Czech reactor at Temelin shifting fuel suppliers from Westinghouse to TVEL

One of the profit centers in the nuclear business is in supplying manufactured fuel elements. Though fuel costs are a much smaller portion of the overall costs of generating power in a nuclear plant than they are in a fossil fuel plant, there is still a significant amount of money involved.

Though full economic information is difficult to obtain for a number of reasons, it is possible to make a few educated guesses to illustrate the order of magnitude of the costs – and revenue – involved in replacing fuel in a large nuclear power plant on a regular basis.

According to information provided by the Nuclear Energy Institute, fuel costs for American light water reactors average about 0.6 US dollar cents per kilowatt hour of electrical generation. The average capacity factor of US nuclear power plants is about 90% and a good guess on their average size is 1000 MWe.

Putting that information together, one can determine that the annual fuel cost for a light water reactor is somewhere close to $50 million. Since most reactors refuel every 18 months, each fuel delivery to a single reactor site is worth something like $75 million. A 1000 MWe reactor on an 18 month refueling cycle will typically replace 1/3 of its core each time it refuels – the process also includes a “shuffling” of the fuel elements to account for variations in fuel consumption during the operational period.

Of course, there are material costs involved in producing the manufactured fuel. Uranium currently costs about $125 per pound on the spot market, though many fuel suppliers have purchased their uranium under long term contracts with a much lower average cost. A good guess for the amount of uranium needed for each fuel reload is about 30 tons, which would cost about $7 million.

For light water reactors, fuel is generally enriched to 3-5%. The cost of enrichment depends on the process used, the final enrichment value for both the product and the “tails”, and the location of the enrichment plant. Normally, enrichment is priced as a service, with the unit of measure being a Separative Work Unit (SWU). It takes between 3.8 and 5 SWU per kilogram to convert natural uranium into low enriched uranium for a light water reactor. That translates to about 150,000 SWU per reload. An SWU can be purchased for between $100 and $150. This means that enrichment costs for a fuel reload would be about $15-23 Million.

Other costs involved in fuel manufacturing are zirconium alloys used for the cladding tubes and fuel element structures, the costs for conversion of fuel material into the various forms needed during the process (UF6 for enrichment, UO2 for pellet manufacturing) and the costs of fuel pellet production.

Those costs might add another 25-30% to the overall cost of the process. There are also a fair number of engineers involved in fuel design and in the specific action of refueling each reactor – their salaries might add another 10% to the cost for the supplier.

When all the costs are computed, it is likely that an efficient fuel manufacturer with access to low cost uranium, moderate wage engineers and SWU’s would be able to produce a fuel reload for between $20 and $50 million and sell it for about $75 million. That is a pretty good business proposition.

Why did I go through all that? Getting back to the headline of this post, there are indications that TVEL, the Russian fuel supplier that currently provides about 17% of the world wide market for light water reactor fuel, is getting more aggressive about competing and expanding its market. Its most recent marketing win was a 10 year contract to supply the two unit Temelin reactor station in Czechoslovakia. You can find a brief story about that event at Czech NPP to start using Russian fuel in 2009 – TVEL.

When compared to its American and French competitors, TVEL holds several low cost advantages which it is apparently willing to exploit. It will be interesting to watch how Westinghouse, Areva, BWXT, and GE respond.