Source: Forbes | Ken Silverstein | August 22, 2015
Has the Clean Power Plan given nuclear energy the fuel it needs to win market acceptance? Beyond that government regulation, the Department of Energy is continuing to dole out part of a $217 million award to the maker of small nuclear reactors — ones that can be assembled in a factory and later scaled up.
The key selling point to which nuclear relies is that when it is burned, the fuel releases zero carbon emissions. That attribute, however, is quickly met by the oft-repeated refrain: It’s upfront costs are too expensive, running close to $20 billion for 2400 megawatts of baseload generation that continually operates.
Now, an “emerging” concept is making headway — the development of pint-size reactors that are more affordable than those being constructed by the world’s major utilities and nuclear operators, Southern Co SO -2.27%. and Scana Corp., in this country, and Areva and Electricite de France, in France. Their mega-plants, however, are centrally located and have a huge advantage: They are able to generate power and deliver it efficiently to the masses.
But the bigger they are … so, the saying goes. As for France, its national energy companies are under pressure. Between the construction delays and technical glitches, at least Areva may require an infusion of public capital to keep it vibrant. Enter U.S.-based NuScale, which is majority-owned by Fluor FLR -2.33% Corp. that engineers and constructs all-types of power plants around the world: It’s sold on the smaller 50-100 megawatt nuclear reactors, which most utilities can afford.
“Coal has been the leading base-load form of generation but it is not the cleanest,” says Biggs Porter, chief financial officer for Fluor, in a phone conversation. “This is a great substitute for coal. Although the cost of a nuclear facility may be more upfront, it is just as economical over its entire lifecycle.”
NuScale says its advantage is that 12 of its modular reactors can be combined to form a 540-megawatt unit. When one of the modules goes down, it could easily be maintained while the rest of the reactors continue to operate, so that whole facilities are not knocked off the grid. Each individual module could be refueled in relatively short order.
The cost of a 540 megawatt unit is about $2.8 billion, not including the fuel. That’s marginally less expensive per unit of output than a traditional nuclear plant.
The timetable: NuScale expects to have its design application into the Nuclear Regulatory Commission for review next year. After that, it anticipates being operational no later than 2024 — in the United States.
If all the talks go as planned, the modules would be located on federal land in Idaho while the facility would be maintained and operated by Energy Northwest, a municipally-owned utility based in Washington State, with experience running nuclear plants. The buyer of the power would be the Utah Association of Municipal Power Systems.
“We are skating to where the puck may be,” in 7-to-10-years, says John Hopkins, chief executive of NuScale, in a phone call. That’s when it predicts natural gas prices will rise to more than $6 per million Btus around the globe: “That’s the price point at which our technology competes.”
At the same time, NuScale says that its technology is not only economical but also safe; the units are self-cooling, meaning that accidents are highly improbable.
Why does it take so long for the technology to become commercial?
“Once the units are built, we will do the training and find the right people to run them,” says Mark Reddemann, chief executive of Energy Northwest, in an interview. “This takes many years.”
Smaller nuclear units are just as viable in other nations where the transmission grids can’t handle larger generation. Once the concept is shown to be feasible, the developers can then scale-up the smaller facilities. Those units, furthermore, could also be used to create drinkable water supplies in those countries where such a resource is in short supply.
The issue that manufacturers of small reactors have is that they are relying on the venture capital community to back their ideas. While they may be worthy, they must still endure years of regulatory scrutiny before they would get the permission to be built in this country. Investors don’t want to tie up their money for that long. That’s why the Energy Department is getting involved.
Critics are thus saying that if they can’t win private capitalthen the U.S. government has no business financing those concerns. Consider also that Babcock & Wilcox and Bechtel Corp. pulled out of this business. Meantime, others are saying that the smaller nuclear modules are inefficient compared to different types of energy production: for each unit of energy input, only 30 percent is returned.
“At the end of the day, if you want clean, then your choices are limited,” responds Fluor’s Porter. “You can’t rely solely on wind and solar. It gets to what the population wants — having a cleaner production system for electricity.”
Will that work to sell consumers, investors and regulators? While NuScale is not deluding itself, it thinks that markets will open given the enactment the Clean Power Plan and other global carbon and electrification initiatives.