Sunday, October 12, 2008
There is an awful lot going on in the world today that will have a big impact on all of our lives and those of future generations for decades to come. The growing financial turmoil around the globe, increasing use of fossil fuels to power the economies of the world, unrest in regions with vast petroleum and gas reserves, and of course climate change.
Tight Credit Markets May Delay Nuclear Build
The current tight-fisted grip on financing by investors and the world’s banks may have an impact on plans to build large infrastructure projects around the world, and nuclear plants certainly fall into that category. Nuclear plants can generate very competitively priced electricity because the price of fuel is but a small fraction of the overall cost. A larger percentage of the cost of nuclear generated electricity is in the costs associated with building the plant and financing the construction. Large coal plants are in the same situation, and with uncertainly around the impacts of probable greenhouse gas regulations virtually no one in the USA is building new coal plants. So what will happen if utilities can’t build new nuclear or coal plants? How will they keep ahead of electricity demand?
Natural gas is the big winner here; there is already an excess capacity of gas-fired plants on the US grid. They are normally only run as “peaking units.” But we’ll see them running more and more if new coal and nuclear plants experience long delays in coming online. It’s a sad situation for consumers and business, though, because gas is a very costly form of electricity and those cost will be passed on to all of us as higher rates for electricity and higher prices for goods and services. In the global economy, goods manufactured in regions of the world with low energy costs will have an increasing price advantage. THAT may result in loss of manufacturing jobs in the US, Canada, and Europe.
What about wind energy? I’ll cover about that later.
Myth Busting – Nuclear Plants Take Too Long to Build
There’s a commonly held myth that nuclear plants take too long to build. This myth perpetuated by the anti-nuclear crowd in an attempt to diminish the role nuclear energy will have in meeting the world’s energy demands and in reducing greenhouse gas emissions. People like Helen Caldicot, Paul Gunter, Greenpeace, and the Rocky Mountain Institute – all want the public and our policy makers to believe a “trifecta” of myths – that nuclear energy is too dangerous, too expensive, and too time-consuming to build.
Their argument something goes like this: “It takes 10 or 20 years to build a nuclear plant, and we need to stop greenhouse gas emissions NOW! If we wait 20 years to reduce global warming it will be too late!”
To put the facts in perspective, I researched data available on line from the US Energy Information Administration. Here’s what I discovered:
14 of the currently operating US reactors were build in five years or less, and a total of 28 nuclear plants were built in under six years.
All these plants were built without modern construction techniques, computer-aided design and scheduling, and the global supply chains that exist today. It’s not hard to imagine shaving one or two years off those times when you take these advances into consideration.
Here’s another fact: There are 104 nuclear plants in the USA. 102 of those reactors were built between 1965 and 1990; a 25 year period.
The USA has done it before – we built 102 nuclear plants in 25 years! With today’s modular construction techniques, mechanized welding, and simpler plant designs there is absolutely no reason to doubt we could do it again. In fact, I’ll argue that with modern construction techniques we could build double that number if we put our mind to it!
All this data is consistent with the 48 to 52 month construction schedules that have been talked about recently, and modern nuclear plants in Asia have already been built in about four years.
The positive impact of that kind of nuclear expansion would be huge. Today’s new plants have greater power outputs on average than the existing ones, so if we built 102 new reactors in the next 25 years we could add 168 GW to the grid. At a 90% capacity factor, that amount of new energy on the grid would be equal to about one-third of the USA’s current electricity consumption. Think about all we could do with that amount of reasonably priced, clean, emission-free energy! If we chose to use that new energy capacity to reduce the amount of coal being burned, we could cut GHG emissions from electricity production by more than 40% of today’s values. On the other hand, if we chose to use that capacity to power electric vehicles we could significantly reduce the amount of petroleum we import.
There IS one area that still takes far too long – the nuclear plant licensing and approval process. It takes the NRC three to four years to review and approve a construction and operating license, and that is for plants for which there is already a certified design and at sites that have already have “early site permits”! That is just insane, and it adds to unnecessary costs! Being fair to the NRC, this is a new process and they have a lot of new people involved. In the future the American people and congress need to hold them accountable to make sure that they improve their performance quickly as they gain experience. It’s important to note, though, that wind and coal plant projects are taking just as long or longer to get approved through their respective approval processes. Plus, because of supply shortages, the waiting period for new wind turbines is about two years. If you add it all up, nuclear energy could make a greater impact in a shorter time than any other power source.
