Obama Vague on Nuclear In Carbon Reduction Policy

NUCLEAR INTELLIGENCE WEEKLY®

Vol. VII, No. 26
June 28, 2013

UPP: $39.64/lb U3O8

NIW Assessment

Market Points
NIW's Uranium Price Panel dropped back to $39.64 per pound of U3O8, once again falling below the $40 mark. Relatively low offer prices may have prompted a series of three spot deals done late Thursday.

Both UAE nuclear developer Enec and California's PG&E appear to have made decisions on outstanding EUP bids. With many market players holding EUP, the field of potential winners is wide open.

Australia-listed Paladin announced this week a delay in an expected sale of a minority stake in the Namibian Langer Heinrich mine. The company had anticipated finalizing a sale in late June but now says it is targeting mid-August.

WEEKLY ROUNDUP
CGN Set to Invest in Hinkley
Once Strike Price Confirmed

• China General Nuclear (CGN) is set to invest in EDF's Hinkley Point new-build once the French utility agrees with the government on a set price for power output (p3). "If the UK wants to build an EPR, I think personally the experience we got in Taishan should be used in the UK," Lu Wei, the head of the Paris branch of CGN construction subsidiary China Nuclear Power Engineering Co. (CNPEC), told a conference in Warsaw this week. He was referring to the two on-schedule EPRs under construction in Guangdong province, a project managed by CNPEC. "We are willing to share our experience with our partners EDF and Areva." But CGN isn't the only potential Asian investor waiting on the "strike price" negotiations. Toshiba subsidiary Westinghouse has joined forces with Itochu in talks with Iberdrola over purchasing the Spanish utility's 50% stake in UK developer NuGen. NuGen, whose other owner is GDF Suez, seeks to build reactors at Moorside in West Cumbria. Should Itochu actually purchase a stake, it would be the Japanese conglomerate's second major foray into nuclear this year, after teaming with GDF Suez and Mitsubishi Heavy Industries in a bid to build Turkey's second nuclear plant at Sinop (p4; NIW May3'13).

• The head of Iran's Atomic Energy Organization says the Islamic republic intends to build an experimental 10 megawatt light-water reactor, a 360 MW pressurized water reactor, and at Bushehr another 2-3 1,000 MW reactors. Speaking Friday, Jun. 28, to journalists at the Atomexpo exhibition in St. Petersburg, Fereydoon Abbasi-Davani said that Iran has nearly finished the design for a 360 MW PWR and begun producing equipment for future plants. Abbasi said that Iran is selecting possible sites and will soon inform the IAEA about both the NPP's design and possible locations. As regards Bushehr, he said that earlier in the week the plant reached full output of 1,000 MW after encountering technical difficulties that required additional inspections, but that "no serious defects" were uncovered. The timing on future reactor projects is unclear, lending credence to speculation that the announcement was aimed at underlining Iranian justification for continued work on its uranium enrichment program, about which Abbasi signaled no change.

• US Nuclear Regulatory Commission (NRC) chairman Allison Macfarlane was confirmed late Thursday to a full five-year term, although the vote was "subject to the nominee's commitment to respond to requests to appear and testify before any duly constituted committee of the Senate" — presumably in this case the Senate's Environment and Public Works Committee, chaired by Sen. Barbara Boxer (NIW Jun.21'13). Boxer, a California Democrat, had held up the nomination, demanding documents related to NRC internal investigations over the hugely controversial restart of the San Onofre reactors, now in permanent shutdown, in her home state (NIW Jun.7'13). But earlier this week the committee passed the nomination through to the Senate floor after apparently striking a deal with the NRC. "What was involved here was working out a protocol to protect the documents," an NRC source said, declining to elaborate further. Macfarlane's term runs to Jun. 30, 2018.

MARKET
Market: Below $40 — An Incentive to Buy?
NIW's Uranium Price Panel dropped its weekly price assessment by 48¢ this week to $39.64 per pound of U3O8, the same price as two weeks ago. Prices submitted to the panel varied significantly less this week than last, an indication of more consensus in the market.

The drop back below $40 came amid rumors that three individual deals were done late on Thursday. Deliveries were slated for March 2014, June 2014 and December 2017, according to one source, although NIW could not confirm this or further details. With seasonally typical low activity, those deals surprised some. "I worry what price they were," another source, who had no independent knowledge of the deals, said.

Offers from suppliers on the high-end of $39 created an environment for possible sales, one market participant pointed out, but the lack of demand and flat price curve continued to weigh on the market. Suppliers were finalizing bids for Ontario Power Generation's request for proposals for uranium deliveries between 2015 and 2018.

Australia-listed Paladin's shares slid more than 7% on Wednesday to 82 Australian cents (76¢) after the company announced that an expected sale of a minority interest in the Langer Heinrich project in Namibia would be delayed from the end of this month until mid-August. Share prices recovered later in the week but only to 88 Australian cents.

"Advanced negotiations have been ongoing with two nuclear parties," Chief Executive John Borshoff wrote in a letter to investors sent on Wednesday. The delay was likely a disappointment to investors: Last month investment firm Raymond James issued a note saying that the "looming transaction" created a "compelling entry point." Paladin has been aggressively cutting cash costs at its mines in the last year and said in its most recent financial results that it had realized an average selling price of $55.22/lb.

