Industry sees a greenhouse lifeline1 October 1998
Competing in a privatised market, taking advantage of growing concern over global warming and improving the nuclear industry’s image in the public eye were the dominant themes of the 23rd annual Uranium Institute symposium. With representatives of the industry worldwide in attendance, delegates discussed the issues which will shape the industry in years to come.
Privatisation of the United States Enrichment Corporation (USEC), which was completed on 28 July 1998, is good for USEC, is good for employees and good for the nuclear industry in general. This was the central message of USEC’s president and chief executive, William Timbers’ address to the Uranium Institute symposium. The privatisation process had been a long-running saga, but now the new company, USEC Inc can look forward.
“The focus is shifting from government to customer needs,” said Timbers. “We now have a different mission and need to broaden the operating base of the company.” The privatisation of USEC heralds a new era for the nuclear industry. Over the next decade it will have to compete on a commercial basis with other forms of electricity generation, whilst improving safety levels as regulatory regimes continue to tighten. Timbers believes that the experience USEC has gone through will act as a prototype for other organisations throughout the world.
“I got a good view of how the industry is viewed by the investing public,” said Timbers. “We travelled the world with a selling road show, making over 150 presentations to potential investors. The result was that the financial community decided USEC was a good buy.
“The downside, though, was the lack of understanding about the industry amongst investors. Many did not know that nuclear power accounts for 20% of electricity production worldwide, about the contribution it can make to meeting the targets of the Kyoto protocol, or that nuclear power produces zero emissions. The industry needs to go and educate investors and USEC’s privatisation has been a very important first step.
“As USEC grows and increases its penetration in financial markets, I hope we can be a leader for the rest of the industry.” Now USEC is a private company it intends to sell its uranium inventory of 70,000 tons of U3O8 equivalent on the open market. Some analysts have expressed concern that this, combined with the downblending and selling of Russian highly enriched uranium which USEC committed itself to doing before privatisation, could flood the market and lead to a significant fall in uranium prices (See NEI, Sep p12). Timbers was keen to reassure the industry that USEC aims to sell these inventories in a way that maintains prices.
“We expect most of our uranium sales to occur after the year 2000 and sales through 2005 should represent less than 10% of world demand,” he said. “It flies in the face of logic and business common sense for USEC to flood the market with uranium and we have no intention of doing so.” According to Timbers, USEC’s uranium inventory is valued at more than US$1 billion.
“The US/Russian HEU contract is another area where there has been considerable misinformation, which has led to unwarranted concerns,” he continued. “One third of the total 500 metric tons of HEU is under firm commercial terms. That’s the equivalent of more than 7000 nuclear warheads.” Despite the privatisation Timbers also said that USEC remains committed to the development of AVLIS laser enrichment technology. But the emphasis has shifted in recent years from a scientific project in which a vital issue had been the continuation of funding year on year, to an engineering one with specific targets and objectives.
“The white coats are out and the engineers are in,” he said. “Over the last 18 months we have had tremendous success in meeting the targets we set engineers and there has been movement towards developing a real technology.” A wider perspective Caroline Varley, head of the energy diversification division at the International Energy Agency, gave the symposium a perspective from the the wider business world. Whilst she saw privatisation as a positive thing for the nuclear industry, she warned that the industry has to address a number of fundamental issues if it is to succeed in a commercial environment. Privatisation is likely to have a number of impacts on electricity market competition, including a concentration of efforts by plant owners to reduce expenditure and maximise returns; reorientation of decision making to incorporate private rather than public costs and benefits; and more transparent pricing which better reflects the costs. Varley’s paper, co-written by John Paffenbarger, argues that privatisation is forcing governments to become more open about support for specific generation sources. This is effecting not only nuclear power, but has also highlighted the costs of supporting coal mining in the UK, Dutch support for renewables and German support for combined heat and power systems.
“In every country with nuclear power plants, there has been strong government funding for their development,” said Varley. “Research and development of nuclear technology has perhaps been the most visible component of this support. Governments have also built specialised facilities such as enrichment plants, fuel reprocessing facilities, and radioactive waste facilities. In countries with atomic weapons...military programmes supported the development of civilian nuclear power plants.
“The past arrangements for government support of nuclear power perhaps contribute to public mistrust of it. Past government support may contribute today to the sentiment that the choice of nuclear power was not made openly and democratically, but secretly, and with financial support that has not been fully justified or accounted for. In some countries there seems to be a strong public sentiment that the true costs of nuclear power are still unknown because of secretive or unquantified public support. The implication is that nuclear power would not be sustained if left to rational economic choice in open markets.
“Competition in electricity markets, and the increased policy transparency it brings, could be an important means to erase this element of mistrust.” Despite Timbers’ bullish language, Varley’s analysis suggests nuclear power faces major problems competing with fossil fuel and other forms of electricity generation. Despite the fact that many nuclear power plants will reach the end of their design lives within the next 10-20 years, Varley anticipates few, if any, new commitments to build plants anywhere in OECD countries apart from Japan and Korea.