(Pickens Plan – Wind) + Nuclear = Success
There’s been a lot of talk recently about using natural gas as an energy source. If you live in the United States, you’ve probably heard of the “Pickens Plan” for energy independence. In summary, Texas billionaire T. Boone Pickens is advocating a gigantic expansion of wind power for electricity generation across the central US. His plan is to use increased wind generation to replace natural gas use for electricity production, then he proposes diverting that gas to replace petroleum as a transportation fuel.
First of all: I am very impressed with the genius of the Pickens public relations engine. His team, financed by a $58 million advertising budget, is doing an incredible job of getting their message out! It is a well thought out and executed PR campaign that will definitely get people talking about alternatives to burning oil. The nuclear industry would do well by following his lead on creating an effective message and in reaching out to the audience using multiple avenues. The Pickens Plan is on television, the Internet, radio, and in the traditional print media. T. Boone has been appearing on talk shows, and is traveling around the USA doing “town hall” meetings. They are even using Internet-based social networks like Linked In, Facebook, and Twitter.
There’s one aspect of the “Pickens Plan” that I agree completely with: Regardless of your national reference point, every nation should strive to become as energy independent as possible. Keeping energy production at home creates jobs and keeps investment in the communities rather than sending money out of the country. This also reduces the political leverage that other nations have on your foreign policies. In the USA this means reducing oil imports.
As much as I respect the goals of the Pickens Plan, there are some very real technical issues that will challenge success. T. Boone refers to the technical challenges as “details that need to be worked out.” Unfortunately, some of these are pretty significant, and are virtually “show-stoppers.”
The wind corridor where the Pickens wind turbines would be built are in the middle of the continent in predominately lightly populated desert and plains regions thousands of miles from concentrated electrical energy demand. Every mile that electricity travels over power lines results in a measurable power loss, and by the time the electricity travels several hundred miles there would be little left for the customer. Why do you think large power plants tend to be built within about 100 miles of cities? The cost of transmitting electricity over these great distances is astronomical and makes the proposal impractical.
The cost of building thousands of miles of roads to build and maintain the turbines, and new power lines to connect the wind turbines to the load centers would more than double the already high cost of the project.
Wind energy is intermittent and unreliable. Europe has discovered that as you increase the percentage of wind generation you also have to increase the amount of fast starting back-up generation. If you don’t, the electricity grid becomes highly unstable when the wind suddenly stops or starts. Europe has experienced blackouts caused by sudden changes in the wind that exceeded the ability of the other power plants to react to the changes. In today’s world this means you need to increase the amount of natural gas powered plants. In a nutshell, increasing the amount of wind generation would INCREASE the amount of gas generation, not reduce it!
There are a few other facts in the Pickens Plan that I believe are misrepresented.
Pickens says electric cars are “a joke.” That is not the case. Automakers are ramping up production of hybrid, plug-in hybrid, and electric vehicles, and consumers have proven they are ready to buy them. In the next ten years these technologies will fundamentally change how we power our transportation system. An improvement in US fleet mileage by just 1/3 achieved by these technologies we can reduce oil imports by ~ 3 million barrels per day (1/3 of 8.9 MB/d for light vehicle petr. use per EIA). That’s almost a quarter of the oil currently imported into the USA!
Pickens also says nuclear plants can’t be built in time. We’ll I’ve just put that myth to rest. In my earlier analysis, those same 102 new reactors that we could build in the next 25 years could completely eliminate the need to burn natural gas for electricity production. In addition, few changes in the transmission system would be needed because nuclear plants would take advantage of the system already in place.
Finally, natural gas is already so expensive that utilities use it for electricity generation only as a last resort. The price has risen more than 400% in the last few years, and there is no sign that it will decline. If we start burning natural gas for transportation, the price will go even higher. That will really hurt the millions of people who use gas for heating their homes in the winter.
