NuScale Sees U.S. Market for Modular Reactors, Others Don’t

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By Rebecca Kern

Nov. 3 — NuScale Power LLC is working to build the first small modular nuclear reactor in the U.S., even though other nuclear companies and analysts don’t see a market for it.

The Oregon-based company plans to file a design certification for its 50-megawatt electric, small modular light-water reactor technology with the Nuclear Regulatory Commission in December. If approved, the company expects to get its first reactor on the U.S. market in 2024 or 2025.

NuScale says its reactor would be quicker to build and potentially less costly than traditional nuclear reactors. The Energy Department sees these reactors as an important part of a future power system in a world that needs to reduce carbon emissions. Still, some experts and other nuclear technology companies say the cost of modular reactors is too high to create demand.

M.V. Ramana, a physicist at Princeton University’s Nuclear Futures Laboratory, which focuses on fuel technology and energy policy, is among experts who don’t think the company’s small modular reactor (SMR) is as economical as the company claims.

“It’s too expensive and it’s not competitive at this point,” Ramana told Bloomberg BNA, adding that he doesn’t see a market for it in the U.S. before 2030.

Westinghouse Electric Co., whose technology is the basis for nearly half of the world’s nuclear plants, has said it doesn’t plan to develop its SMR technology in the U.S. due to lack of market certainty.

“Frankly, the market signals, the demand signals, the regulatory certainty are not yet in place to allow most companies—including ours—to rationalize the several hundred-million-dollar investment to do it absent some stronger signal,” Westinghouse’s Jeff Benjamin, senior vice president, new plants and major projects, told Bloomberg BNA.

Yet the Energy Department does see a viable market for SMRs in the U.S. as part of an increased transition to low-carbon energy sources.

“We look at the coming decades with tens of gigawatts of coal plants expected to retire, and we would expect SMRs to capture some percentage of that market,” Matt Bowen, an associate deputy assistant secretary in DOE’s Office of Nuclear Energy, told Bloomberg BNA.

Even so, nuclear power at present is facing headwinds.

Since 2013, U.S. nuclear operators have shut down six reactors in five states, primarily driven by the historically low price of natural gas. Another seven reactors are scheduled to retire by 2025 in four states, according to the Nuclear Energy Institute, which represents the nuclear industry. Another 10 to 15 nuclear reactors are facing financial pressure and are at risk of premature closure in the coming years, the group told Bloomberg BNA.

Shorter Build Time

Each NuScale reactor is designed so it can be individually purchased. A plant can be scaled up to a total of 12 reactors. NuScale is aiming for its first 12-reactor, 600-megawatt plant to cost approximately $3 billion to build. After several years of site preparation work, it will take approximately 36 months to construct, Mike McGough, NuScale’s chief commercial officer, told Bloomberg BNA.

This shorter build time and modularity of the plant could be beneficial to a small utility, because it could start to generate electricity after installing just one reactor and then continue to raise capital to purchase and install additional reactors later, Chris Gadomoski, lead nuclear analyst with Bloomberg New Energy Finance, told Bloomberg BNA.

“So you’re not floating the cost of the money for six or seven years. Theoretically these things should be built between 36 and 48 months,” Gadomksi said. “The advantage of doing it that way is that you’re generating electricity after the first units are operating.”

This is compared to the four large-scale light water reactors being built in the U.S., which have faced serial cost increases and schedule delays. Scana Corp./SCE&G’s V.C. Summer two reactors, Units 2 and 3, in South Carolina, which are expected to generate a total of 2,200 megawatts, are estimated to cost approximately $13.9 billion to build, according to Scana. Separately, Southern Co.'s Vogtle Units 3 and 4 in Georgia, also expected to generate about 2,200 megawatts, are estimated to cost approximately $11 billion, according to Georgia Power Co., a co-owner. All of the units are estimated to open between 2019 and 2020.

