Hitachi Freezes Plans to Build Four ABWRs in the UK

  • big ben big freezeDue to a lack of investor interest, rising costs, and the UK government’s reluctance to take more than a one-third equity stake in the projects, Hitachi has suspended all work on the Wylfa and Oldbury projects. The two sites at 2700 MW each (2 1350 MW ABWRs at each) would have provided 7% of the UK’s carbon emission free electricity once completed.
  • Key industry and government stakeholders expressed worries about the future of the UK new nuclear build.
  • The UK energy minister, Greg Clark, told Parliament the government is now considering offering the Regulated Asset Base (RAB) method to finance new nuclear energy projects.
  • EDF and CGN are in negotiations with the government to use RAB for Sizewell and Bradwell projects.

Hitachi Halts Wylfa Newydd Nuclear Plans
After Talks On Financing Fail

(NucNet): Japan’s Hitachi announced last week that it will suspend work on plans to build two 1350 MW  UK Advanced Boiling Water Reactors (ANWR) at the Wylfa Newydd nuclear site in north Wales. The firm said it made the decision because of because of rising construction costs and a failure to reach an agreement on financing with the UK government. Hitachi will also stop planning work on a second project in Oldbury, England.

The expected cost of the reactors at Wylfa was estimated to be $19.3 billion or $7148/kw almost $700/kw above the global average “overnight cost” at $6500/Kw for new nuclear reactors in western industrialized countries. Other estimates had put the cost at between $24-27 billion, but the government had said previously that it didn’t agree with these numbers.

The New York Times reported, “The decision was made from the viewpoint of Hitachi’s economic rationality as a private enterprise,” Hitachi said in a statement from its HQ in Japan.

The firm has incurred costs of $2.75 billion which include site preparation and the completion of the UK’s demanding and expensive Generic Design Assessment (GDA) for new reactors to be built in that country.

According to the NYT, in a statement to Parliament, Greg Clark, the secretary of state for business and energy, said the government had proposed to provide one-third of the equity financing for the project and to take on all of the construction debt.

However, when Hitachi did not accept that offer, which also included loan guarantees and other incentives, Clark drew the line on putting anything more on the table. He said the political support for going further just wasn’t there. He’s now looking for a new financing method for the UK new build and may have one. More on this below.

Efforts by Hitachi to attract Japanese and UK based investors did not bring enough money to table to close the gap between the cost of the reactors and the UK government’s offer for a one-third stake in the project. The firm said that its involvement in future new nuclear energy projects would more likely be as a supplier rather than as the developer and EPC.

UK newspapers raised the question of whether the country’s plans for 19 Gwe of new nuclear power was on the rocks. In recent months the UK has also struggled to come to terms with the Moorside project.

Hitachi’s decision comes only months after Japan’s Toshiba Corp announced it was withdrawing from its nuclear new-build project in the UK and shutting down its NuGeneration effort, which had planned to build a nuclear power plant of up to 3450 MW at the Moorside site in West Cumbria, using three AP1000 nuclear reactors from Westinghouse which at that time was owned by Toshiba.

When Toshiba pulled the plug on its involvement in new nuclear projects in early 2017, the future of that project looked grim. More recent efforts by South Korea’s Kepco to take over the project have not produced a deal due to differences over costs estimates.

Taken together the Wylfa, Oldbury, and Moorside project were expected to provide 13-15% of the UK’s electricity when complete.

Parliament Unhappy with Hitachi’s Decision

A UK parliamentary group has said Hitachi’s decision to suspend work on the Wylfa Newydd nuclear power station in north Wales is “hugely disappointing” with the facility a crucial part of the government’s new nuclear build program and vital for future energy needs.

The all-party parliamentary group on nuclear energy, an informal cross-party group, said in a statement that the two UK Advanced Boiling Water Reactors planned for Wylfa Newydd would have provided 60 years of reliable, secure, low-carbon power for homes, businesses and public services.

It said nuclear power already plays an important role in the UK’s energy mix, providing 21% of the UK’s electricity. Nuclear is “an integral part of a future decarbonized power supply alongside other low-carbon technologies”, the group said.

Sue Hayman MP, co-chair of the group, said: “We need a funding mechanism that works to deliver new nuclear and low-carbon electricity. Time is of the essence.”

Government Must Deliver New Nuclear
at Wylfa, Says UK Nuclear Trade Group

(NucNet) The urgent need for further new nuclear capacity in the UK should not be underestimated and the government must work with industry to deliver that vital capacity said CEO Tom Greatrex in a statement.

