction is completed, Toshiba will be left with a 100% stake in NuGen. Toshiba noted that Westinghouse's Chapter 11 bankruptcy filing met the definition of an 'event of default' under the terms of its agreement with Engie. That gave Engie the option to sell its stake in NuGen to Toshiba, or to acquire Toshiba's stake, and Engie chose the first option.12

Toshiba was hoping to sell its 60% stake in NuGen and is now seeking to sell its 100% stake.

Ironically, just as the Moorside project took a giant leap towards being abandoned, UK regulators announced on March 30 that the AP1000 had successfully completed the Generic Design Assessment process.12

Engie is the seventh international energy utility to give up on UK new nuclear build over the past decade, the others being Toshiba, E-on (Wylfa), RWE Npower (Wylfa), Iberdrola (Moorside), SSE (Moorside), and Centrica (Hinkley Point).13

While South Korea's Kepco has shown no interest in acquiring a stake in Westinghouse, the utility is interested in acquiring a stake in NuGen.14 Whether that interest is affected by Engie's withdrawal remains to be seen. Kepco might seek to deploy its APR1400 reactor technology instead of AP1000 reactors, in which case development would be delayed by a further 4‒5 years while the APR1400 is put through a Generic Design Assessment by UK regulators.

In 2015, Toshiba estimated a total cost of ¥1.5 trillion yen (US$13.6bn) for the NuGen project but analysts now believe the cost could be roughly double that amount due to higher labor costs and revised safety standards.5

Of course, the cost could be brought down by weakening safety standards and one way to do that would be to abandon AP1000 technology in favour of South Korea's APR1400 design. The APR1400 lacks safety features of AP1000 and EPR designs such as aircraft crash protection.15

India

Danny Roderick from Westinghouse said in November 2016 that the company was on track to build six AP1000 reactors in India's southern state of Andhra Pradesh and expected a final engineering, procurement, and construction agreement before the end of 2017.10

But funding had not been secured, India's nuclear liability law remained an obstacle, and the project faced stiff public opposition ... and that was all before the Toshiba / Westinghouse financial crisis began to surface late last year. The project is unlikely to proceed ‒ it is almost impossible according to three industry sources contacted by Reuters in early February.16 Likewise, a separate, less-developed plan for an additional six AP1000 reactors in India has little chance of progressing.

Toshiba said in mid-February that India's liability legislation ‒ which provides some recourse to sue vendors in the event of an accident ‒ would have to be changed to promote reactor projects in India.17

Former World Nuclear Association executive Steve Kidd noted in an April 7 article: "India is clearly not set to follow China into a rapid nuclear growth phase. Its targets announced for nuclear generation in the early 2030s look even more unachievable than before, and the Indian industry is becoming inward-looking once again. Its tie-up with Russia on reactors appears sound, but proposed cooperation with Areva, Westinghouse and GE now looks dead in the water after their recent financial disasters."18

A senior Indian government official reportedly said in early April that the "atomic meltdown" of Toshiba and Westinghouse "is a blessing in disguise", and the Economic Times of India reported that "many in the Indian atomic establishment are silently celebrating this premature death of suitors who were wooing to put tens of atomic plants in India".19 The argument is that the 'Indian atomic establishment' can take up the slack with new reactors in India and the atomic meltdown "could also provide an opportunity to the country to become a hub for low cost suppliers of nuclear technology".

But in all likelihood, despite the opportunities afforded by the meltdown of its competitors, the Indian atomic establishment will probably continue doing what it does best: building bombs, taking an axe to the global non-proliferation and safeguards regime, and failing to meet its nuclear power targets by orders of magnitude.

References:

1. Michael Shellenberger, 13 Feb 2017, 'Why its Big Bet on Westinghouse Nuclear is Bankrupting Toshiba', www.environmentalprogress.org/big-news/2017/2/13/why-its-big-bet-on-west...

2. World Nuclear Industry Status Report, 2016, www.worldnuclearreport.org/The-World-Nuclear-Industry-Status-Report-2016...

3. Westinghouse, 29 March 2017, Westinghouse Announces Strategic Restructuring, http://www.westinghousenuclear.com/About/News/View/WESTINGHOUSE-ANNOUNCE...

4. Samantha Cheh, 3 April 2017, 'Never-ending misfortunes: Toshiba stuck in the news cycle from hell', http://techwireasia.com/2017/04/toshiba-stuck-newscycle-hell/

5. World Nuclear Industry Status Report, 2 Feb 2017, 'Toshiba-Westinghouse: The End of New-build for the Largest Historic Nuclear Builder', www.worldnuclearreport.org/Toshiba-Westinghouse-The-End-of-New-build-for...

6. 1 April 2017, 'Westinghouse files for bankruptcy', www.economist.com/news/business/21719836-global-nuclear-power-industry-b...

7. World Nuclear Industry Status Report, 2 April 2017, 'Westinghouse: Origins and Effects of the Downfall of a Nuclear Giant', www.worldnuclearreport.org/Westinghouse-Origins-and-Effects-of-the-Downf...

8. http://thebulletin.org/global-nuclear-power-database

9. Reuters, 5 April 2017, 'Toshiba fired Westinghouse chairman two days before bankruptcy filing', www.reuters.com/article/us-toshiba-accounting-westinghouse-idUSKBN1770O6

10. Nikkei Asian Review, 29 Nov 2016, 'Toshiba aims to nail down multiple nuclear orders in China, India', http://asia.nikkei.com/Business/Companies/Toshiba-aims-to-nail-down-mult...

11. World Nuclear Industry Status Report, 2 April 2017, 'Westinghouse: Origins and Effects of the Downfall of a Nuclear Giant', www.worldnuclearreport.org/Westinghouse-Origins-and-Effects-of-the-Downf...

12. World Nuclear News, 5 April 2017, 'Engie gives notice to sell NuGen stake', www.world-nuclear-news.org/C-Engie-gives-notice-to-sell-NuGen-stake-0504...

13. Nuclear Free Local Authorities, 4 April 2017, www.nuclearpolicy.info/news/as-engie-becomes-the-seventh-internationalen...

14. Song Jung-a in, 22 March 2017, 'Kepco rules out buying Westinghouse stake', www.ft.com/content/cd70d392-0ec8-11e7-b030-768954394623

15. Steve Thomas, July 2014, 'Nuclear technology options for South Africa', http://earthlife.org.za/www/wp-content/uploads/2014/09/nuclear-cost_repo...

16. Geert De Clercq and Kentaro Hamada, 3 Feb 2017, 'Battered Toshiba seeks exit from UK, India in nuclear retreat: sources', www.reuters.com/article/us-toshiba-accounting-idUSKBN15I0VG

17. World Nuclear News, 14 Feb 2017, 'NuGen confirms Toshiba commitment to Moorside', www.world-nuclear-news.org/C-NuGen-confirms-Toshiba-commitment-to-Moorsi...

18. Steve Kidd, 7 April 2017, 'The future of the nuclear sector – is innovation the answer?', www.neimagazine.com/opinion/opinionthe-future-of-the-nuclear-sector-is-i...

19. 9 April 2017, 'Global nuclear giants go bust, should India celebrate?', http://economictimes.indiatimes.com/articleshow/58091514.cms

Will Westinghouse and Toshiba survive?

Nuclear Monitor Issue: 
#841
4632
12/04/2017
Jim Green ‒ Nuclear Monitor editor
Article

On March 29, the day that Westinghouse filed for Chapter 11 bankruptcy protection in New York, Bloomberg noted: "Westinghouse Electric Co., once synonymous with America's industrial might, wagered its future on nuclear power ‒ and lost."1

Whether Westinghouse will survive is an open question. Toshiba said on March 29 that Westinghouse has debts totalling US$9.8 billion and the bankruptcy filing is a clear indication that the company's viability is in doubt.2

Toshiba would sell Westinghouse if it could find a buyer, but it can't. Toshiba has tried but failed to sell Westinghouse several times already.3 Incredibly, Toshiba chief executive Satoshi Tsunakawa said in mid-March that Toshiba might have to pay a buyer to take Westinghouse off its hands.4 Presumably a utility or company willing to accept Westinghouse (along with a payment) would also be taking on a debt load as well as future risks associated with Westinghouse's nuclear business.

The Financial Times reported on March 5: "Mitsubishi this month ruled out rescuing the US company, citing its partnership with Areva, the troubled French reactor designer. Hitachi, which makes reactors with GE, also said it would not invest in Westinghouse, highlighting technology differences. GE is also thought to be highly unlikely to have any interest in Westinghouse. GE declined to comment. EDF, the French power company that is planning to buy a controlling stake in Areva's reactor business, is not expected to pursue Westinghouse. An EDF spokesperson said buying Westinghouse was "not in our plan"."3

South Korea's Kepco is seen as a possible buyer of Westinghouse, or parts of Westinghouse, and Kepco is also seen as a possible saviour of Toshiba's NuGen reactor project at Moorside in the UK. George Borovas from law firm Shearman & Sterling said: "It is therefore possible that some kind of 'package deal' could be structured for a strategic Korean investment into Westinghouse and NuGen at the same time."3

But Suh Kyun-ryul, professor of atomic engineering at Seoul National University, asked: "Why should [Kepco] take such big financial risks by taking over a troubled business amid the gloomy industry outlook?"3 And Kepco president Cho Hwan-eik was unequivocal in his comments on March 22: "We have no plan to acquire Toshiba's stake [in Westinghouse] ... there is no role for us there".5

There is speculation that Chinese utilities might be interested in buying Westinghouse ... if only because just about every other possibility has been ruled out.6 None of the speculation about a Chinese buy-out addresses the point that Chinese interests are no more likely to be interested in a bankrupt company than anyone else. Speculation about a Chinese buy-out has been laced with warnings about the 'need' to keep Westinghouse out of Chinese hands for various non-descript 'national interest' and 'national security' reasons.7

Bloomberg reports that Westinghouse has been a repeated target of Chinese espionage.7 Five Chinese military officials were indicted in absentia in 2014 for allegedly stealing trade secrets from Westinghouse through computer hacks, and China General Nuclear Power Corp. was indicted in 2016 for conspiring to steal restricted nuclear technology from Westinghouse.7

US officials are reportedly examining three options to keep Westinghouse out of Chinese hands: blocking a sale to a Chinese buyer (assuming there is a Chinese buyer ... which seems to be the elephant in the room ... at the moment there isn't a buyer); encouraging a bid from US investors or US-allied foreign investors; or direct US government investment in Westinghouse in return for an equity stake.7

A carve-up of Westinghouse is possible with profitable operations sold off to lessen existing debts. Jose Emeterio Gutierrez, interim president and CEO of Westinghouse, said in early April: "It's a reality that we have this problem with the construction of the US AP1000 projects, but it's also true that the rest of the company is in good shape. It's a healthy business. We don't have significant problems."8

But Westinghouse may have to sell profitable operations to stave off bankruptcy and may be left with little or nothing other than the high-risk, heavily-indebted AP1000 reactor projects in the US. George Borovas from law firm Shearman & Sterling said: "Any sale would likely be preceded by a restructuring of Westinghouse so that the 'new Westinghouse' being sold would be free of any liabilities arising from the current new build projects that Westinghouse is constructing."6

Toshiba itself is already in precisely that situation: reluctantly selling profitable parts of its business to stave off bankruptcy and being left holding an unwanted atomic bomb.

