I have shamelessly borrowed the title of one of the talks given during the first day of the Nuclear Energy Insider 4th Annual Small Modular Reactor (SMR) Conference as being representative of both the rest of the agenda and the conversations that I had in the hallways during the breaks.
For the past five years, a relatively small band of stalwarts has been gathering several times per year to talk about their progress in creating a new and improved energy option for the United States. Though nuclear fission has been in commercial use since 1957, the operative design philosophy has been that the way to improve its economics was to build bigger and bigger units in order to take advantage of the “economy of scale.”
SMR proponents believe there is a different way to achieve scale economies. They are investigating several different design philosophies that revolve around finding the right combination of output, physical size, locational flexibility, approval challenges, manufacturability, and construction schedule to attract a sufficient number of timely orders to enable economy of series production. Scale is important, but it’s the size of the overall enterprise, not the size of individual units that will matter.
Over time, the nascent SMR industry has also learned that they need to address a number of additional issues in order to achieve their challenging goal of enabling a useful and economically competitive new energy option based on the known technical advantages — specifically a virtually unlimited resource base of low-cost, emission-free fuel — of using atomic fission as the basic energy source.
A comprehensive list of the additional challenges is beyond the scope of this post, but yesterday I learned a little more about an important issue that has not yet received enough attention. Before any SMRs can be built in the US, the industry needs to resolve the issue of providing appropriate liability and property insurance. The current rules work when all reactors are either tiny research reactors or very large commercial reactors; there is a huge uncovered gap in the middle where no investor in their right mind would want to tread.
Dan McGarvey, US Power and Utility Practice Leader at Marsh, which is one of the largest insurance brokers serving the nuclear industry, described the challenge. There is a system that covers research reactors and small power reactors producing less than 100 MW. Once a reactor exceeds that power level, they join the system that covers large commercial reactors.
Under current rules, every reactor larger than 100 MW must carry the maximum available liability insurance, which is currently $375 million. They also must join the pool that provides standby liability coverage in the case of an accident at any covered facility. In the event of an accident where the payout is greater than the primary liability coverage limit, every reactor is assessed an identical fee which can go as high as $127 million per event.
Without a rule change, a 720 MWe installation that has four individual B&W mPowerTM reactors, each producing 180 MWe, would owe four times as much money to the pool as a single 1300 MWe Westinghouse 4 loop reactor. That is an untenable situation and what we used to call a “non-starter” in my former career.
Correction: (Posted May 11, 2014) The Energy Policy Act of 2005 included a provision that defined a combined facility as a facility hosting two or more reactors, each with a capacity between 100-300 MWe with a total capacity of less than 1,300 MWe as a single facility for the purposes of Price-Anderson liability coverage. (See page 9 of Price-Anderson Act Amendments of 2005.
While four individually-sited 220 MWe Westinghouse SMRs would owe four times as much in retrospective premiums as a single 1,300 MWe GE ESBWR, a single site hosting as many as seven B&W mPower reactors would have the same liability as one ESBWR.
Section 170 of the Atomic Energy Act (aka Price-Anderson) treats the 45 MWe NuScale Power Module differently because it is less than the current 100 MWe threshold for treatment as a commercial power reactor. It has a lower per unit liability coverage requirement (currently a maximum of $74 million) and is not included in the normal power reactor retrospective liability pool. End Correction.
The men from Marsh made it clear to the attendees that they need to focus some unified attention on resolving this issue. Until it is resolved, there will not be any small reactors built in the US.
There, I hit the hardest lesson from the day first.
The rest of the day was also usefully enlightening. There was a lot of discussion about the current level of competition from low-priced natural gas in North America. Many speakers, especially those from Wall Street, seem to accept the notion that low-priced gas is here to stay. Others expressed more skepticism.
Utility representatives mostly indicated that their boards of directors have a wait and see attitude and prefer not to make big bets on either low prices forever or on a rapid shift in gas prices to something that more closely resembles historic behavior where the price of gas is within about 20% of the price of oil when each fuel is converted to the amount of heat energy that it contains.
The man who was most skeptical and most concerned about the probability that gas prices are going to rise faster than conventional wisdom currently assume was Dave Mohre, Executive Director, Energy & Power Division, NRECA (National Rural Electric Cooperative Association).
Electric cooperatives will need fuel diversity in the future. We have a lot of problems thinking that natural gas is the fuel of the future. We’ve had experience, as you all have, with the rapid change in gas prices. In 2002 it was two bucks; actually it was under two bucks. Then came a couple of hurricanes and it was at fifteen or eighteen dollars. Then it went down. Now we have shale, but then we had a polar vortex recently.
