On 29 March 2017, Westinghouse Electric Company, a subsidiary of Japanese company Toshiba and the largest historic builder of nuclear power plants in the world, filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York. The insolvency has resulted from a number of factors, most importantly, the massive cost increases and time delays at the two projects in Georgia and South Carolina. As Westinghouse’s website puts it somewhat more discreetly, the “company is seeking to undertake a strategic restructuring as a result of certain financial and construction challenges in its U.S. AP1000 power plant projects”. Contributing to the bankruptcy are also certain decisions that Westinghouse made, including, for example, its choice to purchase Chicago Bridge and Iron (CBI), which was working on the Vogtle reactors. Done as a part of attempts to resolve a complicated legal tangle, that purchase left Westinghouse with “no way to pass on the cost overruns” associated with the project. Fundamentally, though, what led to this bankruptcy were two bets that Westinghouse and Toshiba made. The first bet was that there will be a growing and large market for nuclear power plants. When Toshiba acquired Westinghouse from British Nuclear Fuels Ltd. (BNFL) in February 2006, the press release confidently projected: “By 2020, the global market for nuclear power generation is expected to grow by 50 percent compared with today”. At that time, the President and CEO of Toshiba estimated that there would be 10 large (1 GW) nuclear reactors built each year till 2020 amounting to 130 GW of new reactor capacity. That estimate was off by at least an order of magnitude. Much of the hype around that time was over what many saw as a coming nuclear renaissance, including Westinghouse personnel. The second bet that Westinghouse and Toshiba made was that the well-known problems of cost increases and lengthy construction periods could be solved using its AP1000 design. These problems have afflicted nuclear power plants around the world. Indeed one study of construction cost overruns showed that 175 out of the 180 nuclear projects examined exceeded the initial budget, on average by 117 percent, and took on average 64% more time than projected. Westinghouse promised to beat this trend because of their expectation that “plant costs and construction schedules benefit directly from the great simplifications provided by the design” and because of the adoption of “modular construction techniques”. Based on these, Westinghouse estimated a “cost per kWh of about 3.0 to 3.5¢/kWh for a twin unit plant”. Westinghouse projected that the AP1000 reactor would have “an accelerated construction time period of approximately 36 months, from the pouring of first concrete to the loading of fuel”. All of these projections have gone spectacularly wrong in both China, with the Sanmen and Haiyang projects, and especially in the United States. The modular construction methods only had the effect of shifting some of the problems from the building site to the factory.
World Nuclear Industry Status Report 2nd April 2017 read more »
In the 21st century Westingouse seemed poised to unleash a new revolution in nuclear energy. Its AP1000 pressurised water reactor was supposed to make nuclear plants simpler and cheaper to build, helping to jump-start projects in America and around the world. But those nuclear ambitions have gone awry. On March 29th the firm filed for Chapter 11 bankruptcy in New York. Its troubles have been a running sore at Toshiba, its Japanese parent, a headache for its creditors, and the latest bad tidings for a nuclear industry beset with problems. But the Westinghouse bankruptcy is unlikely to be neat. Southern and SCANA may go to court to seek payment from Toshiba: the Japanese company has guaranteed ¥650bn ($5.9bn) against the spiralling cost of the projects. Any suggestion that Toshiba is bilking the utilities would anger Donald Trump. The AP1000 projects’ future was recently discussed in a meeting of officials from America and Japan. The future for other AP1000 reactors looks bleak. A plant in China is years behind schedule. In America, the troubles in Georgia and South Carolina may bolster support for more modest nuclear projects, says Tyson Smith, a nuclear-energy expert at Winston & Strawn, a law firm. On March 15th the country’s nuclear regulator said it would review an application for America’s first small modular nuclear reactor (SMR), from a company called NuScale, in Oregon. The SMR technology has been touted as a cheaper, easier way to build nuclear capacity. But it will have to compete with inexpensive natural gas, wind farms and solar plants. Those hoping for an American nuclear resurgence may have to wait a long time yet.
Economist 1st April 2017 read more »