Currently, Toshiba is being forced to increase its 87% stake in Westinghouse. Japanese company IHI Corporation is exercizing its put option to sell its 3% stake of Westinghouse to Toshiba for US$157 million.9 KazAtomProm owns the remaining 10% of Westinghouse and may also exercize its right to sell its stake to Toshiba on or after 1 October 2017.10

On a brighter note, Jose Emeterio Gutierrez, interim president and CEO of Westinghouse, recently told staff that the company's decommissioning business currently brings in almost US$100 million a year and could easily double or triple in the next few years.8 He pointed to plants at risk of early closure in the US and fleets in countries like Germany that are phasing out nuclear power altogether after the Fukushima disaster. "The market is huge. Also, it's not a market that is short term," he said.8

Will Toshiba survive?

Toshiba said in February that it expects to book a US$6.3 billion writedown on Westinghouse11, on top of a US$2.3 billion writedown in April 2016.12 The losses exceed the US$5.4 billion Toshiba paid when it bought a majority stake in Westinghouse in 2006.11

Now Toshiba says there is "substantial doubt about the Company's ability to continue as a going concern".13

Toshiba's demise is a crushing blow to Japan's nuclear industry ... which was already crushed by the Fukushima disaster. Nikkei Asian Review commented on April 10:14

"Japan's nuclear power industry is at the most critical juncture in its history. Demand for new reactors has dried up at home following the Fukushima nuclear disaster and dismal prospects for export are dual menaces threatening the fate of the country's nuclear technology. No domestic construction on a new reactor has begun for the past eight years. The catastrophic accident at the Fukushima Daiichi nuclear power plant in 2011 blew a hole in the industry's plans. The picture for exports of Japanese nuclear power technology looks just as gloomy. Japanese reactor manufacturers and suppliers of key components are now facing the possible loss of their technological viability."

Toshiba's decision to have its subsidiary Westinghouse file for bankruptcy protection may put some boundaries around future liabilities and losses, particularly those associated with the US AP1000 projects. But Toshiba will still be responsible for guaranteeing roughly ¥650 billion (US$5.9bn) worth of Westinghouse debt if the nuclear projects are delayed due to the bankruptcy filing, and Toshiba also needs to set aside about ¥170 billion (US$1.54bn) in loan-loss provisions in case loans to Westinghouse prove unrecoverable.15

The US government is also on the hook due to its US$8.3 billion loan guarantee for the two AP1000 reactors under construction in Georgia.16 A Department of Energy spokesperson said the agency is "keenly interested" in Westinghouse's bankruptcy proceedings and that the administration expects all companies to "honor their commitments" to finish the project.16 If Westinghouse cannot complete the reactors, repayment of the loans will likely be delayed, in which case the government would take on the debt. Nikkei Asian Review reported on March 11: "It remains unclear how Washington and Toshiba would split the costs in this case. But the possibility that American taxpayers could bear some of the burden has spurred negotiations involving the U.S. and Japanese governments to settle the matter."17

The BBC noted on March 29 that Toshiba's share-price has been in freefall, losing more than 60% since the company first unveiled the massive cost overruns with US reactor projects in December 2016.18

Standard & Poor's cut its credit rating on Toshiba on March 17, down two notches to CCC-, pushing it further into junk status after previous downgrades in December and January.19

Toshiba is selling profitable businesses to stave off bankruptcy, including its highly-profitable memory chip business. Toshiba will need to earn about ¥1 trillion (US$9.1bn) from the sale to bring its net worth out of the red.15

Toshiba, Hitachi and Mitsubishi Heavy Industries were planning an integration of their nuclear fuel operations due to the protracted weakness of Japan's nuclear industry ‒ but that has stalled due to Toshiba's current crisis.20

A broader integration between the three companies would make sense according to Tom O'Sullivan from energy consultancy Mathyos Japan. "It would make sense. There's no point in having three companies chasing a dying market in Japan," he said.21 But Mitsubishi president and chief executive Shunichi Miyanaga ruled out a merger in mid-February22 and a Hitachi spokesperson said there are no discussions on merging the companies' overall nuclear operations.21 Nevertheless, the Japanese government might use whatever leverage it has to force a tie-up between the three companies.

There are conflicting reports as to whether Tokyo might use government funds to rescue Toshiba. Most of the statements from the government suggest that there will not be a government bail-out.23 But Nikkei Asian Review reported on March 18 that the Toshiba/Westinghouse crisis was discussed at a meeting between Japan's minister of economy, trade and industry and the US commerce secretary and energy secretary, and speculated that the two governments "seem to be softening on their previous stance that the company's restructuring is a private-sector matter."24

In February, Toshiba said it plans to exit the reactor construction business and focus its nuclear business on design, equipment supply and engineering services.25 That probably remains the plan, but comments by Toshiba chief executive Satoshi Tsunakawa on March 29 suggest a more complete withdrawal from the nuclear industry outside of Japan. "This is a de facto withdrawal from the overseas nuclear business for us. Therefore, we don't see any more risk," he said.

Whatever Toshiba does, it is still on the hook for multi-billion dollar liabilities associated with the AP1000 projects in the US.

References:

1. Chris Martin and Chris Cooper, 29 March 2017, 'How an American Tech Icon Bet on Nuclear ‒ and Lost its Way', www.bloomberg.com/news/articles/2017-03-29/how-an-american-tech-icon-bet...

2. Diane Cardwell and Jonathan Soble, 29 March 2017, 'Westinghouse Files for Bankruptcy, in Blow to Nuclear Power', www.nytimes.com/2017/03/29/business/westinghouse-toshiba-nuclear-bankrup...

3. Kana Inagaki and Song Jung-a, 5 March 2017, 'Kepco seen as potential buyer for Toshiba's ailing nuclear unit', www.ft.com/content/32f14d76-f8e6-11e6-9516-2d969e0d3b65
4. Makiko Yamazaki and Taiga Uranaka, 14 March 2017, 'Toshiba pushes sale of nuclear unit Westinghouse as crisis deepens', www.reuters.com/article/us-toshiba-accounting-idUSKBN16L02X

5. Song Jung-a in, 22 March 2017, 'Kepco rules out buying Westinghouse stake', www.ft.com/content/cd70d392-0ec8-11e7-b030-768954394623

6. Stephen Stapczynski, 13 March 2017, 'Troubled Nuclear Builder Seen Best Fit for Asian Ambitions', www.bloomberg.com/news/articles/2017-03-13/troubled-nuclear-builder-seen...

7. Jennifer Jacobs, Saleha Mohsin, and Jennifer A Dlouhy, 5 April 2017, 'Trump Team Takes Steps to Keep Chinese From Westinghouse', www.bloomberg.com/politics/articles/2017-04-04/trump-officials-alarmed-c...

8. Anya Litva, 11 April 2017, 'Westinghouse CEO tries to spread optimism despite bankruptcy', http://powersource.post-gazette.com/powersource/companies/2017/04/11/Wes...

9. Tom Hals and Jessica DiNapoli, 27 March 2017, 'Factbox: Toshiba's options in U.S. nuclear bankruptcy', www.reuters.com/article/us-toshiba-westinghouse-factbox-idUSKBN16Y2QP?il=0

10. World Nuclear News, 29 March 2017, 'Westinghouse files for US bankruptcy protection', www.world-nuclear-news.org/C-Westinghouse-files-for-US-bankruptcy-protec...

11. BBC, 14 Feb 2017, 'Toshiba chairman quits over nuclear loss', www.bbc.com/news/business-38965380

12. Reuters, 26 April 2016, 'Toshiba Takes $2.3 Billion Writedown on U.S. Nuclear Unit Westinghouse', http://fortune.com/2016/04/26/toshiba-writedown-westinghouse-nuclear/

13. Toshiba Corporation, 11 April 2017, 'Toshiba Announces Consolidated Results for the First Nine Months and the Third Quarter for Fiscal Year 2016, Ending March 2017', www.toshiba.co.jp/about/ir/en/finance/er/er2016/q3/ter2016q3e.pdf

14. Nikkei Asian Review, 10 April 2017, 'Japan's nuclear technology faces extinction', http://asia.nikkei.com/Business/Trends/Japan-s-nuclear-technology-faces-...

15. Nikkei Asian Review, 6 April 2017, 'Cutting Westinghouse loose puts Toshiba in a deeper hole', http://asia.nikkei.com/magazine/20170406/Business/Cutting-Westinghouse-l...

16. Peter Maloney, 3 April 2017, 'Westinghouse bankruptcy puts $8.3B in federal loan guarantees for Vogtle plant at risk', www.utilitydive.com/news/westinghouse-bankruptcy-puts-83b-in-federal-loa...

17. Nikkei Asian Review, 11 March 2017, 'Toshiba scrambles to stem further bleeding from Westinghouse', http://asia.nikkei.com/Spotlight/Toshiba-in-Turmoil/Toshiba-scrambles-to...

18. BBC, 29 March 2017, 'Toshiba's Westinghouse files for US bankruptcy', www.bbc.com/news/business-39424634

19. AFP, 17 March 2017, 'S&P cuts troubled Toshiba's credit rating', www.businesstimes.com.sg/consumer/sp-cuts-troubled-toshibas-credit-rating

20. Japan Times, 23 Feb 2017, www.japantimes.co.jp/news/2017/02/23/business/hitachi-toshiba-mitsubishi...

21. Aaron Sheldrick, 31 March 2017, 'Big in Japan? Hope at home for Toshiba's nuclear arm after U.S. debacle', www.reuters.com/article/us-toshiba-nuclear-idUSKBN17211S

22. Financial Times, 16 Feb 2017, 'Mitsubishi Heavy rules out Toshiba nuclear rescue', www.ft.com/content/0238df8c-f44f-11e6-8758-6876151821a6

23. Samantha Cheh, 3 April 2017, 'Never-ending misfortunes: Toshiba stuck in the news cycle from hell', http://techwireasia.com/2017/04/toshiba-stuck-newscycle-hell/

24. Nikkei Asian Review, 18 March 2017, 'Toshiba's trials entangle Tokyo, Washington', http://asia.nikkei.com/Spotlight/Toshiba-in-Turmoil/Toshiba-s-trials-ent...

25. Makiko Yamazaki, 14 Feb 2017, 'Delays, confusion as Toshiba reports $6 billion nuclear hit and slides to loss', http://uk.reuters.com/article/us-toshiba-accounting-idUKKBN15T033

26. Russell Gold and Mayumi Negishi, 31 March 2017, 'Ire at Toshiba's nuclear backdown', www.wsj.com/articles/toshibas-westinghouse-electric-files-for-bankruptcy...

U.S. small reactor project just got smaller

Nuclear Monitor Issue: 
#840
4628
21/03/2017
Jim Green ‒ Nuclear Monitor editor
Article

The mPower small modular reactor (SMR) project in the USA just got much smaller: it has been abandoned.

mPower was conceived in 2008 and announced to the world in June 2009. In July 2010, Babcock & Wilcox announced an alliance with Bechtel called Generation mPower. At the same time, Babcock & Wilcox announced that it would build an mPower test facility in Virginia, part-funded by a US$5 million grant from the Virginia Tobacco Indemnification and Community Revitalisation Commission.1

Generation mPower planned to apply to the Nuclear Regulatory Commission (NRC) for design certification by 2013.1 The company aimed for NRC certification and a reactor construction permit in 2018, and commercial operation of the first two units in 2022.2

The idea was to produce scaled-down (195 MWe) pressurized light water reactors (PWR), drawing on decades of worldwide experience with (larger) PWRs and thus making NRC licensing simpler and quicker.3

Experienced, cashed-up companies ... a conventional reactor design ... R&D funding support from Virginia and from the federal Department of Energy ... what could go wrong?

