Are Big Nuclear Reactor Deals Right for Europe?
- Oct 10, 2021 2:31 am GMT
- Are Big Nuclear Reactor Deals Right for Poland, Romania, and Czech Republic?
- A Modest Proposal to Fund Sizewell C – which is a very big deal
- UK’s Financial Times Weighs in on ESG for Nuclear Energy
- NIA Offers Guidance on “Due Diligence” for Investors in Advanced Nuclear Technologies
- Want to Buy an SMR? Fluor is Offering Equity in NuScale to New Investors
- Kairos Submits PSAR for Oak Ridge Demonstration Reactor
- Rolls-Royce Said to Be Pitching Its Mid-Size Nuclear Reactors for U.S. Cloud Computing Data Centers
Are Big Nuclear Reactor Deals Right for Poland, Romania, and Czech Republic?
There is a lot of activity, if you count the number of MOUs, in Poland, the Czech Republic, and Romania regarding full size nuclear power plants. Of the three countries, only Poland appears to have ambitions, so far unfunded, to build both full size reactors, e.g., 1000MWe and small modular reactors (SMRs) at less than 300 MWe.
It is not going to be easy to be a vendor of nuclear power plans, or an EPC, in any of these three countries even if they get investors, or other nation states, to help fund the projects. The situation in Poland, Czech Republic, and Romania regarding nuclear energy projects is colored by several imponderables.
All three governments are more or less unstable. It is unreasonable to expect a utility or nuclear reactor vendor will commit to the long time frame for even an SMR under these circumstances. Yet, all three countries are engaged in what one energy analyst calls “the dance of the mastodons.” By this the analyst doesn’t mean to imply that large reactors are going to be extinct, but the phaser does nicely indicate the size and weight of these creatures as a metaphor. If you prefer a more modern comparison, think about an 18 wheel tractor trailer compared to any gas efficient compact passenger car.
The analyst means that what the three countries have in common is that they are committed to building large nuclear power stations. The questions are whether these plans are realistic and whether focusing on SMRs might be a better and more affordable way to go.
For instance, Poland is talking to Westinghouse about building that firm’s 1150 MWe AP1000. The Czech Republic wants to build a 1200 MWe PWR at Dukovany and perhaps two more of equal size later on at Temelin. Romania remains engaged in a perpetual quest to complete two 700 MWe PHWRs at Cernavoda.
So far none of these projects have been tied to any plausible plan for financing them. Besides the problem of where the money will come from, there are additional imponderables that have no easy solutions.
Poland has a brittle, increasingly unpopular, and authoritarian government that is both unpredictable and ruthless in its efforts to stay in power. The current government is locked in a series of self-destructive disputes with the European Union over various governance and judicial issues.
In response the EU has told Poland if it continues down this road it may lose access to certain lines of funding from Brussels and that could include energy projects of all kinds, not just nuclear. None of these conditions are predictors for the kind of long term stability needed to build and commission a major nuclear reactor project or a fleet of them over a 10-15 year period.
The Czech Republic election taking place this week could toss out the current PM, or weaken his political hand, and possibly end all of his nuclear energy plans. The government finally got over its nervous views about having a regulated rate for the plants, but naysayers may gain more leverage depending on who the voters choose and that will be mostly over issues unrelated to the next nuclear plants.
Update 10/10/21: Babis lost the election by a narrow margin. Petr Fiala, chairman of the center-right Civic Democratic Party, has acknowledged widespread support in the Czech Republic for nuclear energy and was a vocal opponent of allowing either Russia or China to bid on a tender for a new reactor at Dukovany. Prospects for that tender will depend on the composition of the new coalition, and that it elects Fiala as prime minister.
Romania has tried multiple times to bring investors to the table to complete Cernavoda units 3 & 4 (CANDU type 700 MWe PHWRs) without success. It recently doubled down on its ambitions by announcing a new energy policy that calls for construction of two new PHWRs.
U.S. Promised a Lot. Can it Deliver?
The Trump administration recklessly made promises, that it could not keep, to Poland and Romania, regarding financial support for their nuclear energy ambitions mostly as part of an effort to keep China and Russia from dominating the nuclear energy market in eastern Europe.
