Are SMRs U.S. Nuclear Power’s Last, Best Hope?

Historic low prices for natural gas and slow demand recovery are the principal barriers to new nuclear power construction in the U.S. Small modular reactors (SMRs) may break through those barriers, but only if installed cost targets are met.

The U.S. nuclear power industry has seen the future, and it is small, modular, flexible, and, most of all, risk resistant in the extreme. To date, that spells Babcock & Wilcox (B&W), an also-ran in the first generation of the civilian nuclear power sweepstakes but now the front-runner in the new contest. But that could change.

SMRs Take Center Stage

B&W’s mPower machine, the very model of the modern small modular reactor (SMR), was the star of the show at the annual Platts nuclear gabfest in Washington in late February. While the 180-MW B&W reactor isn’t the only SMR, it is the leader of the pack by virtue of being the Department of Energy’s first, and so far only, selection for government support. (On Mar. 11, as this story was in production, the DOE announced a new funding opportunity for SMRs. On Mar. 27, NuScale said it would enter the competition for this funding round, and a Westinghouse-Ameren team followed suit on Apr. 8.)

B&W positioned its captain of the modular flagship, Christofer Mowry, in a prominent role at the Platts nuke event: presenter of a paper in a major morning session, purveyor of more good news at a B&W-sponsored luncheon, and glad-hander and nimble responder to a gaggle of reporters in a noisy hallway press confab. (An interview with Mowry begins on p. 74.)

Mowry’s various presentations and proffers drew figurative “Ooos” and “Aaas” from the assembled nuclear luminaries, literal applause from the luncheon audience, and only a few skeptical questions from the ink-stained wretches of the press (most of whom are steeped in digital delivery and have little notion of what printer’s ink is). It was as if B&W had won the nuclear Grammy awards. Finally, nuclear power in the U.S. had something to cheer about.

Mowry announced during lunch at the posh and historic Capital Hilton in downtown Washington that his firm and Tennessee Valley Authority (TVA) had signed a formal contract to go forward with site development for a two-unit B&W plant at TVA’s Clinch River site in pursuit of a license from the U.S. Nuclear Regulatory Commission (NRC) to start construction (Figure 1). The contract gives a green light to drill, dig, and scrape into the site to gather data for a formal environmental assessment that is necessary for NRC approval. Let’s ignore the irony in the fact that this site is where TVA and the federal government once schemed (and failed) to build a demonstration liquid metal–cooled, fast neutron–impelled breeder reactor—once the next big thing in nuclear technology.

1. Double your pleasure. B&W has secured its first order, from TVA for two SMRs to be built at the Clinch River site. This is an artist’s conceptual drawing of the plant. Courtesy: Babcock & Wilcox

The mundane contract with TVA demonstrates the resolve of B&W and TVA, both of which have had a checkered nuclear past, to be very careful and take no shortcuts in developing what many believe is the next, maybe only, best hope for new nuclear power in the U.S. and for regaining supremacy in international markets. It is what one observer called the “belt and suspenders” approach to designing a nuclear power plant. There is no way B&W or TVA will let the pants fall down on this attempt at nuclear energy if they can do anything about it.

B&W Springs SMR Licensing Surprise

An example is how the partners want to develop the license for the plant, in the context of NRC licensing reforms. These reforms were encouraged by Congress in the 1980s and were implemented by the commission several years later, but have not yet been formally tested. The industry’s complaint was that the way to get a plant operating in the early days of nuclear enthusiasm was cumbersome and costly. Lurking in Part 50 of the U.S. Code of Federal Regulations that governs the NRC’s licensing process were two major hurdles before a plant could generate power for the grid. First the developer had to convince the NRC of the virtue of the design and site, leading to a construction permit. Then, once the plant was built, the licensee had to convince the NRC that the plant was built to specs and would operate safely. It was complex, costly, and time-consuming.

So Congress approved and the NRC established a one-stop process. Nuclear projects henceforth need only apply for a combined construction and operating license (COL), a new Part 52 of the U.S. Code. It was deemed to be necessary, if not sufficient, if new plants were ever to be built again in the U.S. after the worrisome experience of the first round of nuclear enthusiasm.

So Part 52 was well and good for the industry and its assertion that the two-step license was one of the things holding back new plant development. But B&W, as Mowry explained, is going at least an extra mile to prove the worthiness of its SMR. B&W and TVA are submitting the buried-in-the-ground mPower design, including features such as exiling the turbine building outside the nuclear fence, to the NRC under its Part 50 rules. That means the partners are looking for the NRC to sign off on a design that would lead to a construction permit for the plant under the old two-step process; that process limited the risk that show-stoppers could come up when a first-of-a-kind machine is already well along in construction.

Then, Mowry told the Platts meeting and reporters afterward, the mPower partners will seek to turn that specific approved design and construction green light under Part 50 into a COL for future mPower plants. “The Clinch River plant will become the reference for licensing future plants,” Mowry told the Platts audience. As such, it will become the standard against which future mPower pressurized water reactor will be judged, the beginning of a standardized approach that the U.S. has historically lacked (and the French have capitalized upon) in reactor design. Future mPower plants, if they materialize, will be able to use the NRC’s streamlined procedure.