Wind energy is not “free” to operate as the proponents would lead you to believe. According to wind energy publications, each ten turbines require two full time operator mechanics to keep them running. If each turbine is 1.8 MW and operates at 28% capacity factor, each 5 MW of generation will require two people. That scales to 600 people for 1500 MW of true capacity. By the way, that is DOUBLE the number of technicians required to operate and maintain a nuclear plant of comparable size. Then, each two-person crew needs a truck and maintenance equipment – that means 300 specialized vehicles, plus fuel and vehicle maintenance costs. There will also be electricians to maintain the thousands of miles of power cables, transformers, and circuit breakers that connect the turbines to the grid. Then there is the management, administrative, and support organization associated with any such organization. The list goes on and on and I’ve not even begun to consider the cost of spare parts! This is great for the communities because of the number of jobs that would be created, but this adds to the high construction costs. All of a sudden you begin to get a realistic picture of what it will cost to build and operate large wind energy projects. If the wind is off-shore then it gets even more interesting. You need special maintenance service vessels, crews for the boats, and even more fuel.
Texas overbuilt natural gas electricity production when gas was cheap. Now that prices have risen Texans are paying the price. This is one reason that Texas is such an attractive market for companies considering new nuclear plants; the alternative is expensive natural gas. There are six or eight new reactors being considered for Texas, and two of them at South Texas Project are a virtual certainty.
I have an alternative for Mr. Pickens to consider: Nuclear energy would be a far better choice than wind as a method of reducing natural gas usage. As I mentioned before, when the wind is not blowing you’d be burning gas, and that pretty much defeats the purpose, doesn’t it?
T. Boone says his plan to expand wind is a stop-gap measure, a “bridge technology” to use until something better comes along. I would argue that we already have a proven solution that can be deployed faster and more cheaply than thousands of wind turbines scattered over many thousands of square miles.
I am not opposed to wind energy, but I believe that we need to use our limited financial resources as wisely as possible. Nuclear energy is simply a better investment than wind or gas generation. You get more energy per dollar spent, it is more reliable, has less impact on the environment, and the costs are lower and more certain.
That’s it for this show. As a reminder, you can find “This Week in Nuclear” at the iTunes Music Store – it is a free download. You can also listen to the show on Internet at thisweekinnuclear.com. At the web site you can listen to prior episodes and you can read show notes and transcripts.
“Go Green, Go Nuke”!
Monday, May 26, 2008
There's been a lot of discussion lately about the impact of rising steel prices on new power plant costs. I decided to do some research on the topic and the results may surprise you. Here's a link to my analysis:
Nuclear Gains Cost Advantage Over Wind and Coal as Steel Prices Rise
Listen to the podcast for my discussion.
The bottom line is this: the cost of raw materials used in the construction of wind, coal and nuclear power plants is rising rapidly. Because nuclear plants use fewer of these natural resources than either wind or coal power plants, as costs rise nuclear plants gain an increasing construction cost advantage.
It looks like another myth held sacred by the anti-nuclear establishment is beginning to crumble; the myth that nuclear plants are too expensive to build.
Friday, May 02, 2008
Shell Pulls Out of Wind Project
Here’s the latest example: Royal Dutch Shell has decided to pull out of a huge off-shore wind energy project known as the London Array because of skyrocketing costs. The London Array is a proposed 1000 MegaWatt, or 1 GW wind farm that is slated to be built off the southeast coast of the
· Let’s assume the cost for the 1GW London Array is $2B BSP – we know it is more, but let’s use that round number. That’s about $4 Billion.
· Wind has a best case capacity factor of less than 30%, but let’s give this project the benefit of the doubt and assume the London Array will achieve a 30% CF.
· That means the usable electric energy will be 300 MW.
· $4 Billion for 300 MW? No one in their right mind would spend $4B for 300 MW! By comparison, a single
I know this is a bit of a simplification. I’ve used round number and back-of-the-napkin math, but it’s certainly not that far off. I used optimistic cost and capacity factor values for wind, and still wind is five times more expensive than nuclear generated electricity. The anti-nuclear crowd has been very successful in creating a perception that nuclear plants are very expensive to build. However, when you compare the cost of new nuclear plants with other forms of non-GHG emitting sources, it is the lowest cost and most reliable option available. I learned something else about the
Oh yea, and you’d have electricity when the wind isn’t blowing!
My last thought on this story is this: when are we going to change the definition of “green renewable energy” to include nuclear power?