The promises made in 2020 by now then Secretary of State Pompeo are not sustainable. He offered Poland $18 billion for a fleet of full size reactors. In particular, in the absence of US funding, no way will government of Poland proceed with commitments to these nuclear reactors. Pompeo’s promise covered just half of what the country needs for its ambitious plans for full size reactors to replace coal plants and to meet climate goals. Poland is one of Europe’s most prolific users of coal for power plants.
Romania was offered $8 billion by Pompeo for completion of its stranded assets at Cernavoda. That country took the US promises seriously enough to tell China it was no longer welcome to bid on completing the two PHWRs.
Separately, the Czech Republic acted on long-standing tensions over Russia’s plans to bid on Dukovany denying them permission to do so. The reason is allegations that Russian operatives blew up an warehouse full of weapons to be shipped to Ukraine. Just to put a point on it, the Czech government also declared 18 Russian embassy staff as persona non-grata and had them sent home to Moscow.
Biden’s Domestic Priorities Will Come First
With US President Biden scrambling for every $1B for his domestic priorities, it doesn’t seem plausible that he is going to approve financing for Poland ($18B) or Romania ($8B) in the near term.
Biden is already in a bind trimming his domestic agenda to meet demands by Democratic Party moderates. He’s not going to further annoy the progressive wing by sending that kind of money overseas when they want ever dime of it for their agenda. Progressives have dug in their heels on these issues and the White House has moved appropriately in response to this political reality
Plus, between now and December, Biden not going to talk about tens of billions in foreign aid when the continuing resolution for funding the federal government and the debt ceiling hang in the balance. However, look for a “deal” on a whole bundle of federal financial issues sometime in the dark news hole between X-mas and New Years. Maybe 2022 will be better for foreign aid and export financing for European reactors that buy from US vendors.
Bring on the SMRs
SMRs would be a better and more affordable path for all three countries. Several major vendors including GE Hitachi (BWRX300), NuScale (a PWR type SMR at 77 MWe), and Rolls Royce with a 470 MWe mid-size PWR are all pitching all three countries with their designs.
The SMRs are affordable because the up front cash needed to build the first of a kind (FOAK) is peanuts compared to the “mastadon” approach to tying up several billion dollars in a single large project.
The time needed to build them is a lot quicker than their extra size large cousins. This means after you build the first one you can raise the money for the second in part from revenue from the first, and so on.
Poland has several proposals by the private sector to pursue SMRs especially for process heat applications for chemicals manufacturing.. Right now these are just paper MOUs with a long path ahead to break ground. Even so the prospects for SMRs look better than other options.
Poland has taken several new steps to prepare for nuclear technologies. Polish company KGHM has partnered with American NuScale Power and Piela Business Engineering (PBE) Molecule to develop small modular reactor (SMR) technology to replace existing coal-based energy sources.
Additionally, a Memorandum of Understanding (MOU) was signed between Cameco, GE Hitachi Nuclear Energy, Synthos Green Energy (SGE), and GEH SMR Technologies Canada, Ltd. The companies have agreed to collaborate on the evaluation of a potential Canadian supply chain for a fleet of BMRX-300 SMRs in Poland.
The UK understands this model. It is working hard to get Rolls Royce set up to undercut US full size reactors with exports of its now 470 MWe PWR to eastern Europe including Poland.
At $4000/Kw, its a price of $4 billion for a 1000 MWE PWR v. $1.9 billion for the Rolls-Royce “compact” model is an easy comparison. Build one now, then build another when it’s done, and so on and pretty soon you’ve got a whole fleet without locking up all that cash in one huge make-or- break project. Rolls-Royce is also pitching the UK government for funding to build a fleet of 16 of these mid-size units aqcross the UK completing them by the mid-2030s.
The claims by Ukraine with plans for five AP1000s, one a rebuilt VVER and four new, are even more problematic. The government is unstable, corrupt, and does not have the cash for such an ambitious plan. The Russians have little green men occupying Crimea and parts of one its eastern provinces. The word “instability” would be front and center in any due diligence report.