It didn't take long for the project to fall apart. In 2013 Babcock & Wilcox said it intended to sell a majority stake in the mPower joint venture, but in February 2014 announced it was unable to find a buyer. In April 2014, Babcock & Wilcox announced it was sharply reducing investment in mPower to US$15 million annually, citing the inability "to secure significant additional investors or customer engineering, procurement and construction contracts to provide the financial support necessary to develop and deploy mPower reactors".1

More than 200 engineers, project managers, administrators, and sales-people were sacked in 2014.4

The Tennessee Valley Authority had been named as a lead customer and plans were developed to build up to six mPower reactors at TVA's Clinch River site at Oak Ridge, Tennessee.5 But in 2014, TVA ended the agreement to share design and licensing costs.

In November 2012, the US Department of Energy (DOE) announced that it would subsidize mPower development in a five-year cost-share agreement. The DOE's contribution would be capped at US$226 million, of which US$111 million was subsequently paid. That funding tap was switched off after Generation mPower downsized the project in 2014, but the company was not required to repay any of the DOE funding.2

The Generation mPower companies spent more than US$375 million on mPower to February 2016.2 Add that to the DOE's US$111 million contribution, and overall expenditure was nudging US$500 million.

In March 2016, Babcock & Wilcox and Bechtel came to an arrangement whereby Bechtel would attempt to secure further funding from third parties, including the DOE.2 However those efforts have been abandoned. On 3 March 2017, Bechtel notified Babcock & Wilcox that it was unable to secure sufficient funding and was invoking a settlement provision to terminate the joint agreement. Generation mPower will terminate the program in the next few months.3

Bechtel spokesperson Fred deSousa said: "Bringing a new reactor program through the design, engineering and regulatory process is a very complex and expensive proposition. It needed a plant owner with an identified location and an investor willing to wait a significant period of time for a return, and these were not available."6

Rod Adams ‒ who worked for B&W mPower as the Process and Procedure Development Lead from 2010 to 2013 ‒ gives some reasons for the demise of mPower:3

  • The financial crisis of 2008.
  • The continuing reduction in natural gas prices.
  • Management challenges associated with a fundamentally unequal partnership between two large, established companies, each with their own culture.
  • "The aggressive effort to market the Fukushima events as a nuclear catastrophe in order to suppress a growing interest in nuclear energy development".
  • "The entry of activist investors that purchased a large portion of B&W's stock and forced a major reevaluation of the project and the overall corporate structure".

Adams' statement about aggressive efforts to market Fukushima as a nuclear catastrophe is a cheap shot at environmentalists and other nuclear critics. His statement about "activist investors" is more intriguing. That's a story he discussed in a 2014 article.4 He notes that the February 2014 announcement to sharply reduce investment in mPower followed the purchase of Babcock & Wilcox shares by Wall Street investment funds. Those investment funds purchased enough stock to impose a restructuring plan that directed spending away from mPower. Their motives, according to Adams, were to prioritize short-term profits over medium-term investments, and to protect their investments in fossil fuels by killing off a potential competitor. And their statements about a lack of customer and investor interest were a concocted cover story.

So mPower was wedged between aggressive anti-nuclear marketeers and fossil-fueled corporate interests. Perhaps. Adams also offers a tendentious conspiracy theory about a "sabotage effort from within the nuclear industry".4

A future for SMRs?

SMRs continue to be the subject of endless hype. There's quite a bit of R&D ‒ in the US, the UK, South Korea, China and elsewhere. But only a few SMRs are under construction: one in Argentina, a twin-reactor floating nuclear power plant in Russia, and three SMRs in China (including two high-temperature gas-cooled reactors).2

The broad picture for SMRs is much the same as that for fast neutron reactors: lots of hot air, some R&D, but few concrete plans and even fewer concrete pours.7 Michael McGough from NuScale, a US SMR company, said: "It's one thing to talk about it. It's another thing to actually build it and do it."8

A February 2017 Lloyd's Register report surveyed almost 600 energy industry professionals and experts and the dominant view was that SMRs have a "low likelihood of eventual take-up, and will have a minimal impact when they do arrive".9,10 Likewise, a 2014 Nuclear Energy Insider report, drawing on interviews with more than 50 "leading specialists and decision makers", pointed to a "pervasive sense of pessimism" resulting from abandoned and scaled-back SMR programs.11

No company or country is seriously considering building the massive supply chain that is at the very essence of the concept of SMRs ‒ mass, modular construction. Yet without that supply chain, SMRs will be expensive curiosities. As pro-nuclear commentator Dan Yurman noted in January 2016, "the real challenge will be to book enough orders to bring investors to the table to build factories to turn out SMRs on a cost effective production line basis."12

Thomas W. Overton, associate editor of POWER magazine, wrote in a September 2014 article: "At the graveyard wherein resides the "nuclear renaissance" of the 2000s, a new occupant appears to be moving in: the small modular reactor (SMR). ... The SMR concept disdains ... economies of scale in favor of others: large-scale standardized manufacturing that will churn out dozens, if not hundreds, of identical plants, each of which would ultimately produce cheaper kilowatt-hours than large one-off designs. It's an attractive idea. But it's also one that depends on someone building that massive supply chain, since none of it currently exists. ... That money would presumably come from customer orders − if there were any."13

So how many orders would a manufacturer need to go the financial markets to get funding to build a supply chain to make lots of SMRs? Dan Yurman writes: "The answer, according to David Orr, head of nuclear business development for Rolls-Royce in the UK, ... is a minimum of about four dozen units and six dozen would be better. Those are high numbers which make some proponents of SMRs unhappy. The reason is this estimate means that turning out the first 50 or so SMRs for any firm in the business could be a high wire act."12

A recent article from two pro-nuclear lobby groups, Third Way and Breakthrough Institute, argues that with small reactor concepts, "there is ample opportunity for learning by doing and economies of multiples for several reactor classes and designs".14 But the mPower project cost close to US$500 million. That sort of expensive failure can't be repeated indefinitely.

NuScale has progressed further than mPower ‒ it recently submitted an application to the NRC for design certification. To get to this point has cost US$500 million and taken two million labor-hours over eight years.15 NRC certification will likely take an additional three years.15 NuScale estimates that by the time it gets through the NRC licensing process, it will have spent US$1 billion overall (including a significant DOE contribution for R&D).16

And then NuScale will face the problem that there is a long way from NRC certification to the completion of its first SMR, and further still from the first reactor to mass production for a mass market.

NuScale says the aim is to replace "economy-of-scale with economy-of-the-assembly-line".17 But the risk is that SMR developers will end up with neither. In the absence of a mass supply chain, costs will be exorbitant. The construction cost of Argentina's 25 MWe CAREM reactor is estimated at US$446 million, which equates to a whopping US$17.8 billion / gigawatt (GW).18 Estimated construction costs for the Russian floating SMR have increased more than four-fold and now equate to over US$10 billion / GW.19 For comparison, the estimated cost of the planned Hinkley Point EPR reactors in the UK is US$7 billion / GW or US$9.5 billion / GW including finance.

References:

1. B&W mPower, https://en.wikipedia.org/wiki/B%26W_mPower

2. World Nuclear Association, March 2017, 'Small Nuclear Power Reactors', www.world-nuclear.org/information-library/nuclear-fuel-cycle/nuclear-pow...

3. Rod Adams, 13 March 2017, 'Bechtel And BWXT Quietly Terminate mPower Reactor Project', www.forbes.com/sites/rodadams/2017/03/13/bechtel-and-bwxt-quietly-termin...

4. Rod Adams, 9 May 2014, 'B&W mPower cover story about lack of interest is bogus',  https://atomicinsights.com/bw-mpower-cover-story-lack-interest-bogus/

5. World Nuclear News, 14 April 2014, 'Funding for mPower reduced', www.world-nuclear-news.org/C-Funding-for-mPower-reduced-1404141.html

6. Margaret Carmel, 15 March 2017, 'BWXT, Bechtel shelve mPower program', www.roanoke.com/news/bwxt-bechtel-shelve-mpower-program/article_9d2f050a...

7. Nuclear Monitor #831, 5 Oct 2016, 'The slow death of fast reactors', www.wiseinternational.org/nuclear-monitor/831/slow-death-fast-reactors

8. John Fialka, 7 March 2017, 'In nuclear poker, who's betting on small reactors?', www.eenews.net/stories/1060051025

9. Lloyd's Register, February 2017, 'Technology Radar – A Nuclear Perspective: Executive summary', http://info.lr.org/techradarlowcarbon

10. World Nuclear News, 9 Feb 2017, Nuclear more competitive than fossil fuels: report', www.world-nuclear-news.org/EE-Nuclear-more-competitive-than-fossil-fuels...

11. Nuclear Energy Insider, 2014, "Small Modular Reactors: An industry in terminal decline or on the brink of a comeback?", http://bit.ly/smrscomeback

12. Dan Yurman, 21 Jan 2016, 'The UK plans to become a global center for small nuclear reactors. Can it succeed?', https://neutronbytes.com/2016/01/21/the-uk-plans-to-become-a-global-cent...

13. Thomas W. Overton, 1 Sept 2014, 'What Went Wrong with SMRs?', www.powermag.com/what-went-wrong-with-smrs/

14. Josh Freed, Todd Allen, Ted Nordhaus, and Jessica Lovering, 28 Feb 2017, 'Do We Need An Airbus for Nuclear?', https://medium.com/third-way/do-we-need-an-airbus-for-nuclear-7f1d2afcea8b

15. Andrew Follett, 17 March 2017, 'After Years Of Delays, Gov't Finally To Review 1st Advanced Nuclear Reactor', http://dailycaller.com/2017/03/17/after-years-of-delays-govt-finally-to-...

16. 4 May 2016, 'NuScale announces roadmap for SMR operation at Idaho site by 2024', https://neutronbytes.com/2016/05/04/nuscale-announces-roadmap-to-smr-ope...

17. NuScale, 'Construction Cost for a NuScale Nuclear Power Plant', www.nuscalepower.com/smr-benefits/economical/construction-cost

18. World Nuclear News, 10 Feb 2014, 'Construction of CAREM underway', www.world-nuclear-news.org/NN-Construction-of-CAREM-underway-1002144.html

19. Charles Digges, 25 May 2015, 'New documents show cost of Russian floating nuclear power plant skyrockets', http://bellona.org/news/nuclear-issues/2015-05-new-documents-show-cost-r...

Nuclear lobbyists argue about how to solve the nuclear power crisis

Nuclear Monitor Issue: 
#839
4626
08/03/2017
Jim Green ‒ Nuclear Monitor editor
Article

Michael Shellenberger from the US-based Breakthrough Institute (and sundry other pro-nuclear lobby groups) offers the following explanation for the "crisis that threatens the death of nuclear energy in the West":1

  • Lack of standardization and scaling: The constant switching of designs deprives the people who build, operate and regulate nuclear plants of the experience they need to become more efficient.
  • The "war" on nuclear power by the environmental movement ... "a powerful, $500 million annual lobby that does everything it can to deliberately make nuclear expensive."
  • Too much focus on machines, too little on human beings: "Areva, Toshiba-Westinghouse and others claimed their new designs would be safer and thus, at least eventually, cheaper, but there were always strong reasons to doubt such claims. First, what is proven to make nuclear plants safer is experience, not new designs. Human factors swamp design. ... In fact, new designs risk depriving managers and workers the experience they need to operate plants more safely, just as it deprives construction companies the experience they need to build plants more rapidly."