Mr Greatrex said new nuclear is an integral part of a future decarbonised power supply. For prolonged periods both this summer and then again in December and the early days of January this year, wind produced less than 7.5% of the UK’s electricity demand.

“Relying exclusively on intermittent and variable sources of low-carbon power alone will increase, not reduce, overall emissions,” he said.

UK Reveals the Financial Terms Offered to Hitachi

(WNN) Greg Clark, the UK’s secretary of state for Business, Energy and Industrial Strategy (BEIS), told the news media, including World Nuclear News, in a “candid” interview that the government has offered “unprecedented financial terms” to Hitachi, but that the firm had decided to not to accept them.

Japan’s Hitachi said it will halt work on its UK subsidiary’s plan to build two new nuclear power plants “from the viewpoint of its economic rationality as a private enterprise.”

It added, however, that “further time is needed to develop a financial structure” for the Horizon project. This statement may indicate that Hitachi is leaving the door open to be a supplier to a new developer of the site, but without the risk of financing it.

Established in 2009 and acquired by Hitachi in November 2012, Horizon Nuclear Power planned to provide at least 5.4 GWe of new capacity across two sites – Wylfa Newydd, which is on the Isle of Anglesey, and Oldbury-on-Severn, in south Gloucestershire – by deploying four 1350 MW Hitachi-GE UK advanced boiling reactors (UK ABWRs).

Three offers Made but None Taken

Clark’s frustrations with Hitachi are evidenced by his decision to tell Parliament about the commercially sensitive details of the negotiations BEIS and Hitachi had held since last June. According to a summary of Clark’s remarks prepared by World Nuclear News, the government put three significant financial incentives on the table.

First, the government was willing to consider taking a one-third equity stake in the project, alongside investment from Hitachi and government of Japan agencies and other strategic partners.

Secondly, the government was willing to consider providing all the required debt financing to complete construction.

Third, it agreed to consider providing a Contract for Difference to the project with a strike price expected to be no more GBP75 per megawatt hour.

“I hope the House would agree that this is a significant and generous package of potential support that goes beyond what any government has been willing to consider in the past.”

He stressed that Hitachi has made clear that while it is suspending project development at this stage, it wishes to continue discussions with the government on bringing forward new nuclear projects at both Wylfa and Oldbury.

However, Horizon is laying off almost all of the workers at both sites since it could be months or years until a new project is assembled with the needed financing and management structure.

Clark closed his remarks by saying, “If new nuclear is to be successful in a more competitive energy market, it is clear that we need to consider a new approach to financing future projects, including those at Sizewell and Bradwell.”

“We are reviewing the viability of a Regulated Asset Base (RAB) model and assessing whether it can offer value for money for consumers and taxpayers.”

Clark said that the energy agency’s plan is to publish an assessment of the RAB method by the summer at the latest.”

In response to Clark’s comments, Agneta Rising, director general of World Nuclear Association said: “We urge the UK government to bring forward fresh proposals for a stable financing framework to enable the construction of new UK nuclear projects that will supply electricity competitively.”

UK Gets Ready To Introduce RAB Financing

(NucNet): UK government ministers may be willing to pioneer a new way of financing nuclear power as Hitachi walks away from a planned new nuclear station at Wylfa Newydd in north Wales.

The Sunday Times reported that the suspension of the Japanese conglomerate’s project will bring to the fore the government’s plan to accelerate offering regulated asset base (RAB) financing, which is popular in the water and infrastructure sectors, for nuclear plants including the Wylfa Newyydd site.

“If new nuclear is to be successful in a more competitive energy market – which I very much believe it can be – we need to consider a new approach to financing future projects,” Energy Secretary Greg Clark told parliament, saying this included Sizewell and Bradwell.

RAB financing is essentially a type of contract drawn up with the backing of government, which calculates the costs and profits of a project before it is started, and allocates an investor’s profits from day one.

Note to readers: For a detailed and expert explanation of the RAB method see this OECD paper available online in PDF or text version. It compares the RAB model with other forms of capitalization of major infrastructure projects.

In summary – A government regulator sets a fixed number, the RAB, which attempts to account for all the future costs involved in the completion of a project. The regulator then also sets a fixed rate of return for the investors based on those costs.

Hitachi Decision Strengthens Franco-Chinese
Role in the UK Nuclear Industry

(Reuters) The wire service reports that the inability of Hitachi to assemble the necessary investor groups to pay for construction of four ABWRs in the UK is expected to  strengthen the hand of France’s EDF and China General Nuclear Power Corporation(CGN) on how to finance new reactors.

