B&W and Bechtel form small modular reactor alliance

Are small reactors game changers for the nuclear industry?

Two leading energy announced July 14 they plan to jointly build and sell 125MW small light water reactors as turn-key projects to U.S. utilities and for export. Babcock & Wilcox (B&W) and Bechtel Power have entered into a formal alliance to build small modular reactors (SMR). Customers can add modules to match growth in electricity demand.

Jack Futcher, president of Bechtel Power, which has a 20% stake in the alliance, said, ""Nuclear energy is a viable source of energy. SMRs are affordable and scalable. It has a potential to be a real game changer."

The alliance joins the design and fabrication capabilities of B&W with the engineering, procurement, and construction expertise of Bechtel Power. The development takes the potential for commercial deployment of a small reactor closer to reality. It puts the B&W Generation mPower SMR out in front of the competition from other firms like NuScale and Hyperion. The first unit built for a customer could enter revenue service as soon as 2020.

Bechtel and B&W are privately-held firms so there is no way to specifically tie the announcement to stock prices or investor interest. First Energy is publically traded, but is diversified across nuclear, coal, and natural gas fueled plants. TVA is a quasi-government agency.

Early customers show interest

Gary Leidich, Executive Vice President for Generation at First Energy (NYSE:FE) in Ohio said the B&W/Bechtel alliance offers the utility a choice relative to "size, scale, and flexibility." Todd Schneider, a spokesman for the utility, said "there is a strong possibility" the firm could be an early customer but said no decision or timeframe was in place to do so. First Energy is part of the consortium that worked with B&W on the initial design of the SMR.

Another potential customer is the Tennessee Valley Authority (TVA). Ashok Bhatnagar, Senior Vice President for Nuclear Power said the utility is interested because "it will need power in smaller increments to replace our aging fleet of coal plants."

TVA is evaluating the Clinch River reactor site for an SMR. Bhatnager said it would take two-or-three years to complete the review.  He added that both B&W and Bechtel have deep experience with TVA nuclear facilities at Watts Bar, which will be completed in 2012, and at Bellefonte, which is being evaluated for a restart of construction.

Another ten utilities indicated they are interested in being customers though it is too early for any to place orders. Expressions of interest from potential customers will get the attention of the Nuclear Regulatory Commission (NRC). The agency is more likely to review a design certification application for a reactor which has customers lined up to buy one.

Design and license application schedules

Chris Mowry, B&W president, said the alliance has three-to-four years ahead of it in design work. The mPower reactor is a a light water reactor design which is well understood by the NRC. A competitive advantage is the agency won't have to go through a steep learning curve to review it. This will lead to faster review times for the safety analysis and the license to build one.

For one of the reactors to enter revenue service by 2020, B&W/Bechtel would have to submit an application to the NRC for the reactor review by 2014. The first customer would have to also simultaneously submit an application for a combined construction and operating license (COL). The reactor would have to complete the design certification process before the COL was issued to the customer.

Assuming the parallel processes take four years, the first unit would break ground in 2018. On-site construction and assembly of the factory built components would have to be completed in 24-36 months to meet a 2020 deadline.

Jud Simmons, a spokesman for B&W, told this blog in an email, "We project a 36-month timeframe for construction duration, measured as the time from COL issuance to fuel loading. Of course, site preparation would occur beforehand, and testing would occur after, but those timelines are more difficult to quantify."

Business case for SMRs

Jack Futcher, president of Bechtel's power business said at the press conference the objective of the alliance "is to make nuclear power more accessible to utilities and more affordable to consumers."

What's unique about Bechtel's participation in the alliance is that the firm's standard business practice to "to be technology neutral." Futcher said it is not business as usual for the firm to link itself to a specific power technology. He said the reason the company joined the alliance is because the "business case is compelling."

Key elements of the business case, which "quickly emerged from due diligence," Futcher said,, are there will be less financial risk, better reliability in the supply chain, and lower labor costs.

Mowry said the attractiveness of the 125MW unit is that it meets demand from utilities for carbon emission free electricity who otherwise, "have no practical means to own a nuclear reactor."

A new 125MW reactor, coming in at $4,000/Kw, a figure previously cited by B&W, would cost $500 million. A 1,000 MW reactor, which is an average for new units, would come in at $4 billion, or eight times the investment.

Mowry added that the business sales model is a "turnkey operation," which means the customer doesn't incur significant financial risk upfront. Compared to the merchant model in deregulated states, Mowry said the turnkey approach "adds to financial certainty for customers."

While the early focus for marketing purposes will be the U.S. utility market, Mowry said the alliance also has its eye on the potential for exports.  Countries with smaller power grids might welcome an SMR.

Fabrication plans

Initial design work is taking place at B&W's Charlotte, NC, office and at Bechtel's Frederick, MD, corporate offices. Manufacturing will likely take place at B&W's plants in Lynchburg, VA, Mt. Vernon, IN, and Barberton, OH. Each reactor, which will be built underground, is 12 feet wide and 75 feet high. Customers are expected to add new 125 MW units up to a "six pack" configuration.

Both companies said the plan is to be able to produce the reactor components in a factory setting offering customers standardized units for lower costs based on production efficiencies. Futcher noted the 125 MW units will take fewer people to build them and skills will increase, along with cost savings, because of repetition.  Fabrication would include all reactor components, the nuclear steam supply system, and balance of plant.

In response to a question at the press conference from Atomic Insights blogger Rod Adams, Mowry said no decision had been made whether B&W would also make the fuel bundles for the reactor.  He added that it is well within the firm’s capabilities to do so. The specifications for the reactor call for a four-to-five year cycle for refueling.