Guest contributor Jennifer Gorton from Forex Traders takes a look at the opportunities presented by new nuclear build in the US and assesses which companies are best positioned to take advantage if the often discussed renaissance becomes a reality.

The explosion of the environmentalism movement upon the American landscape over the last ten years has done wonders in awakening the American consciousness to the hard fact that we must take care of our world. Whether one believes in the full arguments of global warming or not, it is clear that steps must be taken to protect the earth from destruction via carbon emissions and unnecessary pollutants. President Barack Obama won over the environmentalism movement when his campaign pledge called for carbon emissions to be cut 80% by 2050. Typically, energy generation has had many negative effects on the environment, which is why nuclear energy is gaining so much traction around the world as a viable source of energy generation. In this report, we will examine the benefits and costs of nuclear power, and examine several key companies that stand to profit from an explosion in the nuclear power market.

In 2009, nuclear power attributed to 15% of the world’s electricity generation. The United States of America is currently the largest producer of nuclear power, representing about 31% of total global nuclear generation. As pressure to adhere to green environmental procedures increases upon countries around the world, many developed nations are continuing to consider nuclear power as a viable alternative energy source. Let’s take a look at several of the key benefits of nuclear power versus other energy sources:

• No greenhouse or acid rain effects
• Easy to transport
• Fuel is inexpensive
• Most concentrated source of energy
• Waste is compact

These key benefits have made nuclear power a very attractive alternative energy source for many countries. However, there are major concerns to further development of nuclear energy, with the main one being proliferation. Some world leaders are concerned what the world may look like if we have innumerable nuclear reactor sites around the world. If this technology fell into the wrong hands, we all know what could happen. Due to the incredible benefits of nuclear power and the fact that many countries, including the U.S., are planning on bolstering nuclear power generation in the next 20 years, has caused many financial analysts to be very bullish on the nuclear power industry. Several companies stand to profit nicely in the long-term as an increasing number of nuclear power plants are built in the U.S. and abroad.

Before we take a look at a few key companies that have positioned themselves to take advantage of this incredible growth and expansion opportunity in the nuclear power market, we must take into account the risks, and possible downside, of the nuclear market. First of all, nuclear power generation is extremely expensive. Although the actual production of energy is cheap, the same cannot be said for the capital costs incurred during plant construction. In fact, a recent Massachusetts Institute of Technology study estimated that the price of a new nuclear power plant, housed with the most advanced for of nuclear reactors, would cost between US$5bn and US$10bn. This very high cost could put pressure on the industry, especially during a time when credit is not readily available. The current economic constraints in the United States and around the world could serve to weigh on the incredible growth prospects in the nuclear power market.

If the market can somehow get past the incredible expense of building nuclear power plants and move forward, there are several companies that have positioned themselves for an increased demand for nuclear energy good and services.

Shaw Group – a leading global provider of engineering, construction, technology, fabrication, remediation and support services for clients in energy, chemicals, environmental, infrastructure and emergency response industries. Shaw is considered a relatively reliable investment, as it is a Fortune 500 company with fiscal year 2009 annual revenues of US$7.3bn. The group is positioning itself for future growth as it has recently locked in a huge nuclear project in Saudi Arabia, and the market is waiting for confirmation of a large deal in India. Shaw has positioned itself to take advantage of the increased demand for the construction of nuclear power plants.

GE – With household name recognition, GE is one of the most recognizable brands in America. Spanning several decades under the able management of Jack Welch, GE was systematically built into one of the richest and robust companies in the world. After a difficult period of several years, GE has shed many of its peripheral businesses and refocused on energy. With its huge capital base, GE should be a top competitor in the development of nuclear energy, especially in the US, where the number of nuclear power plants are expected to increase dramatically in the next 20 years.

Fluor– A Fortune 200 company with revenues of US$22bn in 2009, Fluor builds and maintains many of the world’s most complex nuclear power plants. Due to the expected rise in the number of power plants in America, Fluor should see strong growth over the long-term. Fluor also has a very strong international presence in the nuclear power industry, so it is not completely dependent on immediate developments the United States, which should serve to reassure potential investors. The energy needs of emerging market are expected to explode during the next 20 years as more countries develop high-tech infrastructures, and Fluor will be a major player in these developments. At the end of June, Fluor announced it had won a US$1.3bn mining contract with a copper mine in central Chile. Due to Fluor’s international presence and business dealings in various currencies, it has been suggested that a viable strategy for the company would be to hedge against currency volatility in a Forex account in order to produce steady growth.

