Power market developments

The American way

11 June 2008



While announcements of new signed EPC contracts in the USA are somewhat premature, the industry has recently moved much closer towards the long-awaited nuclear renaissance.


At long last, the ‘nuclear renaissance’ in the USA is taking shape. Over the last year, there have been several important steps towards building new nuclear plants. The most significant of these are:

  • The docketing of eight combined construction and operating licence (COL) applications for a total of 13 new reactors. A further COL application (for two units) has been submitted to the Nuclear Regulatory Commission (NRC).
  • In April this year, Southern Company subsidiary Georgia Power entered into a provisional engineering, procurement and construction (EPC) contract with Westinghouse and The Shaw Group for two AP1000 units at the Vogtle plant. Later, at the end of May, Westinghouse and The Shaw Group announced that a similar EPC contract had been entered into with South Carolina Electric & Gas (SCE&G) and Santee Cooper to provide two AP1000s at the Summer plant.
  • Several utilities have ordered ultra heavy forgings for nuclear components.
  • At the beginning of August 2007, the Tennessee Valley Authority (TVA) board gave the go-ahead for the $2.49 billion Watts Bar 2 completion project. TVA expects the 1218MWe unit to come online by 2013.
  • At the end of 2007, Congress authorised $38.5 billion in loan guarantee authority for innovative energy projects, including $18.5 billion for nuclear power facilities and $2 billion for front end facilities.

South Texas Project

The first full COL application to be lodged was for NRG Energy’s South Texas Project (STP), for two ABWRs to be built alongside two existing PWRs. This is also the reference COL for this reactor type, as well as the only ABWR COL either submitted or currently expected by the NRC. (Amarillo Power – a company set up by Amarillo property developer George Chapman to build a nuclear plant in the vicinity of Amarillo, Texas – had originally selected the ABWR design but later settled on Areva’s USEPR.)

The 1356MWe ABWR design was developed by GE, Hitachi and Toshiba and the three companies worked together to build the first two ABWR units at Kashiwazaki-Kariwa in Japan in 1996. GE and Hitachi allied their nuclear businesses to become GE-Hitachi in the summer of 2007 and it is this company that owns the specific version of the ABWR design that has been certified by the NRC. The COL application for the South Texas ABWRs references the certified GE-Hitachi design, even though Toshiba has been selected as the main contractor to build the units. In the summer of 2007, STP Nuclear Operating Company (STPNOC) contracted with Toshiba for project services support for the STP units, including pre-engineering work and the procurement of long lead-time components, and Toshiba subsequently signed up Fluor to provide engineering, procurement and construction related services.

As some information relating to the certified design is proprietary to GE-Hitachi, it looks as if Toshiba will either have to make amendments to the certified design or come to some arrangement with GE-Hitachi to obtain access to the full design. The current impasse has led to the review of the COL application being delayed. In January, STPNOC wrote to the NRC asking the regulator to “focus its review activities on the portions of the application that are site specific and generic.” As a result the NRC decided to suspend its review of the final safety analysis report (FSAR) and other parts of the application. The regulator made it clear that although it would continue with the environmental report (ER) and the emergency plan (EP) parts of the COL application, a full review would not be undertaken until such time as STPNOC was prepared to support a review of the complete COL application. “The NRC will develop a schedule after you have resolved any vendor support issues and made any COL revisions necessary to allow a staff review of your application in full,” the regulator informed STPNOC in a letter dated 30 January 2008.

Both Toshiba and GE-Hitachi are investing in companies in the USA to support their ABWR marketing and construction activities. Toshiba set up Toshiba America Nuclear Energy in January, to promote its ABWRs and provide related support services. In March, Toshiba agreed to partner NRG Energy in Nuclear Innovation North America (Nina), a company formed by NRG Energy to promote the use of ABWRs in North America and to support the STP construction project. Not to be outdone, GE-Hitachi shortly afterwards announced it was setting up a Global Unified Project Office, based at GE’s site in San Jose, California, to perform a similar role for its ABWR.

The COL surge

The other certified design for which COL applications have been submitted is Westinghouse’s 1117MWe AP1000: four applications have been filed and docketed (Lee, Bellefonte, Harris and Vogtle); another one is filed (Summer); and two more applications are expected (Levy County and Turkey Point). All the AP1000 applications are for two-unit plants.

While the AP1000 design is certified, an amended design is currently under NRC review. The design changes include a redesign of the pressuriser, a revision to the seismic analysis, changes to the instrumentation and control systems, a redesign of the fuel racks, and a revision of the reactor fuel design.

The first AP1000s to go into operation are likely to be in China, where excavations have already begun prior to the start of construction work on the first of four units. The first AP1000 COL application was submitted by the NuStart Energy consortium in October 2007 for two units at TVA’s Bellefonte site in Alabama and is the reference plant for this reactor type, meaning that other COL applications can draw on generic portions of it.

One of the most significant advances was made by Southern subsidiary Georgia Power, which entered into an engineering, procurement and construction (EPC) contract in April this year with Westinghouse and The Shaw Group for two AP1000s at Vogtle, although the contract is dependent upon approval by the Georgia Public Service Commission (PSC).

