UK Commits to Financing Method for New Nuclear

  • UK Commits to Financing Plan for New Nuclear Power Plants
  • UK / Government Announces £1.7 Billion for Sizewell C Funding
  • Private Sector Investment Grows in Nuclear Fusion Startups
  • Saudi Government Restarts Work on Tender for Two Reactors
  • Green Hydrogen / Russia Says Production Using HTGR Could Begin In 2030
  • Terrestrial Energy Awards Major Component Design Contracts to BWXT Canada

UK Commits to Financing Plan for New Nuclear Power Plants

The UK finally steps up to financial reality by announcing that it is going ahead with the regulated-asset-based (RAB) model. The plan will support companies building new plants by paying them while they reactors are being built. It is similar to the “construction while in progress” (CWIP) method of financing used in the US in Florida, South Carolina, and other states. The benefits in the UK of the RAB method of financing will by to reduce risk of failure due to lack of capital during construction and allow for cheaper costs overall as the utility will not have to carry the interest of loans until the reactor is in revenue service.

The World Nuclear Association points out that aside from providing additional incentives to deliver the project within budget, the main function of the funding cap for a project is  to limit the exposure of investors. This ‘enveloping’ of the investment lowers the risk profile considerably, opening up new categories of potential investors (e.g. pension and insurance funds), and allowing the cost of capital to be reduced materially.

rab model wna

The RAB Funding Model Compared to Other Financial Plans.
Image: World Nuclear Association;
Financing Nuclear Energy

If the RAB method had been in place a few years ago, it is likely that Japan’s Hitachi would not have walked away from the Wylfa and Oldbury new nuclear projects which represent 2700 MWe of electrical power. Political indecision

by PM Boris Johnson’s government and and an unwillingness to work with Hitachi to mitigate the risks of cost overruns led to the abandonment of the project. Now the government is belatedly picking up the pieces and will have to start over for these two projects.

The main focus of the RAB method now is to get funding underway for the Sizewell C project which consists of two massive 1650 MWe EPRs to be built by EDF. The reactors are mirrors of the two plants being built at the Hinkely Point project.

In making the case for the RAB method, which must be approved via legislation by Parliament, the government points out that the RAB method has been used in the UK to finance civil infrastructure assets such as water, gas and electricity networks. Anti-nuclear groups immediately pounced on the announcement saying the method will saddle rate payers with onerous cost overruns.

The government shot back saying the model could save more than GBP30 billion ($41 billion) over the lifetime of a new nuclear project and attract funding from UK financial institutions.

Business and Energy Secretary Kwasi Kwarteng said in a statement, “The existing financing scheme led to too many overseas nuclear developers walking away,” which is a clear reference to Hitachi leaving its two projects.

He added, “We urgently need a new approach to attract British funds and other private investors,”

The decision will empower Kwarteng to block China’s state-owned China General Nuclear (CGN) from future energy projects including Sizewell C and the Bradwell project. CGN currently has a 20% stake in the project, with France’s EDF owning the remaining 80%.

If the RAB method is approved by Parliament, it would allow the UK to swap out CGN’s 20% stake with a combination of government funds and private investment.

& & &

UK / Government Announces £1.7 Billion  for Sizewell C Funding As It Pushes Towards a New-Build Decision

edf (NucNet) The UK government announced funding of £1.7bn in EDF’s Sizewell C nuclear power station project as it pushes to reach a final investment decision within three years and begin a program of new-build that will replace the nation’s aging reactors.

The funding follows an announcement by ministers this week of an overhaul of the financing model for new nuclear plants. Business secretary Kwasi Kwarteng said the government will use the regulated asset base (RAB) financing model to fund future nuclear power stations in Britain.

He said it is “a tried and tested method that successfully financed other infrastructure projects, such as the Thames Tideway Tunnel and Heathrow Terminal 5.”

Prime minister Boris Johnson endorsed the action and made it clear that nuclear energy must play a key part in reaching the UK’s net zero goals.

Despite commitments by successive governments over the past decade to build a new generation of nuclear power stations, most of the projects have collapsed as the private sector was unwilling to fund them.

They include Wylva & Oldbury (four 1350 MWe ABWR reactors and Moorside (three Westinghouse 1150 MWE AP100) for a total of 6,000 MWe of electrical power tossed in the ditch due to the government’s political fantasy that the private sector would invest in and carry the risk of building the plants.