Enrichment Activity — Unwinding Surplus?
On enrichment, two buyers appeared to have made decisions for outstanding tenders: the Emirates Nuclear Engineering Corp. (Enec) and California's Pacific Gas and Electric (PG&E). PG&E had initially received bids on Apr. 5 for delivery of 20,000 kg of EUP, but asked suppliers to extend the validity of their bids. While Enec's decision remains unclear, the chosen supplier so far looks unlikely to be either Usec or Urenco (NIW May17'13). The EUP spot purchase is for delivery next year, although Enec's first reactor is not scheduled to be on line until 2017. The 2014 delivery is meant to provide the fabricator with working inventory, one person said. High global inventories right now mean that the field of prospective winners is wide open. "There's an awful lot of people with quantities of EUP so it really — it literally — could be one of half a dozen or more companies," one enrichment provider said.

Shareholders of US enrichment provider Usec approved a reverse stock split Thursday aimed at meeting the criteria for continued public listing on the New York Stock Exchange (NIW Mar.22'13). Shares, which closed down 3¢ on Thursday at 29¢, will be traded at a rate of 25-for-one. The reverse split, scheduled for Jul. 1, should remedy one issue for Usec's status on the exchange, pushing the share price over the required $1. But it will not affect market capitalization, which is required to be more than $50 million, a level Usec fell below earlier this year. In remarks to shareholders, CEO Jack Welch concentrated on the prospective American Centrifuge Project, currently under a joint research and development program with the Department of Energy, but issued a warning related to slack demand in the uranium market. "Given this competitive environment, we must also be prepared for a scenario where the pickup in customer demand for nuclear fuel takes longer than our current estimate," he said.

Emily Meredith, New York
emeredith@energyintel.com

URANIUM PRICE PANEL
For the week ended June 28, 2013
Weekly Spot Market Prices
Jun
Change 28 21 14 7 31 24 May 17 10 3 26 19 12 5
Price ($/lb U3O8) 0.48 39.64 40.12 39.64 39.42 40.35 40.39 40.63 40.45 40.34 40.41 40.06 41.43 42.09
Total Assessments 0.00 8.00 8.00 7.00 9.00 8.00 8.00 7.00 8.00 7.00 8.00 8.00 8.00 10.00
% within 1 StDev 0.00 100.00 100.00 86.00 89.00 87.50 100.00 100.00 100.00 100.00 62.50 100.00 100.00 70.00
Low ($/lb U3O8) 0.00 39.00 39.00 39.00 39.00 40.20 40.00 40.50 40.00 40.00 40.00 39.75 41.00 42.00
High ($/lb U3O8) 0.90 40.00 40.90 40.00 39.85 40.50 41.00 41.00 40.75 40.75 40.75 40.50 42.00 42.25
Variability* 0.16 0.09 0.24 0.00 0.14 0.05 0.19 0.04 0.03 0.04 0.44 0.06 0.21 0.00
The Uranium Price Panel (UPP) represents the average price assessment reported by active spot market participants for a transaction of 100,000 lbs of U3O8 by book transfer on the date given. In the UPP, participants are assigned a market position of seller, buyer or intermediate. Each week Energy Intelligence eliminates assessments that are statistical outliers, and double-checks the market position of intermediates. It then uses random elimination to maintain an equal number of buyer and seller assessments in the final average. "Variability" represents the absolute range of conceivable final averages resulting from this random elimination. "High" and "Low" assessments represent the extremes of the non-eliminated market assessments. For a detailed explanation of the price panel methodology, see www.energyintel.com.

UNITED KINGDOM
Whitehall Offers Loan Guarantee for Hinkley

While talks continue between the UK Department of Energy and Climate Change (Decc) and EDF over a "strike price" for output from the planned Hinkley Point reactors in Somerset, Whitehall announced several key moves this week that could move the project forward and set the stage for signing contracts-for-differences (CFDs) in which this price will be paramount. Chief among these was the promise of a hefty project loan guarantee.

On Jun. 27 Treasury Chief Secretary Danny Alexander told parliament that the government would underwrite up to £10 billion ($15.2 billion) of the project cost, making it easier and cheaper for EDF to raise the necessary finance for two EPRs whose pricetag could well exceed £14 billion. A Decc statement noted "the Treasury has announced the decision to pre-qualify EDF's Hinkley Point C new nuclear power project for a UK Government Infrastructure Guarantee."

Beyond this Decc unveiled draft strike prices for low-carbon generation, which at face value look very attractive for renewables. The draft numbers — which will go through consultation — are part of the government's Electricity Market Reform (EMR) designed to attract some £110 billion in green investment by 2020. But they were high enough that they might make it easier for Decc to acquiesce to rumored EDF demands for a number north of £95 per megawatt hour for Hinkley (the French-owned utility refuses to publicly discuss numbers while talks are ongoing).

Starting in 2014, up to £155/MWh is being offered for offshore wind projects, £100/MWh for onshore wind and up to £125/MWh for large-scale solar photovoltaics. Nascent green technologies including wave and tidal could get £305/MWh. The levels decline slightly over time, reflecting likely industry cost reductions and economies of scale. No details of the proposed strike price for nuclear were given. Numerical indications of the money to be offered for carbon, capture and storage (CCS) projects were also omitted.