For similar reasons, export funding from the US is not a near term prospect. Meanwhile, Holtec has a foothold in Ukraine for its 160 MWe SMR which includes a factory to make parts on an OEM basis for SMRs. It’s time for Ukraine to get its head out of the clouds and make a deal with someone to embrace for SMRs based on the paradigm that “small is beautiful.”
How the US Could Make Credible Promises
If the US wants to pursue credible commitments to nuclear power plants to replace coal in eastern Europe, it can expand the current 3 Seas initiative by focusing on two important initiatives.
First, create a multi-national buying consortium across as many of the 12 member countries as possible to get the cost of nuclear reactors down based on volume purchases of long lead time components.
Second, create a multi-national energy bank that would draw public and private investments from the 3 Seas member countries as well as from the US, the UK, and other countries, to fund SMRs. Risk sharing on a multi-lateral basis makes a lot of sense.
By combining buying power with multi-lateral investments, 3 Seas member countries, which include Poland, Czech Republic, and Romania will have a faster path to nuclear power projects and with a focus on SMRs.
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A Modest Proposal to Fund Sizewell C – a very big deal
It is no secret that UK PM Boris Johnson has been convinced by his advisers to boot China off of the Sizewell C nuclear power project and then repurpose the 20% equity stake that China was slated cover to be taken up by western investors.
This is a perilous move since it will undoubtedly annoy China which has it firmly in mind on being able to build one of its Hualong One 1000 MWe PWRs at the UK Bradwell size in return for the Sizewell investment.
Actually, there is a way for EDF to get funded for SizewelL C, for which it still does not have a formal deal with the UK, and to soften the blow to China. The proposed move is a major swap of equity for EDF and China. Here is how it would work.
Back in 2008 EDF signed a deal with Chinese state owned nuclear energy firms for a 30% equity stake in the construction of two 1650 MWe EPRs in Taishan, China. The two reactors have since been built and commissioned into revenue service. Suppose for the sake of discussion that EDF swaps its 30% stake in Taishan for China’s 20% stake in Sizewell C and takes the additional 10% to boost its stake in Sizewell C?
Advantages of the Swap
The advantages of the deal are that China saves face, though not completely, in exiting Sizewell C. It takes some of the bite out of a deal they can’t refuse.
The advantage for EDF is that it now has a 30% stake in Sizewell with capital it can’t raise for now in France.
The advantages for the UK government is that now has to raise only 70% instead of 80% of the capital needed to build the two reactors. Also, it takes the sharp edge off of ending China’s equity stake.
Also, with a price tag of about $25 billion, a 10% reduction for the UK government in a combination of public and private funds is worth $2.5 billion. That’s money that could be invested in SMRs or other of the UK full size nuclear power plants.
It looks simple on its face, but probably has the potential to get complicated which means that if the UK and EDF think this is a good idea, time is being wasted just thinking about it. Obviously, valuations will have to be compared and due diligence worked out, but as a concept it makes a lot more sense than just running China off with a political pitchfork and having a big unresolved investment headache that will take a lot more effort to resolve.
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UK’s Financial Times Weighs in on ESG for Nuclear Energy
A key investment paradigm that is sweeping the globe is the use of metrics of company performance based on environmental, social, and governance (ESG) indicators Many of these measures are tied to concepts related to climate change and sustainable development that measure best business processes that do not further degrade the planet and which promote equitable practices in terms of social and corporate operations and governance with internal and external stakeholders.
It is more than just “green investing” as it broadens the roles and responsibilities of public and private firms that go well beyond the dead hand of conservative economist Milton Friedman who asserted that the only obligation firms have is to their stockholders.
ESG measures look at how the firm is a participant in its community, the nation, and how it acts on a global basis including its supply chains. A perfect example of this, and one you likely see a lot of, is Starbucks Coffee campaign to tell its customers it sells “fair traded coffee.”
How does all this apply to nuclear energy? The Financial Times (FT) , a UK leading business newspaper, ran a major piece on this subject on October 7th. Gillian Tett, an editor at the FT, wrote a column in which she addressed ESG for nuclear energy. The piece is behind the FT firewall but here are a couple of take-aways.
