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Pyroprocessing: the integral fast reactor waste fiasco

Nuclear Monitor Issue: 
#849
4671
25/08/2017
Article

In theory, integral fast reactors (IFRs) would gobble up nuclear waste and convert it into low-carbon electricity. In practice, the IFR R&D program in Idaho has left a legacy of troublesome waste. This saga is detailed in a recent article1 and a longer report2 by the Union of Concerned Scientists' senior scientist Ed Lyman.

Lyman notes that the IFR concept "has attracted numerous staunch advocates" but their "interest has been driven largely by idealized studies on paper and not by facts derived from actual experience."1 He discusses the IFR prototype built at Idaho ‒ the Experimental Breeder Reactor-II (EBR-II), which ceased operation in 1994 ‒ and subsequent efforts by the Department of Energy (DOE) to treat 26 metric tons of "sodium-bonded" metallic spent fuel from the EBR-II reactor with pyroprocessing, ostensibly to convert the waste to forms that would be safer for disposal in a geological repository. A secondary goal was to demonstrate the viability of pyroprocessing ‒ but the program has instead demonstrated the serious shortcomings of this technology.

Lyman writes:1

"Pyroprocessing is a form of spent fuel reprocessing that dissolves metal-based spent fuel in a molten salt bath (as distinguished from conventional reprocessing, which dissolves spent fuel in water-based acid solutions). Understandably, given all its problems, DOE has been reluctant to release public information on this program, which has largely operated under the radar since 2000.

"The FOIA [Freedom of Information Act] documents we obtained have revealed yet another DOE tale of vast sums of public money being wasted on an unproven technology that has fallen far short of the unrealistic projections that DOE used to sell the project to Congress, the state of Idaho and the public. However, it is not too late to pull the plug on this program, and potentially save taxpayers hundreds of millions of dollars. …

"Pyroprocessing was billed as a simpler, cheaper and more compact alternative to the conventional aqueous reprocessing plants that have been operated in France, the United Kingdom, Japan and other countries.

"Although DOE shut down the EBR-II in 1994 (the reactor part of the IFR program), it allowed work at the pyroprocessing facility to proceed. It justified this by asserting that the leftover spent fuel from the EBR-II could not be directly disposed of in the planned Yucca Mountain repository because of the potential safety issues associated with presence of metallic sodium in the spent fuel elements, which was used to "bond" the fuel to the metallic cladding that encased it. (Metallic sodium reacts violently with water and air.)

"Pyroprocessing would separate the sodium from other spent fuel constituents and neutralize it. DOE decided in 2000 to use pyroprocessing for the entire inventory of leftover EBR-II spent fuel – both "driver" and "blanket" fuel – even though it acknowledged that there were simpler methods to remove the sodium from the lightly irradiated blanket fuel, which constituted nearly 90% of the inventory.

"However, as the FOIA documents reveal in detail, the pyroprocessing technology simply has not worked well and has fallen far short of initial predictions. Although DOE initially claimed that the entire inventory would be processed by 2007, as of the end of Fiscal Year 2016, only about 15% of the roughly 26 metric tons of spent fuel had been processed. Over $210 million has been spent, at an average cost of over $60,000 per kilogram of fuel treated. At this rate, it will take until the end of the century to complete pyroprocessing of the entire inventory, at an additional cost of over $1 billion.

"But even that assumes, unrealistically, that the equipment will continue to be usable for this extended time period. Moreover, there is a significant fraction of spent fuel in storage that has degraded and may not be a candidate for pyroprocessing in any event. …

"What exactly is the pyroprocessing of this fuel accomplishing? Instead of making management and disposal of the spent fuel simpler and safer, it has created an even bigger mess. …

"[P]yroprocessing has taken one potentially difficult form of nuclear waste and converted it into multiple challenging forms of nuclear waste. DOE has spent hundreds of millions of dollars only to magnify, rather than simplify, the waste problem. This is especially outrageous in light of other FOIA documents that indicate that DOE never definitively concluded that the sodium-bonded spent fuel was unsafe to directly dispose of in the first place. But it insisted on pursuing pyroprocessing rather than conducting studies that might have shown it was unnecessary.

"Everyone with an interest in pyroprocessing should reassess their views given the real-world problems experienced in implementing the technology over the last 20 years at INL. They should also note that the variant of the process being used to treat the EBR-II spent fuel is less complex than the process that would be needed to extract plutonium and other actinides to produce fresh fuel for fast reactors. In other words, the technology is a long way from being demonstrated as a practical approach for electricity production."

References:

1. Ed Lyman / Union of Concerned Scientists, 12 Aug 2017, 'The Pyroprocessing Files', http://allthingsnuclear.org/elyman/the-pyroprocessing-files

2. Edwin Lyman, 2017, 'External Assessment of the U.S. Sodium-Bonded Spent Fuel Treatment Program', https://s3.amazonaws.com/ucs-documents/nuclear-power/Pyroprocessing/IAEA...

Update on the Toshiba / Westinghouse crisis

Nuclear Monitor Issue: 
#847
4662
21/07/2017
Jim Green ‒ Nuclear Monitor editor
Article

(Please subscribe to Nuclear Monitor at www.wiseinternational.org/nuclear-monitor/subscribe-nuclear-monitor)

The Toshiba / Westinghouse crisis continues to drag on without any clear resolution in sight. As things stand:

  • Toshiba will probably survive in a much-weakened form, assuming it can sell profitable assets to cover debts.
  • Profitable parts of Toshiba's US-based nuclear subsidiary Westinghouse will survive in one form or another after a restructuring plan has been developed and approved by the bankruptcy court. Westinghouse might survive in a weakened form or it might be carved up for sale and no longer be a recognizable entity.
  • Toshiba would like to sell its entire 90% stake in Westinghouse but that may not be possible.
  • Toshiba and Westinghouse will no longer take on reactor construction projects in their home countries or abroad.
  • Much of the discussion about the four partially-built AP1000 reactors in the US assumes that one way or another the reactors will be completed. The four reactors ‒ two in Georgia and two in South Carolina ‒ are largely responsible for the crisis facing Toshiba and Westinghouse due to cost overruns of around US$13 billion. But to push ahead would entail enormous risk and it would be no surprise if the owners of the nuclear plants decided to cancel one or both of the reactors at each plant.
  • Toshiba / Westinghouse and the NuGen consortium have yet to acknowledge that the plan for three AP1000 at Moorside in the UK is dead ... but it is dead.
  • The likelihood that the plan to build AP1000 reactors in India will proceed is vanishingly small.

Toshiba

Toshiba hopes to submit audited financial figures for the 2016/17 fiscal year, which ended 31 March 2017, by August 10.1 Toshiba and its auditor PwC Aarata are still working to reach agreement on the figures and to resolve their disagreement as to whether Toshiba should correct past financial reports.2

On June 23, Toshiba said it expects to report a negative net worth as of 31 March 2017 of ¥581.6 billion (US$5.18 billion), a 7.7% increase on earlier estimates.3 The company's estimated net loss for the 2016/17 fiscal year has also increased, to ¥995 billion (US$8.87 billion).3

Also on June 23, the Tokyo Stock Exchange (TSE) announced that from 1 August 2017, Toshiba shares will be demoted from the exchange's first section to its second tier.2,3 The TSE is also reviewing Toshiba's internal control systems to decide whether to remove the company from the exchange's designation as a "security on alert."2

Toshiba is trying to sell its prize asset, its memory chip business, to stave off bankruptcy and to avoid being delisted altogether from the TSE. But negotiations over the sale of the memory chip business have become complicated, as reported by Nikkei Asian Review:3

"Massive losses from its U.S. nuclear unit plunged the once-mighty Toshiba into negative net worth in fiscal 2016. The company is now desperately trying to raise enough funds to save itself from remaining in negative net worth for a second year ‒ a scenario that would see the company face delisting from the TSE. On Wednesday [June 21], it decided to prioritize negotiations with a Japanese government-led alliance for the sale of its flash memory unit.

"Any conclusion to the deal, however, faces obstacles. Bain Capital, the private equity firm in the alliance, is collaborating with South Korean chipmaker SK Hynix, making a protracted examination into antitrust matters a possibility.

"In addition, Toshiba chipmaking partner Western Digital has sought an injunction against the sale in a California court. With the U.S.-based company weary of the involvement of direct rival SK Hynix, the government-led alliance will have to negotiate with Western Digital, either by asking it to drop the case or trying to include it in the consortium.

"The formation of the alliance was mostly orchestrated by Japan's Ministry of Economy, Trade and Industry, which wants to keep Toshiba's sensitive chip technologies under domestic control."

