SMR Alliances go for $452M In DOE gold
Four consortiums line up but only two can win
This is an updated version of my coverage in Fuel Cycle Week, V11, N474 May 24, 2012, published by International Nuclear Associates, Washington, DC
An overflow crowd at the Platts Third Annual Small Modular Reactor conference held last week in suburban Washington, D.C., got an up-close and personal look at three of the consortia.
They are vying for a piece of the U.S. Department of Energy’s $452 million cost-shared funding program for licensing and engineering support to develop small modular reactors, e.g., less than 300 MW.
DOE Deputy Assistant Secretary John Kelly told the conference that it was taking place on the day the proposals were due.
“Your work is ending,” he said. “Ours is just beginning.”
Kelly committed to making an award to one or two firms by the end of September and having the funds in the hands of the winner(s) by the end of the year.
The role of the government, he said, is take some of the uncertainties out of the process of deploying the first commercial SMR on the grid by 2022.
“If there were no uncertainties, there would be no role for government.”
The $452 million must be matched by equal spending by firms receiving the government money. It cannot be used for construction.
And Kelly made a sweeping promise to the group about how the DOE money would impact market acceptance of SMR technology. “We’re looking at a fleet of SMRs. We have no interest in building a few and walking away.”
Cost Savings in Fleets?
A panel of energy economists who spoke at the conference thinks a fleet is feasible. Stanford University’s Geoffrey Rothwell said that the cumulative effect of jumpstarting the industry now is that the U.S. could be building the equivalent of as many as 14 100-MW SMRs every year by 2030 for domestic energy production and export.
While several of the SMR developers said they planned on delivering the “Nth” of a kind SMR at less than $5,000/Kw, Rothwell said, “cost targets are easy. Delivering on cost estimates to customers is hard.”
The Stanford official said the price of a factory-built unit will be closer to $6,000/Kw. To get to that price, an SMR vendor may have to invest as much as $300 million in a factory, which will only be built with a fat order book.
As far as raising investment capital, he said that financial markets remain “confused” by SMRs. Instead, Wall Street sees another nuclear reactor with cost overrun baggage from the 1970s-80s, and the more recent issues with TVA’s Watts Bar 2.
Ionnis Kessides of the World Bank agreed that a fleet is what’s needed because of the cost penalties of building just one unit. He said that by the time four units are built, enough learning has taken place that “scaling factors and cost savings kick in.”
He estimated the cost difference between the first-of-a-kind and the fourth unit, for conventional LWR technology in an SMR, is as much as 22%.
Christopher Kerr, a senior manager with Exelon, said in a separate session that staffing for reactors doesn’t scale with size due to current Nuclear Regulatory Commission regulations. Cost savings won’t be available in terms of labor costs unless there is change.
Kerr sugested that a “fleet approach” where subject matter experts support multiple reactors might be a place to start.
In another session on developing design specific regulatory standards, Stephanie Coffin, a senior manager at the NRC, presented a long list of agency SMR issue papers that address topics of multi-module reactor facilities. She said the agency is working toward exemptions for SMRs that would eventually be formulated into regulatory changes.
Three Alliances in the Running
The three alliances seeking the DOE money—led by vendors Babcock & Wilcox, Westinghouse, and NuScale, respectively— have several things in common, but also enough differences that will make it a challenge for the government to pick winners. This was recognized by many at the conference and reflected in the fact that Kelly was asked while on the podium to reconsider limiting the decision to just two awards.
The common factors are that each vendor-driven alliance has at last one utility partner, plus support from engineering firms.
For instance, for its 180-MW LWR mPower SMR, Babcock & Wilcox has an agreement with the Tennessee Valley Authority for a Part 50 licensing process and a separate construction license also under Part 50. Bechtel is B&W’s engineering partner. If the SMR is built at Clinch River, TVA would be the owner/operator, but TVA has not yet committed to supporting construction.
Ali Azad, Chief Business Development Officer for mPower, told FCW that future projects would be pursued under the newer Part 52 process. He added that the basic configuration to be offered to customers would be dual 180-MW mPower reactors in a single facility, along with turbines and balance-of-plant equipment.
Westinghouse has an agreement with a complex consortium called NexStart to build and operate a 225-MW LWR SMR at partner utility Ameren’s Callaway reactor site. The consortium includes several engineering firms and utilities in Missouri, and Burns & McDonnell as the EPC.