Another feature of the NuScale technology is that it can be manufactured in a factory and can be shipped in three pieces—weighing a total of 640 tons—via rail, truck or barge. “It’s designed specifically for that transportability,” McGough said.

The NuScale plant has a smaller footprint than the large-scale nuclear plants, about one-fourth the size of an average Westinghouse AP1000 pressurized water reactor plant. McGough said a goal would be to locate the plants in shut-down coal plants to use existing transmission and cooling water infrastructure.

“A big part of our market is to locate these on sites where coal plants have been taken out of service, and there’s lots of those,” he said.

Questions About Economics

Economists say small reactors would only be economical if they were mass produced in factories. That would would require enough customers lined up to buy the reactors ahead of time.

Mark Cooper, a senior research fellow for economic analysis at the Vermont Law School, said you’d need to produce 50 SMRs to get the modular production down to the cost level that people are projecting for large reactors.

“There’s no market for SMRs in any developed country,” Cooper told Bloomberg BNA. “I can’t see an economic path to the future.”

NuScale’s McGough said NuScale is in early discussions with dozens of potential clients around the world, and approximately 12 potential clients have started spending money evaluating the option of deploying a NuScale plant, nine of them in the U.S.

The first NuScale reactor to potentially be built in the U.S. would be funded by Utah Associated Municipal Power Systems (UAMPS), a utility cooperative representing 45 members, and it will build its plant on the property of the Energy Department’s Idaho National Laboratory. UAMPS includes municipal utilities in Utah, New Mexico, Arizona, California, Idaho, Nevada, Oregon and Wyoming servicing approximately 310,000 customers.

So far UAMPS’ membership is still assessing whether it wants to move forward with an application, and will decide in the first quarter of 2017, Jackie Coombs, UAMPS’ manager of corporate and member relations told Bloomberg BNA. If its membership agrees to support a NuScale facility it plans to submit a combined operating license application with the NRC during the fourth quarter of 2018, she said.

The Energy Department has been doing a cost-sharing program to help fund the site licensing for both UAMPS and the Tennessee Valley Authority, which submitted an early site permit in May to the NRC for its Clinch River nuclear site in eastern Tennessee as a potential location for a future small modular reactor plant. However, TVA said it hasn’t selected a specific SMR technology yet.

UAMPS can get below-market interest rates on loans to fund the projects, unlike investor-owned utilities, which pay market rates for loans, Bloomberg analyst Gadomski said.

“It depends upon who the buyer is and what the cost of the interest rate is. If you’re a municipal authority, you can get cash at a cheaper rate, and one of the biggest drivers is the cost of capital,” he said.

Cooper called that “nuclear socialism.”

“Socialists can hide costs,” he said. “NuScale is dealing with the government. That’s not a market. They’re dealing with [municipals]— that’s not a market phenomenon. They’re dealing with TVA—that’s not a market phenomenon. That’s the only way [NuScale] will ever build an SMR in the U.S.”

NuScale has been the benefactor of multiple grants from DOE. It first won $217 million in matching government funds in 2013 which will last until fiscal year 2017, and a $16.7 million award from DOE in 2015 for the preparation of a combined construction and operating license application with UAMPS.

Princeton’s Ramana said that “absent government subsidies, it seems to be unlikely to me that many more projects will be built.”

Competitors Look Outside U.S

NuScale is the furthest of the small modular technologies in development in the U.S., in part because the technology started as part of Energy Department-funded research in 2000 in partnership with Oregon State University.

Other nuclear competitors are mainly not pursuing U.S. markets. An exception is BWX Technologies Inc. and Bechtel Corp.'s Generation mPower SMR, which won a DOE SMR funding award in 2013. However, the companies reduced funding toward their SMR technology in February 2014 and DOE stopped its funding in November 2014.

BWX Technologies and Bechtel are still working on submitting a design certification application with the NRC for its SMR technology and a site-specific licensing, with a goal of pursuing market commercialization by 2024 to 2025, Fred DeSousa, a Bechtel spokesman, told Bloomberg BNA.