“Until very recently, the word “nuclear” was toxic to most green activists and many politicians, both because of the pollution risks linked with spent nuclear fuel, and due to previous accidents at nuclear plants. Indeed, events such as the 1986 meltdown in Chernobyl, Ukraine or the 2011 tsunami at Japan’s Fukushima plant have left such a legacy of fear that countries such as Germany have been shutting their existing plants, along with US states such as New York and California.”
She adds how this applies to nuclear energy.
“However, there are now two factors which could (and should) change this conversation. First, nuclear technology is shifting. Whereas 20th century reactors were so big and expensive that they required a decades-long commitment to install, the new generation of [small modular reactors] SMRs are smaller, cheaper and far more flexible. This means that they can be located in more convenient places, and — crucially — treated as a temporary or transitional energy source.
Evangelists for nuclear power, such as Bill Gates, claim that such technological breakthroughs have also made plants far safer than before, with less pollution risk, because they can be run on recycled fuel, although these claims remain controversial.
The second factor changing the conversation is a growing sense of realism — or desperation — about carbon emissions ahead of COP26. In an ideal world, there is (or should be) no question that the best way to slash emissions is to use renewable sources, such as solar, wind and hydroelectric power.”
The advantages for firms that publish ESG reports is that they tend to attract more investors, not fewer. and, can lower the cost of capital as a result. This is a big challenge for a utility which has nuclear power plants as it may also have plants that burn natural gas and coal.
This is an area where we will see more dialog like Ms. Tett’s column so stay tuned.
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NIA Offers Guidance on “Due Diligence” for Investors in Advanced Nuclear Technologies
The Nuclear Innovation Alliance (NIA) released a new report, “Due Diligence for Advanced Nuclear Technology Companies: A Guide for Potential Investors.”
This report is an introductory guide for potential investors in companies developing advanced nuclear technologies for electric power generation, industrial or district heating, hydrogen production, or other applications. The guide describes advanced reactor characteristics and considerations that may be of particular interest for evaluating investments.
NIA Executive Director Judi Greenwald provided the following statement on the relevance of this new NIA work to ongoing efforts to enable decarbonization of energy systems:
“Investor interest in advanced nuclear energy is growing because it has attributes that can help meet urgent energy and environmental needs, both here and abroad: it is carbon-free, emits no conventional pollution, and is highly reliable. Advanced reactor technology is promising, rapidly evolving, highly regulated, but also unfamiliar to many. The new guide is designed to provide potential investors with helpful context as they begin to navigate the advanced nuclear space.”
“The guide will also help advanced nuclear innovators understand what questions to expect from savvy investors. We have published the guide as part of our ongoing effort to ensure that advanced nuclear energy plays a role in helping the United States and other countries reach their zero-carbon emission goals.”
To read the report, visit the NIA website here:
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Want to Buy an SMR?
Fluor is Offering Equity in NuScale to New Investors
In May 2021 Fluor announced that Nuscale Power has engaged Guggenheim Securities to explore financing options. Fluor said in a press statement that it has been actively engaged with potential strategic investors in NuScale since 2013, and recent milestones have been achieved which have rapidly increased the number of interested parties.
It is expected that any potential proceeds raised through this process would be used by NuScale to accelerate and expand its SMR development program including those elements currently supported by a U.S. Department of Energy (DOE) cost-share awards.
Options for Fluor include selling some or all of its current equity shares in the firm while continue to to provide engineering services, project management and supply chain support to NuScale as part of any contemplated future projects.
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Kairos Submits PSAR for Oak Ridge Demonstration Reactor
(WNN) US company Kairos Power has submitted the preliminary safety analysis report (PSAR) for its fluoride salt-cooled, high-temperature reactor (KP-FHR) to the US Nuclear Regulatory Commission (NRC) as part of its application for a construction permit for the Hermes low-power demonstration reactor, which is to be built in Oak Ridge, Tennessee.
The KP-FHR is a novel advanced reactor technology that leverages TRISO “pebble bed” type fuel combined with a low-pressure fluoride salt coolant. The Hermes unit, designed to achieve a thermal power level of 35 MWt. It will not generate electricity. It’s purpose is to demonstrate the technology’s capability to deliver low-cost nuclear heat and is part of a “rapid iterative development” approach.