Some bankers and potential investors are reportedly pressing the Toshiba board to consider alternatives to the sale of its memory chip business. But selling other assets is problematic as Toshiba has few of sufficient value, and a piecemeal sell-off could take too long.4 Toshiba will be automatically delisted from the TSE if it cannot drag itself out of its negative shareholder equity position by the end of the current fiscal year, ending 31 March 2018.5

In mid-June, Toshiba said it is being jointly sued by 70 shareholders, foreign institutional investors, and individuals seeking damages of ¥43.9 billion (US$391 million) related to a US$1.3 billion profit-padding scandal from 2008‒2014. Separately, Toshiba has been sued by 26 groups and individuals over the scandal with total damages of ¥108.4 billion (US$960 million) being sought.6

There was a moment's respite for Toshiba in early June when its share price rose, partly due to an agreement to cap Toshiba's liabilities for the AP1000 reactor project in Georgia at US$3.68 billion.7 But Toshiba lost all those gains and more and its stock price fell to half what it was before the problems with the US AP1000 projects came to light last December.8

Westinghouse

According to a July 3 Reuters report, citing industry and diplomatic sources, the US administration has said that Westinghouse will emerge from Chapter 11 bankruptcy and be sold to a US investor by the end of the year.9

But of course the government can't force investors to buy a bankrupt company. Toshiba has previously tried to sell Westinghouse, without success, and has openly flagged its ongoing desire to rid itself of Westinghouse. But the process is on hold until Westinghouse emerges from Chapter 11 bankruptcy proceedings with a court-approved restructuring plan.9

According to Reuters: "Some form of U.S. backing or involvement, industry experts say, could avoid a Chinese or Russian buyer unpalatable to Washington, which would prefer to keep Westinghouse's advanced nuclear technology out of the hands of its foreign rivals."9

In court records filed on June 5, the US Committee on Foreign Investments in the United States said that the sale of Westinghouse or its assets could be subject to the panel's review. Consisting of various cabinet members, the Committee is authorized to review transactions which could result in foreign persons or entities acquiring US businesses.10

In May, Westinghouse was in trouble with the US Nuclear Regulatory Commission (NRC) because of problems at its nuclear fuel plant in Columbia, South Carolina.11 After finding an accumulation of uranium in an air pollution control device last year, in May the NRC cited one additional violation related to the same piece of equipment. In June 2017, the NRC issued a notice of non-conformance to Westinghouse over lax quality assurance at its Mangiarotti subsidiary in Italy.12 The problem concerns incorrect use of material for AP1000 passive residual heat removal heat exchanger stiffener plates, identified in an earlier inspection. As with the problem at Columbia, Westinghouse has been slow to act. NRC inspections were carried out at Mangiarotti's plant in Italy in July 2016. Follow-up inspections were carried out at Westinghouse's plant in Rockville, Maryland in April 2017. The NRC concluded that Westinghouse "had not taken prompt corrective action or identified the cause of a significant condition adverse to quality", which involved the use of a different type of stainless steel in the manufacture of the component from that required.12

It has emerged that Toshiba didn't know that Westinghouse was preparing for a bankruptcy filing even after Westinghouse had hired lawyers for the task late last year, according to court records and Toshiba's official timeline. The Wall Street Journal commented: "If Toshiba's timeline is accurate, it suggests poor communication between parent and subsidiary contributed to letting the problems at Westinghouse get out of hand. Toshiba, one of Japan's biggest and oldest conglomerates, has said it has doubts whether it is a going concern because of its unit's bankruptcy. Conversely, if Toshiba did know about the unit's bankruptcy plans ahead of time but failed to disclose them promptly, it could worsen trust among investors at a time when stock-exchange officials in Tokyo are weighing whether to delist Toshiba shares."13

AP1000 reactors under construction in the US

Decisions about the fate of the partially-built AP1000 reactors in Georgia and South Carolina keep being deferred. Westinghouse is expected to break its contracts with the owners of the Vogtle (Georgia) and Summer (South Carolina) plants. Meanwhile the plant owners are weighing up their options regarding the future of the reactors, and paying for work to continue in the meantime. The owners of the South Carolina plant hope to make a decision on the fate of the two AP1000 reactors by August 10.14 And Southern Co. hopes to make a decision about the two reactors in Georgia "sometime in August" according to CEO Tom Fanning.15 But no previous deadlines have been met and the issue is likely to drag on for months.

Georgia Power and Westinghouse have finalized an agreement which allows for the transition of project management at the Vogtle plant from Westinghouse to Southern Nuclear and Georgia Power. Under the agreement, finalized on June 9, Toshiba will meet its contractual obligations by paying Southern Co. US$3.68 billion from October 2017 to January 2021 to help cover the costs of completing the two reactors, while Southern Co. agreed not to ask for more, even if the project continues to run over budget.16 The agreement has been approved by the US Department of Energy, which has a stake in the outcome of the negotiations because it approved a US$8.3 billion loan guarantee for the Vogtle project.

Toshiba may strike a similar agreement with SCANA and Santee Cooper in relation to the two AP1000 reactors under construction in South Carolina. SCANA and Santee Cooper would take responsibility for completing (or abandoning) the reactors, and Toshiba would make a payment to settle contractual obligations.17

On May 15, Toshiba said it had set aside ¥670 billion (US6.0 billion) to cover parent company guarantees for the Vogtle and Summer plants. Thus a payment of US2.3 billion for the South Carolina plant can be expected in addition to the US3.68 allocated for Georgia.

Another modest win for those hoping to complete the reactor projects in Georgia and South Carolina came on June 15 when the House of Representatives approved a bill on tax credits that could amount to around US$2 billion in subsidies for each of the nuclear plants ‒ Vogtle and Summer.18 However the future of the bill in the Senate is uncertain. The owners of the nuclear plants need the tax-credit subsidies locked in, and soon.

Despite the Toshiba agreement with the Vogtle owners, and the House of Representatives' vote on tax credits, the future of the Vogtle and Summer reactors is still very much in doubt.

Construction of the four reactors is less than half complete so there is ample scope for further delays and cost overruns. A report by consultants to the Georgia Public Service Commission found that attempts to improve efficiency have had little success: over the past year, four core activities at the Vogtle plant fell an average of 325 days further behind schedule.19

A recent document written by South Carolina state regulators states: "The projection of

time and costs is made more difficult given the incredible variances in time and costs

actually incurred in comparison to Westinghouse's previous quotes and projections of time

and costs."14

Owners of the nuclear plants are doing their best to estimate the likely costs to complete the four reactors ‒ but it is a guessing game. Analysts at Morgan Stanley say future costs could exceed current estimates by as much as US$8.5 billion, more than double what shareholders of the two companies are effectively pricing in.20

The Southern Alliance for Clean Energy (SACE) estimates that the total cost of the two reactors in Georgia could reach US$29 billion.19 SACE based its estimate on a June 2017 report by two utility consultants to the Georgia Public Service Commission. The consultants' report is based on a scenario in which the project comes online in 2022, and Westinghouse's bankruptcy adds further costs.19

A Morgan Stanley report in March 2017 said the final cost of the two Summer reactors could be as high as US$22.9 billion ‒ double the original estimate.18

Using the SACE figure for Georgia, and the Morgan Stanley figure for South Carolina, the total cost for the four reactors could be US$51.9 billion, more than double the original estimate of US$23.9 billion (US$14.1 billion for Vogtle and US$9.8 billion for Summer).

Nuclear corporations and lobby groups argue that completion of the Vogtle and Summer reactors is a "national security issue" and a "strategic national imperative". Typically, those meaningless assertions are backed up with the meaningless justification that the US will be "left behind" by other countries such as Russia and China if it exits the global nuclear industry. The Nuclear Energy Institute has gone one step further. The industry lobby group has been circulating a document in Washington arguing the case for tax credits to support nuclear power projects. The document states that if the Vogtle and Summer plants aren't completed, it would stunt development of the nation's nuclear weapons complex because the engineering expertise on the energy side helps the weapons side.21

A further complication for the owners of the South Carolina plant is that they learnt in June, much to their astonishment, that Westinghouse's detailed construction schedule for the two reactors is non-existent.18 "I'm just floored that they haven't been able to produce a schedule for their own project," said Tom Clements from Savannah River Site Watch. "That violates a basic tenet of sound construction management, and I think it reveals that there are more problems to be encountered if the project continues."18

Friends of the Earth and the Sierra Club filed a complaint with South Carolina state regulators on June 22, calling for a hearing on whether construction should be allowed to move forward at the Summer plant and whether the utilities should be forced to pay back money customers have already spent through higher rates to build the reactors.18 The South Carolina Public Service Commission approved the groups' request and a hearing is scheduled for August 14 in Columbia.18

The groups call on the Summer plant owners to "cease and desist from expending any further capital costs related to the Project" and referred to "unreasonable electric rates" ‒ in particular, nine electricity rate hikes since 2008 to help fund the Summer project.17

Dr Mark Cooper from the Institute for Energy and the Environment at Vermont Law School has written a detailed paper for Friends of the Earth and the Sierra Club in support of their complaint to the South Carolina Public Service Commission.22 Cooper argues:

"Management will waste more money going forward in a futile attempt to complete the project ... Future costs may be twice as much as the costs that have been sunk. This report outlines five steps that can be taken to soften the negative blow to both SCE&G ratepayers and the economy of South Carolina:

  • Stop wasting money by abandoning the project.
  • Claw back improperly expended sunk costs through reclamation under the bankruptcy laws and reparation for imprudent costs improperly incurred.
  • Return to traditional least-cost, used and useful principles for utility resource acquisition.
  • Rely on lower cost, cleaner resources, like efficiency, renewables and dynamic system management to meet any growth in demand or reduction in emission of pollutants.
  • Mitigate the bill impact by enhancing ratepayer ability to lower their electricity costs with on-bill financing of efficiency, reducing the profit paid on wasted capital expenses, and extending the period for cost recovery."

