Nuclear industry in crisis

Nuclear industry in crisis

One of the most significant nuclear industry developments of 2016 was the revelation that nuclear giant Toshiba faces multi-billion dollar losses and write-downs and may rule itself out of future nuclear construction bids around the world.

Toshiba was only just recovering from a 2015 accounting scandal in which it padded reported profits by about A$1.7 billion over seven years.

The ripple-effects of Toshiba’s latest problems will be many and varied. Japan’s ambitions to develop a large nuclear export business are in tatters.

As recently as last year, Toshiba said it hoped to win 50 contracts to build new nuclear plants in India and China over the next decade. Also up in the air are reactor construction projects being planned in the UK, Turkey, and elsewhere.

Toshiba says it is “re-examining its relationship” with Westinghouse, its struggling US subsidiary. Delays and cost overruns on nuclear construction projects in the US will be expressed as write-downs that could be as high as A$9.1 billion. Toshiba’s 2006 acquisition of Westinghouse has turned out to be a “pivotal moment in Toshiba’s decline” according to Bloomberg.

Pro-nuclear commentator Dan Yurman says the looming massive write-down has “doomed” the company’s U.S. nuclear business and it “also apparently ends the so-called nuclear renaissance in the U.S. for full size reactors.

During 2007-2010 there were more than two dozen applications expected for new reactors, but now only a few licenses have been completed and they do not have any links to near term plans to build the units.

Forget the hype about so-called ‘Generation IV’ reactors ‒ the industry is having massive problems with ‘Generation III’ reactors, which are nothing more than modified versions of long-established reactor technology.

Problems with Generation III projects ‒ which largely explain Toshiba’s crisis ‒ are summarised in a recent Bloomberg piece: “Costly delays, growing complexity and new safety requirements in the wake of the triple meltdown at Fukushima are conspiring to thwart a new age of nuclear reactor construction. So-called generation III+ reactors were supposed to have simpler designs and safety features to avoid the kind of disaster seen in Japan almost six years ago.”

“With their development, the industry heralded the dawn of a new era of cheaper, easier-to-build atomic plants. Instead, the new reactors are running afoul of tighter regulations and unfamiliar designs, delaying completions and raising questions on whether the breakthroughs are too complex and expensive to be realized without state aid.”

Other nuclear utilities around the world are also in deep trouble. Their problems were summarised in the July 2016 World Nuclear Industry Status Report:

“Many of the traditional nuclear and fossil fuel based utilities are struggling with a dramatic plunge in wholesale power prices, a shrinking client base, declining power consumption, high debt loads, increasing production costs at aging facilities, and stiff competition, especially from renewables.

In Europe, energy giants EDF, Engie (France), E.ON, RWE (Germany) and Vattenfall (Sweden), as well as utilities TVO (Finland) and CEZ (Czech Republic), have all been downgraded by credit rating agencies over the past year. All of the utilities registered severe losses on the stock market.

French utility AREVA has accumulated €10 billion (US$10.9 billion) in losses over the past five years. Share value 95% below 2007 peak value. Standard & Poor’s downgraded AREVA shares to BB+ (‘junk’) in November 2014 and again to BB- in March 2015. The company is to be broken up, with French-state-controlled utility EDF taking a majority stake in the reactor building and maintenance subsidiary AREVA NP will then be opened up to foreign investment. The rescue scheme has not been approved by the European Commission.

The AREVA rescue scheme could turn out to be highly problematic for EDF as its risk profile expands. EDF struggles with US$41.5 billion debt, downgraded by S&P, shares lost over half of their value in less than a year and 87% compared to their peak value in 2007.

RWE shares went down by 54% in 2015.

In Asia, the share value of the largest Japanese utilities TEPCO and Kansai was wiped out in the aftermath of the Fukushima disaster and never recovered. Chinese utility CGN (EDF partner for Hinkley Point C), listed on the Hong Kong stock exchange since December 2014, has lost 60% of its share value since June 2015. The only exception to this trend is the Korean utility KEPCO that operates as a virtual monopoly in a regulated market.

In the US, the largest nuclear operator Exelon has lost about 60% of its share value compared to its peak value in 2008.”

Nuclear Reactors and Net Operating Capacity in the World, 1956–2016

L’andamento del numero di reattori nucleari presenti nel mondo e la loro capacità operativa (Fonte: World Nuclear Industry Status Report, 2016)

The nuclear power ‘renaissance’ … or a dead cat bounce?

Global nuclear power capacity increased by 9.2 gigawatts (GW) in 2016. By contrast, renewable electricity capacity growth was 153 GW in 2015 and almost certainly greater in 2016.

In broad terms, nuclear power has been stagnant for the past 20 years. Using figures from the World Nuclear Association (WNA) and the International Atomic Energy Agency, global nuclear capacity has grown 12.7% over the past 20 years and 5.7% over the past decade. But those figures include idle reactors in Japan and the inclusion of those reactors is, as former WNA executive Steve Kidd states, “misleading” and “clearly ridiculous”.

The World Nuclear Industry Status Report (WNISR) excludes 34 idle reactors in Japan (and one each in Taiwan and Sweden) from its calculations of current nuclear capacity. Using WNISR figures, nuclear capacity has grown by 1.7% over the past 20 years and it has declined by 4.6% over the past decade.

If we look more closely at recent figures, the picture is a little confusing. Global nuclear power capacity increased “slightly” in 2016 according to the pro-nuclear WNA while the anti-nuclear WNISR said that a “significant” number of new reactors came online. If there’s some confusion now as to the trajectory of nuclear power, that confusion is likely to grow in the next few years.

Source: Renew Economy

Date: March 2017

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