No competing bids were submitted for the project, so Georgia Power’s bid is now under review by the PSC’s independent evaluator before the PSC selects a preferred resource in August. Final certification is expected in March 2009, which according to Georgia Power would mean startup dates of 2016 and 2017 for the two units. An ESP application for the Vogtle site in Georgia was submitted in August 2006, followed by a COL application in March 2008.

Even more recently, on 27 May this year, it was announced that Westinghouse and The Shaw Group have signed an EPC contract with SCE&G, principal subsidiary of Scana, and Santee Cooper, South Carolina’s state-owned electric and water utility, for two AP1000s at the Virgil C Summer nuclear plant. As is the case for the Vogtle project, the Summer contract is contingent on PSC approval. If everything runs smoothly, SCE&G expects the startup dates to be 2016 for the first unit, and 2019 for the second.

COL applications for Areva’s USEPR, GE-Hitachi’s ESBWR, as well as the ABWRs at STP, are also under review. Applications for single 1560MWe ESBWR units at two sites (North Anna and Grand Gulf) have been docketed and three more are expected (River Bend, Victoria County and Fermi). A COL application has been docketed for a single 1600MWe USEPR at Calvert Cliffs, with applications for six more units expected (Susquehanna, Callaway, Nine Mile Point, Elmore County, and two units in the vicinity of Amarillo, Texas). Both the USEPR and the ESBWR designs are undergoing certification review.

Finally, a single COL application is expected for Mitsubishi Heavy Industries’ (MHI’s) US-APWR (two units at Comanche Peak). An application for standard design certification for the 1700MWe US-APWR was submitted on 31 December 2007.

Costs escalate

On the downside, projected costs of new nuclear have been increasing rapidly. Last year, NEI reported that different sources estimate the capital costs of a new nuclear plant to be anything from $1400/kWe up to $6000/kWe. Now, the latter figure is beginning to look conservative.

One of the most significant factors has been the recent rise in the costs of construction materials, in particular cement, steel and copper. However, these increases also affect all major construction projects, including competing forms of generation.

Ironically, the only planned COL application to be dropped so far on grounds of escalating costs was that of MidAmerican Nuclear Energy, a company owned by Berkshire Hathaway, the largest shareholder and CEO of which is Warren Buffett – the world’s richest man, according to Forbes. At the end of January this year a statement by MidAmerican president Bill Fehrman was issued saying that although the company continues to “believe that nuclear energy must be an important part of the nation’s energy future,” it concluded: “Consumers expect reasonably priced energy, and the company’s due diligence process has led to the conclusion that it does not make economic sense to pursue the project at this time. The decision is based on economic considerations and not on issues related to the suitability of the Idaho site.”

Despite the reluctance of the vendors to disclose the price of their plants, several utilities have issued their projections. In a March 2008 submission to the Florida Public Service Commission as part of the determination of need for its planned nuclear plant at Levy County, Progress Energy estimated the construction cost of the two AP1000 units at $10.5 billion (around $4800/kWe).

Progress Energy’s director of regulatory planning Javier Portuondo told the Florida PSC: “Progress Energy Florida is currently estimating to spend $13 billion, before carrying cost/AFUDC (allowance for funds used during construction), to construct the Levy nuclear power plants, including associated transmission facilities. This estimate includes approximately $10.5 billion for Levy units 1 and 2 nuclear generating plants, and approximately $2.5 billion for the associated transmission facilities. Carrying cost/AFUDC is expected to amount to approximately $3.9 billion for both units 1 and 2 and the associated transmission facilities.”

These figures are broadly consistent with those of Georgia Power. On 7 May, a statement on its proposed two AP1000s at Vogtle read: “Georgia Power’s proportionate share of the estimated in-service cost of the two units, based on its current ownership interest of 45.7%, is approximately $6.4 billion, subject to adjustments and performance bonuses under the EPC contract.” The company said it expected that a typical customer would “see a base rate increase of approximately $12 per month in 2018, when both units are fully operational,” though over time this rate impact would decline.

Also in Florida, FPL told the PSC that it had “determined a capital cost range of $3108-4540/kWe to be reasonable for Turkey Point 6 and 7.” This figure is the ‘overnight’ cost; the total project cost estimate range in ‘year spent dollars’ – ie, taking into account inflation and interest payments over the duration of the project – works out to $5492-8071/kWe, FPL senior director of project development Steven Scroggs told the Florida PSC in an October 2007 hearing. This brings the cost of two AP1000s at Turkey Point in the region of $12.3-18.0 billion, again consistent with the proposed AP1000s at Levy County and Vogtle.

The clearest indication of the cost of building two AP1000s came from SCE&G on 27 May, in the announcement of the provisional EPC contract for the proposed new units at Summer. “We estimate the cost for both units upon completion is approximately $9.8 billion,” the statement read, noting that there would be additional costs related to transmission facilities and the financing of the project. Kevin Marsh, president of SCE&G, added: “A significant portion of the contract price is fixed, or fixed with agreed-upon inflation factors. In addition, the ability to construct the new units on our existing nuclear site will lower the cost and minimise the need for new transmission lines.”