Excelon – The largest nuclear operator in the America, Excelon is a utility services holding company that specializes in operating its electric generating facilities, its wholesale energy marketing operations, and its retail supply operations. It is considered to be a strong presence within the nuclear energy production area.

The two major risks to incredible growth in the nuclear power market are high capital costs and proliferation. If these two risks are discounted in the face of the incredible benefits of nuclear power generation, then the nuclear power market should see very strong growth in the next 20 years and investing in companies such as the ones above may be a good investment strategy.

India’s new found acceptance by the international community comes at an opportune time for the country’s nuclear sector. As recently as February, The Times of India reported that only three of the country’s 17 nuclear reactors were working at full capacity, due to a shortage of uranium. A total of 11 were working at low capacity factors, while three others had been shut down for long-term maintenance until November 2009. The three that are working to full capacity are doing so thanks to imported uranium, as opposed to local supplies. The overall capacity factor for the nation’s power plants is hovering around a rather lacklustre 60 per cent, underscoring the importance of the agreement with the International Atomic Energy Agency (IAEA) from the perspective of securing the uranium fuel resources necessary to revitalise the country’s nuclear industry.

The plans for new build are ambitious. The Nuclear Power Corporation of India is planning to build ten new 1200-1400MW high capacity light water reactors by 2020, as part of the 12th Five Year Plan. The Plan aims to increase the country’s nuclear generating capacity to 10GW from the current 4.56GW in the form of 20 reactors. This should perhaps be taken with a strong pinch of salt given that the country has had a long track record of setting ambitious targets for its power sector, which are often not achieved. On the other hand, the country’s Science, Technology and Earth Sciences minister, Prithviraj Chavan told lawmakers in the upper house that the country’s nuclear generating capacity is expected to increase by around 68 per cent to 7.28GW by March 2012 as a result of projects already under construction. The current fleet accounts for just three per cent of India’s generating capacity.

NPCIL successfully commissioned two nuclear reactors each of 220MW at Rajasthan in February and March 2010. A 220MW light water reactor at Kaiga is expected to be completed by June 2010 and will be followed by two 1000MW reactors at Kudankulam, projected to be commissioned in September 2010 and March 2011. There is also a 500MW fast-breeder reactor at Kalpakkam under construction, which is expected to be completed in 2011 (see the trouble with thorium, below). The funds required by existing projects over the next two years are estimated to be INR36.19bn (US$805m).

Unlike other commodities, uranium has essentially just one use: power generation in nuclear reactors. As a result, demand is determined purely by the number of reactors in operation and their capacity factors. It follows that with the exception of new reactor starts, operational news tends towards the bearish, given the economic incentive for keeping capacity factors high and the fact that nuclear reactors are very much a baseload technoloy. The upshot of this is that global uranium demand going forward can be easily extrapolated from new build proposals, projects under construction and decommissioning schedules, over a 5-10 year timeframe. In addition, the small volume of processed fuel means that power utilities purchase uranium in batches. This is one of the main reasons, why uranium hasn’t recorded gains similar to those of other energy commodities on the back of the global economic recovery. In addition, this also suggests that short- to medium-term gains in the absence of new reactor starts will be limited to a few percentage points.

Uranium differs substantially in terms of its supply/demand dynamics to oil, the most studied energy commodity when it comes to depletion. In particular, there is little danger of domestic demand in major uranium-producing nations eating into their capacity to export the fuel abroad. However, as with oil, there is a major drive by developing countries, such as China to lock up the resources needed to continue their break-neck expansion.