In New York City the basis price reached $100 and people who tried to buy gas at that price to run their peaking units couldn’t get it. Tomorrow, FERC is having a conference about what went wrong during the polar vortex. It’s all about people who couldn’t get gas or paid way too much for it. This is just the beginning.
The dramatic fluctuations in gas prices converts what is normally considered to be a reliable fuel that might be suitable for a base load power plant into a fuel with characteristics more similar to other unreliables like wind and solar. It’s nice and cheap sometimes, but when you really need it, it’s either not there or way too expensive to afford.
Mohre is cautiously enthusiastic about smaller nuclear plants, but only if they can avoid the enormous cost and schedule challenges that plagued the “stick built” large nuclear plants. He used a phrase from a fairy tale to describe the experience that co-ops have had with nuclear plant investments, “When they were good, they were very, very good. When they were bad they were awful.” Some of the plants that the co-ops invested in as part owners came on line for a little less than $1000 per kilowatt of capacity, others cost as much as $5,600 per kilowatt (in 1985 dollars).
That experience, as Mohre explained, was substantially a result of NRC actions after the Three Mile Island accident. The regulator’s initial indecision and subsequent rule changes played havoc with construction project schedules at a time when interest rates approached 20%. As a result some projects, like the River Bend plant in Louisiana, ended up with financing costs that were two to three times the actual construction costs.
The bottom line from the potential SMR customers at the conference was that they were interested in the product that the SMR vendors say they are creating. They want plants that can be built in a factory and reliably delivered with a predictable schedule at a predictable cost. They want a nuclear energy option that will fit onto smaller sites and into smaller grids and they like the idea of projects that can be structured with a lower initial investment and create positive cash flow before the next incremental investment needs to be made.
The two vendors who have received funding from the DOE SMR program described their progress in creating a complete product that will meet the desires expressed by the customers.
Mike McGough, the Chief Commercial Officer for NuScale Power (a subsidiary of the Fluor Corporation), titled his talk “NuScale Power: Full Speed Ahead.” In December 2013, NuScale received notification from DOE that they would be the sole recipient of the second round of funding. Since then, the company’s development pace has increased. They have 45 open positions being advertised and expect to hire at least 100 people in 2014. I spoke to an engineer manning their display in the exhibition room; he told me everyone was happy about the award and working even harder and longer hours than before.
McGough described the simplicity of the natural circulation NuScale module, which does not use any pumps to move the cooling water through the reactor, even when operating at full power. That design decision reduces system complexity dramatically and eliminates a number of high cost systems.
The first product that NuScale expects to sell is a 560 MWe power station consisting of 12 individual modules, each with a reactor and a turbine generator. The installation will require about 42 acres of land. The company is planning to have the first installation ready to operate by 2025. The most likely location for that station will be on the Idaho National Laboratory property near Idaho Falls, ID. One of the main reasons for starting with a full scale, 12-unit power station is that it allows the company to get to ‘N’ as in ‘Nth of a kind’ more quickly.
In response to my question, McGough stated that the company has plans to offer other combinations including the possibility of a 45 MWe power plant that includes just one module.
Bill Fox, the Generation mPower Chief Operating Officer, provided an overview of the current Generation mPower product offering of a 360 MWe power station that includes two B&W mPower reactors located in underground containments sending steam to a turbine building that is outside of the security boundary. That installation requires about 40 acres of land and has a profile similar to a large Wal-Mart.
About six months ago, Fox came to Generation mPower from the SCANA corporation. While there, he led the effort to obtain a construction and operating license for VC Summer units 2 & 3, create a workable project schedule and begin construction. During his career he has developed a reputation for exceptional execution. Chris Mowry is now working on other projects for B&W.
Unlike NuScale, Generation mPower is not moving full speed ahead. The engineers assigned to the project are working diligently on their currently scheduled activities, but are anticipating a new project direction from the corporate headquarters. During an investor call about 4 weeks ago, Jim Ferland, B&W’s CEO, announced that a new project plan would be issued in four to six weeks. That plan has not been announced yet.
Fox is deeply involved in the Generation mPower project review. He has asked for a full review of a number of previous assumptions and decisions.
Answering the headline question, “Why not now?” SMRs are not available yet. The designs are not yet finished. License applications are not complete. Financing, insurance, and regulatory questions still need to be resolved.
“Then When?” The best available estimate is that there will be commercially available SMRs in the United States by 2025.
Now it’s time to get ready for day two of the conference. There are sessions scheduled about the international market, advanced reactors that are not evolutionary light water reactors, and presentations about various aspects of the SMR supply chain. It should be informative.