Cooper argues that "even under the unjustifiably optimistic projection of no future delays and cost overruns, ratepayers will be better off if the utility abandons the project, even if ratepayers are forced to bear the costs that have been sunk to date." In the best-case scenario, swift action by the Public Service Commission could save ratepayers as much as US$10 billion.

Planned AP1000 reactors in the UK

Numerous media reports over the past six weeks have flagged the possibility that South Korea's Kepco could buy into the NuGen consortium that planned to build three AP1000 reactors at Moorside in the UK. Toshiba would be more than happy to sell most or all of its stake in NuGen to Kepco ‒ or anyone else. But Kepco wants to build its own APR1400 reactors instead of Westinghouse AP1000s. That brings with it another set of problems ‒ financing, the anti-nuclear stance of recently-elected South Korean President Moon Jae-in, and the several years it would take for the APR1400 reactor design to go through a generic design assessment process in the UK. Suffice it here to note that previous plans to build AP1000 reactors at Moorside appear to be stone cold dead.

Planned AP1000 reactors in India

Indian Prime Minister Narendra Modi and US President Donald Trump issued a communique after their meeting in Washington in late June. The two leaders "looked forward to conclusion of contractual agreements between Westinghouse Electric Company and the Nuclear Power Corporation of India for six nuclear reactors in India and also related project financing," the communique said.23

However there is very little likelihood of contractual agreements, no clarity about financing, no obvious reason why India would pay for Westinghouse reactors when cheaper options are available to meet energy needs, no obvious reason why India would sign up for AP1000 reactors given the massive cost overruns in the US, and an unresolved disagreement about India's nuclear liability law.

Another obstacle is that Westinghouse ‒ assuming that Westinghouse even exists after the bankruptcy process ‒ is exiting the reactor construction business. The Hindu reported: "Westinghouse is working out a new model with its lenders under which they will design the reactor and provide consultations, but Indian companies would be entrusted with the actual construction of the plant. A process is underway to ascertain who will do what in the new business model and which Indian companies could be involved."24

References:

1. Reuters, 13 July 2017, 'Toshiba: Not true auditor told co it can't form opinion on annual report', www.reuters.com/article/us-toshiba-accounting-idUSKBN19Y03K?il=0

2. Nikkei Asian Review, 24 June 2017, 'Toshiba teeters on brink of delisting', http://asia.nikkei.com/Business/Companies/Toshiba-teeters-on-brink-of-de...

3. Shotaro Tani / Nikkei Asian Review, 23 June 2017, 'Toshiba's negative net worth widens to 5.2 billion dollars', http://asia.nikkei.com/Business/Companies/Toshiba-s-negative-net-worth-w...

4. 10 July 2017, 'Toshiba need alternative plan quick', www.simmtester.com/page/news/shownews.asp?num=19296

5. 23 June 2017, 'Toshiba asks regulators for extension on annual statement deadline to Aug. 10', www.japantimes.co.jp/news/2017/06/23/business/corporate-business/toshiba...

6. Kathleen Wirth, 13 June 2017, 'Toshiba Being Sued for $399 Million for Accounting Irregularities', http://wirthconsulting.org/2017/06/13/toshiba-being-sued-for-399-million...

7. Peter Wells, 12 June 2017, 'Toshiba jumps 8% after deal to cap US reactor liability', www.ft.com/content/889d3470-4a72-3039-9450-9602bd2faef1?mhq5j=e3
8. www.bloomberg.com/quote/6502:JP

9. Reuters, 3 July 2017, 'Indo-US nuclear deal: Westinghouse could be sold by Dec, ending bankruptcy, says report', http://indianexpress.com/article/business/companies/westinghouse-could-b...

10. Michael Smith, 7 June 2017, 'Washington weighs in on Westinghouse bankruptcy', www.northaugustastar.com/news/washington-weighs-in-on-westinghouse-bankr... of Form

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

12. World Nuclear News, 21 June 2017, 'Westinghouse subsidiary receives notice of non-conformance', www.world-nuclear-news.org/RS-Westinghouse-subsidiary-receives-notice-of...

13. Kosaku Narioka, 8 June 2017, 'Toshiba Unaware Its Nuclear Unit Was Preparing for Bankruptcy, Timeline Shows', Wall Street Journal, www.advfn.com/news_Units-Woes-Stun-Toshiba-Toshiba-Missed-Unit-Woes_7496...

14. www.regulatorystaff.sc.gov/Documents/7-12-17%20Nuclear%20Construction%20...

15. Nikkei Asian Review, 13 July 2017, 'US utility to decide fate of Westinghouse reactors in August', http://asia.nikkei.com/Business/Companies/US-utility-to-decide-fate-of-W...

16. World Nuclear News, 12 June 2017, 'Vogtle agreement caps Toshiba obligation', www.world-nuclear-news.org/C-Vogtle-agreement-caps-Toshiba-obligation-12...

17. Michael Smith, 23 June 2017, 'Toshiba seeks SCANA, Santee Cooper takeover of V.C. Summer', www.aikenstandard.com/news/toshiba-seeks-scana-santee-cooper-takeover-of...

18. David Wren, 24 June 2017, 'Missing documentation throws Santee Cooper, SCE&G nuclear project timeline, costs in doubt', www.postandcourier.com/news/missing-documentation-throws-santee-cooper-s...

19. Tom Hals, 15 June 2017, 'Group says Georgia nuclear plant costs rise to $29 billion', www.reuters.com/article/us-toshiba-accounting-westinghouse-bankr-idUSKBN...

20. Lauren Silva Laughlin, 28 March 2017, 'Nuclear waste', www.breakingviews.com/considered-view/utilities-to-pay-price-of-westingh...

21. Amy Harder, 16 June 2017, 'Nuclear scramble on tax credits', www.axios.com/nuclear-scramble-on-tax-credits-2442400126.html

22. Mark Cooper, July 2017, 'The Failure of the Nuclear Gamble in South Carolina', www.cleanenergy.org/wp-content/uploads/MarkCooper_VCSummerReport_Final_J...

23. Reuters, 3 July 2017, 'Indo-US nuclear deal: Westinghouse could be sold by Dec, ending bankruptcy, says report', http://indianexpress.com/article/business/companies/westinghouse-could-b...

24. Vikas Dhoot, 28 June 2017, 'Westinghouse's $20 billion nuclear deal needs a reboot', www.thehindu.com/business/Economy/westinghouses-20-billion-nuclear-deal-...

Will the AP1000 reactors under construction in Georgia be completed?

Nuclear Monitor Issue: 
#848
4667
09/08/2017
Jim Green ‒ Nuclear Monitor editor
Article

(Please subscribe to Nuclear Monitor at www.wiseinternational.org/nuclear-monitor/subscribe-nuclear-monitor)

Only three power reactors have been connected to the grid in the US in the past 25 years, and no power reactor in the US has both begun construction and been completed since the Three Mile Island accident in 1979.1 With the cancellation of the V.C. Summer project in South Carolina, only two reactors are under construction in the US: the AP1000 reactors at the Vogtle plant in Georgia. Will the Vogtle project break the streak of no reactors being ordered, built and completed since Three Mile Island? Or will the project be cancelled ‒ in which case there will be a grand total of zero reactors under construction in the US?