A good example of such a deal is the acquisition of a AUD83.6m controlling stake in Australia’s Energy Metals Ltd (EME.AU) last year. The growth in Chinese demand for yellowcake was highlighted in January, when it imported ~3337t of uranium, over 10 times the amount seen in January 2009. Fifty-seven per cent of the imported uranium came from Kazakhstan, with smaller contributions from Russia, Namibia and Uzbekistan. The country currently has 11 reactors in operation, with a further 20 under construction. However, this pales in comparison with the 36 currently in the planning stages and proposals for a further 157. Small wonder then, that the World Nuclear Association is expecting the country’s nuclear capacity to grow to 60GW by 2020, before reaching 160GW by 2030. For some idea as to how this will impact the uranium market, comments made by Zhou Zhenxing, chairman of Guangdon Nuclear Power’s uranium supply limit made back in November are quite sobering. He predicts that the utility’s annual need for uranium will rise fivefold to 10,000t in 2020, up from the 2000t seen in 2009.

Often overshadowed by China, India’s own efforts in this arena are also impressive and are accelerating courtesy of the Nuclear Suppliers’ Group agreement achieved back in 2008 and the subsequent civil nuclear cooperation agreements with the US, Russia, France, the UK, among others. The country’s nuclear capacity stood at 3.7GW in 2006 and the WNA expects this to rise to 20GW by 2020 and 63GW by 2032. The rapid pace of new build is being driven primarily by a projected 6.3 per cent annual increase in electricity consumption per capita. While China is rapidly expanding its own nuclear expertise so that it can handle all aspects of plant construction and the fuel cycle, India is working hard to develop fast breeder and thorium reactor technology, a sensible strategy given its large thorium reserves, lack of uranium resources and the understandable desire to avoid direct competition with other developing economies, which may potentially have deeper pockets.

Many countries such as China and Japan are rushing to lock up uranium supplies abroad due to their lack of domestic resources

Japan is also looking to secure uranium supplies. The country lacks any real energy resources of its own and is aiming to build another 13 nuclear reactors. In this light, the current low share price of many uranium miners has been seized upon by Japanese companies, eager to buy up resources at a discount. Late in 2009, Mitsubshi Corp teamed up with Cameco to buy Rio Tinto’s Kintyre Uranium deposit in Western Australia for US$495, and Mitsui & Co bought a 49 per cent stake in the Canadian Uranium miner, Uranium One’s Honeymoon project in South Australia. More recently, a Japanese consortium, including Toshiba Corp, the Japan Bank for International Cooperation and the Tokoyo Electric Power Company Inc, entered into a long-term agreement to a 19.95 per cent interest in Uranium One for US$270m. In addition to its Canadian and Australian assets, Uranium One is active in Kazakhstan, thanks to a 70 per cent stake in the Adkala mine and the South Inkai Uranium project, along with a 30 per cent stake in the the Kharasan project. Along with a sizable holding in the Canadian uranium miner, the consortium will hold the right to purchase up to 20 per cent of Uranium One’s output from 2014.

Rio Tinto’s current strategy of selling off non-essential assets has sparked rumours that Japanese companies are considering purchasing its 68 per cent stake in Energy Resources Australia, which owns the Ranger Mine, which is second largest uranium project in Australia and is responsible for almost 11 per cent of the entire world’s uranium output.

In addition to the more established players, there is the Middle-East to consider. While all bets are off with regard to whether or not Iran’s Bushehr plant will ever see the light of day, it is clear that many countries in the region are increasingly looking to nuclear energy, due to a combination of rocketing demand for power and the growing realisation that nuclear reactors could potentially free up more oil for export. The UAE, Egypt and Jordan are particularly interesting, given the former’s colossal deal earlier this year with KEPCO and the fact that Jordan has the 11th largest uranium reserves in the world (some two per cent of total global resources), according to its atomic energy commission (JAEC). Of this figure, some 64,880t is thought to be located in the country’s central region at a depth of 0.5-3m.

As far as the overall picture is concerned, the IEA is expecting the world’s nuclear fleet to grow from the 371GW seen in 2007 to 410GW in 2015 and 475GW by 2030. Assuming no radical advances in technology, that translates to roughly 4.5GW of new capacity being added a year and a 28 per cent increase in both capacity and annual uranium demand.