The mainstream media has done a good job of associating images of large parabolic cooling towers with nuclear power plants. It's an inaccurate association because cooling towers are used in many large fossil fueled power plants, and many nuclear plants do not use cooling towers. Some examples in the
It's an example of anti-nuclear misinformation aimed at creating negative images and negative branding. Unfortunately the
The truth is the loss of a cooling tower might limit the power level to which the reactor could operate, but it would not prevent reactor operation. Even without the cooling tower the North Koreans could operate the reactor at low power levels.
But worse, the
Davis Geisen, an engineer who worked at the Davis Besse nuclear plant was sentenced to three years probation, four months house arrest, and a $7,500 fine for misleading the NRC about the status of the plant's reactor head in the fall of 2001. He was convicted in October of 2007 by a jury that deliberated for 26 hours, and faced up to $250,000 in fines and five years in prison. In 2006 the NRC banned Mr. Geisen from working in the nuclear industry for five years because he had willfully provided false information to NRC inspectors.FirstEnergy, the owner of the plant, has paid a record $33.5 million in fines for its role in the event in which severe corrosion was found on the reactor vessel head.
Sunday, April 27, 2008
Entergy's Bold Move
I don't usually spend so much time on one story, but this one is unique, and it's the type of story that warrants a good deal of discussion. There is a financial development underway in the
Before I go into the details of this story, I need to make clear that all of the information I discuss on This Week in Nuclear is already in the public domain in one form or another. I don't do investigative reporting other than researching news that's already been reported. Hopefully I'm able to provide some insights, analysis, and context that listeners find informative and entertaining. Also, the opinions expressed here are mine and those of my occasional guests, and not the opinions of the companies that employ us. I've mentioned this before, but feel it's important to do so again now because this plan by Entergy's to spin off nuclear assets is still under way and involves publicly trades stocks. I don't want to give anyone the slightest impression that I'm discussing proprietary or insider information.
To understand the deal and the motivations behind it, it's helpful first to have an overall picture of Entergy's current business. Entergy is a big company, but in reality it is made up of two very different businesses:
- In the southern US, Entergy is a traditional regulated utility with power plants, transmission & distribution lines, and customers. If you live in many parts of LA, MS, AR, and TX then Entergy is the company that provides your electricity. This part of the business is called "regulated" because the rates the company charges for it's electricity is regulated by public service commissions and other government entities. The electricity markets in the territories Entergy serves in the south have not "deregulated" as they have in many parts of the
. Five of Entergy's nuclear plants are in the regulated business; USA Waterford3, ANO Units 1 and 2, , and River Bend. Entergy also has a number of fossil generating plants in their regulated business. Profits for any regulated utility come from guaranteed rates of return on moneys invested and spent. It's a low-risk business model with a lower but secure rate of return for investors. Grand Gulf
- The other part of Entergy's business is owning and operating six nuclear plants in "deregulated" markets in the northeast and midwest. These free-market nuclear plants sell their power to utilities and large customers, and they make their profits the way most other businesses do; profits are equal to revenues minus costs. The price these deregulated nuclear plants get for the energy they produce is based negotiated wholesale power contracts, and on the competitive market prices for electricity. Entergy's deregulated nuclear plants are Indian Point 2 and 3, Pilgrim, Vermont Yankee, James Fitzpatrick, and
Palisades. The deregulated business also includes a contract that Entergy has with Nebraska Public Power District to manage the operation of the Cooper Nuclear Station, and a group that markets the power that the plants produce. This deregulated part of Entergy's business is very lucrative, and is fundamentally very different from the traditional utility business. From an investor and financial perspective, this part of their business could be viewed as having greater risk, with a greater potential return on investment. For example, according to Entergy's latest annual report, in 2007 the deregulated nuclear plants make up 21% of the company's assets while they generated 48% of the company's income on just 18% of their total revenues. So in round numbers, about one-fifth of the assets generated about one-half of the income.
So Entergy is in two very different businesses, one low risk, steady return, traditional utility, and the other a higher risk, higher potential return free-market energy generation company.
There is one additional factor affecting the decision to spin off the six deregulated nuclear units; Entergy's leadership believes those plants are worth more from an investment point of view than is being reflected in the current value of Entergy's stock. According to Wayne Leonard, Entergy's CEO, "..the full value of the business has not and is unlikely to be realized or recognized embedded in a regulated utility." In summary, they believe the new separate companies will have a total worth greater than the currently undivided company.