A decision will probably be announced by the end of the month by the project owners, then the Georgia Public Service Commission will have to decide whether or not to accept their proposal ‒ a process that could take several months.2

Comments by Southern CEO Tom Fanning on August 2 suggested that he is leaning towards recommending that construction keep going.3 Fanning said the company had costed the option of building one of the Vogtle reactors and a gas-fired plant at the same site, but preferred to either keep or abandon the nuclear project as a whole.4 "We would need to build a rather lengthy [gas] pipeline, and maybe other sites around Georgia are maybe more suitable for that," Fanning said.4

In some respects, the Vogtle project in Georgia has better prospects than the abandoned V.C. Summer project in South Carolina:

  • Energy demand is growing more rapidly in Georgia.5
  • The Vogtle project is closer to completion than V.C. Summer. According to the Augusta Chronicle, the Vogtle project is 66% complete overall, with almost all of the engineering and most of the procurement done, and construction 44% complete.6 The current timeline for completion of the reactors is between Feb. 2021 and March 2022 for Vogtle #3 and between Feb. 2022 and March 2023 for Vogtle #4.7
  • Toshiba's settlement payment for the Georgia AP1000 project is US3.68 billion, well above the US$2.2 billion to be paid to the South Carolina utilities.
  • The rate impact is spread across a bigger customer base ‒ Georgia Power has about three times more customers than SCE&G.7

But there are important similarities between the South Carolina and Georgia projects. Westinghouse is exiting from both projects. Both projects are long-delayed and billions over-budget. Ratepayers in both states are sick of paying in advance for the AP1000 reactors that may never be completed ‒ Georgia Power had collected almost US$1.2 billion from ratepayers by the end of 2016 to pay for Vogtle.8

Another vulnerability for the Vogtle project is that it has more owners ‒ Georgia Power (45.7%), Oglethorpe Power Corp. (30%), the Municipal Electric Authority of Georgia (22.7%) and Dalton Utilities (1.6%) ‒ and the project might collapse if just one of the owners calls for its termination.9 Georgia Public Service Commissioner Stan Wise said: "I would question whether the commission would have the appetite to go forward without a unanimous decision from the owners."9

In 2008, the cost estimate for the two Vogtle reactors was US$14 billion. Southern Co. said on August 2 that its current estimate is a total cost of at least US$25 billion.3,10

Georgia Power estimates net additional capital costs of US$1.0-1.7 billion to complete the two AP1000s under construction at Vogtle.7 Costs for other owners ‒ who own slightly over 50% of the project ‒ would presumably be slightly larger.

Of course, that US$25 billion figure could prove to be an underestimate, as with all previous estimates. The Southern Alliance for Clean Energy (SACE) estimates that the cost could reach US$29 billion.11 SACE based its estimate on a June 2017 report by two utility consultants to the Georgia Public Service Commission. The consultants' report is based on a scenario in which the project comes online in 2022, and Westinghouse's bankruptcy adds further costs.

Will Vogtle go ahead? "It might be a close call," said Kit Konolige, a New York-based utility analyst for Bloomberg Intelligence. "The biggest issue is, what's your level of confidence that if you do go ahead, it's going to be done on time and on budget."10

Few people on the outside looking in have much confidence that Vogtle could be completed without significant additional cost overruns and delays. But there is more confidence among the Vogtle project partners and state 'regulators' that the project can be completed.

Southern Co. recently noted that the project has fallen further behind schedule since Westinghouse filed for bankruptcy protection in March 2017.3

Matt Kempner commented in the Atlanta Journal-Constitution:12

"Continuing to fund the only remaining nuclear power plant under construction in the U.S. relies largely on decision-makers convincing themselves that the companies can accurately revise cost and schedule estimates for Plant Vogtle's expansion. It's a dicey proposition. Accuracy hasn't been a strong suit of the power giants in recent years.

"Southern is one of the biggest power companies in the country and the parent of Georgia Power. It has embarked on exactly two mega construction projects in the last decade or so. Both ‒ the expansion of Plant Vogtle and the Kemper clean coal/gas plant in Mississippi ‒ have gone billions of dollars over budget and faced years of delays. As each project struggled, Southern and its subsidiaries continued to underestimate the magnitude of the overruns. Independent monitors for the Georgia Public Service Commission regularly warned about rising Vogtle costs that were more accurate than Georgia Power's reassurances about stability."

Georgia Power estimates it would cost it a total of US$6.3 billion to cancel the project, comprising its share of expenditure on the project to date; financing costs; and other costs connected with cancellation, including terminating contracts for construction and other services, and securing the construction site.7

References:

1. www.iaea.org/PRIS/CountryStatistics/CountryDetails.aspx?current=US

2. Russell Gold, 2 Aug 2017, 'US nuclear revival hopes dim as utilities ditch reactors', www.theaustralian.com.au/business/wall-street-journal/us-nuclear-revival...

3. Russell Grantham, 2 Aug 2017, 'Southern Co. says Vogtle costs to exceed $25B', www.myajc.com/business/southern-says-vogtle-costs-exceed-25b/mvP3M8H3Db3...

4. Megan Geuss, 4 Aug 2017, 'Vogtle, Summer nuclear plants face bleak outlook after Westinghouse bankruptcy', https://arstechnica.com/information-technology/2017/08/vogtle-summer-nuc...

5. Tom Buerkle, 31 July 2017, 'Power down', www.breakingviews.com/considered-view/scana-move-signals-lights-out-for-...

6. Tom Corwin, 2 Aug 2017, 'Company update predicts longer start date for Vogtle reactors', Augusta Chronicle, http://businessinsavannah.com/bis/2017-08-02/company-update-predicts-lon...

7. World Nuclear News, 3 Aug 2017, 'Georgia Power expects late August decision on Vogtle', www.world-nuclear-news.org/NN-Georgia-Power-expects-late-August-decision...

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. Kristi E. Swartz, 1 Aug 2017, 'Death of Scana's V.C. Summer project puts industry on notice', www.eenews.net/stories/1060058199

10. Mark Chediak and Jim Polson, 2 Aug 2017, 'Even at $25 Billion, Southern Sees Value in Finishing Nukes', www.bloomberg.com/news/articles/2017-08-02/southern-sees-benefit-to-fini...

11. Tom Hals, 15 June 2017, 'Group says Georgia nuclear plant costs rise to $29 billion', www.reuters.com/article/us-toshiba-accounting-westinghouse-bankr-idUSKBN...

12. Matt Kempner, 3 Aug 2017, 'Kempner: Georgia's nuclear crisis of confidence', www.myajc.com/business/kempner-georgia-nuclear-crisis-confidence/Zm7o79f...

A stay of execution for the South Carolina AP1000 reactor project

Nuclear Monitor Issue: 
#849
4674
25/08/2017
Jim Green ‒ Nuclear Monitor editor
Article

(Please subscribe to Nuclear Monitor at www.wiseinternational.org/nuclear-monitor/subscribe-nuclear-monitor)

The two partially-built AP1000 reactors at the VC Summer plant in South Carolina may be resurrected ‒ but it is a long shot. On August 15, South Carolina Electric & Gas Co. (SCE&G) ‒ 55% owner of the project ‒ announced that it had voluntarily withdrawn its petition to the South Carolina Public Service Commission to abandon the two reactors, a fortnight after saying it would discontinue work on the project and lodging the abandonment petition.1

Kevin Marsh, CEO of SCE&G parent company SCANA Corp., said SCANA has "not changed our position on abandonment" and that the withdrawal of the petition is seen as temporary and that it will be refiled "at an appropriate time" once reviews of the project by legislators are complete.2 That may be after state legislators complete their Jan.‒ May 2018 sitting session, by which time they will also have completed reviews of the VC Summer project failures.3

SCE&G said it might not complete the reactors even if a new power company is willing to partner on the project.4 The company previously said it would have been willing to proceed with one of the two reactors if not for the decision of state-owned Santee Cooper ‒ 45% owner of the project ‒ to abandon both. But Marsh told state legislators on August 10: "I've got to be convinced that building the one-plant option ‒ even with a new partner ‒ would be in the best interest of our customer."4 He also said it would take at least a year to restart the project, even if a new partner emerged.