A key issue is that given the recent carnage on the financial markets and a move towards greater risk adversity among financiers, investors and lenders, the large up-front costs of nuclear power are more daunting than perhaps they were in the past. A clear sign that lending remains down in the US, is the fact that M3, the broadest definition of money supply, has stopped growing and has in fact started to shrink, as can be seen from the graph below from Shadowstats. In addition, seasonally adjusted total consumer credit on an annual basis averaged -4.0 per cent over the course of 2009, although this did moderate down to -0.8 per cent in December and according to the latest data from the Federal Reserve, outstanding commercial paper remains significantly below where it was in 2008. Although this situation may well improve going forward, it does serve to illustrate the uphill struggle that many companies are experiencing when trying to raise finance.

One major change since the last nuclear build programme took place in the US is that new reactors will have to compete with renewables such as wind and solar power. Although both of these are currently more expensive than conventional power generation, their costs are falling and perhaps more importantly, they are scalable, with much quicker build times. In combination with vastly lower safety and environmental concerns, this means that they offer much less risk to potential investors than nuclear power, especially when one considers the massive cost overruns seen at the Finnish Olkiluoto project, which as of May 2009, was 75 per cent over budget and had seen a doubling in its construction time. An obvious criticism might be that this is an unfair comparison, given the fact that much of the increased costs are the result of the decision to proceed with construction prior to finalising the overall design, but even so, the point stands that this sort of fiasco simply could not occur with renewable equivalents, due to their modular nature.

While the Yucca Mountain repository was extremely expensive and unpopular in many quarters, it would have served to transfer the responsibility of storing nuclear waste from the nuclear industry to the federal government. Given its official demise and the fact that the DoE has increased its budget on fuel cycle research to US$201m, it is clear that nuclear reactor operators will be saddled with their own waste for many years to come. This has important implications in terms of their risk exposure and makes it harder to defend the industry from criticism on environmental grounds.

On the regulatory front, there is the farcical spectacle of large teams of safety experts around the world, all hell-bent on duplicating each other’s work to slightly different criteria. Fortunately, for the US industry, the federal safety review and licensing process in the US has recently streamlined and the Nuclear Regulatory Commission (NRC) has changed its approach. Now it certifies individual reactor designs and also consolidated the licenses need to build and operate a nuclear power station into a single combined construction and operating licence. However, given that a single new nuclear project has yet to break ground, it is hard to assess whether or not the new regime has struck the right balance between speed and rigour.

Crunching the numbers

Getting a real handle on the economics of nuclear power is made difficult by the fact that reliable and recent data concerning the total cost of building a new nuclear plant is notoriously hard to find, with estimates ranging from US$4000/kW as put forward by some utilities to the US$6250/kW proposed by Moody’s Investors Service in mid-June 2009. Some additional light on this subject comes from a March 2008 filing by Progress Energy with the Florida Public Services Commission, in which the utility estimated that the overnight cost for two Westinghouse AP-1000 reactors would be U$5000/kW for the first and US$3300/kW for the second. Once other factors had been considered, this translates into US$8.3bn and US$5.8bn, respectively, a colossal sum by anyone’s standards and an immense risk particularly in the light of the American deregulated electricity market, in which risks have already been largely passed to utilities from consumers.

The issue of cost and build-time gains further urgency in the light of recent estimates from the EIA, which put the overnight cost of an IGCC plant with CCS at just US$3000/kW. This perhaps should be taken with a pinch of salt, given that there is currently not a single full-scale power plant utilising CCS in commercial operation, but at the same time, this raises the question as to just how cheap the technology could become once fully mature.

To be fair, the situation does change markedly, when framed in terms of levelised costs, which take account of capital, fuel and O&M costs. A study by the EIA which has forecasted the average levelised costs (in 2007 US$ values) for plants entering service in 2016, put advanced nuclear firmly ahead of the pack at US$107.3/MWh, above conventional coal (US$94.6/MWh) and CCGT (US$83.9/MWh), but cheaper than renewables and coal or natural gas-fired power plants using CCS. In addition, a recently-updated study by MIT put the levelised cost of nuclear power at US¢8.4/kWh with a risk premium, US¢6.6/KWh without, compared to US¢6.2/kWh and US¢6.65/kWh for coal and natural gas-fired generation. The study made the point that under a US$25/t CO₂ regime, the cost of the latter two rose to US¢8.3/kWh and US¢7.5/kWh, respectively. The risk premium attributed to nuclear power is technological and reflects the uncertainities regarding the ability to build the plants on time and on budget, as opposed to reflecting safety or environmental risk. The obvious message from the MIT study is that the higher the price of carbon is, the more competitive nuclear power becomes.