Treasury documents released last week say there were “active negotiations” with EDF over the Sizewell C plant and that it had allocated “up to £1.7bn of direct government funding” to help reach a final investment decision.

Tom Greatrex, chief executive of the London-based Nuclear Industry Association, said the news was “a big vote of confidence in nuclear and a historic step forward for nuclear investment”.

He said: “We can’t get to net zero without investing in new nuclear capacity, and this is a clear signal from government to investors that it sees nuclear as essential to our clean energy transition. This is not only an investment in a greener future, but also in jobs and skills right across the country.”

& & &

Private Sector Investment Grows in Nuclear Fusion Startups

(Wire services) Private sector investment into nuclear fusion companies is increasing, according to a recent study by UK Atomic Energy Authority and the Fusion Industry Association.

Of the 35 firms identified in the report, 18 have received $1.8B in private sector investment. In 2020, over $300M was poured into private fusion companies, according to a Bloomberg report.

Of the companies surveyed, more than half were founded in the last five years, but none have yet been able to produce sustained nuclear fusion producing more energy than they use in the process.

fusion plant

Profile of a Fusion Plant – Wikipedia Commons

The industry is hopeful that the old dodge about fusion being 50 years in the future will be put to rest.

“We are at this cusp of the commercialization point where we are taking all of the research that’s been done for 60 years, into plasma physics, fusion energy designs, and we are now applying it to engineering, ” Andrew Holland, chief executive of the Fusion Industry Association told the Financial Times last week.

According to the newspaper, four companies, Commonwealth Fusion Systems (CFS), California’s TAE Technologies, Oxford-based Tokamak Energy and Canada’s General Fusion, which is backed by Jeff Bezos, account for 85% of private sector funding in the industry space.

More than two-thirds of the 35 firms surveyed said they believed fusion power would be connected to the grid in the 2030s.

Commonwealth Fusion Systems (CFS) last month demonstrated using high-temperature superconductors to generate much stronger magnetic fields. Engineers believe this will enable the construction of faster and cheaper fusion power plants. CFS hopes to demonstrate net positive energy by 2025 and bring commercial applications to market  in the early 2030s.

& & &

Saudi Government Restarts Work on Tender for Two Reactors

The Saudi government has issued a press statement (below) which indicates they are close to selecting a management consulting firm to help them assemble a tender for two full size commercial nuclear power plants. The management firm will in turn select an EPC to advise it on the technical aspects for the specifications that will go in the tender.

The statement is a door opener to revival of the Saudi effort to acquire commercial nuclear reactors which has been on hold for more than a year. Once the management firm is named, that company will undoubtedly receive communications from potential bidders in an effort to tailor the resulting tender/bid document to their advantage.  The key bidders will likely include Russia, China, France, and South Korea. U.S. firms are unable to bid, nor cooperate with other bidders, due to the fact that Saudi Arabia does not have an agreement with the U.S. under Section 123 of the Atomic Energy Act.

While the Saudi energy ministry is experienced when it comes to bids/proposals for fossil fuel projects, it doesn’t have in-house nuclear engineering expertise to evaluate how terms and conditions in their tender might propel one or another bidder across the finish line.

For example, when the Saudi energy ministry downsized their ambitions in 2015 from 16 1000 MWe reactors to just two units, the initial specification was for a “1400 MWe PWR.”

It was no surprise to see that number as it exactly matched the power rating of the four South Korean PWRs being built in the UAE. Two units there are complete and number three is close to completion. While this suggests South Korea has an “inside pole” position, it won’t deter other bidders.

The Saudi Arabian Atomic Regulatory Authority (SAARA) was set up in 2014. It relies on technical advice from the UAE and Finland, but it has no hands-on experience conducting a safety design review of a commercial nuclear reactor, reviewing the construction of a new reactors to insure they meets quality requirements, nor making a determination that once one is built, that it is safe to operate. The learning curve will be very steep.

The UAE experience is that stubbed its toe repeatedly convincing its own regulatory agency that the first reactor was safe to operate. One of the stumbling blocks was a fear that counterfeit parts had been shipped to the plant from South Korean vendors. As it turned out, the parts were intercepted in time to prevent a problem. Another issue was that it took forever for the UAE to train and certify reactor control room operators. There are plenty of lessons learned that the UAE can share with its Saudi counterparts so they don’t put their foot in the same bucket.

