Special Report: Nuclear Power Executive Roundtable

Construction continues on Vogtle Unit 4's circulating water system and nuclear island with Plant Vogtle Units 1 and 2 in the background. Photo courtesy of Southern Co., Inc.

By Brian Wheeler, Editor

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. Nuclear Power International magazine 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.

Nuclear Power International 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.

NPI: Following Three Mile Island (TMI) in 1979, the cost of building new nuclear units went up as new safety and regulatory measures were put in place. What are the principal ways the costs of new nuclear construction in North America will be affected as lessons learned from Fukushima are incorporated into regulations? Given what you know now, what sort of percentage increase in overall costs should we expect as a result of Fukushima-related rules?

Franch: We have and will continue to incorporate lessons learned. We are not waiting on industry events. We have been pro-active and as we are a continuous learning industry, we have incorporated lessons learned from Three Mile Island, from Chernobyl and from 9/11. So when you look at all of the lessons learned that we have incorporated from previous events, I believe we will be able to incorporate the necessary changes and lessons learned from Fukushima and minimize the cost to customers. We can also expect to gain some plant performance improvements as well. In the end, nuclear will still prove to be viable and an economical solution to clean energy needs.

Oberth: It is too soon to quantify cost impacts. There will be some, but I hope they are not significant because we already face a serious business case challenge particularly with natural gas being as cheap as it is right now.

Reilly: From the U.S. perspective, the NRC has not made any final rulings on what changes are going to be required, in terms of incorporating lessons learned from Fukushima. Every plant is going to different based on their site and plant conditions, so they are going to have different hurdles to comply with any changes that could come out. It is a bit premature to try to put a number on this right now. But when you compare back to TMI, you need to recognize that the situation is fundamentally different. We had many plants under construction in various stages in 1979. When new regulations and measures were put in place there was a lot of expensive rework required. Right now we have just a few plants under construction and they are in the very early stages. So if there are regulatory changes that have to be accommodated, I would see the impact on the overall price of the plant as minimal.

Franch: I want to add one more thing to what Brian Reilly said, and I agree with everything that he said. When we had TMI in '79, we did not have the decades of experience, the operating hours and the safety records that we now have in the U.S. fleet, and the North American fleet in general. So there is a considerable amount that has been learned over the decades and many plant improvements have been incorporated. There are decades of safe operations here in the U.S. fleet and we have learned a lot from both internal and external events, and we have made improvements to our U.S. fleet.

Ontario Power Generation is expected to add up to four reactors at the existing Darlington Nuclear site. Photo courtesy of Ontario Power Generation.

NPI: The U.S. nuclear industry created the Institute of Nuclear Power Operations (INPO) after Three Mile Island and its existence is widely credited with improving nuclear fleet operations. Is it time for a global INPO standard to ensure uniformly high operating standards?

Oberth: Well, there kind of is a global INPO and that is the World Association of Nuclear Operators. Building on that point, the greatest impact on a global basis might be in emergency response planning. Can we learn from one another and create some sort of an umbrella organization that helps member utilities consider and implement improved emergency response procedures?

But I don't think there are major lessons to be learned from plant operations, other than how to deal with emergency response and how you restore plant power in the event of a station blackout.

Franch: I agree. There is merit in taking a look at more of a global response and that would definitely help. That is part of what industry is looking at with the NRC. I am sure you are aware they are also doing stress tests in Europe, but these are regional responses. A global type of coordination will be very beneficial.

NPI: 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.

Is there a view in some circles that shale gas is really a game changer and it is offering very, very cheap gas for hundreds of years to come? Do some people believe that?

Reilly: Absolutely. There is no doubt that the marketing of the gas available through the shale gas deposits has been exceptional and has contributed to the perception of gas as a preferred fuel choice. No doubt about that.

NPI: In the U.S., Section 316(b) of the Clean Water Act could force multiple nuclear facilities to change their water intake systems. What are the most effective strategies for 316(b) compliance and do you expect the rules to have a major impact on nuclear generation capacity?