“This assessment is common, both within the nuclear industry and in the electricity utility industry in general,” she said. “It assumes that fossil fuel prices do not increase greatly, and that environmental protection regulations do not become significantly more stringent.” The reasons for this prediction are that in many markets there are cheaper alternatives to nuclear power; there are no fully developed and politically accepted plans for disposal of high level waste; public concerns remain over safety which give rise to problems in siting new plants; concerns also exist regarding proliferation; and in some markets there is little demand for new base load power. Furthermore in many states, there are political arrangements preventing the construction of new plant.
“This political impasse, and the issues that must be resolved before there could be new political decisions in support of nuclear power, are far more important to the future of nuclear power than the introduction of competitive markets,” said Varley.
A change in the wind Significantly, Varley’s analysis assumes there will be no major changes in the costs of fossil fuel generation. This could well be wrong as CO2 emissions are the most important contributor to global warming and the Kyoto conference last December for the first time committed developed nations to cuts in greenhouse gases.
Timbers said that the next few years were “a crucial time” for nuclear power with regard to benefiting from the greenhouse effect, Jean-Pierre Rougeau, chairman of the Uranium Institute and senior vice president of Cogema, described global warming as offering the nuclear industry “a window of opportunity” and that incorporating environmental costs would help nuclear power compete, whilst Martin Fertel, senior vice president of the Nuclear Energy Institute in the USA, argued that: “For years, little or no attention was paid to the fact that nuclear energy produced trillions of kilowatt-hours of electricity without contributing to air pollution problems in the United States and abroad.” Fertel expanded the issue, saying that one of the industry’s goals is to gain economic recognition of its environmental benefits.
“We believe tradable credits should be earned not only on the basis of reduced pollutant emissions, but as a function of avoided emissions as well,” he said. “As the Clinton Administration looks towards satisfying its Kyoto carbon reduction commitments, the use of cap and trade systems, specifically including those that would give nuclear energy and other non-emitting sources credit, are being discussed as part of the policy formulation process.” Political antipathy in the United States to nuclear power, which has prevented the building of any new plants since the Three Mile Island incident in 1979, is, according to Fertel, beginning to dissipate. Senator Frank Murkowski, chairman of the Senate Energy and Natural Resources Committee recently recommended that Congress establish an “emission-free portfolio standard”, while Senator Pete Domenici said in a speech at Harvard University that “The President’s [clean air] goals are not achievable without seriously impacting our economy. What the President should have said is that we need nuclear energy to meet this goal.” Perception is reality Convincing people that nuclear power can contribute to preventing catastrophic climate change, however, is likely to be easier than gaining public trust and addressing the other problems Caroline Varley detailed. Throughout the debates there was an exasperation at the difficulties the industry has in convincing people that nuclear power is safe and clean and many expressed a belief that regulatory regimes throughout the world are too harsh on the nuclear industry, forcing it to operate to standards higher than those of other industries.
During a debate between industry representatives and the media, Morris Rosen of the International Atomic Energy Authority argued that regulators had to be brave and stand up and say that the risks posed to the public as a result of incidents such as that of the contaminated transport casks in Germany (See NEI, July p4), were absolutely minimal and that the direction of regulation should be towards relaxation rather than further tightening. His argument was supported in a paper presented by Bernard Cohen of the University of Pittsburgh, in which he challenged the conventional linear no-threshold theory of radiation carcinogenisis, arguing that the evidence suggested that exposure to low radiation doses actually gave an individual protection when exposed to higher doses.
The recent incident with transport casks which had radiation hot-spots exceeding the regulatory limit of 4 bq/cm2, exposes the industry’s greatest problem. Despite the fact that the risk to the public was almost non existent, the German government ordered that no further transportation could take place until an inquiry took place. The inquiry is likely to focus less on any possible risk, but on the fact that the industry had known of the contamination for many years, but had not reported it. This is the industry’s Achilles’ heel, a perception built up over many years that it does not answer difficult questions properly and suppresses information which may damage it.
Rosen’s response when the press raised this issue was to repeat: “There was no health risk - there was no health risk.”
|UI report looks ahead to 2020|
|The Uranium Institute has published its latest report, The Global Nuclear Fuel Market, Supply and Demand 1998-2020. The report details three scenarios for the future of the nuclear power industry and the subsequent demand for uranium fuel. In the reference, or middle, scenario, the Institute anticipates an annual growth rate of a little under 1% per year. This translates into uranium reactor requirements growing from 60,000 tU in 1997 to 64,600 tU in 2000, 70,600 tU in 2010 and 73,700 tU in 2020. The upper scenario leads to uranium demand of 87,100 tU in 2020 and the lower estimate is considers a drop in demand from 63,400 tU in 2010 to 52,900 tU in 2020 as reactors are closed down. Two trends emerge from the uranium market over the last two years. Production is increasingly concentrated in large mines in a small number of countries, in particular Australia and Canada; and ownership of mines is concentrating in fewer companies.Secondary sources, such as inventories held by commercial organisations and governments, uranium recycled from spent fuel, downblended military uranium and re-enriched depleted stocks, will provide a significant proportion of uranium requirements. The institute concludes that the nuclear power industry is likely to remain well supplied with uranium up to and beyond 2020.|