In terms of time frame, it will take at least a year to get a tender out the door for response by bidders and another year to make a contract award. This is a best case scenario. The Saudi have a history of starting and then abruptly stopping the nuclear program going all the way back to 2011. From the perspective of corporate risk, any bidder needs to pay attention to the tea leaves.

One of the “tea leaves” is that the timing of the decision to restart the civilian nuclear program follows the very recent steep rise in the price of oil which makes the nuclear procurement affordable. The price of oil this week (10/24/21) is $82/bbl up from a long period of time during which it didn’t make it out of the $60/bbl range.

The ability of the Saudi oil infrastructure to produce oil is estimated to be about 12.5 million barrels a day. So, it follows that the cost of the two reactors can be measured in terms of days of production of oil over time if the priority is to pay for them from current revenues.

Assuming the two reactors come in at $5,000/Kw, two 1000 MWe PWRs will cost $10 billion. It will take at least six years to complete the entire process from initiation of regulatory safety review to connecting the first finished reactor to the grid. That’s a best case scenario.

The process can be accelerated up if the Saudi nuclear safety agency adopts the design certification from another country for any of the bidders. For instance, South Korea has completed the process with the U.S. Nuclear Regulatory Commission for its 1400 MWe PWR.

Without getting into the weeds, once the Saudi commit to building the reactors, they will also be placing a forward bet that oil prices will stay high enough and long enough to keep their costs in line with oil revenues and therefore avoiding impacts on other domestic spending priorities or having the dip into the sovereign wealth fund.

Separately, the Saudi have a sort of “Plan B” which is to build more affordable small modular reactors (SMRs) about one third the size of the big ones. The Saudi have been working with South Korea in this area since 2011 but never committed to buy one. If things do not turn out well in the bid process for the full size units, they may go with the second source strategy.

Winning technical advice bidder for Saudi nuclear power program to be named soon:
CNBC Arabia  arabnews.com/node/1955676/business-economy October 26, 2021
RIYADH: Saudi Arabia is about to determine the winner of the presentation of the technical advice bid for its first nuclear power program, Banking sources told CNBC Arabia.
King Abdullah City for Atomic and Renewable Energy, the government agency responsible for implementing the Saudi nuclear program, has been studying the offers from four bidders, Deloitte, EY, HSBC, and PwC.

& & &

Green Hydrogen / Russia Says Production Using HTGR
Could Begin In 2030

(NucNet) Russia is planning to develop a “commercially effective” solution for the production of green hydrogen using a high-temperature gas-cooled reactor (HTGR) and a methane conversion unit. Methane reforming to produce hydrogen requires extremely high temperatures which can be supplied by the outlet temperature of an HTGR.

HTGR_ns

Most hydrogen produced today is made via steam-methane reforming, a mature production process in which high-temperature steam (700°C–1,000°C) is used to produce hydrogen from a methane source, such as natural gas.

The temperature of steam (light water reactor) from the steam generator (secondary loop) runs at about 500F / 275C which is too low for steam reforming. For this reason, electrolysis is the preferred method for light water reactors (LWRs) to make hydrogen.

In the US the Department of Energy is funding demonstration projects for production of hydrogen at commercial PWR type reactors in Ohio (Davis Besse), New York (Nine Mile Point) and Arizona (Palo Verde).

New advanced reactors may have outlet temperatures, especially TRISO fueled HTGRs, in the required range.

Anton Moskvin, vice-president for marketing and business development at JSC Rusatom Overseas, a subsidiary of state nuclear energy corporation Rosatom, said during a discussion on green hydrogen production at the Russian Energy Week conference that a first such HTGR facility could be in place by 2030. It isn’t clear what project he is referring to as Russia’s work on HTGRs is mostly still in the R&D phase.

As well as creating electricity to power homes on the grid, HTGRs will also be able to generate green hydrogen. In addition, by generating extremely high temperature heat, they could help decarbonize industry and potentially power district heating networks.

Moskvin also confirmed that Rosatom has chosen the Kola nuclear power station site near Murmansk (map) in northern Russia for a facility to test the production of green hydrogen from reactors using electrolysis and which requires far less heat. The facility is composed of four 440 MWe VVER (PWR) type reactors.

According to Rosatom, the project is in its preparatory stages. It wants to have a facility for hydrogen production and conversion in operation by 2023. The facility will initially have electrolysis plants with a total capacity of 1 MW-capacity. It is expected that this will expand to 10 MW.

