Nuclear: Atomic revival gathers momentum

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The revival of interest in nuclear energy has been in full swing for several years, and the list of countries considering building new reactors is lengthening all the time. Concerns about energy security and climate change are gaining political momentum around the world, and are winning over many former opponents to nuclear power.

As well as established nuclear powers such as the US, the UK and China planning to boost nuclear investment, countries that have never hosted atomic reactors are talking about getting involved in the industry.

For example, Poland, which gets more than 90 per cent of its electricity from coal-fired power stations, has asked South Korea for help in building its first nuclear reactor and hopes to start construction by 2012.

The United Arab Emirates, also a newcomer to nuclear power, has awarded a contract to US engineering and construction company CH2M Hill to manage its atomic investment programme. Although the UAE has large amounts of oil and gas, it wants to move into nuclear energy in order to satisfy a rising demand for electricity. CH2M Hill will be responsible for planning the UAE’s nuclear investment programme in accordance with United Nations standards.

As more countries decide to enter the nuclear world, questions are being asked about how governments can most effectively encourage investment in reactors and avoid mistakes of the past.

Safety considerations are paramount; another accident on the scale of those at Three Mile Island in 1979 or Chernobyl in 1986 would destroy public confidence in the nuclear industry and would kill off much of the political and commercial interest in nuclear expansion. Countries that have either never built a nuclear reactor before or those, like Italy and the UK, that have had a hiatus of several decades since their last plant was constructed, need to prove that their nuclear safety regulatory regimes are robust and that risks will be minimised.

Another issue is cost. In the early days of nuclear power, proponents said that electricity would be generated so cheaply it could almost be given away for free. But in the decades that followed, many reactor projects missed deadlines and ran over budget. In the UK, a tendency to change the reactor technology each time a new power station was built meant that there was only a very shallow pool of expertise and spare parts to draw on when the plants broke down, leading to lengthy outages.

This time around, standardisation is the nuclear industry’s buzzword. Reactor manufacturers such as Westinghouse, Areva and GE stress that the best way to keep costs down and limit outages is to build large fleets of standardised reactors. This would provide economies of scale, and mean that each country could draw on an established global supply chain and source of skills and technical information.

In the past, nuclear power has been more expensive than power generated from gas-, oil- or coal-fired plants, when measured over the life of the plant. But as fossil fuel costs have risen in recent years, nuclear energy has started to look more commercially-viable.

There are fierce debates about the real cost of nuclear energy, once the expense of dealing with spent fuel and radioactive waste has been included. As yet there is little impartial data available, but experts argue that nuclear power offers countries advantages that outweigh the costs.

Tony Ward, a partner in the power and utilities team at Ernst & Young, says that governments’ desire to diversify sources of power and cut emissions of CO2 will continue to drive investment in nuclear power, no matter how much coal, oil and gas prices fluctuate. “Nuclear is at the moment the only truly scaleable provider of base-load power that is also low carbon,” he says, adding that falling steel and construction costs should help projects keep to budgets.

Governments differ in how they expect nuclear investment to be paid for. In China and France, plants are being built by government-owned companies and it is not yet clear how much of the cost will be passed on to customers through bills and how much will be subsidised by the governments. In the US and the UK, investment is coming from the private sector, with the full cost being recovered from customers over time.

But to kick-start nuclear investment, all governments are offering some sort of incentive. “The US has chosen to provide financial incentives for the first tranche of reactors built and the UK is seeking to refine its energy policies,” says Mr Ward at Ernst & Young.

It remains to be seen whether there will be enough skilled engineers and specialised components to support the revival. Mr Ward says projects could be delayed by shortages.

“Despite major investments around the world in the manufacturing plant, equipment and nuclear certifications on which the industry depends, demand is expected to outrun supply for at least the next two decades,” he says.

Finland’s symbol of resurrection becomes showcase for hassles, delays and cost-overruns

Finland’s Olkiluoto power station was meant to symbolise the resurrection of nuclear power after the 1986 Chernobyl disaster and to act as a showcase for Areva of France’s new EPR reactor technology, writes Robert Anderson.