The firms want to use a financing model under which investors in their nuclear projects receive payment from the moment they start construction, reducing their risk. This approach could be a tough sell in the UK given the risks of cost overruns.

Reuters reported that EDF is negotiating with the government on funding the Sizewell C project using the regulated asset base (RAB) model in which investors earn a government-set fixed return from the start, instead of waiting years until construction is completed before receiving a return.

China General Nuclear Power Corporation (CGN) has a 20% stake in Sizewell C, while EDF has a 33.5%stake in CGN’s project to build a reactor at Bradwell, Essex. China plans to build two of its new Hualong One 1000 MW PWR type reactors at Brfadwell.

As a background note Reuters noted in its report that the regulated asset base model may now be one of the few remaining options to fund new nuclear plants in Europe. It is commonly used to fund construction of electricity transmission lines.

In Britain it has been used to fund the Thames Tideway Tunnel, a “super sewer” for London. However, using the RAB model for nuclear projects would require new political commitments from the government.

~ Other Nuclear News ~

NuScale and JAEC Agree to Explore
SMR Deployment in Jordan

NuScale Power announced that it has signed a memorandum of understanding (MOU) with the Jordan Atomic Energy Commission (JAEC), to evaluate NuScale’s small moduler reactor (SMR) nuclear power plant for use in Jordan.

JAEC is the government entity leading the development and implementation of nuclear strategy and managing the nuclear program in the Hashemite Kingdom of Jordan. Through this MOU, NuScale and JAEC will collaborate on conducting a joint feasibility evaluation of NuScale’s SMR, which will inform JAEC’s decision on moving forward with the project as part of Jordan’s planned deployment of nuclear power plants.

“As Jordan considers its energy future, I’m confident that the unmatched resiliency and safety features of NuScale’s SMR technology make us the ideal partner on the Kingdom’s nuclear power goals,” said John Hopkins, NuScale Power Chairman and Chief Executive Officer.

“NuScale is at the forefront of U.S. SMR Technology,” said H.E. Dr. Khaled Toukan, JAEC Chairman. “We look forward to this collaboration to assess the viability and potential for deployment of NuScale SMR Technology in Jordan.”

NuScale said in its statement that its scalable multi-module plant design permits a high degree of flexibility for deployment in a wide range of conventional and unique electrical and thermal applications. This includes economic energy production, making it a particularly attractive energy source for desalination processes at various scales.

NuScale has seen considerable interest in its SMR technology in regions of the world, like the Middle East, where fossil fuels are the source of heat and electricity for desalination.

NuScale’s technology is the world’s first and only SMR in the U.S. to undergo design certification review by the U.S. Nuclear Regulatory Commission, and is scheduled to complete its review of NuScale’s design in September 2020.

Prior Efforts by Jordan to Secure Nuclear Energy Projects

In June 2018 Jordan scrapped a deal with Russia to build two 1000 MW VVERE over disagreements on its financing. Also, Jordan was unable to attract outside investors to the project.

The Jordan Atomic Energy Commission (JAEC) said that it ended the $10 billion planfor two 1000 MW VVERs with Rosatom because the Russian side wanted to secure the financing through commercial loans, which the JAEC said were too costly. The JAEC also complained that the higher cost of locally financing the project would result in much higher rates for electricity from the plants.

The demand by Rosatom for retail commercial loans in the Jordanian deal is a sharp change from its past practice of offering generous financing for its export deals.  It may reflect the fact that while oil prices briefly rose earlier this year, they are now retreating from the mid $70s to the mid $60s which is where they have been since January 2015 thus apparently hindering Russia’s ability to finance mega nuclear export projects.

State news agency Petra quoted JAEC chairman Khaled Toukan as saying that Jordan was still working on plans to build at least one commercial reactor of about 1,000 MW, expected to come online around 2029.

Other SMR Discussions

Jordan has also been in talks for the past year with at least three different vendors of LWR and advanced small modular reactors. The talks include UK Rolls Royce for to be  LWR type SMR.  Jordan is also talking with US based X-Energy which has a new generation of South Africa’s PBMR “pebble bed” high temperature gas cooled reactor (HTGR), and  with the China National Nuclear Corporation (CNNC) which has has an HTGR design.

In November 2017, Rolls-Royce signed a memorandum of understanding with JAEC to carry out a technical feasibility study for the construction of a Rolls-Royce SMR in Jordan. A similar agreement was also signed in November 2017 with X-Energy for electricity, water desalination and other thermal applications.