Westinghouse’s Benjamin said virtually all of the company’s SMR efforts are in the U.K.

“That is really a reflection of where we see the support and frankly where we see the leadership courage on the part of the U.K. government being willing to make a sizable investment that is many, many times more than the U.S. DOE,” he said.

Holtec International Inc., a global nuclear technology company, is only pursuing commercial deployment in countries outside the U.S., with planned deployment of their SMR-160 reactor overseas in the mid 2020s, Thomas Marcille, vice president and chief nuclear officer at Holtec International SMR LLC, Holtec’s subsidiary working on their SMR technology, told Bloomberg BNA.

Nuclear Industry on SMRs

Meanwhile, the nuclear industry still sees value for SMRs in the U.S. market.

“My vision in the future is that you’re going to have large light water reactors, you’ll have these small light water reactors, and you’ll have advanced non-light water reactors further down in the future,” Marc Nichol, senior project manager for new plant licensing at the Nuclear Energy Institute, which represents the nuclear industry, told Bloomberg BNA.

“And I think they’re all going to co-exist and complement each other. They all have different advantages and they fit well in different uses,” he said. In particular, small modular reactors could benefit rural communities with smaller electricity demand, he said.

Safety Feature Concerns

One of the features NuScale highlights is passive safety: In an emergency, the plant could shut down automatically and cool itself without the need for operator intervention, off-site electricity or pumps for additional water.

NuScale’s reactor was designed to address many of the problems that occurred following the loss of off-site power in the earthquake and tsunami in Japan in 2011 that caused three of the Fukushima Daiichi nuclear power plant reactors to melt down.

The reactor technology has motion sensors that would automatically trip the reactor to shut down if seismic activity is detected, McGough said.

Ramana is concerned with how the the passive safety system would work since it hasn’t been tested by the existing fleet of large scale reactors, which operate under an active safety system involving manual intervention.

“This notion that passive safety is a panacea for all safety problems is mistaken,” he said. “Understanding the laws of physics is not the same as being able to understand what will happen under any given circumstance.”

“In an accident, things become much more complicated. Our understanding of how a reactor will behave is much more limited compared to normal circumstances,” he said.

Upcoming NRC Review

Once NuScale submits its design certification, expected by December, the review process itself will be similar to that used for large-scale light water reactors, Anna Bradford, the NRC’s deputy director of the new reactor licensing division of the NRC’s Office of New Reactors, told Bloomberg BNA.

The NRC initially will do an acceptance review of the application in the first 60 days after it is submitted to determine if it is complete enough to begin a technical review.

NuScale and NRC have agreed to a 40-month review timeline for the SMR application. However some observers question this time frame. “I think that’s an extremely ambitious and I would say unrealistic schedule,” Princeton’s Ramana said.

NuScale has indicated that it may seek an exemption from certain safety requirements involving the emergency planning zone, which currently involves a 10-mile and 50-mile radius surrounding the nuclear power plant where extra safety precautions are exercised in the case of a nuclear plant emergency.

Scott Burnell, an NRC spokesman, told Bloomberg BNA the NRC expects NuScale will request a smaller emergency planning zone in its application because of its smaller plant size.

“That’s probably going to be the largest departure from what we’ve done in the past with the large designs,” he said.

Safety advocates have raised concerns.

“We’d be a lot more supportive of these efforts if [NuScale] stopped trying to get the NRC to weaken its emergency planning and its security requirements,” Edwin Lyman, a senior scientist at the Union of Concerned Scientists, told Bloomberg BNA.

Ramana said he is concerned that NuScale is cutting safety features in reducing its emergency planning zone size to save money.

“To me that suggests that they are not really confident they’re going to be able to meet their cost goals of what they need to be able to generate power at in order to be economically competitive,” he said.

To contact the reporter on this story: Rebecca Kern in Washington at rKern@bna.com

To contact the editor responsible for this story: Larry Pearl at lpearl@bna.com

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