Franch: First of all, I would like to point out that 316(b) doesn't apply to just nuclear. It is basically any facility that draws cooling water into their facility and that is really the impact. It is really referring to entrainment, impingement and the aquatic species affected. It is not just nuclear. It is fossil; it is chemical; it is anyone who draws cooling water. I do believe that there can be innovative solutions that with technology can minimize impact. We are also working to understand the ruling with EPA (the U.S. Environmental Protection Agency), and I think the impact can be minimized.

Reilly: The issue with 316(b) is the criteria that are being used is very conservative and is a one-size-fits-all type of criteria. Every plant is different and every site is different and so there is going to have to be a different solution at every site. Trying to come up with that site-unique scenario for each plant is going to have to be the direction that this takes.

NPI: Is this an issue being dealt with in Canada as well?

Oberth: Well, obviously it is part of the environmental assessment. The issue that we are facing on the Darlington project is whether cooling towers are going to be required or not. I really can't comment on the specifics of U.S. regulations. We are fortunate that we have the Great lakes, which have meant that none of our plants in Canada have cooling towers to date. The owner/operators would prefer to use once-through cooling subject to environmental approvals.

NPI: Over the past two years NRC has approved 10 power uprates at existing nuclear power plants and has 16 applications for uprates pending. Another 10 applications for uprates are expected in 2012. And in Canada there are refurbishment projects currently taking place. How much more headroom exists for additional uprates? With electric demand growth slowing and even declining, do the economics work out for additional uprates?

Franch: That is part of our core business at Areva, servicing the existing fleet. We actually survey them, and we believe that there still is room for extended power uprates at plants. Obviously, the economics have to work out. Power uprates are a very cost-effective way to deliver more electricity out of their existing asset and increase the asset value. We do see it as very cost-effective, even up against options such as gas or coal, when you look at a dollar per kilowatt basis.

There are three levels of uprates. There is measurement uncertainty recapture, there is a stretch uprate (which is typically 5 to 7 percent) and then there is an extended power uprate, which is anything above that.

Oberth: I guess it depends on your BOP (balance of plant) and the availability of your BOP to handle more steam. Does it tend to be that kind of margin in some of the U.S. plants that you can take more steam?

Franch: You have to do a whole analysis, looking at both the primary and secondary side. And then it gets into a cost-benefit analysis. How much improvement do you have to do in the secondary side to gain the full advantage of the increased megawatts for heat transfer? So, you are right. You have to look at it. And at some point there is a limiting condition that you do not want to uprate beyond.

Reilly: This is a significant market for Bechtel. Right now we are involved in extended power uprates at nine plants. The answer to this question is going to be different for every plant. The demand load for every utility is going to be different. We touched on the reduced energy demand and low natural gas prices. All of those challenge the economics of an extended power uprate, but these items are cyclical and are only a portion of what a utility looks at it. In addition to the fuel costs, they evaluate things like the fuel diversity within their generating system and any kind of emission reductions they need to address.

One of the environmentally friendly things that has been accommodated with these additional megawatts is the retirement of older generating units that are big greenhouse gas emitters for utilities. So the answer is going to be different for each utility and for each plant, but I think there is still a lot more activity to come in this market.

Oberth: We are doing plant refurbishments. Uprates only of a marginal amount may come out of those refurbishments through upgraded equipment. Taking a plant and doing a significant uprate modification has not been done recently at a CANDU plant.

NPI: A few years ago a cooling structure at Vermont Yankee collapsed. Are owners spending enough time upgrading and maintaining non-core-reactor equipment and systems?

Reilly: I think the answer is a resounding yes. I can't speak to the specific incident that happened at Vermont Yankee, but we are working across the industry at a number of plants with a good number of owners and they are all focused on maintaining their plants to produce safe and reliable power.

