Tuesday, December 21, 2010

Taking It to the Fuel Bank

russia-signs-agreement-on-worlds-first-nuclear-fuel-bank-2010-03-30_l There’s a nuclear fuel bank open for business. And to think, it was approved by the IAEA just the other day.

The 35-nation board of the International Atomic Energy Agency approved an IAEA-run repository for nuclear fuel on [December 3], in a move meant to limit proliferation by reducing the incentive for starting domestic uranium enrichment programs.

Oh wait, not that fuel bank:

The first international nuclear fuel repository in the world formally launched operations on Friday at a uranium enrichment facility in Angarsk, Siberia, the International Atomic Energy Agency announced.

This one has also been approved by the IAEA. The point behind both fuel banks is fairly straightforward:

The [Russian] site, approved in 2009 by IAEA governors, would enable countries free of proliferation histories to purchase nuclear power plant fuel on an apolitical basis as an alternative to developing production capabilities that could also generate nuclear-weapon material.

So it’s a way to keep proliferation concerns at bay because countries that have a reliable supply of uranium will not be tempted to open their own enrichment facilities.

A fuel bank also ensures a reliable source should a country not be able to acquire uranium on the open market. That’s important because it damps down problems that could occur if, say, tensions flare between a uranium buyer and seller and the supply dries up.

One fuel bank too many? The more the merrier? The test will come when some countries that haven’t had nuclear energy industries prepare to switch on their first plants – Vietnam, Abu Dhabi – and then run into some kind of supply difficulty. Until then – well, the banks bank the uranium.

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This last point raises some eyebrows. Steve Kidd, the World Nuclear Association’s Deputy Director General, put it this way:

“Hardly any of the South East Asian nations will be tempted to develop their own enrichment program and so this provision of a fuel bank is largely unnecessary. The market works very efficiently and is very competitive and there shouldn’t be a problem in these countries sourcing uranium.”

That sound like a free marketeer argument the Heritage Foundation might embrace, but there’s more:

“Lack of uranium didn’t stop Japan. It very rapidly built a large nuclear program without its own uranium. It wasn’t a barrier for them and I don’t think it need be a barrier in Asia. Countries like Malaysia, Thailand and Indonesia won’t have any problem in sourcing uranium and enrichment from the world market.

Well, that still seems like a free market argument, doesn’t it?Interestingly, though, the idea isn’t to supplant the free market, but to supplement it when it falls down. Kidd’s argument seems to be that that will never happen. He may be right – and it might not matter that he’s right to countries that feared the possibility. This argument seems a non-starter in the face of a perceived need that’s now being answered. You can read the rest of Kidd’s comments about this here.

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I wouldn’t care to associate Kidd with an Iranian ambassador, but they may have the same fear in mind:

The establishment of a nuclear fuel bank, approved by the main global nuclear watchdog, would amount to "nuclear apartheid," Iran's ambassador to the group [the IAEA] said Saturday.

This CNN story doesn’t name the ambassador, but if he or she believes the IAEA means to replace the commercial market, the bank would have to be reconfigured – right now, it isn’t offering uranium in competition. Later, Iran decided to okay the bank:

Iranian Foreign Minister Manouchehr Mottaki says Tehran agrees to the creation of a global nuclear fuel bank provided that a branch is set up in Iran.

Well, one can ask, anyway.

Shake hands on it: IAEA Director General Yukiya Amano (L), and Sergei Kirienko, head of Russia's Rosatom {the country’s nuclear energy authority) agree to a fuel bank last March.

Thursday, December 16, 2010

The SEC Accuses AEHI of Fraud

payettesite A year or so ago, I wrote:

It may just be that AEHI is trying everything it can to find and develop a market and interest enough venture capital to help it stay afloat until it makes a sale – either in Idaho or China. Certainly not unusual (if a bit unusually far flung), often not successful, but that’s how it works. All one can really do from the outside is speculate. Let’s keep half an eye on AEHI and see how it goes.

Well, both eyes open beats half an eye:

The SEC [Securities and Exchange Commission] alleges that Alternate Energy Holdings Inc. (AEHI) has raised millions of dollars from investors in Idaho and throughout the U.S. and Asia while fraudulently manipulating its stock price through misleading public statements that conceal the secret profits reaped by its CEO Donald L. Gillispie and Senior Vice President Jennifer Ransom.

It gets worse:

The SEC’s complaint charges AEHI, Gillispie, and Ransom with violations of the anti-fraud provisions of the federal securities laws, and names as relief defendants two companies controlled by Gillispie and Ransom (Executive Energy Consulting LLC and Bosco Financial LLC).