Shellenberger has a three-point rescue plan:1

  • 'Consolidate or Die': "If nuclear is going to survive in the West, it needs a single, large firm ‒ the equivalent of a Boeing or Airbus ‒ to compete against the Koreans, Chinese and Russians."
  • 'Standardize or Die': He draws attention to the "astonishing" heterogeneity of planned reactors in the UK and says the UK "should scrap all existing plans and start from a blank piece of paper", that all new plants should be of the same design and "the criteria for choosing the design should emphasize experience in construction and operation, since that is the key factor for lowering costs."
  • 'Scale or Die': Nations "must work together to develop a long-term plan for new nuclear plant construction to achieve economies of scale", and governments "should invest directly or provide low-cost loans."

Josh Freed and Todd Allen from pro-nuclear lobby group Third Way, and Ted Nordhaus and Jessica Lovering from the Breakthrough Institute, argue that Shellenberger draws the wrong lessons from Toshiba's recent losses and from nuclear power's "longer-term struggles" in developed economies.2

They argue that "too little innovation, not too much, is the reason that the industry is on life support in the United States and other developed economies":2

  • The Westinghouse AP1000 represents a fairly straightforward evolution in light-water reactor design, not a radical departure as Shellenberger claims. Rather, it represents "just the sort of incremental innovation in design and operation that Shellenberger argues elsewhere holds the key to reducing nuclear costs."
  • Standardization is important but it is not a panacea. Standardization and building multiple reactors on the same site has limited cost escalation, not brought costs down. "France, the poster child for standardization and economies of multiples in light-water reactor design and deployment, has seen modest cost escalation over time, not cost declines."
  • Most of the causes of rising cost and construction delays associated with new nuclear builds in the US are attributable to the 30-year hiatus in US nuclear construction, not the novelty of the AP1000 design. The AP1000 projects in Georgia and South Carolina are "for most practical purposes ... a first-of-kind-build" and the same challenges would have been faced even if a Generation II plant had been chosen instead of the AP1000.
  • Reasonable regulatory reform will not dramatically reduce the cost of new light-water reactors, as Shellenberger suggests. Not even the most zealous reformers would advocate dispensing with expensive items such as containment domes or multiple redundant back up cooling systems.

They write this obituary for large light-water reactors:2

"If there is one central lesson to be learned from the delays and cost overruns that have plagued recent builds in the US and Europe, it is that the era of building large fleets of light-water reactors is over in much of the developed world. From a climate and clean energy perspective, it is essential that we keep existing reactors online as long as possible. But slow demand growth in developed world markets makes ten billion dollar, sixty-year investments in future electricity demand a poor bet for utilities, investors, and ratepayers.

"Liberalized electricity markets only further exacerbate the risk associated with these investments. Conventional light-water reactors are capital intensive, long-lived infrastructure that require central planning, cheap capital, and long operating lifetimes to pay off, none of which exist in liberalized markets. Neither standardized conventional light-water designs nor regulatory reform address any of these challenges, which are in fact the central challenges that investment in new nuclear capacity faces. ..."

"Standardization and learning by doing are key requirements for sustainable nuclear economics. But those criteria alone will be insufficient to make new nuclear an economically rational option so long as they are coupled to large light-water technology. Whether Gen II or Gen III, learning by doing and economies of multiples require sufficient replication to bring declining costs. That replication is unlikely so long as the reactor in question is a 1GW, multi-billion dollar proposition, at least in the United States and Western Europe."

A radical break

The four Third Way / Breakthrough Institute authors conclude that "a radical break from the present light-water regime ... will be necessary to revive the nuclear industry". Exactly what that means, the authors said, would be the subject of a follow-up article. So readers were left hanging ‒ will nuclear power be saved by failed fast-reactor technology3, or failed high-temperature gas-cooled reactors4-6 including failed pebble-bed reactors7, or by thorium pipe-dreams8 or fusion pipe-dreams9 or molten salt reactor pipe-dreams10 or small modular reactor pipe-dreams?11,12 Perhaps we've been too quick to write off cold fusion?

The answers came in a follow-up article on February 28.13 They want a thousand flowers to bloom, a bottom-up R&D-led nuclear recovery as opposed to Shellenberger's approach, which they characterize as "a massive, state-directed consolidation of the nuclear sector in developed economies" and a "single state-sponsored nuclear behemoth [that] would deploy a single standardized light-water reactor design".

They argue against top-down, state-led innovation: "State-led development of advanced designs, bringing together large incumbent firms and scientists from national laboratories failed in United States, France, Britain, Japan, and Germany in the 60's and 70's. It will likely fail as well in Korea, China, France, and Russia today."

The authors don't just want a new reactor type (or types), they have much greater ambitions for innovation in "nuclear technology, business models, and the underlying structure of the sector" and they note that "a radical break from the light water regime that would enable this sort of innovation is not a small undertaking and will require a major reorganization of the nuclear sector."

Beyond that, the authors offer Silicon Valley-inspired gobbledegook and flapdoodle rather than anything meaningful: "[R]adical nuclear innovation must be informed by markets, end users, and modern fabrication and manufacturing methods. This is centrally a job for entrepreneurial engineers, not scientists at national laboratories, technocrats at the Department of Energy, or division heads at Westinghouse or General Electric. Public policy that empowers nuclear innovation and entrepreneurship will need to support engineers and start-ups, not direct them."

To the extent that the four authors want to tear down the existing nuclear industry and replace it with a new one, they share some common ground with nuclear critics who want to tear down the existing nuclear industry and not replace it with a new one. Shellenberger also shares some common ground with nuclear critics: he thinks the UK should scrap all existing plans for new reactors and "start from a blank piece of paper"1 whereas nuclear critics think the UK should scrap all existing plans for new reactors and not start from a blank piece of paper.

Small reactors

The four Third Way / Breakthrough Institute authors argue that nuclear power must become substantially cheaper ‒ thus ruling out large conventional reactors "operated at high atmospheric pressures, requiring enormous containment structures, multiply redundant back-up cooling systems, and water cooling towers and ponds, which account for much of the cost associated with building light-water reactors."13

Substantial cost reductions will not be possible "so long as nuclear reactors must be constructed on site one gigawatt at a time. ... At 10 MW or 100 MW, by contrast, there is ample opportunity for learning by doing and economies of multiples for several reactor classes and designs, even in the absence of rapid demand growth or geopolitical imperatives."

Other than their promotion of small reactors and their rejection of large ones, the four authors are non-specific about their preferred reactor types. Any number of small-reactor concepts have been proposed.11

We've discussed small modular reactors (SMRs) frequently in Nuclear Monitor.14 The bottom line is that there isn't the slightest chance that they will fulfil the ambition of making nuclear power "substantially cheaper" unless and until a manufacturing supply chain is established at vast expense ... and even then it's far from certain that the power would be cheaper and unlikely that it would be substantially cheaper.

As things stand, no country, company or utility has any intention of betting billions on building an SMR supply chain. The prevailing skepticism is evident in a February 2017 Lloyd's Register report based on "insights and opinions of leaders across the sector" and the views of almost 600 professionals and experts from utilities, distributors, operators and equipment manufacturers. The report states that the potential contribution of SMRs "is unclear at this stage, although its impact will most likely apply to smaller grids and isolated markets."15 Respondents predicted that SMRs have a "low likelihood of eventual take-up, and will have a minimal impact when they do arrive".16

An analysis of SMRs in the Bulletin of the Atomic Scientists sums up the problems:17

"Without a clear-cut case for their advantages, it seems that small nuclear modular reactors are a solution looking for a problem. Of course in the world of digital innovation, this kind of upside-down relationship between solution and problem is pretty normal. Smart phones, Twitter, and high-definition television all began as solutions looking for problems. In the realm of nuclear technology, however, the enormous expense required to launch a new model as well as the built-in dangers of nuclear fission require a more straightforward relationship between problem and solution. Small modular nuclear reactors may be attractive, but they will not, in themselves, offer satisfactory solutions to the most pressing problems of nuclear energy: high cost, safety, and weapons proliferation."

References:

1. Michael Shellenberger, 17 Feb 2017, 'Nuclear Industry Must Change ‒ Or Die', www.environmentalprogress.org/big-news/2017/2/16/nuclear-must-change-or-die

2. Josh Freed, Todd Allen, Ted Nordhaus, and Jessica Lovering, 24 Feb 2017, 'Is Nuclear Too Innovative?', https://medium.com/third-way/is-nuclear-too-innovative-a14fb4fef41a

3. Nuclear Monitor #831, 5 Oct 2016, 'The slow death of fast reactors', www.wiseinternational.org/nuclear-monitor/831/slow-death-fast-reactors

4. Nuclear Monitor #823, 4 May 2016, 'The checkered history of high-temperature gas-cooled reactors', www.wiseinternational.org/nuclear-monitor/823/nuclear-news-nuclear-monit...

5. M. V. Ramana, April 2016, 'The checkered operational history of high-temperature gas-cooled reactors', Bulletin of the Atomic Scientists, http://dx.doi.org/10.1080/00963402.2016.1170395

6. Matthias Englert, Friederike Frieß and M. V. Ramana, Feb 2017, 'Accident Scenarios Involving Pebble Bed High Temperature Reactors', Science & Global Security, Vol.25 Iss.1, pp.42-55, http://dx.doi.org/10.1080/08929882.2017.1275320

7. Steve Thomas, 22 June 2009, 'The demise of the pebble bed modular reactor', http://thebulletin.org/demise-pebble-bed-modular-reactor

8. Nuclear Monitor #801, 9 April 2015, 'Thor-bores and uro-sceptics: thorium's friendly fire', www.wiseinternational.org/nuclear-monitor/801/thor-bores-and-uro-sceptic...

9. Fabian Schmidt, 18 Dec 2015, 'The rocky road to nuclear fusion power', www.dw.com/en/the-rocky-road-to-nuclear-fusion-power/a-18927630

10. James Temple, 24 Feb 2017, 'Nuclear Energy Startup Transatomic Backtracks on Key Promises', www.technologyreview.com/s/603731/nuclear-energy-startup-transatomic-bac...

11. M.V. Ramana and Zia Mian, 4 Sept 2014, 'Too much to ask: why small modular reactors may not be able to solve the problems confronting nuclear power', Nuclear Monitor #790, www.wiseinternational.org/nuclear-monitor/790/too-much-ask-why-small-mod...

12. Nuclear Monitor #800, 19 March 2015, 'Small modular reactors: a chicken-and-egg situation', www.wiseinternational.org/nuclear-monitor/800/small-modular-reactors-chi...