Loan guarantees have also been offered to other electricity-generation schemes, principally Drax Power's coal-to-biomass conversion projects, a move which the government hopes will keep the assistance outside the realms of what the UK government defines as direct subsidies. Moreover a total pool of £6.7 billion collected via the Levy Control Framework (LCF), under which consumers fund the move to low-carbon generation through their electricity bills, is projected to be available annually in 2020. Should EDF agree a deal with Whitehall, the lion's share of the LCF pool could potentially go to the French utility, leaving very little for other low-carbon generators, no matter how attractive the numbers appear at first glance.

London slapped on a massive caveat when releasing the numbers: there is likely to be just 1 gigawatt of capacity supported through the LCF money pool and each recipient project is subject to value for money and cost reduction parameters. Analysts have been quick to point out the "attractiveness" of these draft strike prices for renewables, saying the government can now make any offer to EDF in the ballpark of £100/MWh look like value for money.

London hopes that by 2020 some 30% of the UK's electricity will come from renewables, up from about 12% now, but there are no targets for nuclear, which provided roughly 18% during the first three months of 2013, according to official data released Thursday. "We have no target for nuclear in the UK," Hergen Haye, Decc's head of nuclear newbuild, told a conference in Warsaw this week. "When you hear 16 GW by 2030 ... these are numbers industry has presented to us. We will allow as much as possible. That is the challenge to all suppliers of electricity — the lowest cost technology may win the greatest share."

Jay Eden, London and Phil Chaffee, Warsaw
jeden@energyintel.com; pchaffee@energyintel.com

EUROPE
Looking Toward CFDs

With prospective nuclear newbuilds in Central and Eastern Europe facing a steady holding pattern of repeated delays, many based on lack of a viable financing option, governments across the region are increasingly looking to one possible solution: a contract for difference (CFD), largely based on the scheme planned for the UK. Under this scheme, a key part of the UK's electricity market reform (EMR), a nuclear generator is paid a fixed rate for its power output; if that rate is above the market price a government-backed counterparty pays the difference, while if it is below the market rate the generator pays the difference to the counterparty (NIW Jul.27'12).

"Why the feed-in-tariff CFD?" Alan Svoboda, the executive director of trading and marketing at Czech utility CEZ, asked at the Platts European Nuclear Power conference in Warsaw this week. "It is not destroying the market; power still ends up on the wholesale market. And it is a symmetrical mechanism. If the wholesale prices start to reflect the embedded CO₂, then the investors would start paying back. That seems to be the right scheme for investing."

CEZ, a 70% state-owned company, is in the midst of a tender to chose a technology for a newbuild at its existing Temelin nuclear plant. But the government is far from settled on how exactly it wants to finance the project. This was underlined this week when Jiri Rusnok, the new prime minister who took office after his predecessor resigned amidst scandal, said that "I won't make strategic decisions" on the nuclear program, according to the Wall Street Journal. With early elections likely in September, it's unlikely that the government will allow any decision on Temelin. But whoever is in power by the end of the year is likely to face a proposal from CEZ and others in the economy ministry advocating some sort of CFD model.

Looking for Support

This model is particularly dear to CEZ because, as a diversified European utility, it is flailing in the current low-priced electricity market. Given the economic contraction since 2008 electricity demand has fallen, as has the price of carbon under the Emissions Trading System (ETS), as carbon targets have been met just through the lower total power output (NIW Feb.15'13). "The only thing still worth operating is old coal and already existing nuclear," explained CEZ's Svoboda. "The energy sector is not investable, except with support through some sort of subsidy scheme."

To this extent the thinking in Prague is quite similar to that in Warsaw or Budapest, which are also scrambling to find ways to attract financing into their respective newbuild programs (NIW May17'13). In Hungary MVM Paks II, the special-purpose company tasked with developing new reactors at the existing Paks nuclear plant, is analyzing financing possibilities including "the contract for difference application possibilities in Hungary," according to Csilla Toth, the company's technical director and deputy chief executive.

"We look very carefully at what is going on in the UK," said Marzena Piczczek, the vice president of the management board for PGE Energia Jadrowa SA, Poland's newbuild developer controlled by state-owned utility PGE. "We think that maybe the CFD will be the solution for us," she continued. Indeed, while both PGE and the economy ministry are still considering other options, such as a power purchase agreement, many of these amount to variations of the CFD — some sort of set price for output to reassure investors.

Waiting on the UK

But while planners in Prague, Warsaw and Budapest are all infatuated with the CFD, they're unlikely to commit to any such mechanism until it has been proven. And this goes beyond the UK government agreeing to a contractual price for nuclear output with EDF, the prospective first newbuild developer in the UK with which it is still in talks. More important is the scheme sustaining review in Brussels.

After a strike price is agreed, "we will then have to go to our friends in the European Commission [EC]," said Hergen Haye, the head of nuclear newbuild at the UK Department of Energy & Climate Change (Decc). "They will look at it from the point of view of state aid. I am confident that we have good arguments. We should have maximal flexibility to deploy all low carbon energies available…"

But whether or not the EC is swayed by Decc's arguments, its review of the CFD and the larger EMR is likely to be lengthy. "Now as a lawyer I cannot speak for my colleagues in DG [Directorate-General] competition," said Jan Jilek, a policy officer at the EC's Directorate-General for Energy. "I read in the newspapers that if the EU finding opens in a regular procedure it can take up to two years. I believe it can be a shortened procedure. It will be kind of a precedent."