Marsh said the project could only move forward with a willing and capable partner, a new ownership agreement, a suitable agreement with a capable construction firm, some certainty about the project being able to qualify for a federal government tax credit (effectively a subsidy of about US$2 billion), and a new agreement with Westinghouse for design engineering services since "the plant is their design."5 The new partner would need to stump up US$3 billion.6

A federal government handout would also be required to revive the VC Summer project. Marsh noted that before abandoning the project, he went to the Department of Energy seeking a grant, but the agency responded with an offer of a loan. "Loans are nice, but they don't reduce the cost of the project. What we were trying to do was minimize the cost of the project," he said.3 SCANA sought a non-repayable grant of US$1‒3 billion.7

Marsh said the federal government would also need to guarantee that ratepayers wouldn't foot the bill for a project with an uncertain price tag. "We would need to protect customers from that risk, and that would be an absolute we would have to have from a cost perspective," he said at an August 1 public hearing with state regulators.8

So SCANA wants a US$1‒3 billion direct handout, a US$2 billion indirect handout in the form of tax credits, and also a blank check covering future cost overruns! No wonder the Trump administration has been silent on a nuclear project it once called 'massively important'.8

Reviving the project would also depend on the Base Load Review Act, which state legislators seem intent on revising or repealing, Marsh said.9 The Act allowed project partners to charge ratepayers for construction of the reactors during the construction period, and also gives them the right to pursue sunk costs from ratepayers.

State Governor Henry McMaster said that he was looking for a utility to buy Santee Cooper's share of the VC Summer project‒ or even to buy Santee Cooper outright ‒ if it meant one reactor would be completed. McMaster said his office was reaching out to some of the South's largest power companies ‒ including Dominion Energy in Virginia, Duke Energy in North Carolina and the Southern Co. of Georgia ‒ to see if they were interested in all or part of the state-owned utility.4 McMaster said he has heard from a "number of entities that have expressed an interest in purchasing Santee Cooper, in whole or in part, or have inquired regarding Santee Cooper's ownership interest" in the plant.10

At an August 22 meeting of South Carolina Senate's VC Summer Nuclear Project Review Committee, Santee Cooper representatives said they were aware of "very preliminary" discussions involving the Governor about the possible sale of the utility.6 Asked what would become of Santee Cooper's almost US$8 billion of debts ‒ US$4 billion for the nuclear plant ‒ Santee Cooper's chair Leighton Lord said: "It would stay with the state of South Carolina. I don't think any investor utility would want to acquire $4 billion in [nuclear] debt."6

So reviving the project would require a US$1‒3 billion direct handout, an indirect US$2 billion tax-credit handout and a blank check from the federal government, a US$4‒8 billion bailout from the state government, maintaining the Base Load Review Act which allows the project partners to continue to gouge ratepayers, a new project partner with US$3 billion to spare ... and much more besides. So much for nuclear power being too cheap to meter.

Estimates of the amount already spent on the VC Summer project range from US$9 billion to US$10.4 billion.11 The estimated cost to complete the project, from start to finish, is around US$25 billion including interest, according to Santee Cooper's Lonnie Carter (almost US$18 billion excluding interest).6

SCANA's Kevin Marsh said: "The governor has stated that he's looking for another partner to possibly come into the plant, but if someone says they're interested, that's not something that will happen overnight," Marsh said. "There are a lot of bridges that have to be crossed before we would get there."4 SCANA had looked unsuccessfully for a new partner before giving up on construction on July 31.12

Santee Cooper said it had heard from two utilities interested in buying its 45% share of the VC Summer project, after contacting "about 50 utilities and other entities in the Southeast who could enter into power purchase agreements dozens of power companies."13 But Lonnie Carter, the utility's chief executive, said neither company has the assets to undertake a multi-billion-dollar construction project.14 Santee Cooper has set a September 15 deadline for serious expressions of interest.15

Corso Capital Management analyst David Frank said that abandoning the project was the likely outcome: "I'm not quite sure how anyone after any comprehensive review could come to any other decision ‒ I mean, even if you had someone with half a brain ‒ to spend the amount of money with all of the risks and potential risks that are still ahead. All these people, I'm sure they are very upset, it's very emotional, but I'd be curious to really hear someone make a solid argument for going ahead and taking on all that risk."3

Dukes Scott, executive director of the South Carolina Office of Regulatory Staff, said it would take something close to a miracle to revive the project.6

Blame game

Just about everyone involved in the VC Summer fiasco failed to meet expectations by a wide margin ‒ state legislators and regulators, the project owners, the lead contractor Westinghouse and a number of other contractors and sub-contractors. Legislators are trying to shift blame to the project owners, who are trying to shift blame to Westinghouse.

The South Carolina House and Senate have initiated separate inquiries, both of which are providing plenty of theatre. Commenting on the failure to establish a credible work schedule or cost estimates before the project began, Republican Rep. Kirkman Finlay told the House inquiry on August 23: "We embarked on a multi-year, multi-billion project with a road map that we didn't really believe was going to get us to the destination. Help me understand how we could have planned it less thoroughly."16 Republican Sean Bennett, a member of the Senate inquiry, told a community meeting that "the good news is, there is no good news".17

Many of the legislators investigating the VC Summer fiasco are themselves partly responsible for it. South Carolina resident Joe Cali said: "This is like asking the foxes to investigate the depredations at the hen-house."17

Republican state Senator Shane Massey said at an August 22 hearing into the fiasco: "We went a number of years with Westinghouse just screwing you over and you let it happen. We can sit here and we can blame Westinghouse all day. At some point, y'all, we can't pass the buck anymore."18

Santee Cooper chair Leighton Lord blamed state and federal politicians ... and Westinghouse: "Without the state Base Load Review Act, the project would have never started. Without the Congress providing single-application licensing, and production tax credits for new nuclear construction, the project would have never happened. ... [W]e would have completed the new units if Westinghouse had lived up to its contract to complete the project for an agreed fixed price. Westinghouse failed to do what it promised it could do."19

Cindi Ross Scoppe, a columnist with The State newspaper, highlighted the absurdities of the Base Load Review Act:20

"You're a private-sector, regulated utility, so your job is not to protect ratepayers. They're stuck with you, and besides, it's the government's job to look out for them. Your job is to protect your stockholders. And you're doing that. Magnificently. That's why you and your executive team keep getting those huge bonuses.

"There's this law, the Base Load Review Act, that your team convinced the Legislature to pass in 2007. It says your stockholders won't suffer the consequences of your decisions, no matter how much you go over budget. In fact, the more you spend, the more they profit, because they're guaranteed a 10.25 percent return on investment. So you have no incentive to keep costs down. Just the opposite.

"You have no incentive to get out unless things get so bad that it would be "imprudent" ‒ an important legal term that can yank that profit out of your fingers ‒ to continue. Like, say, if your prime contractor goes belly up. And your 45 percent partner bails on you. Until that happens, invest more, profit more.

"When you add this bizarre economic incentive to the natural human inclination toward inertia, it's almost impossible not to keep sending money on the project. More than you should. Longer than you should. That situation is not SCANA's fault, at least not mostly. It's the fault of our Legislature, which created that disincentive to keep costs down. Or pull the plug."

In a blistering attack that's worth reading in full, Republican state Senator Chip Campsen blamed state legislators for passing the Base Load Review Act.21 He says that as a freshman senator he voted against the Act in 2007 but it was approved by a vote of 21 to 1.

Campsen writes:21

"This shifting of risk to customers, when coupled with guaranteed returns up to 11 percent on construction costs, created a perverse incentive to spend big dollars building risky plants. The more utilities spend, the more money they make. Customers underwrite it all, even if a project fails.

"How did such a bill ever pass the General Assembly? The principle of concentrated benefits and diffuse or abstruse costs. When the benefits of a bill are significant and concentrated in a few, beneficiaries lobby the General Assembly assiduously for its passage. When costs are diffuse, abstruse, or both, no one is motivated to lobby against it. Members sense a lot of support and no opposition. The bill typically passes.

"In this case utility lobbyists descended upon the General Assembly like the plague of locusts in Exodus 10. And what of the opposition? Instead of locusts, it was crickets chirping. Opposition was essentially nonexistent."

Cheryl Rofer, who runs the 'Nuclear Diner' blog, blames everyone in a sarcastic post:22

"So congratulations to:

The contractors who cannot build nuclear plants on time and within budget. Special mention for lowballing their bids and failing to meet quality control requirements.

The utilities that cannot contract or manage the building of nuclear plants.

The financiers who have botched their judgments of the projects.

Proponents of nuclear power. The strategy of competitive parading of one's knowledge, parochial defense of a single system against all others, and unthinking opposition to wind and solar have been tremendous public relations successes.

Opponents of nuclear power. Spreading incorrect information and confusion instead of clearly delineating actual problems with nuclear power has made the public dumber.

Reporters who can't be bothered to learn middle-school science.

The schools that didn't teach it.

The Department of Energy and its predecessors. From a major misjudgment by a Rickover protégé through continuing confusion as to its role relative to the national laboratories and wildly varying support for nuclear energy, these agencies at best have been a neutral influence on commercializing nuclear energy.

Congress. Ever-increasing micromanagement of budgets, bending to lobbyists without a clear plan, and, since the mid-1990s, continuing resolutions rather than thought-out budgets make long-range plans impossible.

