November News

by Will Davis

We have two fairly significant news items to report on today at ANS Nuclear Cafe. First a major nuclear vendor change of ownership and second a further threat to the sustenance of existing nuclear.

EDF AGREES TO BUY AREVA NP NUCLEAR BUSINESSES, SEEKS PARTNERS

In the culmination of a lengthy process, Électricité de France (EDF), the French national electricity provider, announced the final signing of a deal with AREVA to buy that company’s new nuclear power plant and nuclear fuel businesses.

AREVA had in recent years become financially threatened both by the general decline in orders for nuclear plants worldwide, and the lengthy overruns being experienced at the EPR type nuclear plants under construction (at Flamanville in France and at Olkiluoto in Finland).  Bailout by the French government directly proved unlikely, and EDF stepped in to negotiate a deal to rescue the long-standing French national nuclear industrial complex.  As might have been expected, it became apparent early that EDF would require control of the business.  Today’s announced deal contains that provision, as EDF will own a subsidiary of AREVA (tentatively called “NEW NP” for “New Nuclear Plants”) which will have responsibility for future nuclear plant orders, sales and construction.  The nuclear fuel and nuclear plant services businesses will also be bundled into NEW NP, according to EDF’s press release.

What’s not included in the sale are the operations and warranty coverage on the EPR plant at Olkiluoto, according to the release.  Further, because there are material concerns with heavy steel components manufactured at the (former) Creusot Forge plant, it appears that AREVA itself will retain any liability due to potential problems with these installed components at operating nuclear plants or any under construction, according to EDF’s statement.

EDF made it clear that there are still some hurdles to be overcome, concerning further quality audits (which could spell liability for EDF in the future) as well as the general business clearances.  It is interesting that while EDF will buy the businesses stated, it will also immediately being to look for partners to assume some of the stock of the (estimated) 2.5 billion euro business. This would eventually potentially reduce EDF’s stake from 75 percent of the business down to 51 percent.   With the 51 percent stake EDF would still have control of NEW NP, while AREVA would hold 15 percent with the rest held by new investors.

The deal is not expected to close until the last half of 2017 following the completion of the aforementioned reviews and the emplacement of partner investors.

FIRSTENERGY WILL SELL OR CLOSE POWER PLANTS – INCLUDING NUCLEAR

Davis-Besse Nuclear Plant; courtesy FirstEnergy

Davis-Besse Nuclear Plant; courtesy FirstEnergy

According to reporting published this morning by Energy Manager Today and by Greentechmedia, FirstEnergy, CEO Chuck Jones told attendees of the Edison Electric Institute financial conference on November 7 that his company will make moves to become a fully regulated utility over the next 18 months, but if it cannot support marginal plants (including its coal and its nuclear plants) either by that means or by state action, it will either sell or shut down the plants.  The plants are actually owned by subsidiary companies of FirstEnergy.

FirstEnergy itself is essentially attempting, according to reporting in those sources, to get out of the free or competitive electric power markets, citing unprofitability of its coal and nuclear base load plants at the low (natural gas driven) prices being hit today.

Jones told the attendees, “We are not going to wait on those states (Ohio and Pennsylvania) to decide what they want to do,” and said (according to Greentechmedia) that the company would sell or shut down its “large” Ohio and Pennsylvania nuclear and coal plants unless the states re-regulated the markets, or else “created a regulation-like” structure for these plants.

Financially sound operation of Davis-Besse, a single unit 900 MWe nuclear plant, has been in question for some time; however, the other plants have not until now been seriously mentioned in any plans to either regulate markets or to shut down.  In fact, FirstEnergy told industry newsletter Fuel Cycle Week earlier this year that Perry was profitable and not in consideration for being shut down.

Energy Manager Today quotes CEO Jones as saying that he believes that re-regulation will not happen, and that the scenarios will “just have to play out.”  He did say that operations at the FirstEnergy electric generating subsidiaries (in terms of unprofitability) will not be allowed to affect the parent company.  “I think the outcome is that some units get sold.. and some get shut down,” he was quoted as saying.

FirstEnergy, according to Energy Manager Today, plans to immediately begin discussing with lawmakers and regulators the possibilities for plans to re-regulate or otherwise support the generating assets owned by its subsidiary companies.


 

ANS member Will DavisWill Davis is Communications Director and board member for the N/S Savannah Association, Inc. He is a consultant to the Global America Business Institute, a contributing author for Fuel Cycle Week, and he writes his own popular blog Atomic Power Review. Davis is also a consultant and writer for the American Nuclear Society, and serves on the ANS Communications Committee and on the Book Publishing Committee. He is a former US Navy reactor operator and served on SSBN-641, USS Simon Bolivar. 

 

9 thoughts on “November News

  1. Stephen Maloney

    As for the recent offshore seismic event and “educat[ing] people about what DIDN’T happen at the place last time”, let’s first consider what happened and what didn’t happen.

    The U.S. Geological Survey (USGS) initially put Tuesday’s quake at a magnitude of 7.3 but downgrading it to 6.9. The earthquake was felt in Tokyo, and was centered off the coast of Fukushima prefecture at a depth of about 10 km (6 miles). USGS described this event as a “shallow quake”.