Phil Chaffee, Warsaw
pchaffee@energyintel.com

FRANCE
Is Negative Electricity Pricing on the Rise?

French wholesale electricity prices were negative during 14 hours of the Jun. 15-16 weekend, with a minimum as low as minus €200/MWh in the early hours of Sunday, Jun. 16. This is a new phenomenon in France — where only 10 hours of negative pricing are on record for 2012 — but relatively common in other markets with abundant wind and solar generation such as Germany, the Scandinavian Nordpool or the US Pacific Northwest.

As fixed costs are spent anyway, wholesale electricity markets normally clear at the variable cost of the last and most expensive megawatt hour required to satisfy demand — typically a coal-fired plant or an open-cycle gas turbine. But sometimes prices can become negative — meaning that sellers pay buyers to take the power — when large amounts of priority dispatch, low variable cost renewable generation is available and certain types of generators such as nuclear cannot or prefer not to reduce output when demand is low because shut-down and start-up costs are too high.

This is what happened in continental Europe during the mid-June week-end, when mild temperatures and relatively low consumption combined with high levels of non-flexible generation — including nuclear, hydropower, wind and solar photovoltaic — in France, Germany and Belgium (see graph). French nuclear generation, at about 44 gigawatts (GW) until Friday Jun. 14, was stepped down to 33 GW-36 GW on Jun. 15 and 31 GW-32 GW during most of Jun. 16. It was progressively restored back to about 42 GW in the morning of Monday, Jun. 17. During that same period there was a noticeable increase in pumped hydro storage, which EDF uses to provide more flexibility to managing its large nuclear fleet (NIW Oct.5'12).

While reactors were not originally intended to be used in load-following mode, the rise of renewables in some parts of Europe and the US has forced them to cut back power at times of lower demand. And some reactor manufacturers have bowed to this reality in their newer designs: Westinghouse's AP1000 and Areva's EPR offer extended flexibility, including load following down to 25% of nominal capacity and power variation up to 5% per minute (NIW Nov.30'12).

Philippe Roos, Brussels
proos@energyintel.com

TURKEY
NPPs Move Forward Despite Heavy Risks

While other nuclear newbuild projects in Europe are struggling with political shifts and uncertain economics, Turkey's two main projects appear relatively buoyant. Ankara is hammering out the details of the equity structure of the second planned plant at Sinop, and Russia's Rosatom says it will build four AES-2006 VVER-1200 reactors at Akkuyu irrespective of whether or not it succeeds in selling off a 49% minority project stake, though it knows it is carrying a heavy risk (p9).

"If we don't find investors we will proceed with the project with our own funds," Oleg Titov, an executive director of Akkuyu NPP JSC, told the Platts European Nuclear Power conference in Warsaw this week in response to an NIW question. "What will be the rest of the funding we are discussing with the government and with banks."

Under the intergovernmental deal Russia signed with Turkey in May 2010, the two sides agreed on a 15-year power purchase agreement (PPA) for output from the 4,800 megawatt Akkuyu plant at a fixed price of 12.35 cents per kilowatt hour — a price that would apply for 70% of the output from units 1 and 2, and 30% from units 3 and 4 (NIW May17'10). But this approach has considerable drawbacks, explained Titov. The project company bears all the risk, and must draw up long-term electricity forecasts with a "high probability of error due to unpredictable factors." This uncertainty and risk makes it particularly difficult to find investors, he explained.

Ankara, meanwhile, is working on a similar model for the Sinop project, which encompasses four 1,150 MW Atmea1 reactors at the Black Sea site (NIW May3'13). The broad outlines appear to include 70% debt financing (all apparently backstopped by Japanese export credit agencies) and 30% equity in the project company. The equity breakdown appears to be roughly as follows: Turkish state-owned utility Elektrik Uretim A.S. (EUAS) with 45%, GDF Suez with 25%, Itochu Corp. with 20%, and MHI with the remaining 10%. But the devil is in the details, particularly when it comes to a PPA and construction risk. All of this is still under discussion.

Earthquakes and Demonstrations

Perhaps just as important as the financial structures of both projects are two other vulnerabilities: seismic risk and public acceptance. The Anatolian peninsula is notoriously earthquake prone, and there are serious seismic concerns about both the Akkuyu and Sinop sites. This is being factored into the Akkuyu reactor design, Titov said. "For this particular reactor we have taken into account that the seismic conditions are worse here," Titov told the Warsaw conference. "We have taken 8.9 [magnitude] for earthquake. So all the precautions have been done."

The issue is perhaps even more acute for Sinop, where the seismic issue scared off many potential vendors. Indeed, in 2010 the likely Japanese vendor at Sinop was Toshiba, backed by Tokyo Electric Power Co. (Tepco). But after the Fukushima crisis Tepco was forced to abandon its newbuild plans in both the US and Turkey, and Toshiba was left looking for a partner. It envisaged building AP1000s at Sinop, a technology on offer from its majority-owned and US-based Westinghouse, in a consortium with GDF Suez.