As usual in cases like this – that is, that involve alleged misuse of funds -there are alarming details:

Gillispie enriched himself using the proceeds of these nominee sales. Ransom transferred at least $200,000 of the $675,326.14 in proceeds from her sales of AEHI stock to Gillispie. Ransom wrote a check to Bosco (her limited liability company) for the majority of the $200,000, but the check was deposited in Gillispie's Energy Executive bank account, which Gillispie uses for personal expenses, such as jewelry, cruises, and his Maserati sports car. Thus, Gillispie's statement that he never sold AEHI shares was false in light of his use of Ransom and Webb as his nominees for stock sales.

Now, being accused of something and being guilty of it are two different things and the SEC hasn’t yet proven anything. However, if nothing else, this episode reinforces that it’s always wise, regardless of the business, to research any company one wants to invest money in.

The Idaho Statesman has more here.

AEHI’s proposed site in Payette County, Idaho.

Slouching Toward the 2011 Budget

congress The way Congress decides how to spend money is fairly straightforward: the President presents a budget proposal to Congress that is then hashed out in committee and then by the full House and Senate and then is voted upon.

In some years, though, Congress cannot quite get through all the spending bills and funds the government via other means.

For example, the House last week passed a continuing resolution. That means that the 2011 budget will mirror the 2010 budget with a few tweaks here and there. And the Senate now seems likely to do the same.

What does this mean for nuclear energy? In most respects, we can’t know until later. Energy Secretary Steven Chu has introduced a list of new projects he’d like DOE to undertake and there are older programs that are being retired. A continuing resolution will not fund the new projects – because they were not in the 2010 budget – but will fund the retired programs. So money will need to be swapped around, some new programs will get less money or will wait until 2012.

But there are a few noteworthy bits to note now:

The Senate would provide $8 billion in new loan guarantees for nuclear power plant construction under a large omnibus year-end spending bill.

That's a bit more than the $7 billion the House approved last week—but far less than the $36 billion President Barack Obama requested in his budget.

DOE has a few projects in line for loan guarantees and the $7 (or $8) billion will about cover them. Loan guarantees don’t really necessitate any outlay from Congress aside from administration, so increasing it doesn’t really affect budget lines very much.

The Senate may vote this week, so stay tuned.

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Loan guarantees are not completely non-controversial. Aside from the usual anti-nuclear energy suspects, the current mood of fiscal discipline also brings opposition, though I’d say extant examples are not notably honest. For example:

Ryan Alexander, president of Taxpayers for Common Sense, says the record of the Department of Energy in administering loan programs is not encouraging. She cites a 2003 Congressional Budget Office study says default rates can hit 50 percent or more, and that would mean that several projects totaling billions could leave the government footing the bill.

Luckily, there’s not much I have to say here about that 2003 study, because reporter Jesse Emspak does it for me:

The CBO Study doesn't actually say that default rates would be 50 percent, however; it says that the default rate was an assumption that would have to be re-evaluated when the projects were executed.

Just so. Maybe we can now consider that abandoned 2003 study well and truly kaput.

The rest of the story is quite interesting:

But now, some groups that see themselves as fiscal conservatives are saying that the loan guarantees would unfairly shift the risk of defaults to the taxpayers and cost the government money that could better be spent elsewhere. Those with a more libertarian bent say the guarantees distort the cost of capital. If the private sector was willing to finance nuclear energy, they say, it would be done.

Well, these are groups feeling their oats after being out of fashion for awhile, so a little overreach is to be expected, and I admit I find the arguments simultaneously novel (for mainstream consideration) and faintly dusty (libertarians have always felt government “distorts the cost of capital.”) But they add perspectives to the discourse and that’s always welcome.

Wednesday, December 15, 2010

A Waste of a Good Nuclear Waste Act

435_BelarusNationalLibrary As you may have heard, DOE is attempting to withdraw the license application for the Yucca Mountain used nuclear fuel repository from consideration by the NRC. This was a decision that remains controversial and may get a further hearing in the next Congress. Regardless, Yucca Mountain continues its retirement.

Yet it is still being paid for via the Nuclear Waste Fund, described as:

[A] 1 mill (one-tenth of a cent) fee for every kWh of nuclear-generated electricity sold. Congress established the fee and Nuclear Waste Fund, a federal trust, in 1982 to bankroll the DOE repository program.

That may not sound like a lot, but it comes to about $750 million per year and has contributed to a fund that now stands at $25 billion. While one could say that the utilities are paying this. it is actually ratepayers that are doing so.