The national laboratories. Replacing their role as national resources for nuclear issues with a university model of individual investigators, but with more fighting over resources and overhead has diluted what they can contribute to the development of nuclear power.

Particular thanks to those who have assembled studies showing their favorite type of energy to be the most economically favored.

Good job, all! Your participation trophies are in the mail."

Environmentalists and nuclear opponents

The weirdest part of the blame game is the mud being thrown at environmentalists. Environmentalists aren't to blame for the VC Summer fiasco. As Houston Chronicle business columnist Chris Tomlinson noted: "Let it be written that environmentalists didn't kill the nuclear power industry, economics did. South Carolina Electric and Gas Co. and partner Santee Cooper abandoned work on two new nuclear reactors ... not because of public protests, but because the only way to pay for them was to overcharge customers or bankrupt both companies."23

Nonetheless, attempts are being made to blame environmentalists and nuclear opponents more broadly. James H. Holloway Jr., an accountant whose clients have included nuclear utilities and companies, runs this curious argument:24

1. Historically, environmentalists and other nuclear opponents forced costly delays to reactor construction, stopping some and driving up the cost of others.

2. As the nuclear renaissance took hold, power companies had to eliminate the risk of opponents forcing costly delays. Hence the need for the Base Load Review Act and similar legislation elsewhere: "If customers were charged for the interest during construction (and construction delays), then opponent activities to stall or stretch out construction would have less financial impact on the project. ... If the activities of nuclear power opponents had not had such a large effect on earlier construction, there would have been no need for a base load law for the new construction."

3. "So when you're sending out thank you notes to the Public Service Commission, SCANA and the Legislature for their roles in forcing you to pay the construction interest on these now-abandoned nuclear plants, be sure to include one to your favorite nuclear power opponents. They won't like it, but they do need to hear from you."

But of course, as Santee Cooper's Leighton Lord bluntly stated, without the state Base Load Review Act, the project would never have started.19

And of course, Westinghouse, SCE&G, Santee Cooper and others proved themselves perfectly capable of screwing up the VC Summer project without any help from environmentalists and other nuclear opponents.

Had the early warnings of environmentalists been heeded, the project never would have started. South Carolinians would have saved many billions of dollars. Or some or all of the wasted money could have been invested in renewables which would have been producing low-carbon power years ago.

Had the mid-project warnings of environmentalists been heeded, problems with the project might have been forced onto the public and political agenda and the project might have been put back on track ‒ or abandoned at a much earlier date with the associated savings.

Sammy Fretwell wrote in The State newspaper on August 12:25

"The troubles at the site didn't surprise [Columbia lawyer Bob] Guild and a small group of environmentalists who oppose nuclear power. Even though they philosophically do not believe in building more nuclear plants, activists from the Sierra Club and Friends of the Earth raised questions as far back as 2008 about the cost of the project and how it might affect ratepayers. Through the years, they held signs and acted out satirical plays, in an effort to raise awareness.

"Despite the efforts, Guild and others said they were able to gain little more than moderate support. "There were so many issues, but people didn't pay attention'' said Leslie Minerd, a longtime environmental activist and Five Points business owner. "Legislators bought what SCE&G said hook, line and sinker. They were listening to them before us.""

The fake environment group 'Environmental Progress' claims that SCE&G and Santee Cooper were "caving into pressure from Sierra Club and Friends of the Earth" by abandoning the project.26 Attempting to justify that ridiculous claim, 'Environmental Progress' said: "The effect of the campaigns funded by [Friends of the Earth and the Sierra Club] has, in fact, been to create the environment in which the Summer project is abandoned".27

Friends of the Earth complained in an August 22 statement about the failure of the South Carolina legislature to include public interest groups in their inquiries into the VC Summer project.28

Friends of the Earth has nevertheless filed unsolicited testimony ‒ titled 'Doomed from the Start' ‒ with the legislature.29 The testimony "documents the state's Public Service Commission (PSC) and the Office of Regulatory Staff (ORS) repeatedly failed to thoroughly analyze suspect requests by utility South Carolina Electric & Gas (SCE&G) concerning cost overruns, schedule delays, construction problems and nine pay-in-advance rate hikes to pay for project financing. Public interest groups, namely Friends of the Earth and the Sierra Club, repeatedly raised warning flags about challenges facing the project but were ignored by both the PSC and ORS."28

Tom Clements, senior adviser with Friends of the Earth and author of the 'Doomed from the Start' testimony, said: "As has been clear since day one, both the PSC and ORS viewed their roles as facilitators in what SCE&G requested, an approach that makes the regulators in large part responsible for the resulting debacle. Both the PSC and ORS rubber stamped every cost overrun and schedule delay that SCE&G asked for and it is now clear that those decisions were based on faulty information and grossly inadequate analyses. For their failure to protect the public interest, PSC commissioners and the director of the ORS must accept responsibility for enabling this $9 billion debacle and resign."28

References:

1. SCE&G, 15 Aug 2017, South Carolina Electric & Gas Company to Voluntarily Withdraw Its New Nuclear Abandonment Petition to Accommodate the Legislative Review Process', www.scana.com/docs/librariesprovider15/pdfs/press-releases/08152017-sce-...

2. World Nuclear News, 16 Aug 2017, 'SCE&G withdraws petition to scrap Summer project', www.world-nuclear-news.org/NN-SCEG-withdraws-petition-to-abandon-Summer-...

3. Kristi E. Swartz, 17 Aug 2017, 'Will V.C. Summer project restart? Probably not', www.eenews.net/energywire/stories/1060058867

4. Thad Moore, Aug 2017, 'CEO: SCANA may not return to scuttled nuclear project — even if a new partner emerges', www.postandcourier.com/business/ceo-scana-may-not-return-to-scuttled-nuc...

5. Rod Adams, 17 Aug 2017, 'Is V.C. Summer really dead or is near term revival possible?', https://atomicinsights.com/v-c-summer-really-dead-near-term-revival-poss...

6. John Downey, 22 Aug 2017, 'Senators told saving V.C. Summer project could take ‘a miracle'', www.bizjournals.com/charlotte/news/2017/08/22/senators-told-saving-v-c-s...

7. Amy Harder, 4 Aug 2017, 'Utility made failed plea for billion-dollar nuclear grant', www.axios.com/utility-made-failed-plea-for-billion-dollar-nuclear-grant-...

8. Thad Moore and Emma Dumain, 12 Aug 2017, 'Trump administration silent on demise of nuclear project it once called 'massively important'', www.postandcourier.com/business/trump-administration-silent-on-demise-of...

9. Avery Wilks, 16 Aug 2017, 'SCANA sticking with plans to abandon nuclear project, charge customers more', The State, www.islandpacket.com/news/state/south-carolina/article167467032.html

10. 19 Aug 2017, 'McMaster to Santee Cooper board: 'All options' on the table when it comes to possible sale', http://bvtnews.com/news/mcmaster-to-santee-cooper-board-all-options-on-t...

11. Mark Nelson and Michael Shellenberger, 2 Aug 2017, 'Wind Energy Still More Expensive Than Nuclear Reactors Halted for Cost Overruns', www.environmentalprogress.org/big-news/2017/8/2/wind-energy-still-more-e...

12. John Downey, 16 Aug 2017, 'SCANA sees little hope for reviving V.C. Summer nuclear project despite partner search', www.bizjournals.com/charlotte/news/2017/08/16/scana-sees-little-hope-for...

13. 17 Aug 2017, 'Fate of US VC Summer NPP still uncertain', www.neimagazine.com/news/newsfate-of-us-vc-summer-npp-still-uncertain-59...

14. Thad Moore, 21 Aug 2017, 'Santee Cooper has heard from 2 companies interested in joining V.C. Summer project, but neither is 'viable'', www.postandcourier.com/business/santee-cooper-has-heard-from-companies-i...

15. 22 Aug 2017, 'Santee Cooper: Offers to Revive Summer Nuclear Expansion Not Viable', www.power-eng.com/articles/2017/08/santee-cooper-offers-to-revive-summer...

16. Avery G. Wilks, 23 Aug 2017, 'SCE&G got state's OK for doomed nuclear project without a detailed construction schedule', www.thestate.com/news/politics-government/article168857122.html

17. Jenna-Ley Harrison, 22 Aug 2017, 'Local senator promises to 'protect the ratepayers' after nuclear project ends', www.journalscene.com/news/local-senator-promises-to-protect-the-ratepaye...

18. Andrew Brown, 22 Aug 2017, 'SCANA CEO rushed from state Senate hearing as failure review begins on abandoned $9 billion nuclear plant project', www.postandcourier.com/business/scana-ceo-rushed-from-state-senate-heari...