But the Sinop site requires a design to withstand peak ground acceleration of 0.45 G-force (Gs) horizontal acceleration, and the AP1000 as currently certified by the US Nuclear Regulatory Commission (NRC) is designed to withstand only 0.30 Gs (NIW Jan.30'12). Westinghouse explored the possibility of modifying its design, but between that and a new NRC certification — which Ankara would demand — it would take years. While the Westinghouse option was petering out, GDF Suez faced pressure from the French government to shift any Turkish work to a reactor at least partially French designed: the Atmea1.

Earthquakes aren't the only major concern. The other is public acceptance. A solid majority of the Turkish population is against nuclear power, and given the massive protests this summer over developing a park in Istanbul, unpopular infrastructure projects have the potential to provoke a similar backlash. To a certain extent this has already happened with Akkuyu — there have been multiple protests at the nearby city of Mersin, and Titov described one particularly large protest in which some 10,000 protesters arrived outside the Akkuyu construction site, forcing workers to seek police protection.

While no work has begun at the Sinop site, public acceptance is likely a key concern of potential developers and financiers. "I think in Sinop there's an even bigger opposition," Cenk Levi, an Istanbul-based energy campaigner with Greenpeace, told NIW.

Phil Chaffee, Warsaw
pchaffee@energyintel.com

RUSSIA
US, France and Russia Ink Breeder Deal

Russia, France and the United States have signed a memorandum for developing and operating an experimental fast neutron reactor that could be launched as early as 2020. Although details are scarce, the 150 megawatt sodium-cooled MBIR to be located in the Russian city of Dmitrovgrad is still in the design phase but will likely have an estimated price tag of 16.4 billion rubles ($500 million), according to Russian industry sources at the Atomexpo exhibition in St. Petersburg, where the document was signed.

For years the three signatory countries were rivals in the fast neutron sector, but soaring costs and political restrictions have forced them to find common ground in breeder technology. Russia's experimental breeder, the BOR-60 launched in 1969, has reached the end of its lifetime, and Rosatom is designing the "fourth-generation" MBIR as a replacement, although the BOR-60 is expected to receive license extensions until the MBIR is up and running. Russia plans to start its BN-800 commercial breeder in November (NIW Apr.19'13).

Thus officials in Russia, where the country's leadership remains enormously upbeat on fast neutron reactors and the closed fuel cycle, have made it clear that the MBIR will be built regardless whether foreign partners participate in the project. But having seen the benefits of running an experimental reactor with broad international support — particularly at Norway's Halden Reactor Project — the Russians decided to go the extra mile to attract influential partners. At one time Japan was a leading candidate for participation, though after Fukushima its interest all but vanished.

"Russia wants to be a global leader [in new generation nuclear technology]," said Rosatom's deputy general director Vyacheslav Pershukov. "[Russia] immediately invited colleagues from the US and France so that we could offer them the opportunity to work on a unique fast neutron reactor that we'll build on federal funds," he said, adding that the three parties will essentially establish a joint venture that will oversee collective operations of the reactor.

UNITED STATES

Obama Vague on Nuclear In Carbon Reduction Policy

While US President Barack Obama praised nuclear newbuild projects for providing large-scale carbon-free power generation in his much-heralded climate change policy speech this week, he outlined no specific incentives for more nuclear power in the US. The most specific support for nuclear power called for strengthening the US nuclear export drive.

"It definitely wasn't an anti-nuclear speech, it just hardly discussed nuclear at all," Keith Crane, the director for Rand Corp.'s environment, energy and economic development program, told NIW. "The big thing for nuclear is whether utilities see that they have a forecasted demand or need for additional baseload [power generation]. I think a lot of it has to do on the utilities' side and we just haven't seen the interest."

Obama's far-reaching regulatory plan to curb US greenhouse gas emissions, which had been signaled for months and considered for years, will set new emission standards for all new and existing power plants, an undertaking aimed at moving the US to the forefront of the global climate movement, a position it hasn't occupied since failing to ratify the Kyoto Protocol on climate change (NE Feb.21'13). Obama laid out a specific policy for 20% of the federal government's electricity consumption to come from renewables in the next seven years.

Obama praised the Vogtle and VC Summer reactor projects, respectively in Georgia and South Carolina, as in line with his objectives but neither his speech or the accompanying policy directive contained anything along the lines of what the previous Bush administration did when it got Congress to approve a massive $18.5 billion federal loan guarantee program to encourage new reactor construction, with another $2 billion thrown in for new enrichment capacity.

Legacy Issue

Congress is completely stalled on climate change, so a combination of pressure from his left-of-center base and an ambition to take a lead role in international climate talks left the president with no option but to use his executive authority to curb carbon emissions, a desire he signaled in both his second inaugural address and his most recent State of the Union speech in February (NE Feb.14'13). The country's nearly 600 coal-fired power plants and well over 1,000 natural gas plants account for the approximate, albeit fluctuating, 40% of US carbon emissions derived from electricity production. President Obama's instruction to the Environmental Protection Agency (EPA) to "work expeditiously to complete carbon pollution standards for both new and existing power plants" certainly would encompass any new nuclear power plants.

But public wariness brought on recently by the Fukushima disaster as well as a combination of stagnant electricity demand growth, low gas-driven power prices and escalating reactor project costs have made new nuclear power a tough sell to utilities. And Crane points out that heavier use of fluctuating renewables power would make things tougher for nuclear power, since US operators prefer to run reactors at full capacity (p4).