Franch: I am out with a lot of customers on a weekly basis as well. Safety is first and foremost on Chief Nuclear Officer's minds. They want to keep these plants safe. And they are going to spend the money appropriate for it. Reliability is also at the top of their mind for them because they do want this power coming out safely and reliably.

Personally, I think they are spending appropriately to maintain the safety, the performance and the reliability at the plants. I can't comment on the Vermont Yankee, but in general the industry is definitely focused on safety and they are spending appropriately.

Oberth: I would echo the same thing for the Canadian utility owners.

NPI: Residents on the East Coast of the U.S. and Canada recently experienced the largest magnitude earthquake to take place in the region since WWII when a 5.8 magnitude quake struck on August 23. Nuclear power plants in the affected zone were headline news that very day, in regards to safety. What are the implications of that event for new construction, particularly since all of the new-build sites in the U.S. are in the east?

Reilly: The good news when you look at what happened, there was a major earthquake that caused a significant ground motion and acceleration and we had a nuclear plant within a very short distance that came through with minimal impact. However, because of this I think the NRC is going to increase their scrutiny on things like seismic hazard risk analysis, structural design and seismic protection design of systems. The applicants that are in the queue right now for new construction are going to see more requests for additional information from NRC staff around those types of issues. We are going to see, and have already seen, interveners showing heightened interest in challenging the new construction applications based on seismic hazard risks. It is going to have an impact, but there are regulatory processes in place that will approach it in a very pragmatic and analytical manner.

Having said all of that, what do I think the implications are? It may have a slowing effect on some of the license approval processes, but beyond that I don't think it is going to be a fatal flaw in any of the applications that are forward right now.

Oberth: It was hardly felt in southern Ontario and it will have no impact on the Darlington project.

The Tennessee Valley Authority is completing the Bellefonte plant in Alabama and when it begins commercial operation between 2018 and 2020, the 1,260 MW reactor will be the largest in TVA's nuclear fleet. Photo courtesy of TVA.

NPI: A year from now will we see new nuclear units under construction or do you anticipate delays from lawsuits challenging some part of the NRC and Canadian Nuclear Safety Commission's review and licensing process?

Franch: I am not going to speculate on delays and lawsuits, but I do believe that our strong regulatory process will give stakeholders and any interested parties an opportunity to express themselves or address their concerns, ultimately giving us the goal of building safe nuclear reactors. I believe we have a very sound, fundamental process to give them an audience. They will have their day in which they can express themselves. And I believe the NRC implements the process very well. We have shown it before in both our old Part 50 license application and even our Part 52. At the end of the day, the process will show that it is rigorous and that nothing gets dismissed arbitrarily. All parties are heard.

I really look at the way the NRC and its processes are aligned and they are very transparent. Obviously we have to keep some things, such as security-type issues, out of the public domain. But for the most part the balance is out there for the public to see, hear and respond to.

Reilly: Look at what happened last month: The NRC issued a timeline supporting the issuance of a combined construction and operating license to Southern for Vogtle. And that is right in the wake of everything that has happened with Fukushima. And the reason they are able to do that is because the regulatory process is transparent and everyone does get the ability to give input to the process. All voices are heard and the people that we depend on to regulate the industry make an informed decision. That informed decision was that this should move forward.

I don't think that lawsuits are going to be a factor. It is going to be the things that we talked about; any kind of regulatory impacts, the economic environment, and alternative fuels, whether that is low gas prices or the drive to renewables. At the end of the day it is going to be a continued focus on a diversified energy portfolio.

Oberth: From north of the border I will add that I am optimistic that by mid-2012 we will have shovels in the ground at the Darlington project site and you will see site preparation work starting for two additional CANDU units at that site. As part of Ontario's diversified supply plan that is also continuing to support build out of more wind, small hydro and believe it or not some solar up here. It is going to be very expensive but our current government is committed to solar and other renewables. Nuclear is part of the diversified mix and will continue to be about 50 percent of energy generation here in the province of Ontario.

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