September 6, 2008
The Role of Nuclear Power in Turbulent Times
By Christopher, Tom
1. How do you foresee the stability of the electrical generation industry in terms of consumer's price in the next five years? I had a really interesting analysis shown to me a couple of months ago. The theme was that we are about to enter extremely turbulent times in the United States in the electric generation industry - very turbulent times over the next 3 to 5 years. It will create a lot of emotional back lash, and we are going to see a storm of events around us. The industry has to be very careful as to how it acts and operates. Until 4 or 5 years ago, United States electricity generation was self contained; 95 percent of the fuel we used - coal, gas, oil, whatever - it was not imported. It was within our own boundaries. And while world events effected things to a degree, in regards to the price of electricity, it was forecastable and predictable and in control.Now very quietly in the last two years, US electric generation has shifted to a more global basis. We are starting to see wild swings. Now all of a sudden the price of coal, up and down the last four months, went up 100 percent again. The forecast is that it will continue to move up. We have shifted to a global electric generation economy now and we are about to go through a roller coaster of events. It will make it very difficult to forecast anything other than instability for 5 to 8 years from now on. With that backdrop, we have seen 35 states shift to fuel cost projection prices. So the utilities can adjust electricity prices on a monthto-month basis, and we could be seeing 50 percent swings in the monthly cost of electricity - driven by fuel costs.
I asked for a strategic analysis in different regions of the United States, like the Northeast and California, for example. There, the price of electricity is largely determined by the price of natural gas. So we asked people what the wholesale price of natural gas is going to be. Experts say that it is something between $6 and $20 (per thousand cubic feet - McF). At a Japanese utility two weeks ago it was $20 (per McF)for an 18-month supply of natural gas.
Fifty percent of our electricity comes from coal. A utility in the Midwest, for example, can make 100 percent profit by shipping its coal to China this week. What does that do to the price of coal? It could triple. Coal mine owners are looking to the global market and selling at 100 percent profit around the world. And they are selling all they can get.
2. What will be the role of the nuclear power industry in bringing about stabilization of electricity prices, given the turbulence in the fossil fuel power plant related energy market?
Given the turbulent circumstances, it is critical that our nuclear power plants operate at their optimum capacity.
We've got to really make sure these units run well. When you go back to 2000, plants were allowed to run for a 60 year life. When you look at the unit and ask what they spent their money on, it's the big stuff such as generators, reactor vessels, turbines - but the routine equipment wasn't touched, and we are beginning to see failures in this older equipment. We have plants that are running flat out. We never quite fixed and upgraded everything needed for 60 years of operating life. Now we are increasing the power against an environment that is going to be extremely unforgiving. The utilities now have to think about all the unpredictabilities. We have an opportunity to operate our plants in a way that helps the economic conditions of the industry and bring about stabilization in the price of electricity.
3. How will the construction of new nuclear power plants bring about stabilization in the electricity prices?
Utilities are asking themselves, can I afford to build a billion dollar unit? Can I afford not to have the option? What I suspect you are going to see is that more and more utilities are getting suppliers like AREVA started with engineering, getting in the queue for long lead-time material supply and moving to the next level. They're going to put their cards on the table for the next three years by going through the design, going through the licensing, and raising the ante to see how this unpredictable environment shakes out. So how many nuclear plants are we going to have? By this time next year the industry will have some 50 designs and sites in the works. The first step is to pick a site. Then get the engineering going to play the option that only a handful will take the next step.
You have to explain to the public why the prices of electricity are about to go crazy in the next 3 to 4 years. They are not going crazy because of the carbon act. They are going crazy for other reasons, and the American public reacts to the latest thing that is throttling. The situation has gotten much more complex. It's an opportunity for nuclear power, especially for power uprates. I never thought I would see a politically favorable climate. We have to upgrade reactors, and based on these prices of electricity, it will probably justify 4 or 5 hundred million dollars in expenditures.
We are looking at reactor power increases of 10 to 18 percent, 120 MW electric increase in the plant, and a 20 percent increase in electric power. Reactor power output is going to go up. The turbine will be modified to be more efficient. The combination of the two, an increase in thermal power and a more efficient turbine will produce an additional 130 MW. We are talking about going from a plant that was originally 1120 MW electric to at least 1300 MW electric.
4. Who is mandating the uprating of nuclear power plants ?
The States are pushing the utilities because the coal plants have all been delayed and reserve margins are coming down. There is no other choice. With these wild swings of natural gas, what's starting to happen is that they are starting to mandate the reactor upgrades. In 18 months we will start getting more nuclear megawatts at a fraction of the cost. You name the unit. Every one of them is looking to increase power.
5. Is it critical to have nuclear plant life extended to 80 years?
Today when you look at a nuclear unit, say one that is 30 years old, the truth is that the material condition is better today than it was 20 years ago. We have systematically improved the equipment that is there. If a unit continues to spend 20 million a year in upgrades, why can't you just keep going? Or, what components would be so costly to change out that you would consider shutting the whole thing down? We have replaced turbines in every nuclear plant. You can put in new rotors and basically rebuild the entire turbine system for 60 to 80 million dollars. Heavily limiting components will be the reactor vessels, whether you have to replace the entire reactor vessel, which would be a really difficult job. Years ago, when people talked about replacing a reactor vessel, it might cost you 8 to 9 hundred million dollars. Units were not built to get a reactor vessel out of the containment. You have to cut it out. That's not the case anymore. You have to consider other systems - like wiring. Can the cable of the plant last that long or do you need to replace most of the cable. Within 10 years we will change every steam generator in the United States. A fleet that is over 35 years old will have steam generators that are 5 years old, and they can run another 30 years to 40 years. We changed out equipment, pressurizers and turbines, for example. The major ugrade consideration will involve the fundamental parts of the units. It will be a cost benefit decision. Are we going to find a flaw in the concrete after 60 to 70 years and have to do something? We'll have to study all these things, but everything about it appears feasible for an 80 year plant life.
A lot of nuclear plants spend a lot of money on upgrades anyway. The average station is close to spending 8 to 10 million dollars per year on capital improvements. It's not a small amount of money, but I think 80 years is possible.
Contact: Susan M. Hess, AREVA NP Inc., 3315 Old Forest Road, Lynchburg, VA 24501; telephone: (434) 832-2379, fax: (434) 382- 2379, email: Susan.Hess@ areva.com.
An interview by Nuclear Plant Journal Editor, Nerval Agnihotri at the Nuclear Energy Assembly in May, 2008 held in Chicago, Illinois (www.nei.org).
By Tom Christopher, AREVA NP, Inc.
Tom Christopher is the President and CEO of AREVA NP Inc. and CEO of AREVA, Inc. Mr. Christopher joined the company in April 2000, as President & CEO.
Before joining the company, Christopher was the Vice President and General Manager of the Siemens Westinghouse Power Corporation's Energy Services Divisions. Prior to that, he served as General Manger of the Westinghouse Power Generations Business Unit's Energy Divisions, a broad-based, fullyintegrated energy service and systems business with full-scope engineering, maintenance, upgrade, repair, and O&M operations spanning six continents.
Christopher holds a Bachelor of Science degree in Mechanical Engineering from the U.S. Naval Academy and a Master of Science degree in Engineering Mechanics from Georgia Tech. He graduated from the Naval Nuclear Program and was a licensed engineering officer of Operating Nuclear Submarines. In 1980, Christopher earned a Master of Business degree from the University of Pittsburgh.
Copyright EQES, Inc. Jul/Aug 2008
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