Toukan noted that the Commission is currently negotiating with China to build the same reactor that China is currently constructing in Shandong province. He added that no contract will be signed with CNNC before the actual startup of the Chinese reactor and operating it in revenue service on the grid for at least two years. Note that CNNC recently stepped back from a plan to develop a “nuclear city” powered by 20 of the HTGRs citing cost and efficiency issues of the current design.

The Jordan Times reported separately that work on selecting a site for an SMR was proceeding in the Qusayer region near Azraq about 60km east of Amman. The paper reports that studies were conducted on the site by Belgium’s Tractebel, Korea Electric Power Corporation and Worley Parsons, with findings showing the suitability of the location for the facilities.

Prior coverage on this blog

Bulgaria Sets Plans for Investor Selection For Belene

(NucNet): The Bulgarian government is in the process of preparing the initial procedure to select an investor for the Belene nuclear power station project, energy minister Temenuzhka Petkova told Bulgarian National Television.

Ms Petkova said she is “hopeful” the procedure would start in February 2019.  A key policy will be that it wants to develop the project without state guarantees or long-term electricity purchase contracts. These pre-conditions will make for formidable challenges for any bidders.

Two 1,000-MW VVER pressurized water reactor units were to be built at Belene before the project was cancelled in 2012 over a series of financial and management disagreement between the Bulgarian government and Rosatom.

France’s Framatome, China’s CNNC, and Russia’s Rosatom have already formally expressed an interest in investing or providing equipment and services for the project.

Bulgarian Regulator Would Need A Year
to Complete Belene Technical Licensing

(NucNet): The Bulgarian nuclear regulator would need a year to complete the licensing process for the technical aspect of the Belene nuclear power station project, Lachezar Kostov, head of the Bulgarian Nuclear Regulatory Agency, told a press conference.

Mr Kostov said the technical case for Belene, which was submitted in 2008 by Russia’s Atomstroyexport, never passed the licensing procedure because the Bulgarian government cancelled construction in March 2012.

He said licensing will need to restart from the point at which it was suspended in 2012 and would need to fulfill the latest national and European Union regulatory requirements.

The regulator would take into account all licensing work which had already been carried out and does not expect the procedure to take longer than a year. The regulator has so far taken only two legally binding decisions on Belene – approval of the site and a permission to begin the project’s technical design stage.

In short, it has a long way to go and may take more than a year to complete despite the government’s claims. It is unclear how the Bulgarian regulator would conduct a safety evaluation review of a design by a vendor other than Rosatom for its 1000 MW VVER or how long it would take.

In 2012 Westinghouse signed a contract to prepare a proposal for a third reactor at Bulgaria’s Kozloduy site. Efforts by the firm to take over construction of the plant came to an end when Russia said has no intention of sharing information with Westinghouse regarding a feasibility study. That project is designed to scope out the potential for a seventh unit at Bulgaria’s Kozloduy Nuclear Power Plant.

It’s unclear whether as part of its efforts to re-establish its nuclear reactor business that it Westinghouse would seek to bid on the Belene project. In 2010 Westinghouse reportedly told the US Embassy in Sofia that the 1st unit was “a lemon” according to a US State Department Cable as reported by the UK Guardian newspaper.

The embassy cable, dated February 17, 2009, also complained about endemic corruption in Bulgaria associated with the project.

Framatome receives $49 million grant
to accelerate enhanced accident tolerant fuel development

Framatome has received a $49 million, 28-month grant from the U.S. Department of Energy (DOE) to accelerate the development and commercialization of enhanced accident tolerant fuel (EATF). These fuel designs enhance performance during normal operations at nuclear power plants and provide operators with more time to respond in the event of loss of active cooling.

“EATF designs represent the next evolution in technologies that will support today’s and tomorrow’s nuclear reactors and unlock value in Framatome’s products and the existing nuclear fleet,” said Bob Freeman, vice president, Contracts and Services, North America, Framatome Fuel Commercial and Customer Center.

The funds from this DOE grant build on a $10 million, two-year grant that Framatome received from the Department in 2016, and will contribute to the advancement of laboratory testing and data collection, as well as irradiation test programs.

Additionally, the grant will support further development of advanced manufacturing processes and the acceleration of long-term EATF solutions.

Framatome’s EATF program is built on the collective knowledge, skills and expertise of leaders across the global nuclear sector, including U.S. national laboratories, utilities, university programs, industry organizations, and European research and worldwide partners.

In addition to this near-term work, Framatome continues research on a silicon carbide-based cladding.

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