13. Josh Freed, Todd Allen, Ted Nordhaus, and Jessica Lovering, 28 Feb 2017, 'Do We Need An Airbus for Nuclear?', https://medium.com/third-way/do-we-need-an-airbus-for-nuclear-7f1d2afcea8b

14. https://wiseinternational.org/search/node/%22small%20modular%20reactor%22

15. Lloyd's Register, February 2017, 'Technology Radar – A Nuclear Perspective: Executive summary', http://info.lr.org/techradarlowcarbon

16. World Nuclear News, 9 Feb 2017, Nuclear more competitive than fossil fuels: report', www.world-nuclear-news.org/EE-Nuclear-more-competitive-than-fossil-fuels...

17. Kennette Benedict, 29 Jan 2014, 'Are small nuclear reactors the answer?', http://thebulletin.org/are-small-nuclear-reactors-answer

US nuclear bailout could cost $280 billion

Nuclear Monitor Issue: 
#833
4595
08/11/2016
Article

A new report by the Nuclear Information and Resource Service (NIRS) finds that a national bailout of nuclear energy patterned on the model advanced this year in New York State would cost ratepayers and taxpayers more than US$280 billion (€254 bn) by 2030.

Based on an independent analysis that over half of existing nuclear power in the US will be unprofitable by 2020, a narrower bailout would still cost US$160 billion by 2030. In addition to the enormous expense, NIRS found that one major side-effect of bailing out nuclear power on a large-scale basis would be the starving of renewable energy of needed capital.

Former Nuclear Regulatory Commission (NRC) Commissioner Peter Bradford, currently adjunct professor at Vermont Law School, said: "This report illustrates that the subsidies now being sought for nuclear units that are already massively subsidized may pay far too much for relatively little climate benefit. Worse still, they may slow the evolution of the electric industry to a less concentrated and more customer friendly form."

The report notes that from 2002‒2012, average operating costs for nuclear power plants rose by 50%. A significant factor in rising operating costs is the aging of the reactor fleet. The US now has the oldest fleet in the world, averaging 35.6 years, with 37% older than their original licensed lifespan of 40 years; another 37% are between 31 and 40 years old.

The report debunks claims that nuclear plants are unsubsidized or "under subsidized", listing a wide range of existing subsidies.

The report recommends, among other things, creating "proactive plans to replace or phase out nuclear, in concert with emissions reduction and renewable energy goals, and grid modernization initiatives."

NIRS has launched a petition to the next President urging the new administration to say no to a national nuclear bailout, and to end subsidies for nuclear and fossil fuels. To sign the petition please visit www.tinyurl.com/nirs-petition

The report is posted online: Tim Judson / Nuclear Information and Resource Service, November 2016, "Too Big to Bail Out: The Economic Costs of a National Nuclear Power Subsidy", http://bit.ly/too-big-to-bail-out-nuclear

A summary of the report is posted at: www.tinyurl.com/nirs-nov-2016

Watts Bar 2: Winning a battle while losing the war

Nuclear Monitor Issue: 
#832
4593
19/10/2016
Ken Bossong ‒ SUN DAY Campaign (www.sun-day-campaign.org)
Article

Ken Bossong puts the start-up of the first U.S. nuclear reactor in 20 years in perspective. To say that renewables are growing faster than nuclear is an understatement. Yet the nuclear industry is likely to trumpet Watts Bar 2 coming online as a big triumph. That is, once the reactor gets past the series of equipment failures that has repeatedly delayed the start-up since June. The Tennessee Valley Authority has spent nine years and more than US$4 billion to bring a 43-year old nuclear construction project to completion, when it could have used that time and money more productively on developing renewables and energy efficiency.

As it nears commercial operation, Watts Bar 2, the first "new" nuclear power plant in the United States in more than a generation, is proof that nuclear power has lost the race with safer, cleaner, and more economical renewable energy sources ‒ particularly solar and wind.

New electrical generation expected to be provided to the nation's grid by Watts Bar 2 during its first year of operating at full capacity has already been eclipsed several times over by new electrical generation provided by renewables.

For example, in just one year's time (i.e., July 1, 2015 to June 30, 2016) as Watts Bar 2 prepared for commercial operation, solar and wind alone increased their contribution to the nation's total electrical generation by an amount three to five times greater than that expected from a year's worth of Watts Bar 2 generation (detailed supporting calculations are posted on the GreenWorld website1).

If one adds in the net increase in generation from other renewable energy sources (i.e., hydropower, geothermal, and biomass) during the past year, the ratio of new renewables generation to that of Watts Bar 2 is even greater.

Looking ahead, the U.S. Energy Information Administration (EIA) is projecting 9.5% growth in electrical consumption from renewable sources during 2016 with further increases in the years to follow.2 Thus, the ratio of new renewable electricity capacity and generation vs. that from Watts Bar is likely to be even greater in the coming year and beyond.

Additionally, the very limited contribution to be made by Watts Bar-2 to the nation's electrical generating capacity hardly seems to have been worth the wait. Construction of Watts Bar-2 originally began in 1973, but was halted in 1985. The project was restarted in October 2007 and finally completed in summer 2016. Thus, not including the period while the plant construction was suspended, it took roughly 22 years to bring Watts Bar 2 online.3

During the eight-year period (2007-2015) required to build Watts Bar 2 following the resumption of construction, the reactor obviously produced no electricity. At the same time, however, new wind and solar plants ‒ which typically require only one or two years to construct and often less4 ‒ were coming online at an increasing pace and contributing to the nation's electricity supply. In fact, during the 2007‒2015 period, wind and solar produced about 15 times more electricity than is projected to come from Watts Bar 2 in the coming year.1

Moreover, since the resumption of construction of Watts Bar 2 in 2007, actual annual electrical generation by wind and solar has mushroomed. Today, those renewable sources are providing over 21 times more electricity each year than that expected annually from Watts Bar-2 ... and growing rapidly.1

Finally, when construction resumed on Watts Bar Unit 2 in 2007, TVA assumed the cost would be US$2.5 billion to complete. Upon completion, though, the actual costs totaled US$4.7 billion. This translates into a cost of approximately US$4.1 million per MW of capacity.5

While nuclear construction costs ‒ as represented by those for Watts Bar 2 ‒ have risen dramatically, those for solar and wind have plunged by 60‒70% over the same time period.

For example, in a November 2015 study, the New York investment bank Lazard reported current electricity production costs of nuclear power to be US$97‒136 per MWh. In comparison, the best large-scale photovoltaic power plants can now produce electricity at US$50 per MWh while onshore wind turbines can do so for US$32‒77 per MWh.6

Thus, as illustrated by Watts Bar 2, the pace at which new renewable capacity and actual electrical generation ‒ particularly wind and solar ‒ are exceeding that of nuclear, the long construction times to bring new nuclear reactors on line, and nuclear power's rapidly rising costs (compared to the dramatically declining costs for renewable sources) all underscore that the nuclear era is over. Watts Bar 2 is proof that nuclear power has lost the race against renewable energy.

References:

1. http://safeenergy.org/2016/10/05/watts-bar-2-winning-a-battle-while-losi...

2. www.eia.gov/forecasts/steo/report/renew_co2.cfm

3. https://morningconsult.com/alert/first-new-nuclear-reactor-almost-two-de...

4. See, for example, www.ewea.org/wind-energy-basics/faq

5. https://morningconsult.com/alert/first-new-nuclear-reactor-almost-two-de...

6. www.lazard.com/perspective/levelized-cost-of-energy-analysis-90

See also:

www.eia.gov/forecasts/aeo/electricity_generation.cfm

www.eia.gov/tools/faqs/faq.cfm?id=19&t=3

www.renewable-energysources.com/

www.nrel.gov/analysis/tech_lcoe.html

About: 
Watts Bar 2

The astronomical cost of new subsidies for old reactors in the U.S.

Nuclear Monitor Issue: 
#832
4591
19/10/2016
Tim Judson ‒ Executive Director, Nuclear Information & Resource Service
Article

The Nuclear Information & Resource Service (NIRS) has covered the unfolding story of the US nuclear power industry's clamor for new subsidies and bailouts since it started in 2014. Purely as a spectator sport, it might have been entertaining to watch the country's largest utilities go from proclaiming a "Nuclear Renaissance" a decade ago to peddling the message that "Nuclear Matters".1

But there is just too much at stake to treat it like a game. The utility industry's ramped-up efforts to block renewable energy and horde billions of our clean energy dollars to prop up old nukes risks both climate and nuclear disaster.2 Most of these proposals have been failing, thanks to the dogged persistence of grassroots activists and clean energy groups – and the outrageous sticker price of subsidies the industry needs. In fact, earlier this month, the two-year saga of FirstEnergy's US$8 billion nuclear-plus-coal bailout plan seems to have ended, with what amounts to a consolation gift to a couple FirstEnergy utility companies.3 Still an outrageous corporate giveaway, but no subsidies for nuclear or coal, even after it seemed like a done deal a few months ago.

But New York Governor Cuomo's decision in August to award a 12-year, US$7.6 billion subsidy package to four aging reactors ‒ including reversing Entergy's decision to close the FitzPatrick reactor in January 2017 ‒ has put wind into the industry's sails.4 Even that chapter isn't over, with lawsuits already being filed and several more expected.5 And environmental groups last week launched a new campaign to get Governor Cuomo to smell the coffee and cancel what will not only be the largest corporate give-away in the state's history, but relegate clean energy to second-class status behind old nukes.6

The lingering uncertainty hasn't stopped the industry PR and lobbying machines, though ‒ after all, billions of dollars in free money is at stake! Exelon, FirstEnergy, and other companies touted New York as a national model, and began urging states from Connecticut to Illinois to follow suit. Having to get each state to line up is going to be a tall order. In addition to FirstEnergy's failed Ohio bailout, Exelon hasn't been able to sell a much smaller five-year, US$1.5 billion subsidy in Illinois. And nukes in Connecticut and New Jersey are still making millions in profits each year, without heaping billions more in subsidies onto ratepayers' utility bills.7

So the industry has started pushing for a national bailout.8 NIRS thought we should take a look at what that might cost. Later this month, we will publish a report showing that a federal nuclear subsidy based on the EPA's estimate of the social cost of carbon would be massively expensive: up to US$280 billion (€255bn) by 2030. Even if it were only applied to reactors that are already becoming unprofitable ‒ more than half of the nukes in the country, according to a recent report9 ‒ it would total at least US$160 billion.

Please sign the NIRS petition

NIRS is launching a petition to the next President urging the new administration to say no to a national nuclear bailout, and to end subsidies for nuclear and fossil fuels. We hope you'll sign the petition and help us get to our goal of 100,000 signatures. Whoever wins the election in November needs to know that another nuclear bailout isn't going to fly with the American people. To sign the petition please visit www.tinyurl.com/nirs-petition

References:

1. https://safeenergy.org/2014/10/14/why-nuclear-matters-doesnt-matter/

2. https://safeenergy.org/2016/03/17/the-nuclear-industrys-game-plan-2/

3. www.utilitydive.com/news/updated-ohio-regulators-scale-back-firstenergy-...

4. https://safeenergy.org/2016/08/02/new-york-just-proved-why-bailing-out-n...

5. www.politico.com/states/new-york/city-hall/story/2016/10/national-advoca...

6. www.stopthecuomotax.org/

7. www.njspotlight.com/stories/16/08/04/new-jersey-unlikely-to-follow-new-y...

8. https://gain.inl.gov/SitePages/DOE%20Congressional%20Event.aspx

9. www.nytimes.com/2016/07/20/business/energy-environment/how-renewable-ene...

