Despite Good Intentions, Nuclear Continues to Sink
April 3, 2017
Westinghouse Electric Company, which helped drive the development of nuclear energy and the electric grid itself, filed for bankruptcy protection on Wednesday, casting a shadow over the global nuclear industry.
The filing comes as the company’s corporate parent, Toshiba of Japan, scrambles to stanch huge losses stemming from Westinghouse’s troubled nuclear construction projects in the American South. Now, the future of those projects, which once seemed to be on the leading edge of a renaissance for nuclear energy, is in doubt.
“This is a fairly big and consequential deal,” said Richard Nephew, a senior research scholar at the Center on Global Energy Policy at Columbia University. “You’ve had some power companies and big utilities run into financial trouble, but this kind of thing hasn’t happened.”
Westinghouse, a once-proud name that in years past symbolized America’s supremacy in nuclear power, now illustrates its problems.
Many of the company’s injuries are self-inflicted, such as a disastrous deal for a construction business that was intended to control costs and instead precipitated the events that led to the filing on Wednesday. Over all, Toshiba has been widely criticized for overpaying for Westinghouse.
Don’t throw anything. Sorry it’s true, but here’s the deal.
Nuclear power was essentially done in the US as of about 1977, due primarily to economic issues – no one wanted to risk the huge cost increases that were cropping up in that era’s build out of pressurized water reactors.
That, you may remember, was two years before the melt-down of Three Mile Island, (TMI) subsequent bad press, and widespread public opposition blossoming around the country.
Love it or hate it, the nuclear industry sowed the sees of its own demise when it went ahead, in the 1960s, with a generation of untested large nuclear designs based on simple faith that engineers could do what they said they could. This included relying on safety systems that had never been tested in the real world.
The first indication that this would be a problem cropped up in 1971, when scale-model testing of emergency core cooling systems failed miserably – raising concerns among large utilities, who already had many large projects, based on that design, well underway.
It was, of course, exactly that cooling system that failed at TMI – and any argument about post-accident body counts misses the point entirely. The accident burned up 2 billion dollars worth of equipment in 20 minutes, and saddled the utility, ratepayers, and taxpayers with enormous decommissioning costs and a decade-long cleanup mess that raised red flags world wide on technology.
In subsequent years, nuclear proponents have argued that it was wrong-headed opposition to nuclear power that sunk the industry. After all, they said, look how great nuclear power was doing in sensible countries like the Soviet Union, Japan, and France.
History has not been kind to that reasoning.
Finnish utility Teollisuuden Voima (TVO) has started fresh legal action against French nuclear group Areva to avoid further delays at its Olkiluoto 3 nuclear reactor in Finland, company spokesman said.
The project, almost a decade behind its original schedule, is nearly complete, but TVO wants assurances that a restructuring of plant supplier Areva won’t cause further delays and that the plant would be ready to begin production in 2018 as planned.
“We have asked for this several times but have not received the necessary assurances,” he said by phone, adding that TVO is now seeking assurances through a case filed in Nanterre Commercial Court, in France.
TVO and Areva are already claiming billions of euros from one another at the International Chamber of Commerce’s arbitration court because of delays and cost overruns on the project which was originally due to start operation in 2009.
Nuclear power growth is falling victim to larger factors. The first factor is the increasingly poor economics of nuclear power across the world. Skyrocketing construction costs, made worse by the post-Fukushima safety upgrades, and reliance on massive government subsidies are making nuclear power uncompetitive.
A second factor is the dire financial state of the foreign companies that were planning to build nuclear power plants in India — Toshiba-Westinghouse and Areva. Their very survival is at stake today. France’s state-owned Areva needs a government-led €5 billion bailout to stay afloat. It is also set to be split, with its reactor unit being sold to EDF, also state-owned.
For Toshiba, the US nuclear market is proving to be its graveyard. On the brink of disintegration, Toshiba has posted a $6.2 billion nuclear-business loss, mainly from its US subsidiary, Westinghouse. Its 2006 blunder in acquiring Westinghouse has been compounded by its 2015 purchase of nuclear plant builder CB&I Stone & Webster. Now Toshiba is jettisoning its lead role in projects to build nuclear plants in India and Britain, a move that would leave it merely as a nuclear equipment supplier.
At the same time, Westinghouse was trying to install a novel reactor design, the AP1000. Using simplified structures and safety equipment, it was intended to be easier and less expensive to install, operate and maintain. Its design also improves the ability to withstand earthquakes and plane crashes and is less vulnerable to a cutoff of electricity, which is what set off the triple meltdown at Fukushima.
Nonetheless, it was inevitable that expansions at the Vogtle generating station in Georgia and the Virgil C. Summer plant in South Carolina would hit some bumps along the road to fruition, nuclear executives say. Not only was the design new, but, because nuclear construction had been dormant for so long, American companies also lacked the equipment and expertise needed to make some of the biggest components and construct the projects.
Indeed, that may ultimately have been at the root of the troubles. The contractor Westinghouse chose to complete the projects struggled to meet the strict demands of nuclear construction and was undergoing its own internal difficulties after a merger. As part of an effort to get the delays and escalating costs under control, Westinghouse acquired part of the construction company, which set off a series of still-unresolved disputes over who should absorb the cost overruns and how Westinghouse accounted for and reported values in the transaction.
Arguments abound for alternative designs, new technologies, standardization and mass production. China, we’re told, is moving ahead with nuclear development. I wish them well.
But in the meantime, we have a problem to solve, and the closest thing to a solution seems more and more like renewables that continue to outperform even the most optimistic projections of just a few years back.
I’ll duck behind my chair now.