France has long been at the forefront of nuclear power as one of the biggest users around the world. But the recent announcement that French nuclear giant Areva would merge its reactor business with fellow French giant EDF is a sign of changing times in the industry.
Both EDF and Areva are more than 80% owned by the French government, so essentially both companies are largely beholden to the will of the state. That reality was reflected by the fact that the French President’s office actually made the merger announcement.
French state-owned companies are not widely regarded as being paragons of efficiency and the involvement of the state certainly complicates the typical profit motive of these firms. Areva is no exception to that rule as the company lost a total of $5.6 billion in 2014, an amount that is larger than the company’s market capitalization.
But the problems are bigger than Areva. The nuclear industry faces exorbitant plant costs, waves of protests, and constant construction delays whenever a new reactor breaks ground. The US and France have historically been the leaders in nuclear power with the largest fleets in the West. But even in France and the US, the time, cost, and difficulty of building new nuclear plants resulted in limited construction in recent decades. Add that to the fact that electric power demand is stagnant, and it becomes clear that the industry is decaying in the West.
Instead most of the growth in the nuclear power industry is occurring in two countries with some of the worst environmental and safety records in the world; China and India. Both countries have enormous plans in the works for an expansion of nuclear power in part as a mechanism to curb the use of coal that leads to horrific air pollution. Still with quality concerns regarding the necessary high tech safety equipment, the two nations will need to be very diligent given the risks associated with nuclear power plant operations.
Areva has posted losses in each of the past four years including a €4.83 billion loss in 2014. Chief executive Philippe Varin said: “Areva’s paradox is that it is a world leader in its sector and a company in crisis.” Varin said the crisis was due to deficient management of big reactor projects and Areva’s failure to adapt to a weaker global market following the 2011 Fukushima disaster.
Areva’s spent nuclear fuel reprocessing operations are in trouble. A May 6 Reuters article outlines the problems. Areva’s reprocessing unit has lost nearly all of its international customers and now relies almost exclusively on domestic business. The company’s ‘back-end’ sales − reprocessing and decommissioning − have fallen from €2 billion in 2004 to €1.53 billion in 2014. Areva needs to invest something of the order of €200 million per year for the next 10 years to renew ageing equipment and boost capacity of its nuclear waste storage pools.
But Areva’s biggest problems involve its European Pressurised Reactors (EPR). These were the first Generation III reactor types to win orders, first in Finland in 2003 (Olkiluoto 3 − the first reactor order in Western Europe in 15 years), France in 2006 (Flamanville) and China in 2007 (two EPRs at Taishan).
Since then, EPRs have faced one problem after another. All three EPR construction projects have suffered cost blowouts or delays or both.
Since the contract was signed in 2003 for a new EPR in Finland, the estimated cost has risen from €3.2 billion to €8.5 billion. Areva has already made provision for a €2.7 billion writedown on the project, with further losses expected. French and Finnish utilities have been locked in legal battles over the cost overruns for several years. The project is nine years behind schedule − the start-up date has been pushed back from 2009 to 2018.
The estimated cost of the Flamanville EPR in France has increased from €3.3 billion to at least €9 billion. The first concrete was poured in 2007 and commercial operation was expected in 2012, but that timeframe has been pushed back to 2017 (with further delays likely).
The British Daily Mail in late 2013 characterised the Flamanville EPR project as one “beset by financial mismanagement with rocketing costs, the deaths of workers, an appalling inability to meet construction deadlines, industrial chaos, and huge environmental concerns”, and noted that “it continues to be plagued by delays, soaring costs, and litigation in both the criminal and civil courts.”
Nevertheless,
The Pentagon’s top arms provider and firms partly funded by Silicon Valley billionaires Bill Gates and Paul Allen are among dozens of companies collectively betting more than $1.3 billion that a new wave of nuclear power can be a force to fight climate change.
Advanced nuclear power plants, which will employ techniques such as using fuels other than uranium and coolants other than water, have attracted private investments from more than 40 companies from Florida to Washington state, the Third Way think tank says in the first report specifying the number of firms and total money invested in the technologies.
The reactors, which could come into development in 10 to 15 years, can help curb U.S. carbon emissions and make investments in electricity generation less costly, researchers at Washington, D.C.-based Third Way said in a report seen by Reuters and to be released as soon as Monday.
Companies expressing faith in advanced nuclear power range from Lockheed Martin, the Pentagon’s largest supplier, to Holtec International, which is building a $260 million technology campus in economically depressed Camden, New Jersey.
Gates has partially funded TerraPower, a company that aims to build reactors cooled by liquid metal, and Allen has partially funded TriAlpha, a company that plans to make nuclear fusion plants.
Investors “realize cost competitiveness is the name of the game,” said Josh Freed, who directs the clean energy program at Third Way. The reactors are “designed to be scalable so that they can produce energy at a per megawatt hour cost that’s competitive not just with existing nuclear, but importantly with fossil fuels and renewable energy.”
Advanced nuclear reactors should be smaller than today’s reactors, and construction should take one to five years, rather than five to six.
Critics of advanced nuclear say companies have yet to make small reactors economically viable despite decades of development by energy companies and the U.S. military. Advanced reactors using new fuels, such as thorium, and new cooling systems, such as molten salt, are also difficult to make economically viable, they say.
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