Parking Lot dumps in the USA

Nuclear Monitor Issue: 
#830
4585
20/09/2016
Mary Olson from the Nuclear Information and Resource Service writes:
Article

US Secretary of Energy Ernest Moniz was recently called to testify before the Senate Appropriations subcommittee on Energy and Natural Resources, now chaired by Lamar Alexander (Republican ‒ Tennessee) and ranking minority member Diane Feinstein (Democrat ‒ California).1 These two have participated in rare bi-partisanship on Capitol Hill in their effort to support their mutual friends: corporations that generate nuclear waste.

Alexander is even getting good at promoting nuclear energy as the prime solution to the climate crisis and labeling anyone opposed to moving the irradiated fuel rods from the reactor sites as "climate deniers." He has learned to speak of "signals" and that Congress and the Department of Energy (DOE) must signal that it will take the waste in order for corporations to decide to build more reactors, which he says are the only climate solution.

In answer to a series of questions from Feinstein, Moniz basically affirmed his DOE's charade: that it can, unilaterally, move ahead on creating "consent-based" consolidated storage sites (what we call a Parking Lot Dump) identical to the technology in use for dry storage at reactor sites ... but out in the middle of the "nowhere" of Texas, New Mexico and South Carolina.

These areas have inhabitants, who have not been asked at all if they "consent" to taking the nation's worst waste at sites that are designed for decades, at best, with no plan for how the waste will ever move again. It is the nuclear contractors who have "consented"! The people of the communities of Hobbs / New Mexico, Aiken / South Carolina, August / Georgia and Andrews County / Texas all have what Moniz does not: a future. Moniz and the entire Obama Administration gang will be exiting 1000 Independence Avenue by January 20, 2017.

So, not too much store should be given to the pronouncements in the hearing, nonetheless Moniz tipped his hand on a startling new theory: that the DOE can use its procurement authority to move ahead on contracting with private contractors to provide storage for commercial waste. While it may be true that the DOE has the ability to set up a contract, it remains unclear that it has the authority to take ownership of the waste and move it. One can congratulate Moniz on his slippery answers to the good Senator from California since he said DOE would need more work on "transportation of the waste" without sending the signal (per Alexander) in public that a change in the Nuclear Waste Policy Act is needed.

Given the coming Lame Duck Congress it is entirely possible that the DOE intends, as has happened repeatedly in the past, to sneak some small wording to make this change into another bill. US readers living in major urban transport are encouraged to call your congress members and warn them of this possibility ‒ and remind them that moving the waste would be a local Main Street issue.

"We all live in Nevada" was a cry of the 1990s; now we all live in the nuclear zones of Texas, New Mexico, South Carolina, or any other area at risk for consolidated storage, and also at all the closed reactor sites. We are one community. This is a value that we have built over the last four decades.

2017 is bringing other changes too: Harry Reid (Democrat ‒ Nevada) is retiring. Harry has been a one-man "Yucca Mountain-Protector" who, I think, has made Corbin Harney, the spiritual leader of the Western Shoshone Nation (who passed in 2007), proud. Reid has done more than any other person to stop Yucca Mountain. Yucca is a site that would fail the mission of waste isolation and thanks to Harry and many of us, and so many others, including Presidents Obama and Clinton, thankfully no waste there. Reid retires when Congress adjourns and we encourage you to send a thank-you card! Senator Harry Reid, 600 East William Street #304, Carson City, NV 89701 USA.

We as a community must keep these commitments! There is a lot of work ahead. In June the Nuclear Information and Resource Service convened a group of "planners" for a radwaste summit. This event is not outreach ‒ it is "in-reach" for activists who are committed (recently and long-term both) to finding ways to work together to prevent really bad waste plans. The event will be Dec. 2‒4 in Chicago. For more information, contact the author (maryo@nirs.org, ph. 828-252-8409).

1. Sept. 14 hearing of Senate Appropriations Subcommittee on Energy and Natural Resources, video and posted written testimony: www.appropriations.senate.gov/hearings/hearing-titled-the-future-of-nucl...

WIPP waste fiasco could cost US$2 billion

Nuclear Monitor Issue: 
#830
4583
20/09/2016
Jim Green ‒ Nuclear Monitor editor
Article

An analysis by the Los Angeles Times finds that costs associated with the February 2014 explosion in the world's only deep underground repository for nuclear waste ‒ the Waste Isolation Pilot Plant (WIPP) in the U.S. state of New Mexico ‒ could total US$2 billion (€1.8b).1

The direct cost of the clean-up is now estimated at US$640 million (€573m), based on a contract modification made in July with contractor Nuclear Waste Partnership. The cost-plus contract leaves open the possibility of even higher costs as the clean-up continues and, as the LA Times notes, it does not include the complete replacement of the contaminated ventilation system (which failed after the February 2014 explosion) or any future costs of operating the repository longer than originally planned.

The lengthy closure following the explosion could result in operations extending for an additional seven years, at an additional cost of US$200 million (€180m) per year or US$1.4 billion (€1.25b) in total. Thus direct (clean-up) costs and indirect costs could exceed US$2 billion. And further costs are being incurred storing waste at other nuclear sites pending the re-opening of WIPP. Federal officials hope to resume limited operations at the WIPP repository by the end of this year, but full operations cannot resume until a new ventilation system is completed in about 2021.1

The US$2 billion figure is similar to the costs associated with the 1979 Three Mile Island disaster. The clean-up of Three Mile Island was estimated to cost US$1 billion by 1993, or US$1.7 billion adjusted for inflation today.1

Yet another cost for the federal government was a US$74 million (€66m) settlement paid to the state of New Mexico in January 2016.2,3 The negotiated agreement relates to the 14 February 2014 explosion and a truck fire that took place nine days earlier. It sets out corrective actions that Los Alamos National Laboratory (LANL ‒ the source of the waste drum that exploded) and WIPP must take to resolve permit violations.

The US$74 million settlement will be in lieu of fines imposed on the federal government by the state of New Mexico for the two incidents. The money will be used to improve roads in south-eastern New Mexico and around Los Alamos; to repair and improve water infrastructure in Los Alamos and improve regional water quality; to enhance training and capabilities of local emergency responders; to construct an offsite emergency operations center near WIPP; and to pay for independent, external triennial reviews of environmental regulatory compliance and operations at LANL and WIPP.2,3

Government Accountability Office report

Given that the February 2014 fire and explosion exposed multiple levels of mismanagement and slack regulation, it was no surprise that the immediate response to the incidents was problematic. Everything that was supposed to happen, didn't ‒ and everything that wasn't supposed to happen, did.4

And in light of the systemic problems with management and regulation, it is no surprise that clean-up operations over the past 2.5 years have been problematic. An August 2016 report by the Government Accountability Office (GAO) found that the federal Department of Energy (DOE) did not meet its initial cost and schedule estimates for restarting nuclear waste disposal operations at WIPP, resulting in a cost increase of about US$64 million (€57m) and a delay of nine months.5

Worse still, mismanagement of the clean-up has involved poor safety practices. The GAO report states:5

"In May 2015, a DOE assessment found that pressure to achieve the March 2016 deadline contributed to poor safety practices in WIPP recovery efforts.6 In July 2015, DOE announced that it experienced delays in implementing the project baseline, including delays related to procuring equipment and delays related to correcting deficiencies in safety practices. As a result of these delays, the department announced that it would revise the WIPP project management baseline with the goal of developing a more realistic schedule. ...

"Nonetheless, the department still faces challenges in completing the recovery. For example, in March 2016, the Defense Nuclear Facilities Safety Board, which oversees DOE's nuclear facilities such as WIPP, reported7 that DOE had made progress in revising its nuclear safety plans at WIPP but additional work remained to address safety concerns to prevent a recurrence of the February 2014 radiological accident."

Independent Office of Enterprise Assessments report

Last year, the DOE's Independent Office of Enterprise Assessments released a report that found that WIPP clean-up operations were being rushed to meet the scheduled reopening date and this pressure was contributing to poor safety practices.6

The report states: "The EA analysis considered operational events and reviews conducted during May 2014 through May 2015 and identified a significant negative trend in performance of work. During this period, strong and unrealistic schedule pressures on the workforce contributed to poor safety performance and incidents during that time are indicators of the potential for a future serious safety incident."

The report points to "serious issues in conduct of operations, job hazard analysis, and safety basis."

Specific problems identified in the report include:

  • workers incorrectly changing filters resulting in five safety violations;
  • waste oil left underground for an extended period despite a renewed emphasis on combustible load reduction;
  • fire water lines inadequately protected against freezing;
  • inadequate processes leading a small fire underground, followed by the failure of workers and their supervisor to report the fire;
  • an operator improperly leaving a trainee to operate a waste hoist, the hoist being improperly used, tripping a safety relay and shutting down the hoist for hours;
  • an engineer violating two safety postings to remove a waste hoist safety guard;
  • workers removing a grating to an underground tank and not posting a barricade, causing a fall hazard;
  • a backlog of hundreds of preventive maintenance items; and
  • failing to properly track overtime such that "personnel may be working past the point of safety".

The Office of Enterprise Assessments' report concludes: "The issues discussed above could be leading indicators of a potentially serious incident in the future. Many more issues involving conduct of operations, maintenance, and inadequate controls also raise concerns about the possibility of a serious incident."

Earlier this year, clean-up work in two underground areas was suspended for one month due to poor air quality. Work was stopped on February 22 after equipment detected elevated levels of carbon monoxide and volatile organic compounds.8

Radioactive contamination of the underground remains a problem, albeit the case that the size of the restricted area has been significantly reduced. "The facility was never designed to operate in a contaminated state," said Don Hancock from the Southwest Research and Information Center. "It was supposed to open clean and stay clean, but now it will have to operate dirty. Nobody at the Energy Department wants to consider the potential that it isn't fixable."1

Los Alamos National Laboratory at fault as well

While a number of reports have exposed problems at WIPP, others have exposed serious problems at LANL. An April 2015 report by DOE's Accident Investigation Board (AIB) concluded that a culture of lax oversight and inadequate safety protocols and training at LANL led to the February 2014 explosion at WIPP.9

"If LANL had adequately developed and implemented repackaging and treatment procedures that incorporated suitable hazard controls and included a rigorous review and approval process, the [February 2014] release would have been preventable," the AIB report states.

"The ineffectiveness and weaknesses in the oversight activities were at all levels," said Ted Wyka, the DOE safety expert who led the investigation.10

The AIB report points to the failure of LANL to effectively review and control waste packaging, train contractors and identify weaknesses in waste handling. The board also found that LANL, contractor EnergySolutions and the National Nuclear Security Administration office at LANL failed to ensure that a strong safety culture existed at the lab.

The AIB found that workers did not feel comfortable raising safety issues and felt pressured to "get it done at all costs." LANL employees also raised concerns that workers were brought in with little or no experience and rushed through an inadequate training program. "As a result," the AIB report states, "there was a failure to adequately resolve employee concerns which could have identified the generation of non compliant waste prior to shipment" to WIPP.

The immediate cause of the 14 February 2014 explosion ‒ mixing nitrate wastes with an organic absorbent (kitty litter) ‒ was recognized as a potential problem in 2012, if not before. One worker told the AIB that when concerns were raised over the use of organic kitty litter as an absorbent, the employee was told to "focus on their area of expertise and not to worry about the other areas of the procedure."

