June 15, 2008

The fallout from shifting nuclear alliances

In the late 1880s’ “War of the Currents,” Thomas Edison used every outrageous tactic to promote direct current (DC) as superior to alternating current (AC), which was championed by George Westinghouse. Edison’s most overblown public display was the electrocution of Topsy, a Coney Island circus elephant, to prove the dangers of AC power. He even advocated AC current for criminal executions, dubbing those killed by electrocution “Westinghoused.” As we know, Edison’s grandstanding didn’t pay off.

 

A similar, though more subtle, battle of technology options is playing out today in the nuclear reactor arena.

Who’s on which team?

In the old days (mid-twentieth century), a power plant owner had a pretty good idea of what he was getting from whom when he chose a nuclear reactor vendor. For example, GE, Hitachi, and Toshiba signed their first nuclear cooperative business agreement in 1967. That agreement worked well over the years, as 31 boiling water reactor (BWR) plants were built in Japan alone by GE’s Japanese partners while none was being considered in the U.S. Today, the advanced BWR (ABWR) has a marvelous operating track record in Japan: The last unit was constructed in just over three and one-half years; three more units are under construction in Japan and Taiwan; and nine more are in Japan’s nuclear queue.

But globalization has led to unanticipated trades among nuclear industry players. More countries are competing for reactors, China (an enormous new market) demands significant technology transfer from suppliers as part of the deal, and there are more reactor technologies in various stages of design certification. One result is that the roster of players seems subject to change at any time as suppliers contend with new market forces.

Toshiba fell out with its former teammates when it acquired Westinghouse Electric and its AP1000 pressurized water reactor (PWR) technology in October 2006. Toshiba-Westinghouse has at least six U.S. orders and four orders for new Chinese reactors at a bargain-basement price of $8 billion, having edged out Areva for the business—perhaps prompting Areva’s recent alliance with Mitsubishi Heavy Industries (MHI).

The remaining GE-Hitachi alliance opened a San Jose–based Global Unified Project Office in mid-April to take economic simplified BWR (ESBWR) or ABWR reactor orders. This team has said it would probably stop providing technical assistance to Toshiba, effectively scuttling their 40-year-old agreement.

Toshiba wants its new partner, Westinghouse, to sever its close relationship with MHI, which also recently opened a U.S. APWR reactor sales office. MHI, with 23 plants in Japan, has forged a partnership with Areva for PWR work, especially in China.

GE and Westinghouse have clashed over U.S. nuclear business before, but the business is now global and more complex—for buyers and sellers.

---