19. Leighton Lord, 21 Aug 2017, 'Here's why Santee Cooper started, stopped nuclear plants', www.thestate.com/opinion/letters-to-the-editor/article168389797.html

20. Cindi Ross Scoppe, 22 Aug 2017, 'How ‘waste not, want not' became ‘spend more, profit more'', www.thestate.com/opinion/opn-columns-blogs/cindi-ross-scoppe/article1679...

21. Chip Campsen, 15 Aug 2017, 'How the S.C. Legislature paved the way for nuclear mess', www.postandcourier.com/opinion/commentary/how-the-s-c-legislature-paved-...

22. Cheryl Rofer, 3 Aug 2017, 'A Job Well Done', https://nucleardiner.wordpress.com/2017/08/03/a-job-well-done/

23. Chris Tomlinson, 3 Aug 2017, 'Nuclear power as we know it is finished', www.houstonchronicle.com/business/columnists/tomlinson/article/Nuclear-p...

24. James H. Holloway Jr., 20 Aug 2017, 'How nuclear opponents paved the way for SC law', www.thestate.com/opinion/op-ed/article167998207.html

25. Sammy Fretwell, 12 Aug 2017, 'Warnings were raised years before utilities abandoned nuke project', www.thestate.com/news/local/article166947252.html

26. Mark Nelson and Michael Light, 31 July 2017, 'New South Carolina Nuclear Plant Would Cut Coal Use by 86%, New Analysis Finds', www.environmentalprogress.org/big-news/2017/7/31/new-south-carolina-nucl...

27. www.facebook.com/environmentalprogress/posts/1944602472472775

28. Friends of the Earth, 22 Aug 2017, 'Friends of the Earth Files Unsolicited Testimony with South Carolina Legislature on Termination of Nuclear Reactor Project', www.foe.org/news/news-releases/2017-08-friends-of-the-earth-files-unsoli...

29. Friends of the Earth, 22 Aug 2017, 'Doomed from the Start: $9 Billion Reactor Construction Debacle due to Imprudence by South Carolina Electric & Gas (SCE&G) and Dereliction of Duty by the S.C. Public Service Commission and the Office of Regulatory Staff', http://webiva-downton.s3.amazonaws.com/877/92/e/10766/testimony_in_absen...

Toshiba and Westinghouse fight for survival

Nuclear Monitor Issue: 
#849
4673
25/08/2017
Jim Green ‒ Nuclear Monitor editor
Article

(Please subscribe to Nuclear Monitor at www.wiseinternational.org/nuclear-monitor/subscribe-nuclear-monitor)

On August 10, Toshiba reported its financial figures for the 2016 fiscal year (ending 31 March 2017) after repeated delays and a protracted dispute with its auditor. Toshiba reported a net loss of ¥‎965.7 billion (US$8.83bn; €7.51bn)1 ‒ more than double the loss of the previous year, and the largest-ever annual loss for a Japanese manufacturer.2

Toshiba said its net worth is negative ¥552.9 billion ($5.07bn; €4.29bn)2 and notes (as it did in April) that there is "substantial doubt about the Company's ability to continue as a going concern".1

Toshiba's losses on its nuclear businesses amounted to over US$11 billion (€9.65bn) in the 2016 fiscal year. The company's financial report states: "Toshiba Group recorded a net loss attributable to shareholders of the Company of 965.7 billion yen (US$8622.0 million), due to the loss of 1,242.8 billion yen (US$11,096.3 million) generated in Westinghouse, its U.S. subsidiaries and affiliates, and Toshiba Nuclear Energy Holdings (UK) Limited, a holding company for Westinghouse Group operating companies outside the U.S."1

Toshiba noted that its subsidiary Westinghouse Electric Company, Westinghouse's US subsidiaries, and Toshiba Nuclear Energy Holdings (UK) Limited, had all filed for Chapter 11 bankruptcy protection under the US Bankruptcy Code on March 29. Those filings "deconsolidated Westinghouse from Toshiba", Toshiba said.1

Toshiba has agreed to meet parent-company contractual agreements with US utilities by paying US$3.68 billion to the owners of the Vogtle AP1000 project in Georgia, and US$2.17 billion to the owners of the VC Summer AP1000 project in South Carolina, in the coming years.1 Thus Toshiba ‒ assuming the company still exists ‒ will be free from the mess of the AP1000 projects in the US when its makes its final payment in September 2022.

And Toshiba hopes to rid itself of Westinghouse altogether: "As part of the Company's plan to offset the negative impact of the ongoing situation, the Company has been reviewing a restructuring plan of Westinghouse Group including deconsolidation by a potential sale of a majority stake in order to eliminate risk in the overseas nuclear power business."1

Auditor dispute

Toshiba had to repeatedly delay releasing its financial figures because of a protracted dispute with its auditor, PricewaterhouseCoopers (PWC) Aarata. The auditor issued an "opinion with qualifications" regarding Toshiba's annual earnings report on August 10, along with an "adverse opinion" on Toshiba's internal controls.2,3 PWC Aarata also said there is an "unfixed significant misstatement" and that Toshiba's figures "are not based on generally accepted corporate accounting levels".2

PWC Aarata believes Toshiba "should have booked a respectable degree or all" of the massive losses stemming from its US-based subsidiary Westinghouse ‒ lead contractor for the VC Summer and Vogtle AP1000 projects ‒ in fiscal 2015 instead of the following year.2 Toshiba claims it wasn't aware of the massive cost overruns with the US AP1000 projects but PWC Aarata evidently believes otherwise.4

If Toshiba followed its auditor's advice, it would have recorded negative net worth for two consecutive years, which would normally trigger a delisting from the Tokyo Stock Exchange.5 That, in turn, would take Toshiba one step closer to bankruptcy ‒ hence the company's reluctance to accept the auditor's advice.

Stock exchange listing

As things stand, Toshiba has avoided a stock exchange delisting – but on August 1 it was demoted to the second tier of the exchange, and will no longer feature in the Nikkei 225 index of Japan's top public companies.6

Toshiba is still under pressure. Japan Times noted that "there are still two scenarios under which it could be delisted from the Tokyo Stock Exchange: by failing to eliminate its negative net worth and failing to show improvement in its internal management controls. TSE rules stipulate that firms must be delisted if they conclude two consecutive business years in a negative net worth. Because Toshiba ended 2016 with a negative net worth, it was demoted last Tuesday to the TSE's second section."7

Financial Times journalist Peter Wells wrote on August 10:8

"The immediate threat to Toshiba may have receded after its auditor signed off its annual results but the broader dangers that still threaten the company's future have not disappeared. Toshiba remains, say people close to the conglomerate, "absolutely devoted" to remaining listed on the Tokyo Stock Exchange.

"But the decision by PwC Aarata, Toshiba's auditor, to add a so-called adverse opinion of the company's internal controls could still bring about its delisting. "I don't see how the TSE can look at the wording of that criticism and decide that Toshiba did have adequate control of its systems at the end of March 2017," says Travis Lundy, an analyst at Smartkarma. The wording, he suggests, lowers the likelihood of Toshiba remaining listed. "I don't see anything that suggests this was a problem in the past, but that it has now been fixed."

"Toshiba's biggest challenge has certainly not gone away. It is still scrambling to fill a $5bn hole in its shareholder equity, punched by a $6.3bn writedown on its US nuclear business, the Westinghouse subsidiary that filed for Chapter 11 bankruptcy protection this year. Japanese companies that report two consecutive years of negative shareholder equity face delisting from the TSE, although the exchange operator is able to exercise some discretion.

"Successfully closing the $18bn sale of its memory chip business by the end of its financial year in March 2018 remains Toshiba's best shot at reversing the shareholder equity deficit and avoiding a forced delisting. But the sale process continues to face numerous obstacles, and bankers, lawyers and other executives involved with the sale have repeatedly described "chaos" in the process. ... Owing to the time any sale agreement would take to pass regulators ‒ as well as the need to smooth out a complicated legal spat with joint venture partner Western Digital ‒ Toshiba has in effect until the end of August to conclude a sale, say bankers and lawyers involved in the talks."

"Even if Toshiba can get the chip unit sale back on track in a timely fashion, the risk of delisting may not subside quickly. Since its [profit padding] accounting scandal in 2015, Toshiba has been under scrutiny from the TSE, and in September last year submitted a report on its internal management controls to the bourse operator. But that was knocked back by the exchange three months later. In March, Toshiba resubmitted the report ‒ its second and final chance to impress the TSE that its controls were up to scratch. Should the TSE at some point decide that Toshiba's internal controls are passable, then it would have to justify how it arrived at a different conclusion from the independent auditor. Such a discrepancy could send investors at home and abroad the wrong signal at a time when Japan is keen to show it is trying to improve corporate governance standards."