Workers noticed foaming chemicals and orange smoke rising from containers of nuclear waste at LANL, but supervisors told them to "simply wait out the reaction and return to work once the foaming ceased and the smoke subsided," the AIB report states.

"Lessons were not learned," the report states.

No doubt some lessons have been learned as a result of the underground explosion at WIPP. But Greg Mello from the Los Alamos Study Group points to a problem that is likely to recur. LANL receives bonuses from the DOE for meeting goals such as removing nuclear waste by a certain deadline. That deadline pressure was very much in evidence at LANL in the lead-up to the WIPP accident and it will likely weaken safety practices in future. "You can't just say everyone has to try harder," Mello said. "Mixing profit, deadlines and dangerous radioactive waste is incompatible."11

A February 2016 report from the DOE's Office of the Inspector General (OIG) was equally scathing of LANL.12 "Overall, we found LANL's corrective action program did not always adequately address issues, did not effectively prevent their recurrence, and did not consistently identify systemic problems," the report said. OIG auditors reviewed 460 issues cited between January 2009 and February 2014, and found "significant weaknesses" in the lab's ability to analyze and document the root causes of problems ‒ some of them significant health and safety issues ‒ and find solutions.

LANL managers said they agreed with the OIG findings and were working to resolve problems. "The Laboratory is working closely with National Nuclear Safety Administration to address the findings of the audit report," LANL said in a statement.13

But the National Nuclear Safety Administration ‒ a semi-autonomous agency within the DOE ‒ is itself a big part of the problem of systemic mismanagement of nuclear sites.

National Nuclear Security Administration

A June 2015 Government Accountability Office report strongly criticized the National Nuclear Security Administration's (NNSA) oversight of contractors who manage the nation's nuclear weapons facilities.14 The report points to a litany of ongoing failures to properly oversee private contractors at eight nuclear sites, including those managing LANL. The report found that the NNSA lacked enough qualified staff members to oversee contractors, and it lacked guidelines for evaluating its contractors.

The Santa Fe New Mexican reported:15

"The GAO, which investigates federal agencies as requested by Congress, said the NNSA shortcomings stem from a 4-year-old experiment in reducing "overly prescriptive and burdensome" federal oversight of contractors by letting the private companies self-report their problems. NNSA staff told the GAO, however, that contractors aren't always as self-critical as they need to be in assessing their own performance.

"The so-called "contractor assurance system" isn't convincing the U.S. House Energy and Commerce Committee that the management of the nation's nuclear facilities is improving. Committee leaders from both major political parties pointed to a leaking container of radioactive waste from Los Alamos that shut down a nuclear waste repository near Carlsbad last year as one of the incidents that prove the NNSA and the Department of Energy have a long way to go in improving oversight of private contractors.

""For nearly two decades, this committee has uncovered management challenges facing the DOE complex involving contractor oversight. For the past five years, DOE has experimented with a new approach to contractor oversight that is not ready for prime time," committee Chairman Fred Upton, R-Mich., and ranking member Frank Pallone Jr., D-N.J., said in a statement. "We saw the results of this experiment at the Y-12 security breach in Tennessee three years ago and more recently in oversight failures that led to a costly incident at the Waste Isolation Pilot Plant site.""

Greg Mello from the Los Alamos Study Group was blunt in his criticism of the NNSA: "An agency that is more than 90 percent privatized, with barely enough federal employees to sign the checks and answer the phones, is never going to be able to properly oversee billion-dollar nuclear facilities of vast complexity and danger."15

References:

1. Ralph Vartabedian, 24 Aug 2016, 'Nuclear accident in New Mexico ranks among the costliest in U.S. history', www.latimes.com/nation/la-na-new-mexico-nuclear-dump-20160819-snap-story...

2. Albuquerque Journal Editorial Board, 29 Jan 2016, 'Editorial: WIPP deal puts feds on notice, cash in NM', www.abqjournal.com/714227/opinion/wipp-deal-puts-feds-on-notice-cash-in-...

3. WNN, 1 May 2015, 'Settlement agreed for WIPP incidents', www.world-nuclear-news.org/RS-Settlement-agreed-for-WIPP-incidents-01051...

4. 20 Nov 2014, 'WIPP waste accident a 'horrific comedy of errors'', Nuclear Monitor #794, www.wiseinternational.org/nuclear-monitor/794/wipp-waste-accident-horrif...

5. Government Accountability Office, Aug 2016, 'Nuclear Waste: Waste Isolation Pilot Plant Recovery Demonstrates Cost and Schedule Requirements Needed for DOE Cleanup Operations', www.gao.gov/products/GAO-16-608

6. Department of Energy, Independent Office of Enterprise Assessments, 2015, 'Office of Enterprise Assessments Operational Analysis of Safety Trends at the Waste Isolation Pilot Plant, May 2014 ‒ May 2015', www.wipp.energy.gov/Special/EA_memo_10152015.pdf

7. Defense Nuclear Facilities Safety Board, March 2016, 'Staff Issue Report: Waste Isolation Pilot Plant Documented Safety Analysis'.

8. 28 March 2016, 'Officials resume work at nuclear dump after safety pause', www.therepublic.com/2016/03/28/nm-nuke-repository-air-quality/

9. U.S. Department of Energy, Office of Environmental Management, April 2015, 'Accident Investigation Report Phase 2: Radiological Release Event at the Waste Isolation Pilot Plant, February 14, 2014', http://energy.gov/sites/prod/files/2015/04/f21/WIPP%20Rad%20Event%20Repo...

10. Patrick Malone, 23 April 2015, 'WIPP investigator can't rule out more leaks', www.santafenewmexican.com/news/local_news/wipp-investigator-can-t-rule-o...

11. Staci Matlock, 16 April 2015, 'Federal probe blames WIPP leak on LANL practices, bad chemical mix', www.santafenewmexican.com/special_reports/from_lanl_to_leak/federal-prob...

12. Department of Energy, Office of the Inspector General, Feb. 2016, 'Audit Report: Issues Management at the Los Alamos National Laboratory',

http://energy.gov/ig/downloads/audit-report-doe-oig-16-07

http://energy.gov/sites/prod/files/2016/03/f30/DOE-OIG-16-07.pdf

13. Staci Matlock, 1 March 2016, 'Federal audit finds more management problems at LANL', www.santafenewmexican.com/news/local_news/federal-audit-finds-more-manag...

14. Government Accountability Office, June 2015, 'National Nuclear Security Administration: Actions Needed to Clarify Use of Contractor Assurance Systems for Oversight and Performance Evaluation', www.gao.gov/assets/680/670721.pdf

15. Staci Matlock, 10 June 2015, 'Report blasts oversight of nuke lab contractors', www.santafenewmexican.com/news/local_news/report-blasts-oversight-of-nuk...

Fukushima lessons learned? The US National Academies of Science panel replicates the same collusion that led to the disaster

Nuclear Monitor Issue: 
#755
4291
18/12/2012
NIRS
Article

In March 2012, a panel was put together for a study by the National Academies of Sciences (NAS) to examine the lessons learned from the Fukushima accident. The study, entitled “Project on Lessons Learned from the Fukushima Nuclear Accident for Improving Safety and Security of U.S. Nuclear Plants,” was recommended by the Blue Ribbon Commission, mandated by the United States Congress, and sponsored by the United States Nuclear Regulatory Commission. As of December 2012, three meetings have been held to discuss and examine the causes of the Fukushima disaster, with a particular emphasis on safety systems and regulations.

The first meeting, held on July 18th and 19th 2012, introduced the provisional panel, which was challenged almost immediately given that many members of the panel had a pronounced pronuclear bias and would be unable to provide accurate assessments of the current safety culture. On July 17th, 2012, 15 national organizations including NIRS, 25 state organizations, and 47 individuals submitted a letter (1) to the NAS expressing these concerns. One reason these concerns were so pressing was due to a report filed issued by the Japanese Diet in Mid-July 2012 on the Fukushima accident. (2) 
Within this report from the Japanese Diet much of the blame for the accident was placed on a “collusive relationship” between the industry and regulators. This relationship ultimately led to a betrayal of the public’s right to be safe. The NAS panel selection appeared to be replicating the same disastrous Japanese pattern of collusion. 

The letter added that a major problem with the panel’s conflict and bias would be revealed when they would be unable to provide an accurate self-assessment of agency conduct and actions. Involved in this assessment would be the key players in the nuclear industry. Those players are the federal agencies, the Nuclear Regulatory Commission and the Department of Energy; the industry and other advocacy groups such as Institute on Nuclear Power Operations, Nuclear Energy Institute, the American Nuclear Society, and the Health Physics Society. In the U.S., as in Japan, there is a very symbiotic relationship between federal agencies and nuclear industry advocacy groups. Several members of the panel were directly involved with or associated with the entities mentioned above, causing the concerns about self-assessment, bias and conflict. The groups writing the letter were also concerned that the panel was completely devoid of nuclear critics, which would lead to an unbalanced view on safety issues and concerns. 
This meeting, as with the others that followed, provided very little in the way of ensuring that bias and conflict would not be an issue. This panel is yet another example that the nuclear industry has a powerful and dangerous stranglehold on the National Academy of Sciences, and can impede crucial safety improvements by packing a panel with pro-nuclear enthusiasts, rather than with individuals and scientists who can make changes for public good and protection. 

Sources: 
(1) http://www.nirs.org/fukushima/nasfu-kushimaltr%207-18-12.pdf
(2) http://www.nirs.org/fukushima/naiic_report.pdf

About: 
Fukushima-Daiichi-1Fukushima-Daiichi-2Fukushima-Daiichi-3Fukushima-Daiichi-4Fukushima-Daiichi-5Fukushima-Daiichi-6

First new “low-level” nuke dump in US in over 40 years controversial right-wing billionaire-owned company buries waste despite technical and legal challenges

Nuclear Monitor Issue: 
#755
4287
18/12/2012
Article

A new sacrifice area in West Texas on the New Mexico border opened up to commercial nuclear waste on 27 April 2012. It is the first “full service” dump in US since the 1980 Low Level Radioactive Waste Policy Act passed seeking new sites, and the first since the Barnwell, South Carolina dump opened in 1971. After decades of searching, cajoling, maneuvering, and a billion dollars or more spent in 18 or more states, the nuclear industry has managed to find a new hole in the ground to bury its waste.  Waste Control Specialists (WCS) joins the original 6 “low-level” waste dumps in the US that opened in the 1960s and 70s and the Utah EnergySolutions site.

Four of these sites are closed. The EnergySolutions (formerly Envirocare) dump in Utah, started taking abandoned radioactive waste in 1988 and kept expanding to take more kinds of nuclear and hazardous waste. But the Utah legislature has never let it accept the more concentrated Classes B and C “low-level” radioactive waste (some of which can give a lethal dose if exposed without shielding). WCS can take Classes A, B and C, commercial and weapons waste, mixed radioactive and hazardous, and hopes to expand to take even more.

Waste Control Specialists (WCS) is a subsidiary of Valhi, owned by multibil-lionaire Harold Simmons, one of the 50 wealthiest people in the U.S. and a major political donor in Texas and nationally. Simmons, who was a key funder of the “swiftboat” ads against former Presidential candidate John Kerry, and gave millions to Mitt Romney Super PACs, has used his influence from the start--first getting the state to change the law to allow a private company to own and run a nuclear waste site, then in getting a state license even though the full technical review team unanimously rejected it for not protecting the water. Three members of that team quit in disgust when the license was granted by the political appointees that head the agency. It was granted with over 90 “conditions” that it had not met.