The Nuclear Waste Act of 1982 set Yucca Mountain as the used fuel repository (through an amendment in 1987) and set the initial fee for the Nuclear Waste Fund. If there is no repository, though:

Ellen C. Ginsberg, general counsel for the Nuclear Energy Institute, said there was therefore no longer a basis for collecting the fee. The federal energy secretary makes annual estimates called “fee adequacy reports,” based on the cost to build, operate and close up the repository, but there is now no repository to base a cost estimate on, she said.

That’s true. So, at least until a new program is put into place and a cost determined for it, should there be any fee at all? NEI and NARUC (the National Association of Regulatory Utility Commissioners) said in a suit filed against DOE that there should not be. It’s an arguable point, certainly, but it isn’t going to be argued, at least not yet:

A federal appeals court Monday closed one door in a legal battle over the US Department of Energy's continued collection of the nuclear waste fee, but opened another for possible legal action by the National Association of Regulatory Utility Commissioners and Nuclear Energy Institute.

The judge did dismiss the suit, but not on its merits. Instead, it dismissed it because DOE issued a fee adequacy report, which is necessary to determine the fee. That’s important, as no report had taken into account the termination of the Yucca Mountain project, and the suit requested that DOE do so. So the suit became moot on the procedural detail - the report - but undecided on the more substantive issue - the fee.

NARUC and NEI have 180 days from the issuance of the DOE report (November 1) to file a new lawsuit. So, for another five months or so, this enters wait and see territory.

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At first, it sounds like a story about unnecessary jitters regarding nuclear energy:

Plans by Belarus to build a nuclear power plant 50 kilometers away from Vilnius are a worry for Lithuania, the country's foreign minister, Audronius Ažubalis, told EurActiv in an exclusive interview.

A worry? That makes it sound as though Belarus is erecting a rusty tub and a few fuel rods. But no:

An official website says that Belarus is now in talks with corporations from France, Japan and South Korea, while maintaining its partnership with the Russian Federation.

And Lithuania has no actual problem with Belarus pursuing nuclear energy:

The minister said Lithuania was not against its neighbor developing nuclear energy - indeed, Vilnius is also planning to replace its Ignalina power plant, which was closed in 2009 after EU pressure.

So what’s the problem? Procedure:

"Any country would [voice concerns] if it were unable to find the proper answers to its concerns according to the Espoo Convention [the Convention on Environmental Impact Assessment in a Transboundary Context] and according to IAEA requirements," Ažubalis said.

Oh, okay. Well, Ažubalis is the Foreign Minister – maybe he should pick up the phone. Belarus might well answer.

The Belarus National Library.

Friday, December 10, 2010

Oyster Creek and Cooling Towers

oyster-creek Exelon has announced that its Oyster Creek nuclear plant will close in 2019, ten years before the license to operate it expires. These are the reasons Exelon gives for its decision:

“The plant faces a unique set of economic conditions and changing environmental regulations that make ending operations in 2019 the best option for the company, employees and shareholders,” [Exelon President and COO Chris] Crane said.

And to expand on this a little more:

The decision is based on the cumulative effect of negative economic factors which has caused Oyster Creek’s value to decline.  These factors include low market prices and demand, and the plant’s need for continuing large capital expenditures. Also, potential additional environmental compliance costs based on evolving water cooling regulatory requirements – at both the federal and state government levels – created significant regulatory and economic uncertainty.

The first half of that explanation may well have been mitigated by an improving economy and a rising demand for clean electricity sources. The second half – about environmental regulations – is rather more serious because it is potentially more intractable.

Although Exelon is specifically referring to rulemaking by the New Jersey Environmental Protection Agency, the federal EPA is likewise considering a change to the Clean Water Act that mirrors that of the NJEPA.

This rulemaking concerns cooling towers. Now, while cooling towers are almost iconic symbols of nuclear energy, not all plants use them. Oyster Creek, for example, does not. Likewise, nuclear energy plants are not the only kinds of plants that use them – coal-fired and gas-fired plants do, too, but as with nuclear plants, not universally.

Up to now, rule 316(b) of the Clean Water Act has allowed plant operators to use what it calls the “best technology available” to capture water for plant cooling purposes. The question is: does capturing that water – and returning it to the source – harm aquatic life.

The EPA actually doesn’t know the answer to that question, but it is knowable. A fair number of studies have been done on the issue and have reached similar conclusions.

Take, for example, this Third Way report:

“316(b) could have serious environmental consequences that should be considered in EPA’s analysis. Closed-cycle cooling is not the panacea it appears to be.

