Earth Track Blog Post

The July 8, 2010 edition of Nucleonics Week (not available on the web) included a fairly remarkable article by Ann MacLachlan on Danny Roderick, senior vice president of new projects for GE Hitachi.  The article is based on an address he gave to the the Platts European Nuclear Power conference on June 29 in London, and a subsequent interview with Platts.  Some choice quotes from the article:

1)  Socialism's not so bad:  sell our reactors when you sell countries military equipment

Nuclear power plant deals today need to be part of a package that includes "missiles and aircraft carriers" as well as reactors and infrastructure support," he said..."If this [nuclear buildout] is going to become a team sport, we're going to have to find a team USA," he said, and find out how the US government can support reactors bids that include military equipment, electricity grids and "the entire supply chain" for nuclear power plant infrastrcture, Roderick said.

I would suggest that from the perspective of taxpayers, competing energy technologies, and for slowing proliferation, a much better path would be to challenge the various other "Teams" for violation of their WTO commitments on free trade.

2)  Most growth markets for nuclear power are "closed" to competitive bids, reliant on national champions and government investment

Of the nuclear units under construction in the world, 48 are "in closed markets where I can't compete," Roderick said.  That includes China, France, Russia and South Korea, he said...Roderick said in the last two years "there have been only two actual competitively bid [nuclear power plant] projects that were based on a private company structure.  All others were government-to-government deals..."

Since France, South Korea, and China are regularly trotted out to demonstrate that nuclear power is economically competitive, it is nice to see a clear statement from industry that government subsidies are a primary driver of nuclear construction in these supposed success stories.

3)  Renewed recognition of risk since the US financial crisis has increased the cost of financing to nuclear reactors substantially

"The financial crisis set us back," Roderick said, noting that while most utilities could get self-financing for nuclear projects three years ago, financial institutions in 2008 were reluctant to provide loans and were charging "almost usurious" interest rates for those they did offer.

Note that while I disagree with him that reactor projects could have gotten self-financing from banks three years ago at the types of interest rates Roderick is implying they could, it is useful to note that most cost models for the levelized cost of new nuclear are probably understating the cost of unguaranteed debt by a large margin.  Or, if they are assuming federally-guaranteed debt, they are understating the size of the subsidy this guarantee is conferring.  These models are also likely overstating the debt share of capital structure feasible in today's markets, further understanding the cost of capital on the projects.

4)  We're not like the other firms:  we will deliver on time, and on budget

Roderick said the experience with schedule and cost overruns for nuclear plants under construction should not be extrapolated to the ESBWR.  That design will be complete when construction begins and, thanks to modular techniques, construction will take only 36 months from first nuclear island concrete to startup.

This is an easy one to fix.  GE and Hitachi are both large and financially savvy companies.  They could demonstrate their faith in their products and process simply by using a fixed price bid with financial penalties after 36 months if the reactor were not up and running.  This bold move would no doubt be quite attractive to many potential customers.  If you see such deal structures from Roderick or from others, please let me know.

(Thanks to Ellen Vancko at UCS for bringing this article to my attention).