Interestingly, while the application was under review by one state agency, the Texas Water Development Board chan-ged the location of the Ogallala Aquifer, moving the mapped boundary from the WCS site to miles away, at least partly based on information provided by WCS geologists. WCS sued a critic who charged the site threatens the aquifer and he has since become silent on the issue. The Ogallala Aquifer, one of the world’s largest fresh water aquifers, extends from Texas and New Mexico through the farm belt of the U.S. up to the Dakotas. Local residents who ques-tioned or challenged WCS have been harassed.

The Lone Star Sierra Club is still fighting for a hearing on the licensing. The court ruled that a contested case hearing should be held but the state and WCS have appealed. Waste is being buried even though the appeal is pending. Ironically the first waste to be buried was from a company outside the Texas-Vermont Compact. The dump had been touted to be exclusively for waste from the two Compact states only and its licensed capacity is less than the amount needed by generators in those two states. Regardless, the Texas and Vermont governors’-appointed Compact Commission approved taking 
“out-of-compact” waste, at the behest of WCS. 

Prior to this, intensely radioactive nuclear weapons waste from the Depart-ment of Energy (DOE)’s Fernald site (K-65 ore from the Belgian Congo) was buried there under a different license. Under the Texas law passed specifically to enable this private dump, commercial compact waste had to begin being disposed before more DOE weapons waste can be buried. 

This translates into billions of dollars in contracts from weapons sites across the country in addition to the commercial waste from TX, VT and generators from all the other states which the compact commission is approving with a rubber stamp. Simmons and WCS will make big bucks. Andrews Country gets 5%. The nuclear industry has the illusion of a solution to its waste problem. The water, air, environment and the species that depend on them pay the price.

NRC/NAS Cancer study--phase 2

Nuclear Monitor Issue: 
#755
4286
18/12/2012
Article

In October 2012, the U.S. Nuclear Regulatory Commission directed the National Academy of Sciences to implement the first large-scale study of health impacts in U.S. communities near nuclear facilities since 1980.

Communities near selected nuclear facilities licensed by the U.S. Nuclear Regulatory Commission (six reactors and one nuclear fuel factory) have been designated as part of a pilot study of cancer: San Onofre, in CA; Mill-stone and Haddam Neck in CT; Dresden in IL; Oyster Creek in NJ; Big Rock Point in MI and Nuclear Fuel Services in Erwin, TN. Big Rock Point and Haddam Neck are both permanently closed.

This study is billed as an "update" of a 1990 National Cancer Institute effort to look at cancer deaths reported in the U.S. counties where nuclear reactors are located. This work was deeply flawed in its design and construction, was conducted twenty years earlier in the period of release of radioactivity from the reactors and did not include any local data, only published information that was very incomplete. In a refreshing break from business-as-usual, several years ago Representative Ed Markey (D-Mass.) and numerous concerned citizens (many of whom have suffered health consequences while living near reactors) managed to jettison NRC's original plan in which it would have conducted this study itself--the basic equivalent of a primary school child filling in their own reportcard. It is NRC's regulations (enforced or not) and NRC's licensing of these facilities that create the question of whether atomic fission and routine and non-routine releases of radioactivity have increased cancer in these communities. 

While many U.S. activists groaned when Rep. Markey suggested the National Academy of Sciences (NAS) to conduct the study, the NRC accepted  the idea, since it would still allow a supervisory role for the Commission. Those who rejected the idea of the Academy cite its typical bias toward industry; they advocated for NRC to make a grant to an institution like the National Institute for Environmental Health where it would be administered with complete independence to fund proposals from qualified researchers competing in an open forum with peer review.

Nonetheless, many observers and citizen advocates who have been personally impacted are heartened by aspects of the recommendations that the NAS made in what is known as "Phase 1" of the cancer study. Of particular note is that two different studies will be performed in each pilot community and one of these will be "case-controlled" and focus specifically on pediatric cancer. 

"This is a break-through moment for the NAS and NRC" said Mary Olson, Director of the Southeast Office of Nuclear Information and Resource Service, "Case-control is what distinguishes a detailed study from broad correlations or associations based on published data, like health department tallies, which provide no real basis to assert causality; case-control means that details about each individual are gathered, providing  a finer grain or higher resolution in the data. If there are health impacts in these communities, and the study is done well, this type of study can deliver a statistically significant causation. The choice to focus the case-control work on children is also stunning since children are far more susceptible to radiation exposure than adults. The pitfall always comes when the numbers studied are too small."

Strange Bedfellows Sometimes Agree
The potential for this work to deliver non-information remains great, and this view is shared by both the nuclear industry's advocacy arm, Nuclear Energy Institute, and one of the very few active epidemiologists to look at nuclear communities in the U.S., Dr. Steve Wing. In 2010 the NEI Blog stated: "Studies of...occupationally and environmentally exposed populations...are useful in ad-dressing allegations of adverse health effects in the population and in demonstrating a concern for the health of the exposed people. However, unless they are sufficiently powerful, they do not add to the scientific knowledge of low dose effects."

From his very different perspective, Steve Wing has contributed to this issue a side bar "Perils and Promises of Studying Health Impacts of Low-Level Radiation" (see page 12) which expresses much the same view.

People are prone to drawing comparisons between radiation and tobacco. If there had been a twenty year lapse in studies of the impact of tobacco AFTER it was already publicly known that tobacco is damaging to health, how would people have reported on that? We cannot with any sense of conscience oppose any study of this issue- but we certainly expect vigilance on the part of this community to ensure that if it is shown to be poorly conducted, or worse-yet, designed to fail, it becomes an inexcusable tarnish on all associated with it.

A step that NAS could and should take to ensure that a real peer review of its work is possible would be to publish both the details of the study protocols, and also the raw data used in their work. Today web publication makes this an easily viable option. Only this level of disclosure will allow a real assessment of the integrity and value of the study. 

The view from the nuclear study sites:
The Nuclear Monitor reached out to people in the impacted communities, and the overwhelming response was essentially "it is too soon to know what to think of this." There is a guarded optimism and hope summed up by Gene Stone of ROSE (Residents Organized for a Safe Environment) near San Onofre on the Pacific coast between Los Angeles and San Diego California: "We worked really hard to bring our health concerns forward and to get the attention that has led to this study -and are also very concerned that it be done right. We want to see independent over-sight of the NAS team- so that every single procedure and decision down to the finest points is subject to peer review. We are really excited about this study, if it is done credibly." 

This view was echoed by people near Dresden (IL), Nuclear Fuel Services (TN) and Big Rock Point (MI) and Oyster Creek (NJ). 

Let us hope that the NAS has the honor and the decency to work for these communities, rather than the source of the money for the study: the U.S. Nuclear Regulatory Commission which licenses each and every one of these sites...and dozens more in the U.S.

"CAN believes that the study 
of communities leaving in the contamination pathway of nuclear reactors is vital. However we are concerned that any finding will be used to justify the continued operation of this generation of nukes. Studies have already occur-red in Germany as well as in this country that have demonstrated an increase in cancer and other diseases. It could be more pro-ductive to study the similarities in the diseases found in communities living in proximity to nukes such as cancer, birth defects, miscarri-age, Down syndrome and learning disabilities." 

--Deb Katz, executive director Citizens Awareness Network.

Thumbnail Portraits of the Facilities
San Onofre,
Southern California Edison. Originally three PWR reactor units, Unit 1 opened in 1967 about 15 years ahead of the other two, and in 1992 was closed permanently. Units 2 and 3 are currently down due to dramatically quick failure of replacement steam generators due to a design flaw that led to vibrations that cause systematic thinning of the tube walls which leads to increased chance of rupture and catastrophic radiation release. San Onofre is located in a densely populated area -- 8.4 million people live inside a 50 mile radius of the site, and a 100 mile radius includes 18 million people. More info on the steam generator problems of San Onofre can be found at http://fairewinds.com

Dresden, Exelon Corp. Like San Onofre, Dresden was three reactor units, and Unit 1, one of the first in the U.S.A (1959) is now closed. All three units are BWRs (the two remaining are GE Mark I’s) that came on-line in the early 1970's. Located in Morris IL, the Dresden site has a population of 67,000 within a 10 mile radius and is 60 miles from "The Loop" of downtown Chicago. Dresden, like many of the selected sites has a history of contaminated ground water, likely from failure of underground pipes on the reactor site.

Big Rock Point, a GE BWR reactor owned by Consumers Energy (formerly Consumers Power) is another old, small reactor (75 MWe) that came on-line in 1964 and closed in 1997. Big Rock was experimental, and it was also used to test experimental nuclear fuels, many of which ruptured during use resulting in astronomically high radiation releases to air, water and solid waste. There is circumstantial evidence that open incine-ration took place on the site, including of "low-level" radioactive waste, which in addition to spills, leaks, and floods have made this section of Lake Michi-gan shore line (the "fourth finger" is the peninsula on which the site is located, west of Traverse City in Charlevoix) a very contaminated place. 

Haddam Neck (Connecticut Yankee) operated from 1976 to 1994 and was a single unit 582 MW PWR. It was operated by Yankee Atomic and closed for economic reasons stemming in part from safety concerns. The site has groundwater contamination and Haddam/Meriden CT is an area with diffuse but significant population. 

Millstone.  Another site that has three reactor units, the oldest shut and two remaining in operation. Millstone, owned by Dominion Generation, is on the Long Island Sound in Connecticut. Unit 1 is a BWR (GE) that operated from 1970--1998, Units 2 and 3 are PWRs. Both are plagued by leaks, many repairs, a lax safety culture and near-misses. Inside the 10 mile radius there are 140,000 people.

Oyster Creek, owned by Illinois-based Exelon Corporation, is a Fukushima –clone (GE Mark 1 BWR) sitting for the past 43 years on a New Jersey bay where the 6.5 foot surge of SuperStorm Sandy exceeded the level of the cooling water intake pumps. As luck would have it the reactor was down for refueling, however another 6 inches would have forced a Fukushima-style use of a firehose to keep the fuel pool coolant full and moving. This dinosaur is plagued with many safety issues inspiring a constant shut-down battle from local folks for the past 20 years. Instead, NRC approved a license extension which has been renegotiated to 2019; 140,000 people live within 10 miles.

Nuclear Fuel Services, Erwin, TN. Unlike the others, NFS is a fuel factory- -compounded in the last decade by the addition of a "low-level" radioactive waste heat treatment facility that cooks the hottest of this type of waste: filters and resins from the primary coolant loop of reactors. This site is tucked into a "holler" off a valley in the Appalachian Mountains where "company town" is an understatement. NFS has only recently returned to making commercial reactor fuel, having primarily supplied plutonium fuel for the propulsion reactors of the U.S. Nuclear Navy. The intimacy of the position of this industrial site with the small town it is planted in is, one hopes, rare. Backyards and jungle gyms abut the site, the local elementary school is a block away, and the river into which some wastes have been "straight piped" for decades has tested positive for highly enriched uranium and plutonium as far as 90 miles downstream.

About: 
San Onofre 1San Onofre 2San Onofre 3Dresden 2Dresden 1Dresden 3Big Rock PointConnecticut YankeeMillstone 2Millstone 3Millstone 1Oyster Creek

Pages