Ge Hitachi makes progress on new reactor 

After high profile setbacks, and false starts, some bright spots point to potential for success for ESBWR

Bringing a new nuclear reactor design to market is like competing in a county fair tractor pull. (video)  A lot of horsepower is applied in a very short period of time to move a huge weight over a defined but significant distance. 

The parallel process for a new nuclear reactor is that when the design comes off the drawing boards, or out of the CAD program, as much as 8,000 electronic pages of text and drawings must be hauled over to the Nuclear Regulator Commission for review.  Once there, the applicant must answer hundreds of questions, often more than once, and pay for the privilege of getting the safety analysis done at rates approaching $300/hr.

While the reactor vendor is doing this, it must also start the equally arduous work of convincing fiscally conservative utilities that its design is indeed the best buy. It has to do this with one hand tied behind its back. Until the reactor's design certification is done, the vendor has no idea what it will cost to build one.  This presents a difficult challenge for the vendor and its customers since state public utility commissions have a strong preference for fixed prices on reactor projects so the rate base (customers) don’t wind up paying for uncontrolled cost over runs.

This background story brings us to the state of the GE-Hitachi Economic Simplified Boiling Water Reactor (ESBWR).  In its fact sheet about the 1,560 MW reactor, which is 200 MW larger than GE-Hitachi’s older ABWR, the firm refers to it as a Generation III+ design.  The reason for this designation, according to the fact sheet, is that it is a less complex design with 25% fewer pumps, valves, and motors yet it gives more power.  To use an automobile analogy, this would be like saying your new Buick has 15% more horsepower and only four pistons instead of six.

GE Hitachi also touted the ability to construct one of the units, from first concrete to fuel load, in 42 months.  Since a COL license application to build one also takes 42 months to get reviewed by the NRC, the time to market for a new reactor would be 84 months or seven years.  That’s fast for a facility that will then produce 1.5 GWe of electricity and operate at 90% capacity or better for the next 60 years.  It is an impressive claim. So far, GE Hitachi hasn’t had the opportunity to prove it.

Customers bail out

The past two years have been hard on GE Hitachi’s plans to gain market share with the new ESBWR.  In late November 2008 Exelon, the nation’s largest nuclear utility, dropped plans to build two of the 1.5 GWe reactors in Victoria, TX.  The Wall Street Journal offered readers a snappy headline about the bad news - “GE Hitachi has a problem with its latest nuclear reactor; getting someone to build it.”

Exelon told the WSJ the reason it bailed on the ESBWR for the project in Texas is that the U.S. Department of Energy ranked the reactor design way down the list in terms of eligibility for federal loan guarantees.  Exelon spokesman Craig Nesbit was specific. 

“We believe the Victoria project fell into the lower tier largely because of the uncertainty of the ESBWR design.  We had no chance of getting a loan guarantee with it.”

That “uncertainty” comes from reports that the NRC was reportedly unhappy with the quality of information it got from GE Hitachi in the initial application and in the follow-up requests for additional information.  Regulatory unhappiness results in schedule delays for reactor certification. No one can build one until the NRC puts its stamp of approval on it from a safety perspective.

A similar story played out with Entergy, the nation’s second largest nuclear utility. It scrapped plans for two new ESBWR reactors at its Grand Gulf and River Bend sites.  Entergy said that without a firm cost from GE Hitachi, it could not do two things which are essential for a new reactor project.

• First, it must convince the public utility commissions in Louisiana and Mississippi that it has a handle on costs. 
• Second, it must be able to take these cost figures and include them in an RFP for an engineering procurement contract to build the plants. 

No one will bid on it unless the reactor vendor has a certified design from the NRC and can put a specific cost figure on the the reactor.

Good news finally from the NRC and a customer

GE Hitachi listened to what the NRC was saying and turned around the situation with the regulatory agency.  In September 2009 it was able to announce that it had submitted all the information the NRC wanted to complete the safety review.  The best news for GE Hitachi is that on Nov 9 the NRC published a date of September 2011 by which time it is committed to completing its review.

More good news was announced on Dec 18 that GE Hitachi had signed an agreement with Detroit Edison to begin site planning for the FERMI III reactor, which will use an ESBWR.  On the other hand, it may be some time before that reactor project breaks ground.  It is not on the short list for federal loan guarantees.  Also, Michigan’s economy, and demand for electricity, is doing poorly as a result of the current U.S. economic recession. The near-collapse of the U.S. auto industry has also had its impact on the region. 

However, the longer time frame for making the economic case for FERMI III may actually work in its favor.  By the end of the next decade, the U.S. will have several reactors under construction giving new projects a much firmer grasp on costs.  This development will deliver more certainty on the price of the new plant to the customer and its ratepayers.  That's not chump change when you are talking about a cost of $3,000-4,000/Kw for 1,560 MW of power. 

International opportunities

Daniel Roderick, VP at GE Hitachi, told the New York Times Dec 18 that he thinks the first ESBWR will be built in the UK.  GE Hitachi will submit its ESBWR design for regulatory approval in the U.K. in 2011 after it gets the sign off from the NRC in the US.  Given that the NRC is considered to be the “gold standard” for safety reviews, it should have clear sailing in the U.K.  Roderick told the U.K. news media he sees the first ESBWR breaking ground there in 2015.

The Wall Street Journal reported Dec 17 that GE Hitachi will partner with suppliers in India to manufacture components for the ESBWR and export them globally.  The Indian firms include Larsen & Toubro and Bharat Forge.  India’s aggressive drive for up to 20 GWe of nuclear energy over the next two-to-three decades means a domestic manufacturing capability there will position GE Hitachi to do well in that market.

GE Hitachi is a bidder for up to 5 GWe of nuclear power for the United Arab Emirates.  Its prospects got brighter as the U.S. and the UAE signed off on an agreement for transfer of nuclear technologies and fuel between the two countries.  However, GE Hitachi is up against still competition from bids from France and South Korea.  The bid process has been pushed back six months because of Dubai's debt crisis.  It may get back on track in 2Q 2010.

Overall, GE Hitachi is turning around the prospects for its newest reactor. While it isn’t a market leader for now, like the Westinghouse AP1000, its longer term prospects look positive, which is a big change from two years ago.

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