Rosatom said Kola was chosen as a pilot site for hydrogen production because it produces low-cost energy at a surplus and has all the necessary infrastructure. Hydrogen is already produced at the station in small quantities for its own needs.

Mr Moskvin said Russia is assessing prospects for the sale of green hydrogen, both domestically and overseas, primarily in the Murmansk region, and also for export, particularly to Eurasian Economic Unions (EAEU) countries. The EAEU is an economic union of post-soviet states in Eastern Europe, Western Asia, and Central Asia. Its members are Russia, Belarus, Kazakhstan, Armenia and Kyrgyzstan.

In Europe, Brussels-based industry association Foratom said recently the low-carbon production of hydrogen from commercial nuclear power plants could help the bloc reach its climate goals, but the EU needs to put in place the right policy incentives to expand development of the emerging technology.

What Is Green Hydrogen?

Hydrogen production is classified using a color scheme.

Grey hydrogen denotes hydrogen produced from fossil fuels. Most of the world’s hydrogen production is grey.

Blue hydrogen is produced using non-renewable resources, but it meets the threshold of a low-carbon footprint.

Green hydrogen, such as that produced by nuclear reactors, is considered low-carbon. It can be produced using other technologies. For example, electricity from solar power or nuclear energy can be used to electrolyze water into its constituents, hydrogen and oxygen.

The carbon footprint of hydrogen production via nuclear electricity or reactor heat has a comparable carbon footprint to hydrogen produced by renewables.

& & &

Terrestrial Energy Awards Major Component Design Contracts to BWXT Canada

Terrestrial Energy has awarded BWXT Canada Ltd. engineering design contracts for steam generators and heat exchangers for use in the Integral Molten Salt Reactor (IMSR). These awards are a continuation of the multi-year collaboration between Terrestrial Energy and BWXT Canada for steam-supply systems and follows an engineering services agreement initially signed by the two companies for design of steam generators in December 2018.

TEI-ISMR-HowItWorks-Diagram

The IMSR steam-supply system comprises a series of heat exchangers, which transfer the thermal energy to a steam generator for turbine operation. Steam supply is a critical element of electrical power plant operation. BWXT Canada excels in this field. It is a global leader in the design and manufacturing of steam-supply systems for the nuclear industry, and it is qualified to nuclear industry codes and standards.

“After three years of close engagement with Terrestrial Energy, we have developed innovative and manufacturable technology for the IMSR that will support its deployment domestically and internationally,” said John MacQuarrie, President of BWXT Canada.

“These awards with BWXT Canada are another important milestone in our program of major component procurement, and we are excited by the prospect of BWXT Canada designing and manufacturing these components for the IMSR,” said Simon Irish, CEO of Terrestrial Energy.

The Terrestrial Energy IMSR power plant is one of three Small Modular Reactor (SMR) power plant designs under consideration for deployment at Ontario Power Generation’s Darlington Nuclear Generating Station. It is one of two Generation IV SMR technology candidates under consideration by OPG, and the IMSR is the only Canadian SMR technology candidate.

Terrestrial Energy announced on September 14 its upgraded IMSR400 power plant, which consists of twin IMSRs and generators to produce 390 MW of clean electricity from one facility.

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About djysrv

Dan Yurman ~ For breaking nuclear news follow me on Twitter @djysrv or https://www.twitter.com/djysrv About this blog and disclaimers for NeutronBytes https://neutronbytes.com/2014/08/31/welcome-post/ ~ Email me: neutronbytes [at] gmail [dot] com ~ ~ Mobile via Google Voice 216-369-7194 ~ ~ I am NOT active on Facebook, Reddit or Instagram. Attempt no landings there. The best way to connect with me professionally is via Linkedin. https://www.linkedin.com/in/danyurman/ ** Header Image Credit: ** http://apod.nasa.gov/apod/ap110904.html ~ ** Emails sent by readers about blog posts are considered to be comments for publication unless otherwise noted. ** The content of this blog is protected by copyright laws of the U.S. "Fair use" provisions apply. The RSS feed is for personal use only unless otherwise explicitly granted.
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2 Responses to UK Commits to Financing Method for New Nuclear

  1. Robert Hargraves says:

    Dan,
    Was not RAB/CWIP financing used for the South Carolina AP1000? We ratepayers in New Hampshire just finished paying off the “stranded asset” for Seabrook II killed in midstream by Mass Governor Dukakis. It’s perhaps reasonable that ratepayers can be investors in new power plants, but the investment risk should be made clear.

    Like

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