These costs for AP1000s are considerably higher than NRG Energy’s estimate for the proposed ABWRs at STP. NRG now estimates the cost of its two planned ABWRs to be around $8 billion, or $2900/kWe. While relatively low, the estimate has risen from the figure of $5.2 billion that was given in a 21 June 2006 press release announcing NRG’s repowering programme.

Slowly but surely

In all the talk of a nuclear renaissance it’s sometimes easy to overlook the fact that the USA already has more installed nuclear capacity than any other country. Certainly US utilities seem to be keen to make the most of the incentives on offer to help towards the construction of new nuclear capacity, but just how many of those COL applications will result in construction remains to be seen. Nuclear Energy Institute (NEI) chairman and Exelon CEO John Rowe summed it up in his State of the Industry Address to the NEI’s Nuclear Energy Assembly in May: “Excellent progress has been made, but the renaissance is not yet here.” Slowly but surely, it seems to be coming.


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The COL leagues

New reactor licensing

Three US regulatory initiatives introduced in 1989 aim to make the nuclear route less daunting and should boost the prospect of new construction in the shorter term: design certification for standard plant designs; early site permits (ESPs); and combined construction and operating licences (COLs).
A COL application can reference an ESP, a standard design certification, both, or neither. The three initiatives provide an alternative to the old two-step licensing process requiring a separate construction permit and operating licence including final design information for each reactor.
Incentives to help drive new build are available through Nuclear Power 2010, a joint cost-sharing government/industry programme launched in 2002 to help drive the deployment of Generation III reactors and demonstrate the then untested regulatory processes, and under the US Energy Policy Act of 2005. These include loan guarantees, risk insurance and an undertaking from the Department of Energy to cover losses from delays due to the licensing process, but are only available to a limited number of projects.

Design certification
Through the design certification process, the Nuclear Regulatory Commission (NRC) can certify a standard reactor design for up to 15 years, independent of a specific site. Certified reactors should be capable of being built anywhere in the USA with only site-specific licensing procedures required. Four standard designs have been certified: GE-Hitachi's ABWR, and Westinghouse's System 80+, AP600 and AP1000. None of these reactor designs have yet been constructed in the USA, although ABWRs of similar design are operating in Japan and are under construction in Japan and Taiwan. Construction work began in China on the first AP1000s in 2007.
Several other reactor designs are currently undergoing review for certification: GE-Hitachi's Economic Simplified Boiling Water Reactor (ESBWR), Areva's US Evolutionary Power Reactor (USEPR) and Mitsubishi's US Advanced Pressurized Water Reactor (US-APWR). Westinghouse has also submitted an amended version of its AP1000.

Early site permit
ESPs are partial construction permits that approve nuclear sites as suitable in principle for the construction and operation of a nuclear power plant application on safety, environmental and nuclear grounds, independent of plant design. They enable a vital part of the planning process to be completed before making a commitment of applying to build a plant, a huge financial outlay. The permits are good for 10 to 20 years and can be renewed for an additional 10 to 20 years. It is not essential for an ESP to be granted before an application is lodged for a new power plant, and possession of an ESP does not commit a site owner to proceed with construction plans nor does it guarantee that a licence will eventually be granted for a nuclear power plant. However an ESP should make the licensing process run more smoothly should a construction licence be lodged, and also allows some limited construction work to begin at a site even before a full construction licence is granted.
So far ESPs have been granted for three sites: Clinton (Illinois), Grand Gulf (Mississippi) and North Anna (Virginia). An ESP application for Vogtle (Georgia) is currently under review.

Combined construction and operating licence
The COL process was instigated as a 'one step' designed to ensure that nuclear plant public health and safety concerns and licensing issues are all resolved prior to the start of construction. A COL provides authorisation from the NRC to construct and operate a nuclear power plant at a specific site, but does not commit the proponent to building the plant.
No COLs have yet been granted but the NRC has to date received COL applications for 15 new nuclear units from 9 proponents, and anticipates applications for many more within the next 12 months (see Table). The NRC estimates that a COL would be issued about 42 months after the application has been docketed.
Some of the COL applications are being made by utility-vendor consortia formed with the aim of spreading the costs and risks associated with embarking on the new licensing process. The largest consortium is NuStart Energy, which has 12 members and has submitted COLs for the two Bellefonte AP1000s and the Grand Gulf ESBWR. Unistar, an alliance of Constellation Energy and the EDF Group working on COL applications for the USEPR, has submitted an application for the lead unit at Calvert Cliffs. Dominion has partnered with GE-Hitachi and Bechtel to submit the COL application for the North Anna ESBWR. The newest partnership is Nuclear Innovation North America (NINA), established earlier this year by NRG Energy and Toshiba to promote Toshiba's version of the ABWR and to work on the South Texas Project reactors for which NRG had already submitted its COL application.



Tables

Table of COL applications

Vogtle Vogtle
AP1000 AP1000
South Texas Project South Texas Project


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