The company says it will help to mitigate technical, licensing, manufacturing and construction risk while establishing cost certainty on the pathway to commercial deployment of the KP-FHR. The demonstration prototype is expected to be operational by 2026.
Kairos Power CEO and co-founder Mike Laufer said in a press statement, “We look forward to working with the NRC staff, State of Tennessee and City of Oak Ridge to build Hermes, demonstrating our ability to deliver safe and affordable nuclear heat.”
Kairos received a DOE Advanced Reactor Demonstration Program (ARDP) cost-shared award for risk reduction funding to support development of the Hermes reactor worth $303M in government cash.
The company is partnering with Materion Corporation, Oak Ridge National Laboratory, Idaho National Laboratory, and the Electric Power Research Institute, and has has also established a cooperative development agreement with the Tennessee Valley Authority to collaborate on the development and demonstration for Hermes.
The company has also established an interactive virtual open house to share information about the project and the technology.
Kairos is one of seven non-light water reactor designers that have formally notified the NRC of their intent to engage in regulatory interactions, the others being;
- General Atomics for the Energy Multiplier Module;
- X-Energy for the XE-100;
- TerraPower and GE Hitachi for the Natrium reactor;
- TerraPower for its Molten Chloride Fast Reactor;
- Westinghouse Electric Company for its eVinci micro reactor; and
- Terrestrial Energy USA for its Integral Molten Salt Reactor.
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Rolls-Royce Said to Be Pitching Its Mid-size Nuclear Reactors for U.S. Cloud Computing Data Centers
Rolls-Royce is planning to offer small nuclear reactors to US-based cloud operators so their data centers, with their huge appetites for reliable electrical power, can have net zero emissions and be independent of the electric grid. While data centers have become more energy efficient over time, they still need a lot of electricity. As the US becomes more digital, it will need more data centers.
Rolls-Royce is talking to Amazon, and other US cloud providers like Google and Microsoft, about the possibility of using a proposed mid-size PWR (470 MWe), currently under development with UK government funding.
The story surfaced according to a computer industry trade press report, as UK premier Boris Johnson promised that Britain’s electricity grid will be carbon-free by 2035, and told the media that this would require nuclear power as part of the country’s baseload electric grid.
The SMR project is a consortium led by Rolls-Royce, which received £215 million from the UK government in 2020 to develop its new) reactor. The proposed design is a 470MW power plant that can be built in Rolls-Royce factories and delivered on-site in modular form, and could be available by 2030.
According to Rolls-Royce’s site, the SMR “takes advantage of factory-built modularization techniques to drastically reduce the amount of on-site construction and can deliver a low-cost nuclear solution that is competitive with renewable alternatives”.
The promise is for long-term, guaranteed, low carbon power which can support baseload without the variability of solar and wind power. This will help support the decarbonization of industries, including data centers.
“Our SMR program has been designed to deliver clean affordable energy for all and does so with a revolutionary new approach aimed at commoditizing the delivery of nuclear power through a factory build modularization program,” said Tom Samson, CEO of the Rolls-Royce SMR Consortium last July.
The trade press report quoted a Rolls-Royce spokesperson saying: “A number of major companies have set low-carbon or green targets for securing their power, and rather than just buying a contract they’re thinking: plug an SMR into a data center and you’ve got full availability of low-carbon power. This is partly a way to keep shareholders happy.”
Cavendish Nuclear, a subsidiary of Babcock International, recently joined the SMR consortium, joining existing members Assystem, Atkins, BAM Nuttall, Laing O’Rourke, National Nuclear Laboratory (NNL), Jacobs, The Welding Institute (TWI), and Nuclear AMRC.
Both Rolls-Royce and Cavendish are involved in a similar project to build an Advanced Modular Reactor (AMR), called U-Battery. This is also aiming to deliver reactors built in factories, with a capacity of around 10MW, by the 2030s. Last week U-Battery demonstrated a mock-up of its reactor vessel and heat exchangers, as a milestone towards delivery of an actual system.
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