The first nuclear power station to be built in western Europe since Chernobyl, Olkiluoto 3 would demonstrate that nuclear energy was the obvious solution to growing concerns about CO2 emissions, high fossil fuel prices and dependence on imported energy sources.

It would also advertise that Areva had an efficient technology that could be rolled out to all the countries now considering building nuclear plants. To meet safety fears, Olkiluoto’s outer shell is designed to withstand the impact of an airliner and nuclear waste will be stored underground on site.

Instead, Olkiluoto has become a showcase for the hassles, delays and cost-overruns that critics say always bedevil nuclear projects. Finland’s fifth nuclear plant is now only expected to start operation in 2012 – three years late – and to cost €4.5bn ($5.8bn), 50 per cent more than originally planned.

If it remains any kind of showcase for Areva, it will be an expensive one. Since Areva and Siemens of Germany (which supplies the turbine unit) agreed to deliver the plant as a turnkey project, they will have to cover the bulk of the cost overruns, although they are likely to try to dispute the final amount.

The Finnish side is adamant that Areva and Siemens will have to foot the bill.

“They have to take all the responsibility,” insists Jorma Aurela, senior engineer of the Finnish ministry of employment and the economy.

Finland took the plunge to build a nuclear power station because it wants to reduce its acute dependence on expensive imported energy sources, particularly gas from neighbouring Russia. It also needs nuclear energy to help fulfil its commitments to reduce CO2 emissions by 16 per cent before 2020. Renewable energy, primarily biomass and hydro-electric power, already represents around one-third of total generation and ramping it up further while consumption continues to grow will be difficult.

Nuclear power – already a quarter of the country’s generating capacity – seemed the obvious answer and parliament voted in 2002 to re-start the nuclear programme, halted in 1993 in the wake of contamination by the Chernobyl fallout.

TVO, a consortium of big energy users, held a tender and chose Areva in October 2003 to build an extra 1,600MW unit at the Olkiluoto power station on an island in western Finland.

Areva needed a showcase for its EPR third-generation reactor and agreed highly aggressive terms to win the project. It agreed a price tag of €3bn and pledged to have the plant up and running in the first half of 2009 – just five years after it applied for a construction licence.

This was unrealistic because a conventional nuclear reactor normally takes six years to build and the EPR is far more complex. It was also Areva’s first turnkey contract and they had no experience of running such a large project, the largest single unit ever built.

More fundamentally, the almost two-decade moratorium on nuclear plants in western Europe has caused reactor-building expertise to atrophy. There have been delays in receiving vital components and quality problems. The construction companies at the site underestimated how many workers they needed and how rigorous the safety procedures would be.

There has also been a culture clash between the French and Finnish approaches to building regulation. The French side has grumbled that the Finnish nuclear regulator has demanded huge amounts of documentation in advance and has been sluggish in processing it.

For their part, the Finns are unapologetic and blame the French for being unprepared. “They should have known what is the Finnish system,” says Mr Aurela. “We have very strict authorities. We have not seen any important delays there.”

Whether Olkiluoto’s problems deter others from building nuclear plants or commissioning Areva’s EPR will depend on whether the French company can stick to its latest targets and whether it becomes embroiled in a squabble over cost overruns with TVO.

Areva will try to write Olkiluoto off as a loss-leading prototype and hope that its experience there will enable it to win new contracts that it can complete under budget.

Areva is also building a second EPR at Flamanville in northern France – which is currently only slightly delayed and over budget – and is competing in a vital tender in South Africa. EdF, the French utility, is also planning to build four EPR reactors in the UK following its recent acquisition of British Energy.

For their part the Finns are not disheartened by their pathbreaking nuclear project. The government has already received proposals from TVO for a fourth unit at Olkiluoto and two separate proposals for new plants are expected to be submitted next year.

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