US — Brushing Off the Cobwebs

For the US, the MBIR represents a chance to brush the cobwebs off its considerable experience with experimental breeders. The US closed both the 40 MW Fast Flux Test Facility and the 62 MW EBR-II in the 1990s, while Congress killed the Integral Fast Reactor project during the same period. "The United States pioneered, along with Russia, fast reactors," Pete Lyons, assistant secretary for energy, told NIW. "The EBR-1, the EBR-II, the FFTF….three different fast reactors which were operated successfully for many years, so we have quite a reservoir of experience, and that can be used for the international community."

According to Lyons, the US will not see a breeder anytime in the foreseeable future, so cooperation on the MBIR might represent the best chance to participate in the development of fourth-generation technology. He said that the US could first and foremost bring invaluable safety expertise to the table, though he stressed that the three sides were still far from hammering out details on costs, terms, and responsibilities. "At this point it's a MOU to work together [on] what might formulate the program, for how such a reactor could be used. ... We're looking for ways that we can cooperate in the use of such a facility."

Pershukov said that each country would likely have the opportunity to carry out individual research programs. "We're giving them the right to equip the reactor with their own analytic instruments. Right now we're discussing … what the reactor's scientific program will be for the first 10 years," he told journalists, adding that this program should be worked out in 2014-2015.

For France, the MBIR is the quickest avenue to return to breeder research with minimal costs and bureaucratic hurdles. "Since we closed Phenix we don't have any means to irradiate materials in a fast breeder," Jean-Yves Blanc, a reactor specialist with France's Atomic Energy Commission (CEA), told NIW. "If we want to irradiate either material or fuel, we have to go to Russia," he said, adding that the country has used the BOR-60 in recent years.

To be sure, Russian-French cooperation in fast neutron technology appears to be accelerating. In March, the Strana Rosatom paper, a bimonthly mouthpiece, reported that Russia and France were proceeding on talks for creating a joint breeder reactor project. According to the report, which cites CEA Chairman Bernard Bigot, the project envisions a 600 MW breeder, the first of which would be built in France and the second in Russia, after which the two countries could sell the project to third countries. Draft documentation could be prepared by 2017, Bigot said.

With a 10-year lead time, new nuclear power projects don't lend themselves to Obama's apparent desire for action on climate change to be a legacy issue. "The Obama administration is rightfully a little gun-shy on the nuclear power issue," said Stephen Smith at the Southern Alliance for Clean Energy, pointing in particular to higher costs and longer construction timelines at Vogtle and VC Summer (NIW Jun.7'13; NIW Jun.7'13). "This isn't a president that's hostile to nuclear power. But I think he's a pragmatist that says 'I've been in office for five years and I've seen the economics completely collapse.'"

Perhaps tellingly, the administration's policy did offer specific praise for small modular reactors (SMRs). The DOE has already agreed to partially fund the Babcock and Wilcox-led mPower reactor slated to be built at the Tennessee Valley Authority's Clinch River site, and it will likely decide on a partial funding for a second round of proposed SMR projects later this year (NIW Apr.12'13). "I think the administration is willing to give those Republicans who can't ever say anything about climate change without mentioning nuclear something," Smith said. In contrast, federal money has been slow to come in support of conventionally-sized reactors through the loan guarantee program. The terms of the DOE-backed loan guarantees weren't appealing enough for the owners of the VC Summer, and while Southern Co. says it is still trying to finalize a provisional loan guarantee for Vogtle, it has moved forward on construction without one.

The administration's apparently indistinct views on nuclear power were reflected in the range of reactions to Obama's speech. The utility-heavy lobby group the Nuclear Energy Institute, apparently seeing little about nuclear in the speech, dug up an old Obama campaign statement, that achieving climate change goals without nuclear would be difficult, as evidence of his support for the industry. In contrast, Henry Sokolski, the executive director of the Nonproliferation Policy Education Center — a group wary of the weapons proliferation implications of expanded nuclear power — saw an aggressive nuclear stance. "The President gave lip service to the goal of nonproliferation and safety," Sokolski said. "But it is clear that his primary goal was to expand nuclear power worldwide."

Emily Meredith, New York and Bill Murray, Washington
emeredith@energyintel.com; bmurray@energyintel.com

IN PERSPECTIVE
Enrichment: Options for Selling Urenco — Hold Onto ETC?

The sale of Urenco offers a number of intriguing, and potentially concerning, possibilities from both a commercial and nonproliferation vantage. US enrichment expert Scott Kemp, an assistant professor of nuclear science and engineering at MIT, weighs the options.

The pending sale of Urenco Enrichment Limited offers a number of interesting possibilities, not least of which is the prospect of an enrichment plant in a new country, most likely Canada or South Korea. On the other hand, in the hands of private commercial owners is the risk that commercial pressures will outweigh nonproliferation concerns in future decisions over the export of technology or material.

With Urenco currently valued at $12 to $15 billion, it's easy to understand why the company's cash-starved owners want to sell. Ownership is shared between the UK and Dutch governments, each with 33.3%, and German utilities RWE and E.On, who each own half of the final 33.3%. The Dutch have been reluctant to sell, arguing that it is important to maintain a controlling interest, and though they have agreed to a 100% sale, it is conditional on finding a means to retain some control over the company's sensitive activities. Buying Urenco means buying national enrichment companies in four countries; six smaller entities that play non-enrichment roles in other aspects of the business; and 50% of Enrichment Technology Company Limited (ETC), the joint venture between Urenco and France's Areva that knows all the centrifuge secrets.

