The safety of nuclear power, as well as the prospects for new plants, has been questioned since the events at the Fukushima Daiichi power plant in Japan begun unfolding on March 11, 2011. Countries such as Japan, France and China have performed stress tests of existing plants to ensure they can operate safely. In North America, Canadian and U.S. nuclear regulators have been reviewing operating plants. The Nuclear Regulatory Commission (NRC) said it will apply recommendations from its review for any changes deemed necessary to improve the safety of operating plants. The Canadian Nuclear Safety Commission (CNSC) established an external advisory review committee to review the Commission’s process and responses stemming from the Fukushima Daiichi accident.
Although Japan’s nuclear tragedy is still fresh on people’s minds globally, the nuclear power industry remains optimistic about the future. Power Engineering magazine Associate Editor Brian Wheeler moderated this year’s Nuclear Power Executive Roundtable, which discussed the future of nuclear power in North America, the challenge of financing new plants and the most effective strategies for complying with proposed new regulations.
Participants included Brian Reilly, senior vice president and manager of Operations, Nuclear, Bechtel; Ron Oberth, president of the Organization of CANDU Industries; and Tom Franch, senior vice president of Engineering and Projects for Areva North America.
Power Engineering magazine: What impact have the events at the Fukushima Daiichi nuclear power plant had on the prospects for nuclear power in North America?
Brian Reilly: It's important to draw a comparison between Fukushima and the U.S. fleet. Most of the operating plants and even the new plant sites here have a significantly different seismic and flood risk condition than what was found at Fukushima. If you look at the factors identified during the fact-finding mission that the International Atomic Energy Agency did, it focused on things like independence of regulatory bodies and emergency preparedness. Those things already have a strong foundation in North America. So, in the short-term there may be delays in new plant construction, but that is really due to the fact that we don’t know what the regulatory changes are going to be that may be enacted. You compound that with what is going on in the economy and the low price of gas and that leads to a lot of uncertainty.
The lessons learned from Fukushima eventually will be rolled into the regulatory fabric that we have in the U.S. and Canada and it will enhance the safety of the plants. So I don’t think that it is going to have a significant, long-term effect on the build out. I would look at this is a complication in the regulatory space.
Ron Oberth: Speaking from a Canadian perspective, our regulator, just like the U.S. regulator, has asked the nuclear operators to review their operations and to make recommendations in any areas they think may need improvements, particularly in the area of emergency response. There may be some tougher regulations coming along that will impact the capital cost of the new plant. Obviously there is a little public apprehension but over time most of the public is recognizing that we learn from these events and each time one of these things happen our industry gets stronger and better.
I don’t see any significant delay in the next project in Ontario. It was held up for a variety of reasons such as an election and the restructure of AECL (Atomic Energy Canada Ltd). But I am optimistic that the Fukushima lessons learned will be implemented in the new build and it will precede on a schedule, maybe a little bit slower, perhaps early 2012.
Tom Franch: The nuclear industry is a continuous learning organization and we are going to absorb these lessons and apply them. We are following the regulatory process, too, and it is very deliberate and should be that way. Industry is very involved and we will provide feedback and incorporate feedback as necessary. In the long-term, nuclear really is part of the energy solution for the country. It needs to be part of the solution if we want to have clean energy. It is not the only solution, but it is part of the solution.
Oberth: Unless you are in Germany. And I guess Italy has decided to once again withdraw from the nuclear game.
PE: Low domestic natural gas prices and project cost overruns and large schedule delays on nuclear units outside of North America were already weighing on the nuclear industry before Japan’s crisis. Given these pressures, what will it take for new nuclear construction projects in North America to secure financing and perhaps more importantly insurance? Will low gas prices continue to be a hurdle?
Oberth: That’s a good question.
Reilly: The insurance question is something that is more readily answerable in the short-term. We have a very robust regulatory system. We have a very strong safety culture and a very long record of safe operations. From an insurance standpoint, the Japanese crisis may have a short-term impact but I don’t think it is going to be a matter of not being able to obtain the necessary types of insurance that would be needed for the plants.
As far as the finance, financing is eventually going to be provided when there is credibility of construction schedules and budgets. There are some good examples of things that have happened in the industry, such as restarts of some plants, some of the new construction that has been on or very close to budgets and schedules.
The thing to remember about what is being built right now is that the industry made a very conscious effort to say “We are going to build standardized plants,” and what is being built right now are serial numbers 0001 of these plants. Having a fidelity to that standardization is going to continue to drive the price of these plants down. The confidence in the schedules is going to get higher and the financial community will be very receptive to those kinds of results and the financing will be available.
Franch: I would also add that you almost have to rebuild the vendor supply chain. The supply chain that existed 30 years ago when we were in full construction mode no longer exists.
You have to remember that we had over 300 plants on the books to build just in the States alone, and we built 104 in a very short period. But we had a pretty robust supply chain to build those. So now, there is an investment movement by the industry (by construction and nuclear steam supply system vendors) to basically standardize and rebuild the vendor supply chain so that it can be very predictable and sustainable on the cost and the schedule. That will really help bring the cost of the plants down. And as Brian talked about, it will give the financial community the data that they need to be able to predict and finance projects. That is all they are looking for, some sort of predictability so they can run their numbers.
Oberth: Tom, what you just said is music to my ears. As you may know, my organization represents the Canadian nuclear supply chain and admittedly many of our components are CANDU unique. But I have been tasked with having a look at the U.S. market and seeing if there are some specific areas where our suppliers—who have stayed busy in supplying CANDU refurbishment projects—might have some capability to also supply your industry. I know you are not looking to export jobs to Canada, but perhaps through partnerships we would like to find ways to work with the U.S. nuclear supply chain to build a strong supply chain, which, as you said, is what the investor community wants to see.
Reilly: One thing I would add to what has been said is that a significant facilitator would be if we could get the DOE (Department of Energy) loan guarantee program back to its original intent, which was to encourage first movers for this new technology. It evolved into a very expensive program for the cost of those guarantees and that is contrary to what was envisioned when the program was originally established.
Franch: When you talk about the gas price and the hurdles, you have to take a long-term view. Historically, if you just look at gas prices there is about a 10-year wave in which they change. When you look at it in regards to being self-sustainable and energy independent, do you want to put all of your eggs in one basket and rely entirely on gas? I don’t know if any of the generation companies really want to go all in with one fuel, because then you are really stuck with whatever that fuel price becomes. It is like a financial portfolio. I am sure your financial advisor advises you to have a diversified portfolio. Same with our energy mix. We need to have a diversified portfolio, and we have to look at nuclear for the long haul. It will supply power for 60 years, which is just not power for us, but power for our children and our children’s children.
Oberth: Well said. I am going into a nuclear debate tonight with someone who is going to come from the renewable side of the business and I anticipate that my opponent will say that there have been two game changers. Shale gas is changing the game in favor of natural gas and Fukushima may have been a game changer for nuclear. Those are arguments I am going to have to refute. Your diversification argument is very compelling and it is going to be a key part of what I have to say.
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