    According to USGS, “The good news here is that the direction the fault was moving is a slight lateral slip. When the faults move laterally they do not create the vertical movement associated with large tsunamis”.

    In other words, the site dodged a bullet.

    As for the third party impacts of Fukushima which did happen, I recommend reading the following literature review before anyone starts “educating” anyone about the severity of that event:

    Hirose, K. 2016. Fukushima Daiichi Nuclear Plant Accident: Atmospheric and oceanic impacts over the five years, Journal of Environmental Radioactivity, 157 (2016) 113-130, http://dx.doi.org/10.1016/j.jenvrad.2016.01.011

  2. James Greenidge

    In lieu the recent Fukushima quakes rattling people and media in more ways than one, this is a perfect time for the worldwide nuclear community to step up before the media and explain and educate people about what DIDN’T happen at the place last time. No deaths, no Doomsday despite it being a triple blow meltdowns. Just my two cents worth of million dollar good publicity.

    James Greenidge
    Queens NY

  3. Joseph Talnagi

    This is yet another kick in the gut. We just went through a lengthy and exhaustive (I can personally attest to the latter) to get the state agency (PUCO) to put a PPO in place that covered Davis-Besse and others. I don’t understand what happened between then and now. Was it not enough? Did the PPO fall through? I have heard nothing about either one.

  4. Meredith Angwin

    Jim

    Thank you for the good words! In my opinion, the RTO “markets” are so far from anything I would call a market that it is ridiculous. I call them “tweaks R us” because they are constantly coming up with more yet more new formulas to implement yet more new policies.

    Nuclear and ratepayers would benefit from a more level playing field.

  5. Stephen Maloney

    Meredith Angwin makes some interesting points about RTO market structure.

    When you start down the centrally-planned path of defining competing imperatives and multiple constraints, you often end up with a thin market saddled with a lot of deadweight losses. This is particularly true with top-down Federal edicts run into state-centric imperatives and edicts.

    For LSEs and generators, all of these edicts remind me of the Dr. Seuss story about Mr. Potter’s difficult job: “And poor Mr. Potter, T-crosser, I-dotter. He has to cross t’s and he has to dot i’s in an I-and-T factory out in Van Nuys!”

    I suspect few nukes are familiar with the details and current debate around RTO structures so I’d like to suggest some recent papers from the literature. While I don’t subscribe to all the proposals made, I recommend these papers as background of where we are and roughly how we got here, and where some people would like this all to go.

    Suffice to say, I doubt there is a “magic bullet” in RTO “reform” that will provide the requisite cash-flow duration guarantees essential to sustaining a nuclear construction and operating schedule.

    (1) Federal Energy Regulatory Commission (FERC), Docket Nos. ER15-623-000, EL15-29-000, ER15-623-001, and EL15-41-000, Order on Proposed Tariff Revisions Issued June 9, 2015.

    (2) Greenfield, Daniel and Kwoka, John, “The Cost Structure of Regional Transmission Organizations”, The Energy Journal, V. 32, N. 4, pp. 159-181, 2011.

    (3) Rose, Kenneth, “Trouble in Market Paradise: Development of the Regional Transmission Operator”, Journal of Economic Issues, V. L, N. 2, pp. 535-541, June 2016

    (4) Klumpp, Tilman, “Strategic Investment Under Open Access: Theory and Evidence”, The Journal of Industrial Economics, V. LXIII, N. 3, pp. 495-521, September 2015

    (5) Morrison, Jay, “Capacity Markets: A Path Back to Resource Adequacy”, The Energy Bar Association, V. 37, N. 1, pp. 1-60, May 2016

  6. Jim Hopf

    Meredith,

    Your referenced article was excellent, and very informative.

    I wonder if that is something that could be pursued, as a reform that would help keep nukes open and does not cost too much money. It might be something that could be pursued with the Trump administration and the GOP, given that it is not necessarily tied to global warming policy. Then again, it would be against the gas interests that wield heavy influence with both Trump and the GOP. But it’s still worth a shot.

  7. Meredith Angwin

    Will

    Thank you for this article. The RTO areas are basically stacked against nuclear and other baseload plants.

    People will say: “Yeah, well, those plants just can’t complete with cheap natural gas.” That is not the case. Actually, in RTO areas, many or most natural gas plants get much of their income from selling “capacity” and “ancillary services,” not from selling kWh. Look at this slide from one of my articles: Payments for various types of power plants on the New England grid

    As you can see, nuclear gets most of its income from selling kWh (gold bars) while NG/Oil GT (gas turbines) get around 80% of their income from “capacity” and “auxiliary” payments (blue and brown bars). That’s because the gas plants don’t sell as many kWh as nuclear sells, and you can also see that if the price of a kWh goes down but the capacity payments go up…the gas plants are all right. The common description of the “low price of natural gas on the grid” accounts for low-price sales of kWh, which are nuclear energy’s life and breath. It doesn’t account for all the ways the grid supports low kWh prices and makes up the difference…for plants that don’t run very much.

    This has also been called the “search for the missing money.” Natural gas plants, without capacity payments, would have to charge more per kWh or go out of business. But…most RTO areas supply the gas plant’s “missing money” in a way that hurts any high-capacity-factor plant on the grid.

    (Note: CC is combined cycle, ST is steam turbine, GT is gas turbine.)

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