September 15, 2008

Global Monitor (September 2008)

By Sonal Patel

Cost hikes for all things nuclear in the U.S. and UK

This August, the U.S. Department of Energy said a revised estimate of the cost to plan, build, and operate its Yucca Mountain nuclear repository in Nevada for its 150-year life cycle was an astounding $96.2 billion dollars--a 67% hike from the agency’s last estimate in 2001. The 2007 estimate took into account a 30% increase in the amount of commercial spent nuclear fuel and added $16 billion to cover inflation. The cost increase was significant, Ward Sproat, director of the DOE’s Office of Civilian Radioactive Waste Management, told reporters--but it was necessary, and much more cost-effective than doing nothing. In fact, though the department had crunched no numbers on how much nuclear waste disposal would cost if the U.S. saw a major nuclear renaissance, the agency had already begun to determine if another repository was needed, he said.

Across the pond in July, as UK Prime Minister Gordon Brown called for “at least” eight new nuclear power stations during the next 15 years to replace the country’s aging plants, the House of Commons Committee of Public Accounts (CPA) criticized ministers for not providing safeguards to cover the future cost of decommissioning the UK’s existing sites (Figure 1). In its report titled “Nuclear Decommissioning Authority--Taking forward Decommissioning,” the CPA estimated that running and decommissioning 19 designated public sites owned by the Nuclear Decommissioning Authority (NDA) over the next 100 years would cost £73 billion ($139.8 billion)--a £7 billion ($13.4 billion) increase in the discounted cost since 2003. This estimate was wrought with “considerable uncertainty,” and there was a risk that costs could rise further, the CPA said.

The £7 billion increase could be explained in two parts, said NDA Chair Stephen Henwood: Roughly half resulted from re-phasing work to focus on higher hazards, and it factored in inflation rates in the construction sector; the remainder arose from revisions to the Magnox Operating Programme, which resulted in the need to operate a reprocessing facility in Sellafield for longer. Having more certainty about costs for intermediate-level waste and contaminated land remediation also added to the increase, he said.

North Americans plan liquid makeover for coal

On August 8, Governor Joe Manchin of West Virginia--the second-largest coal-producing state in the U.S. and a major electricity exporter--said at a Southern States Energy Board meeting that he would push renewable energy projects for his state. The reason: He wants greater credibility for the state’s manufacture of gasoline and other products from coal.

The state was not trying to do away with coal power, he said; rather, it was seeking economic stability by promoting technologies that would leverage the state’s role in the future of coal. Manchin noted that clean coal was a priority for West Virginia, pointing to approval by the state’s Public Service Commission of a $2.3 billion clean coal plant proposed by American Electric Power this March. But the state was also encouraging fuel liquefaction--or the conversion of coal to diesel and other liquids.

Coal-to-liquids technology is used worldwide, particularly in South Africa, where Sasol, the world’s biggest coal-to-fuel producer operates. In North America, development of the technology had been overlooked largely because of affordable petroleum-based fuels. But with oil at $115 per barrel and a pending bill (sponsored by a West Virginia legislator) that would mandate that by 2022, 6 billion gallons of coal-to-liquid fuels be produced annually from coal reserves, the technology is looking increasingly viable, says the Coal to Liquids Coalition.

Only a week before announcing his push for renewables, the governor and West Virginia’s congressional delegation had, as a show of support, announced an $800 million project by Pittsburgh-based Consol Energy and Houston-based Synthesis Energy System (SES) to build the nation’s first modern coal-to-liquids plant in West Virginia’s northern panhandle. Consol, the nation’s largest producer of bituminous coal, and SES, a gasification company, have formed a new firm, Northern Appalachia Fuel (NAF), to proceed with the venture and proposed the plant be sited near Benwood, in Marshal County.

The plant would be a mine mouth facility with feedstock--a blend of run-of-mine coal and coal otherwise not recovered in the normal preparation process--supplied directly from Consol’s nearby Shoemaker complex (Figure 2). Using SES’s technology, coal would be converted to synthetic gas, which would then be used to produce about 720,000 metric tons per year of methanol for the chemical industry. NAF is looking to convert some methanol into about 100 million gallons per year of 87 octane gasoline, and it said it is currently negotiating for a license for ExxonMobil’s methanol-to-gasoline technology. The project’s plans include a carbon management strategy--specifically, plans to sequester carbon dioxide in a deep saline aquifer--but NAF has yet to file for environmental and other permits to build the plant.

Meanwhile, five days prior to NAF’s announcement, Calgary-based Alter NRG Corp., called attention to its coal-to-liquids project with carbon dioxide capture, which it said was “Canada’s first.” Alter NRG said its $4.2 billion project would develop a mine near the Fox Creek area in coal-rich Alberta and build a plant to convert coal through gasification and other processes into as much as 40,000 barrels per day of diesel fuel and naphtha.

Having already initiated the regulatory process and a strategic partner selection process, Alter NRG said the project was expected to be operational as early as 2014. The company’s incentive to proceed with the project was to reduce the energy industry’s carbon footprint, and--as with West Virginia’s proposed plant--to serve as a long-term contributor to the regional economy and “set a precedent for clean energy solutions,” said the company’s president and CEO, Mark Montemurro.

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