The list of possible buyers or partial investors currently includes Japan's Toshiba, France's Areva (although it lacks capital and would face anti-trust issues at the European Union level); Canada's Cameco (perhaps in a consortium with Canada's hugely-endowed National Pension Plan Investment Board); and Korea Electric Power Co., which has already been in talks with Urenco about buying a share of LES in the US for more than a year. Another option, and one that should not be dismissed, is a consortium of investors, including some of the above, headed by former ETC Chief Executive Pat Upson, that would probably be organized as a British or Dutch holding company.

Treaty Constraints

Urenco's international transfers of materials and technology are subject to the treaties of Almelo and Cardiff. The first of these established the Joint Committee, with a representative from each of the three Urenco states, which must approve unanimously any export of enriched material, equipment, or information produced by Urenco. If this treaty is preserved as Urenco states it will be, no sensitive transfers could be made without Joint Committee approval regardless of who owns the financial interest in Urenco.

The question arises whether it is possible to apply pressure to the Joint Committee, or to modify this structure at the time of sale in such a way that it would lessen the safeguarding function this committee provides. That will depend on the structure of the deal and who buys.

First, consider ownership by a private firm within a Urenco country. In some ways, this could be among the least desirable option from a nonproliferation standpoint. A private firm would be able to exert political pressure on its domestic government when its financial interests ran up against national security interests, and would almost certainly receive a sympathetic hearing.

By comparison, if the buying firm were foreign and external to the Urenco countries, then such pressures would not exist. However, in this case the sale might involve modifications to the Almelo and Cardiff treaties that in some way softened the Joint Committee's control at the time of sale. Furthermore, if the buyer is a foreign national entity with an interest in domestic enrichment, such as Korea Electric Power Co., or even the Canadians, there will be strong pressure to permit the construction of an enrichment facility in the owner's country. The argument will be made in diplomatic channels that it is only fair to allow the owning country to have an enrichment plant of its own. After steady diplomatic pressure, it is not hard to see the three governments, and by extension the Joint Committee, yielding. This leads to a second-level question: what is the proliferation risk of such a development?

In theory Urenco can build a facility in a foreign country without transferring sensitive knowledge. In reality, the "black box" security arrangements that supposedly allow for this are more gray than black. For example, in the United States where this was done, the keepers of the foreign knowledge that is supposedly disallowed to the US government are actually US citizens. Similarly, when Russia sold a "black-boxed" centrifuge plant to China, it decided to fill it with centrifuges that were two-generations old because, in Russia's judgment, the technology would probably leak out. In short, governments don't have that much trouble finding out information about activities on their own soil.

Technology transfer aside, the more salient fact is that once a country has a centrifuge plant, it has a nuclear weapons option — whether it knows how to make centrifuges or not. Commercial plants are so large, and can be converted to produce highly enriched uranium for weapons so quickly, that safeguards are basically incidental. Simply put: Whoever gets a centrifuge plant, has a nuclear weapons option.

This problem might be minimized if the sale of Urenco involved the transfer of only Urenco's enrichment operations, with the three governments retaining their 50% ownership of ETC. It is the enrichment business with its long-term contracts that commands value, so the sellers could still profit considerably. However, by retaining ETC the governments would guard against any unpredictable effects in treaty modifications that might arise. They would also enjoy an additional layer of safeguards against lobbying of the Joint Committee because, regardless what Urenco decides to do in the future, only ETC can manufacture the centrifuges, and therefore any decision to expand to a new country would necessarily require the approval of ETC's government owners.

BRIEFS

CANADA
Canada's nuclear regulator has granted only a two-month extension for the Pickering nuclear generating station, giving the Canadian Nuclear Safety Commission (CNSC) until Aug. 31 to decide whether to grant the Ontario plant the five-year license extension operator Ontario Power Generation (OPG) had sought (NIW Jun.21'13). OPG said the decision was not "unexpected," although anti-nuclear groups cheered the decision after earlier pushing for the CNSC to hold further hearings on safety concerns. "The Commission has decided it requires more time to render its decision ... to allow it sufficient time to deliberate and carefully consider all the information on the record before issuing a final decision," CNSC said in a press release. OPG is seeking to keep the 40-year old plant in operation until 2020 without doing a major overhaul of its six operating reactors (two others are permanently shut down). A key issue is that the pressure tubes in units 5-8 (Pickering B) reach the end of their design life between 2014 and 2016, although OPG maintains it has taken steps to keep them operational through 2020.

FRANCE
EDF has had at least two fires at nuclear plants this month, as well as a large steam release Jun. 23 from the the non-nuclear side of Flamanville-2 in northern France, where the visual impact was magnified by a loud noise audible in the surrounding countryside for some 15 minutes, according to Le Monde. The next afternoon at Bugey, near Lyon, EDF workers discovered a fire in the Unit 5 turbine which was quickly extinguished, according to the Express newspaper. On Jun. 7 a fire at Cattenom, in eastern France near the border with Luxembourg, sent huge plumes of black smoke into the sky, causing some anxiety among the local population. The blaze was traced to the stepdown transformer, which supplies the reactor with electricity. None of these incidents caused harm to the public, according to EDF.