So here's Entergy's plan: after the spin off later this year there will be three companies instead of one.
- The six deregulated nuclear plants with about 5,000 MW of electricity generating capacity will be owned by a new nuclear energy company called Enexus. This company will be an investor owned, publicly traded company. While the terms of the split have not been announced, anyone who owns Entergy stock on the day of the spin-off will be granted shares in the new company.
- A new nuclear services company will be formed to operate all the nuclear plants owned by Enexus, plus all the nuclear plants owned by Entergy. This new nuclear operating and services company will be called Equagen. Equagen will be a 50/50 joint venture between Entergy and Enexus.
- What's left of the old Entergy, basically the traditional regulated utility will continue to be called Entergy.
Financing for the deal is fairly complicated, but in a nutshell Enexus will borrow $4.5 billion to buy the six nuclear plants from Entergy. That's a lot of money, but when you consider what it would cost to build 5,000 MW of base load generation capacity it is a great price. Those six nuclear plants are probably worth two or three times that amount. From what I can tell, Enexus will pay Entergy $4 B for the plants. I'm not sure where the other $500 million will go, but presumably it will be used for initial operating costs. Entergy will use the $4 B it receives in the deal to pay off $1.5 B in debt and, and $2.5 B will be used to buy back stock. In theory, Entergy's stock price should drop on day one of the spin-off, then should increase later as the company uses that $4 B in cash to reduce debt and buy back stock.
So is this a good idea? Well, I guess that depends on whether or not you believe that a 100% nuclear generating company in the
On the down side, if you believe there is any risk that license renewals for Pilgrim, Vermont Yankee, or Indian Point will not get approved, then Enexus's assets would be worth considerably less.
From my opinion, I think it's a great idea. You've heard me talk before about how difficult it is for new power plants of any type to be built in the northeast, and I believe that the price of electricity will continue to go up as fuel prices rise for oil, gas, and coal. I think some kind of carbon tax or cap and trade program is inevitable, and that will provide advantages to nuclear plants that emit zero greenhouse gasses or other forms of air pollution. I also believe that while the political battles over license renewals will be hard fought, in the end all the plants who seek license renewals will be granted them. In my opinion the risk is pretty low. But PLEASE don't take this as financial advice! If you have any interest in investing in any of the companies I've mentioned, please talk to a financial professional.
Vermont State Senate Leader Peter Shumlin's Poor Behavior Forces Governor to Apologize
For years Shumlin has been at the center of opposition to Vermont Yankee. This latest proposal would force Vermont Yankee to make $400 million in additional payments into the decommissioning trust fund that they say is under-funded. The plant's contention is that there is plenty in the account to cover the eventual cost of decommissioning when interest earning is factored in. Business leaders, including John O'Kane voiced their opinion that the legislation is unnecessary and that there are many financial means other than cash deposits into the fund that would provide added assurance to the state. The business leaders are concerned that the legislation would result in rate increases and higher costs for businesses and the people of
During the press conference O'Kane made the analogy of a 30 year mortgage in which the bank suddenly demanded full repayment of the loan. Here's a transcript:
O'Kane "Money has time value, and you're changing the time.
Shumlin: "We are not asking for the money. You're lying about that. We are not asking for the money. The bill says..."
O'Kane: "Peter, that's it. You just called me a liar."
Shumlin: "I said you're not telling the truth about that, John."
After Shumlin's freak-out, Vermont Governor Jim Douglas called IBM to apologize for Peter Shumlin's inappropriate comments and his behavior "disgraceful."
Under Shumlin's leadership the state legislature has proposed a long series of laws to extort moneys from
- $28 Million for a "clean energy fund" to promote wind, solar, and methane projects,
- $7.8 Million to clean up algae in
(BTW, the plant is not even located on the lake). Lake Champlaign
- $2.1 Million to subsidize low-income home heating
- An "excess revenues" tax that would only apply to the plant.
- A tax on stored fuel rods.
Fortunately most of these bills were defeated and never became law, but that does not slow him down. Shumlin has another piece of anti-nuclear legislation going though the process now; a bill that would require Vermont Yankee to undergo a costly and subjective "comprehensive vertical audit and reliability assessment."