Michael Anness, SMR Product Manager for Westinghouse, told FCW the company’s reactor will be built as a complete package with turbine and other balance-of-plant equipment.
It isn’t intended to be “modular” in the sense that additional units would be harnessed to work in the same physical infrastructure, said Anness. Instead, the approach “a step change in design for the entire nuclear island using modular construction.”
Like the other SMR vendors, NuScale has a multi-party agreement with DOE’s Savannah River Site; NuHub, a regional economic development group; and Scana, the utility that is building twin Westinghouse AP1000s at its Summer plant near Columbia, S.C.
Bruce Landry, who heads up marketing for NuScale, told FCW Fluor is both an equity partner with a majority interest and the EPC for the first unit. Flour put $30 million into the firm to recapitalize it after another investment collapsed due to unrelated events.
Landry said NuScale is proposing twin six packs, or 540 MW, of its 45-MW unit with turbines and balance-of-plant set ups scaled for six reactors at a time. Landry also noted that as a vendor, NuScale has no interest in being a utility owner/operator. That’s where Scana comes in as part of the NuScale plan.
Where Are the Markets?
All three firms vying for the $452 million in DOE gold told FCW that SMRs will not be built in unregulated markets as long as natural gas remains at or near its current price of less than $3/ Mbtu. That said the vendors are looking to the day when gas prices rise to above $6-8/Mbtu.
Key among the possible applications for SMRs is replacing old coal-fired plants and providing district heating (steam) as well as process heat for industrial processes.
Others include areas without a national grid or grids large enough to accommodate 1,000-MW reactors. Desalination is another application that shows up on everyone’s short list of customer applications for SMRs.
These uses point to developing nations. Habid Subki, the IAEA’s Technical Lead on SMRs, told the conference vendors should not underestimate the need for strong, independent regulatory nuclear safety agencies. “There are substantial gaps in some countries that profess to want these reactors.”
In the U.S. SMR developers are keen to put their first units inside the emergency planning zones of existing nuclear reactors or at nuclear sites. That’s one of the reasons B&W chose the Clinch River reactor site and Westinghouse wants to co-locate its SMR at Ameren’s Callaway reactor.
The lineup of firms headed to DOE’s Savannah River site will be inside a large federal reservation.
One of the potential prizes being sought in Missouri, Tennessee, and South Carolina is the location of the factories that will build the SMRs once the fleet orders start to flow. That vision is what brought NuHub into the picture with Savannah River.
The reality is that B&W already has manufacturing plants in Ohio, Indiana, Tennessee, and Virginia. B&W will make its own fuel at an existing plant and so will Westinghouse. While Westinghouse has sufficient vertical integration to be its own EPC, like B&W it went with an outside firm to handle these tasks.
All of the prospective vendors said their reactors would be "modular" in the sense they could be delivered to customer sites by a truck, rail, or if available, by barge. The current price of natural gas at less than $3/MBtu is a worry, but the vendors think it won't stay at that price forever.
Time to market is a key competitive factor and each of the vendors is pushing as hard as possible to line up a book of orders to justify investing in manufacturing capacity. The US NRC license is a "gold standard" that the vendors hope will open doors to export sales. They note there are large opportunities overseas in Europe and Asia where natural gas runs $8-10/MBtu.
Holtec offers money back guarantee
Holtec International, which did not present at the Platts Conference, said in a press release late last week that it is offering the Department of Energy a money back guarantee if it fails to obtain an NRC license for its 160 MW LWR design. The promise is included in its proposal to the government as part of the firm's application for the SMR funding.
Like several of the other SMR developers, Holtec is working on a plan to build a first of a kind unit at DOE's Savannah River site. The firm may partner with The Shaw Group and Areva as part of that effort. Holtec will also partner with NuHub an economic development organization which is interested in attracting SMR manufacturing to South Carolina.
From 2007-2012 Dan Yurman published a blog on nuclear energy. It covered the nuclear energy industry globally including new reactor investments, economics, politics, and technologies. He was a frequent contributor to the ANS Nuclear Cafe http://ansnuclearcafe.org and to Fuel Cycle Week http://fuelcycleweek.com
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