Bankruptcy

The small risk of Toshiba going bankrupt will loom much larger if the sale of the memory chip business falls through. There is also a possibility that Toshiba will voluntarily file for bankruptcy protection, much as Westinghouse has done in the US. The Wall Street Journal reported on July 27:9

"A number of creditors and others involved in Toshiba Corp.'s restructuring are pushing for a Toshiba bankruptcy filing as the best path to rebirth after its effort to raise money through a chip-unit sale stalled. People involved in talks over Toshiba's workout, including business partners, lawyers and people with ties to the company's main bankers, said bankruptcy is worth serious study. Some of them said it is the best available option and that they are advocating it in discussions with Toshiba or creditors. They said a bankruptcy filing by Toshiba, the core of an industrial conglomerate, could free it of burdens that include lingering liabilities from the March bankruptcy of its Westinghouse Electric Co. nuclear unit in the U.S."

"Toshiba's chief executive, Satoshi Tsunakawa, said at a recent news conference that seeking debt relief through the courts isn't an option. A Toshiba spokesman reiterated this week that the company has "no specific plan" to seek bankruptcy protection.

"A person familiar with deliberations at one of Toshiba's main lenders compared the conglomerate to a hole that might have treasure at the bottom but also lurking snakes. Bankruptcy, this person said, could kill any snakes and let the lenders access the treasure. ...

"One person directly involved in a portion of the Toshiba recovery plan said "everyone thinks" bankruptcy has to be looked at ‒ but it is difficult to say so publicly."

Westinghouse

On July 31, SCE&G and Santee Cooper announced their decision to abandon the two partially-built AP1000 reactors at the VC Summer plant in South Carolina. Westinghouse wasn't forewarned even though it was formally the lead contractor on the project (though less directly involved since its March 29 bankruptcy filing). Westinghouse has been working on restructuring plans which assumed that the company would play a minor but profitable role in the completion of the VC Summer project ‒ those plans must now be reworked.

In a court filing on July 26, Westinghouse asked a New York bankruptcy judge to allow the company an extra three months to file a restructuring plan.10 Westinghouse said it needs more time given the complicated nature of the business ‒ the company has thousands of vendors, around 37,000 creditors and "five different business lines that serve more than half of the nuclear power plants in the world".10 Bankrupt companies have a 120-day exclusivity period to come up with a reorganization plan, the Pittsburgh Post-Gazette reported, and another 60 days to try to gain approval of it without worrying about creditors or others introducing competing plans.10 Westinghouse is seeking to extend both deadlines until December 6 and February 4, 2018, respectively.

On July 31, Westinghouse said it has submitted a five-year business forecast to its bankruptcy lenders which includes savings of US$205 million over that period and plans to cut 7% of its 14,000-strong global workforce.11,12

In early August, Westinghouse laid off 870 employees who were working on or supporting the VC Summer project.13 That prompted a lawsuit alleging that Westinghouse violated labor laws by laying off hundreds of workers without proper notice. Seeking class-action status, Andrew Fleetwood, a field engineering manager at VC Summer, is suing Westinghouse for violating the Worker Adjustment and Retraining Notification Act, which requires employers to provide at least 60 days of advance notice before a plant shutdown or a mass layoff.13 Westinghouse said it provided as much notice as practicable and that the employees will be permanently laid off on August 31 if no other assignment is identified for them.

On August 7, Westinghouse asked the bankruptcy court to allow it to break thousands of contracts associated with the VC Summer project ‒ contracts cover everything from engineering services and security protection to scaffolding and urine testing.14 These contractors will join the long list of unsecured creditors in Westinghouse's bankruptcy. The company has accumulated debts of around US$9.8 billion.15

Santee Cooper said in late July that it will continue to pursue Westinghouse's assets in bankruptcy court to obtain further payment on top of its share (US$976 million) of the parent-company contractual settlement of US$2.17 billion agreed to by Westinghouse's parent company Toshiba for the VC Summer project.16 Santee Cooper will "continue to pursue Westinghouse ... revenues and assets through bankruptcy court and other legal channels" to further offset its losses, according to chief executive Lonnie Carter.17

On June 27, the Delaware Supreme Court ruled against Westinghouse, and in favor of Chicago Bridge & Iron Co, in a US$2 billion dispute over cost overruns with the four AP1000 reactors under construction in Georgia and South Carolina.18,19

References:

1. Toshiba Corporation, 10 Aug 2017, 'Toshiba Announces Consolidated Results for Fiscal Year 2016, to March 31, 2017', www.toshiba.co.jp/about/ir/en/finance/er/er2016/q4/ter2016q4e.pdf

2. Kyodo, 10 Aug 2017, 'Toshiba submits delayed financial report, avoids immediate delisting', https://english.kyodonews.net/news/2017/08/ba1c8caa4acd-toshiba-submits-...

3. Reuters, 10 Aug 2017, 'Toshiba's auditor gives 'adverse opinion' on governance: filing', www.reuters.com/article/us-toshiba-accounting-governance-idUSKBN1AQ0CN

4. Nikkei Asian Review, 11 Aug 2017, 'Battle between auditors drove Toshiba's earnings delay'', https://asia.nikkei.com/Japan-Update/Battle-between-auditors-drove-Toshi...

5. Reuters, 10 Aug 2017, 'Toshiba wins auditor sign-off, likely avoiding delisting for now', www.reuters.com/article/us-charter-commns-m-a-altice-idUSKBN1AP1QN

6. 2 Aug 2017, 'Cumbria nuclear backer Toshiba sees stock exchange demotion', www.in-cumbria.com/Cumbria-nuclear-backer-Toshiba-sees-stock-exchange-de...

7. Kazuaki Nagata, 10 Aug 2017, 'Toshiba ducks delisting by submitting long overdue financial report', www.japantimes.co.jp/news/2017/08/10/business/corporate-business/toshiba...

8. Peter Wells, 10 Aug 2017, 'Cloud hangs over Toshiba even after auditor sign-off', www.ft.com/content/d6ac9154-7dc1-11e7-9108-edda0bcbc928
9. Kosaku Narioka, Takashi Mochizuki and Peter Landers, 27 July 2017, 'Toshiba Bankruptcy Filing Pushed by Some Involved in Workout', www.wsj.com/articles/toshiba-bankruptcy-filing-pushed-by-some-involved-i...

10. Anya Litvak / Pittsburgh Post-Gazette, 27 July 2017, 'Westinghouse needs more time in crafting bankruptcy plan', http://powersource.post-gazette.com/powersource/companies/2017/07/26/Bri...

11. Anya Litvak / Pittsburgh Post-Gazette, 16 Aug 2017, 'Westinghouse cuts office space in North Hills', http://powersource.post-gazette.com/powersource/companies/2017/08/16/Wes...

12. World Nuclear News, 1 Aug 2017, 'US nuclear construction project to be abandoned', www.world-nuclear-news.org/NN-US-nuclear-construction-project-to-be-aban...

13. Anya Litvak / Pittsburgh Post-Gazette, 11 Aug 2017, 'Westinghouse furloughed 870 employees in fallout from the cancelled South Carolina nuclear project', http://powersource.post-gazette.com/powersource/companies/2017/08/11/Wes...

14. Anya Litvak / Pittsburgh Post-Gazette, 9 Aug 2017, 'Westinghouse: Project canceled 'without warning'', http://powersource.post-gazette.com/powersource/companies/2017/08/09/Sou...

15. Nathan Bomey / USA Today, 30 March 2017, 'Georgia nuclear plant in jeopardy after Westinghouse plunges into bankruptcy', www.11alive.com/money/georgia-nuclear-plant-in-jeorpardy-after-westingho...

16. Steven Mufson, 31 July 2017, 'S.C. utilities halt work on new nuclear reactors, dimming the prospects for a nuclear energy revival', www.washingtonpost.com/business/economy/sc-utilities-halt-work-on-new-nu...

17. Andrew Ward, 1 Aug 2017, 'Westinghouse nuclear project halted in South Carolina', www.ft.com/content/aaaeda90-761d-11e7-a3e8-60495fe6ca71

18. Reuters, 29 June 2017, 'US court rules for Chicago Bridge in Westinghouse dispute', http://asia.nikkei.com/Spotlight/Toshiba-in-Turmoil/US-court-rules-for-C...

19. Anya Litvak / Pittsburgh Post-Gazette, 27 June 2017, 'Court rules against Westinghouse in nuclear acquisition deal', http://powersource.post-gazette.com/powersource/companies/2017/06/27/wes...

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...

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