All this to oppose a plant that keeps Vermont's carbon footprint the lowest in the nation, and the electricity rates at about one-half of what is paid in surrounding states.
Sunday, April 20, 2008
Listen to the This Week in Nuclear Podcast Here
British Investment in Nuclear Energy Pays Off Big - Again!
Back in 2003 British Energy was in trouble and the
But what a difference five years makes. The
There are at least 6 companies in the bidding: EDF and Suez of France, EoN and RWE of Germany, Vattenfall of Sweden, Iberdrola of Spain; and
Why the interest? The sale includes properties where existing nuclear plant are located, and those are prime locations for new nuclear plants that will built under the UK's plan to expand nuclear energy's role in meeting energy demands and reducing greenhouse gas emissions. Owners like EDF will have an advantage in getting their respective reactor technologies built.
Nuclear Plants Continue to Operate Safely Through 5.2 Magnitude Earthquake
On April 18th an earthquake with a magnitude of 5.2 on the Richter scale rocked the Midwestern USA . While the quake was centered in southern IL, it was easily felt by people as far away as
This earthquake was considerable less intense than the one that struck
It seems like every week we hear of another utility announcing they are exploring the possibility of building new nuclear units, even in states where the political climate is decidedly anti-nuclear. New Jersey is the latest; on one hand they are opposing a license extension for the Oyster Creek pant, and on the other Governor Corzine released a draft energy policy that includes a new look at nuclear plant licensing, siting, and financing. It's all part of an initiative to meet the state's booming energy demands while complying to commitments to reduce greenhouse gas emissions.
The Governor wrote in the plan, "A business as usual energy policy risks enormous economic and environmental consequences. In contrast, an energy policy that focuses on producing and using energy as wisely as possible greatly reduces these consequences and positions us to be a strong competitor in the global economy."
PSE&G, the owner of the
Anti-nuclear environmentalists criticized the plan because they said it does not place enough emphasis on wind and solar energy.
This is an interesting decision because
So it seems
Sunday, February 10, 2008
- the Business Council of Westchester
- the Construction Industry Council/Construction Advancement Institute of Westchester and Hudson Valley
- the County Board of Realtors, and
- the Building and Realty Institute
If Indian Point is closed, the report concludes the following would occur:
- the average annual residential electric bill in Westchester would jump to $2,500 from $1,000.
- 11,000 full- and part-time jobs could be lost in Westchester County
- the region would suffer $2.1 billion in lost wages and nearly $5.5 billion in lost economic output
- The hardest-hit jobs would be in health care, real estate, government, education and the retail sectors
- Conservation and development of renewable energy sources such as windmills will not be sufficient to offset the loss of Indian Point
- The likelihood of rolling brownouts and blackouts would be high
The report also busts another anti-nuclear myth. Anti's try to convince local residents that their property prices will rise when nuclear plants are shut down. The new report dispels that myth.
Riverkeeper and Andy Spano's office called foul and claimed Entergy influenced the report. In response to the those allegations, Marsha Gordon, president and chief executive of the Business Council, said in an e-mail message on Monday: “Entergy had absolutely no role in the development of this report. While Entergy is one of more than 1,200 members of the Business Council, they are not affiliated with the other three sponsoring organizations.”
I hope the people of Westchester County pay attention. Andrew Spano needs a wake up call from the voters!
Tuesday, January 01, 2008
It looks like 2008 will start out with a new round of delay tactics by Greenpeace to slow the inevitable deployment of new reactors in the
"Given the circumstances we will be facing, it is inconceivable that we should prevent nuclear from being part of our energy mix."
The Prime Minister indicated in his New Year message to the country that the Government was prepared to take the "difficult decision" of upgrading nuclear power plants.
Following months of delays over a legal challenge, John Hutton, the Business Secretary, is expected to tell MPs that a new era of nuclear power can begin. Greenpeace forced the Government to launch a further study of the plans earlier this year after judges ruled that the initial decision-making process was flawed. Greenpeace is likely to try to halt the plans again.
Senior sources in the Department for Business and
Intelligent, educated leaders with political fortitude, when faced with the uncertainty of oil and gas supplies from politically unstable regions, growing concern for climate change, and skyrocketing fuel prices will virtually always reach the same conclusion: nuclear energy's role must grow.