INDIA
US Secretary of State John Kerry's promises of a "commercial agreement" by September between Nuclear Power Corp. of India Ltd. (NPCIL) and Westinghouse for a nuclear power plant (NPP) at Mithivirdi in Gujarat raised more questions than answers. Westinghouse publicly welcomed the remarks after the Jun. 24 meeting between Kerry and his Indian counterpart Salman Khurshid in New Delhi. "Secretary Kerry's efforts to move discussions forward with an announced goal of reaching commercial agreement in the September timeframe to support licensing and site development of AP1000(R) reactors in India are proving to be invaluable," Westinghouse president and CEO Danny Roderick said in a statement. A joint statement by the two governments made no such promises; it only encouraged NPCIL and Westinghouse to "expedite these consultations" and took note of ongoing talks between NPCIL and GE-Hitachi for an NPP in Andhra Pradesh. Westinghouse and GE-Hitachi have been working on an Early Works Agreement with NPCIL, allowing for preliminary work on their projects, but each have had problems with India's 2010 nuclear liability law. Indeed Roderick, while he was still at GE-Hitachi, called it "a showstopper for every world vendor that's thinking of going for India" (NIW Jun.15'12).

LITHUANIA
As Rimantas Vaitkus, the chief executive of the project company tasked by Vilnius with building a new reactor in Lithuania, began addressing a Warsaw nuclear conference this week, one European utility executive muttered "this thing will never happen." Indeed, even Vaitkus acknowledged that "last year we had a very hot time"; voters overwhelmingly rejected the project in a nonbinding plebiscite in October 2012 (NIW Oct.19'12). In February Lithuania's new prime minister told NIW that "in general we say 'yes' to nuclear energy but we said 'no' to this particular project since it lacked the publicity, transparency and economic calculations" (NIW Mar.1'13). But still the project stumbles on, with planners consulting with the Baltic state governments as well as likely technology-supplier Hitachi-GE Nuclear Energy. "We should have some decisions by investors done by our government by the first of October," Vaitkus said in Warsaw. "Even during summertime we are working very hard." But even if these stakeholders back the project, financing will remain uncertain. "Banks cannot finance a country that has rejected by a vote the nuclear program," warned Olivier de Goursac, the director of nuclear energy in structured export finance at French bank Natixis, in on-stage remarks to conferees.

SOUTH KOREA
Korea Hydro & Nuclear Power (KHNP) is moving ahead with its APR-1400 newbuild projects at both Shin Kori and Shin Hanul. The first nuclear-related concrete pour for Shin Hanul-2 — the last of the first four APR-1400s being built — took place Jun. 19, almost a year after the Unit 1 pour last July. Meanwhile Shin Kori-3 and -4 are nearing completion, with Unit 3 due on line in September and Unit 4 to follow a year later. However, evidence of faked safety certificates has showed up at the Shin Kori site, some related to the APR-1400 newbuilds (NIW May31'13). Whether safety investigations will cause delays at the newbuild sites is unclear. Completion dates for the Shin Hanul units have been moved to April of 2017 and 2018 from December of 2015 and 2016, respectively, though the reasons are unclear.

TURKEY
While Rosatom still intends to at some "later" point sell 49% of the shares in its currently wholly owned Akkuyu NPP JSC, for now Russia is providing the "initial funding" for the project on the Mediterranean coast, according to Oleg Titov, an executive director at the Turkish project company, who spoke at a Warsaw nuclear conference this week (p4). At the moment Rosenergoatom, the Rosatom subsidiary that owns and operates Russia's domestic fleet, owns 92.8% in Akkuyu NPP JSC. Under Russia's much-ballyhooed build-own-operate model, for which Akkuyu is the test case, Rosenergoatom looks set to extend its "domestic" fleet into reactors controlled abroad (NIW Jun.14'13). And while it will still be responsible for all of the plant's design work, Rosatom subsidiary Atomstroyexport, the company's traditional reactor export arm, will be Akkuyu's prime contractor, managing construction and equipment supply. Rosatom envisions a 70-30 debt-equity financing with projected capex of $20 billion. "We are going to have operation for 60 years, with an 18-year payback period and an internal rate of return of 10%," said Titov.

UNITED STATES
A bipartisan group of four Senators introduced legislation to establish a single agency dedicated to resolving the nuclear waste issue in the US. The Nuclear Waste Administration Act of 2013, which follows an April draft, calls for an independent agency headed by a single administrator and overseen by a five-member board to pursue in parallel both interim and permanent storage facilities, with separate — but similar — siting processes for each (NIW Apr.26'13). The bill follows the Blue Ribbon Commission and Department of Energy (DOE) prescription for a consent-based approach to finding sites to avoid the pitfalls of Yucca Mountain, which encountered widespread opposition (NIW Jan.18'13). A pilot permanent storage facility is intended for "priority waste" from decommissioned reactors and other emergency shipments; "consolidated storage" facilities would hold "non priority spent fuel for utilities or defense waste for DOE on a temporary basis." Sites can be selected over 10 years as long as there are funds to continue work on a permanent repository; selection could continue after that only if at least one site has been identified for evaluation as a permanent repository. The project would be funded by utility fees, including some $28.2 billion remaining in the Nuclear Waste Fund.