Third Way is a centrist think tank. Here’s the British version of the EPA, the U.K. Environment Agency:

A distinct difference in the U.S. approach has been the assumption of 100 percent mortality of any fish eggs, larvae or juveniles entrained in plant cooling systems and discharged back to sea. U.K. studies have shown that substantial portions survive cooling water system passage, potentially reducing the magnitude of entrainment impacts.

Entrainment refers to aquatic creatures, mostly fish, that get pulled into the plant’s cooling system along with the water.

EPA also means to bar from the rule a number of factors, such as water use conflicts, climate change, land use, and the potential cost of electricity to consumers, that represent elements of a cost benefit analysis. This analysis is important because it permits plant operators to demonstrate that taking on the cost of a technology such as cooling towers can do far more harm (up to and including shuttering the plant) than good (rescuing a few fish). The cost and its benefits and harms can be weighed against each other and an option chosen. That option still might be cooling towers – but maybe not, if the full case against them is compelling.

Weighing costs against benefits can be a tough concept – we want modern convenience without negative consequences because it seems the just way to go about things – but that doesn’t really work in any known human endeavor. What one does to keep the scales balanced is to mitigate potential harm as much as possible to gain the considerable benefits.

Power plants do this – they take the environmental impact of the plants very seriously and spend serious money to prove it. NEI’s Insight newsletter has written extensively on the subject of plant operators and their involvement with the aquatic bodies they sit astride. See here for more on impingement and entrainment (and minimizing their harm) and here for more on the ecological stewardship practiced at nuclear energy plants. (I’m sure that coal and gas fired plants do this too, but that’s not our brief.)

Obviously, regulation that might have the impact of closing so many plants has to be considered very seriously and from all angles. Forcing nuclear energy plants to shutter at a time when their emission-free nature is so prized – and alternatives to cooling towers are so effective - seems nutty.  (It’s why the Supreme Court advocated a cost-benefit analysis be applied in these situations.)

The solution isn’t very tough to grasp. Here’s the North American Electric Reliability Corp., which manages the electricity grid:

“The pace and aggressiveness of these environmental regulations should be adjusted to reflect and consider the overall risk to the bulk power system. EPA, FERC, DOE and state utility regulators … should employ the array of tools at their disposal to moderate reliability impacts, including, among other things, granting required extensions to install emission controls”

That’s written in NERC-ese, but it contains a workable solution: clearly, the government and industry both want fish and other aquatic creatures to live happy and full lives, so a rule that allows utilities the flexibility to choose the “best available technology” that works best at their sites and permits cost-benefit analyses strikes a balance between the needs of business and the prerogatives of EPA. Granted, a “one-size-fits-all” rule makes things easier for EPA, but promises a good deal of unnecessary havoc for energy consumers.

None of this has come to pass yet – EPA expects to issue a draft rule, with a public comment period following, around February – but if you are so inclined, read through the documents referenced below and email the EPA and your representatives in Congress.

NEI has gathered together an extensive collection of documents on this issue. Start here and, if you want to know more, start googling. There’s a lot out there.

Oyster Creek.

Wednesday, December 08, 2010

The New Millennium Nuclear Energy Summit

steven_chu_20101122075346_320_240 The Third Way, a policy organization in Washington, held a conference yesterday called the New Millennium Nuclear Energy Summit, which proved to be exceptionally consequential.

Energy Secretary Steven Chu called for nuclear power to be part of the mix as the nation moves toward mandating that power companies use more clean and renewable energy. As much as 25 percent of the country's power could be from clean energy by 2025,

That’s a start, but not that different than what Chu has said consistently. The consequential part comes with the push for a clean energy standard, which would include nuclear energy along with renewable energy sources as a means to reduce carbon emissions.

“Our Republican friends in the Senate are less comfortable with a renewable electricity standard. They are more comfortable with a clean energy standard that would allow some credit early on for nuclear [and] some credit early on for clean coal,” said Sen. Tom Carper (D-Del.). “Some kind of clean energy standard might actually bridge the difference between the two sides. We’re not going to put a price on carbon, at least for awhile.”

Carper, I should note, is agreeing with his Republican colleagues. And so does Secretary Chu:

“A clean energy portfolio standard is one example of a potential policy that the administration and Congress should discuss,” said Chu.

Indeed. If an important goal of energy policy is to reduce carbon emissions, then leaving nuclear energy off to the side, as most proposals for a renewable energy standard have done, sells the entire policy short. Here’s some more from Chu:

“I think 50 percent [of energy generation from clean energy sources] by 2050 is about right. Quite frankly, I think 25 percent by 2025 is about right. Anything shorter than that is too short for nuclear, but by 2025 there’s enough breathing room so people can make plans.”