Nuclear Competition

It was fortunate that the mPower reactor was able to inject some optimism into the Platts meeting, because it has not been a good time for nuclear power. After waiting for years for the rumored nuclear renaissance, the industry has returned to the Dark Ages, with little hope for the future. The atomic Godot never showed up. Instead, the Platts meeting occurred just a couple of weeks short of the second anniversary of the catastrophe at Fukushima in Japan.

Richard Myers, policy chief at the industry’s Washington lobbying group, the Nuclear Energy Institute, gave a downbeat assessment of the state of the industry. “I’ve been watching U.S. energy markets for 40-odd years, and I don’t remember a more wretched year… a more punishing year… than 2012,” he said. “Electricity consumption last year was down—again—by almost half a percentage point from 2011. We’re still not back to prerecession 2007 levels of electricity demand. Natural gas spot prices bottomed out at $1.95 per million Btu in April and, although they’ve increased since then, the disruption was enormous.”

Myers added, “Gas-fired generation displaced about 220 billion kWh of coal-fired generation in 2012. Just to put that in perspective… that’s more than one-quarter of U.S. nuclear generation. Wholesale spot prices across most regional power markets were at a 10-year low.”

The conventional thinking in the nuclear (and coal and renewables) part of the generating market is that low gas prices are a transitory phenomenon. The historic volatility of gas is the natural condition for the fuel, they believe, and the current low prices cannot hold. As Myers put it, “The number of rigs drilling for natural gas in the United States has collapsed in the last 12 to 18 months—from about 900 rigs at work in late 2011 to about 400 today. The experts tell me that sustaining current natural gas production takes about 600 rigs… so we expect to see production start to drift down and expect to see gas prices testing $5 per million Btu in 2014 and 2015.”

But the conventional (among nuclear enthusiasts) wisdom may be mostly wishful thinking. A new and rigorous analysis from the University of Texas’s Bureau of Economic Geology concludes that the Barnett shale gas formation “will continue to be a major contributor to U.S. natural gas production through 2030” (Figure 2). With funding from the Alfred P. Sloan Foundation, the University of Texas project intends to look at “three other major U.S. shale gas basins by the end of this year.”

2. Gas glut continues. The outlook for the Barnett Shale is slowly declining production through 2030 and beyond but total recovery at greater than three times cumulative production to date. Each color band represents the cumulative number of wells entering service during a production year. Source: Bureau of Economic Geology, University of Texas at Austin

Nuclear Challenges Continue

Adding to the nuclear woes, some of the high-profile new projects under way are suffering from delays and cost increases. In the U.S., Southern Company has announced that it is pushing back the planned start for its two-unit Vogtle new build to the fourth quarter of 2017 and the fourth quarter of 2018, a year’s delay on top of earlier delays (Figure 3). SCANA Corp.’s V.C. Summer two-unit expansion has run into the same problems with the structural design of the reinforced concrete basemat that hit Vogtle, and Summer is running behind schedule. SCANA completed placement of the nuclear island basemat for Summer Unit 2 on March 11.

3. Slow and steady. This was the state of construction at Plant Vogtle on Jan. 31, 2013. The existing two units can be seen in the background. Courtesy: Southern Company

The key to the future for nuclear power in the U.S. undoubtedly will be economics. The first go-round for nuclear in the U.S. was a tragicomedy of cost overruns and sliding schedules, leading to a new industry vocabulary that included phrases such as “imprudence” and “rate shock.” So far, with Vogtle in the U.S. and France’s horrific experience in Finland, not much seems to have changed. The cost of the 1,600-MW Olkiluoto unit in Finland, originally pegged at about $4 billion, has soared to north of $7 billion (and the project is at least seven years behind schedule).

SMR skeptics—and they do exist—often focus on the capital costs of the smaller machines. The small reactors surrender the economies of scale that drove the evolution of the first generations of conventional nuclear plants to 1,000 MW and above. On the other hand, SMRs may gain cost savings by factory fabricating most of the parts offsite and assembling them on the site, reducing construction costs.

B&W’s goal, Mowry said, is to offer a reactor that is no more expensive than conventional new large reactor designs. He pegs that figure at $5,000/kW, which may strike some as astonishingly high. But because of the modular nature of the technology, the capital hit doesn’t come all at once. For TVA, that would mean bringing the two 180-MW units in at a capital cost of under $2 billion. The target date for the plant going commercial is 2022.

After previously exploring the possibilities for both Germany and, counterintuitively, France to get out of nuclear power entirely, the March-April issue of the Bulletin of the Atomic Scientists ponders, in three separate articles, whether nuclear power is reaching a dead end in the U.S. Looking at Dominion’s surprise decision to close the Kewaunee plant, at a point where it had recently received a 20-year license extension, the wobbles at Vogtle and elsewhere, and the economics of nuclear energy, Editor John Mecklin summarizes: “In the United States, policy makers, the press (in general), and the public at large have yet to focus significantly on the question of whether the country might be better or worse off if reliance on nuclear power were curtailed or eliminated.” Mecklin adds, “The question deserves a serious, considered answer in every country with a commercial nuclear power industry.”

Can the SMR rescue nuclear energy in the U.S., where the conventional approach to nuclear power plants has so far failed? Or is nuclear a dead industry walking? Next year, no doubt, the old geezers and the young guns of the nuclear endeavor will again assemble in Washington to assess the state of the industry. Stay tuned for the next installment of the adventures of the atom.

Kennedy Maize is a POWER contributing editor and executive editor of MANAGING POWER.