And one way to achieve this is through government loan guarantees.  The likelihood of a project defaulting is very low, but the amount of money required to build a plant is enough to make banks hesitate.

President Obama and Chu have both demonstrated support for an increase in loan guarantee volume, which Congress has to approve.

“In the near term, one of the things that we are focused on is additional loan guarantee money,” said Carol Browner, director of energy and climate change policy at the White House. “We have already made one conditional loan guarantee. … We would like to make more. There are projects in the queue, but as people are keenly aware, there are not adequate resources for all the potential projects in the queue.”    

Browner said the administration would be working with Congress to find additional funding opportunities for loan guarantees.

Panel participants urged the members of Congress in attendance to think big when it comes to a clean energy standard.

David Crane, president and chief executive officer of NRG Energy, said that he would like to see a standard with clean energy making up 50 percent of the portfolio by 2050.

“A clean energy portfolio standard is not just a renewable portfolio standard on testosterone,” said Crane. “We’re not talking about a 15 percent niche for wind and solar, we’re talking about something that should be at least 50 percent. A clean energy portfolio standard properly done is a national energy policy.”    

A recurring theme of the conference was the need for concrete action.

Sen. Jim Risch (R-Idaho) summed it all up nicely:

“Nuclear energy is going to provide baseload [capacity] for America to move [in]to the 21st century. We were the leader in the world on this and we put it on the shelf. It’s time to take it back off the shelf.”

A consequential meeting.

TJ Swanek contributed substantially to this post.

Energy Secretary Steven Chu

Tuesday, December 07, 2010

Deposits at the Fuel Bank

The IAEA approves a fuel bank:

The fuel bank would offer nations civilian atomic reactor fuel on an apolitical basis in hopes of deterring them from pursuing their own capability to produce such material -- a process that could also generate nuclear-weapon fuel.

Essentially, it does this by providing enriched uranium when there is a disruption in the commercial supply. The idea is that this limits proliferation opportunities because the host country will not do the enrichment itself.

Naturally, there are still a lot of details to work out:

Undecided aspects of the plan include the site of the fuel supply, the precise process by which the bank could acquire additional fuel and how its capacity could be increased.

This story goes into more details of Warren Buffett’s involvement, which was considerable:

"Throughout my lifetime I will be interested in this subject and I will back that interest up with money," Buffett told Reuters. "If the project sounds like a good one and has any real chance of reducing the probabilities of the terrible use of nuclear, chemical and biological weapons, I'm prepared to put up significant money."

And he did back it up with money - $50 million worth, matched by the United States and other countries, with Kuwait’s $10 million kicking the total over the necessary $150 million to get started.

The Washington Post was not able to get a response from the Obama administration (though it’s known to want it), but did weigh in with a quote from former U.S. Senator Sam Nunn, co-chairman of the Nuclear Threat Initiative:

"This is a breakthrough in global cooperation to enable peaceful uses of nuclear energy while reducing the risks of proliferation and catastrophic terrorism."

Indeed it is. Much more to come about this.

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I didn’t know what to think:

The [chair of the] Kuwaiti National Committee for Utilizing Nuclear Power for Peaceful Purposes, Dr. Ahmad Bushara, said "Kuwait seeks to build four 1,000 MW nuclear power plants, to produce electricity, by January 2011."

Well, that’s ambitious, since ground hasn’t been broken for the first plant yet. But Dr. Bushara, perhaps badly translated or perhaps just a victim of a typo, means that the committee wants to get the ball rolling then.

He added, that by 2013, Kuwait will go out on bidding for its first nuclear project and launch its first nuclear power plant by 2020-2022.

That’s more like it.

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We’ve followed the German struggles with keeping its nuclear plants open with both amusement and dismay. Amusement because the Germans are complaining despite being in a very good place – safe nuclear plants, a good head start on meeting carbon emission reduction targets – and dismay because the government dithered so long that it led to people protesting against their own best interest.

Others have the same attitude:

Putin recognized that "the German public does not like the nuclear power industry for some reason." He continued: "But I cannot understand what fuel you will take for heating. You do not want gas, you do not develop the nuclear power industry, so you will heat with firewood?" Putin then noted, "You will have to go to Siberia to buy the firewood there," as Europeans "do not even have firewood."

Putin is, of course, Russian President Vladimir Putin, showing he can bring his customary bluntness to any situation. Russia has a bad habit of turning off the natural gas spigot to the West, so there’s that. But when he’s right, he’s right.