Carbon: the billion dollar question

Unfortunately, while power executives in Europe lament the lack of a stable price signal for carbon emissions, which they see as vital in order to justify the colossal expenditure of new build, their US counterparts lack even a functioning carbon market at the federal level. Given the bitter divisions on this issue in both chambers of the House, not helped by the importance of coal mining to some of the most economically-vulnerable states in the union, some currently believe that such legislation won’t pass until 2011. However, even if it passes this year or had even gone into operation during the Bush administration’s second term of office, a cap-and-trade system would still be unlikely to have matured to the point where utilities could factor it into their decisionmaking. This scenario gains further ground, when you consider that due to the amount of compromise needed to get significant legislation passed in the current political atmosphere, it is easy to see the spectre of over-allocation of carbon credits to major emitters persisting for many years, before such a scheme would start to create a credible price signal for emitting CO₂. While there are alternatives to cap-and-trade, given that the very concept of anthropogenically-induced climate change remains a hotly-debated and divisive issue in the US, coupled with concerns regarding the ability of the country’s economy to withstand a carbon “tax” and the fact that cap-and-trade is probably easier to twist in favour of special interest groups than the alternatives, it is very hard to see the US adopting a flat tax on carbon emissions or a cap-and-trade system with a meaningful price floor.

The importance of carbon to the nuclear occasion has recently been underlined by a study entitled “The economic future of nuclear power” which was written by Paul L Joskow and John E Parsons and published in the October 2009 issue of Daedalus. Among its conclusions was the following:

“Absent the imposition of explicit or implicit prices on CO₂ emissions, and given the current expected costs of building and operating alternative generating technologies, it does not appear that a large nuclear renaissance will occur based primarily on the economic competitiveness of new nuclear power plants compared to alternative fossil-fuelled base-load generating technologies. It does not appear that new nuclear power plants would be a competitive base-load generating alternative to conventional supercritical coal-fuelled technology, even with high coal prices.”

Why so costly?

In terms of reactor design, steady process has been made, both in terms of safety and optimisation, with particular regard to reducing the number of components, moving towards a more modular approach and the introduction of passive safety features. For example, Westinghouse’s AP1000 pressurised water reactor is designed so that in the event of an accident such as a coolant pipe leak, the plant is designed to undergo and maintain a safe shutdown, even in the absence of operator commands or responsive active components. It also boosts a 60-year design life, an 18-month fuel cycle, which Westinghouse claims, will boost availability and result in lower fuel costs and significantly fewer components than previous designs. GE Hitachi Nuclear Energy’s economic simplified water boiling reactor (ESWBR) also has a range of innovative features and passive safety features. It also involves 25 per cent less pumps, valves and motors, compared to previous nuclear island designs. Both designs according to their manufacturers can be built relatively quickly, the AP1000 in 36 months and the ESBWR in 42.

Unfortunately, these efforts have yet to be shown to reduce the cost of new build. A key issue is the fact that the focus on safety rocketed after the Three Mile Island incident of 1979, leading to a dramatic increase in the specifications required of components. On the positive side, nuclear plant capacity factors, a key determinant in the economics of nuclear power, have risen markedly over the past two decades to around 90 per cent, while the average time to reload fuel has dropped to about 40 days from the 100 required back in 1990. In addition, on an operating cost basis, nuclear power plants do significantly outperform coal-fired power generation or modern CCGTs, but this naturally fails to take account of the vastly higher capital costs of nuclear generation. It should be noted, however, that it is the life-time capacity factor that matters from the point of plant economics and that of the US fleet hovers around 80 per cent.

Jordan is on the brink of an energy crisis if it continues to rely on its current energy generating capacity and technology. In 2006, the country generated 11.6TWh and imported 0.5TWh of electricity for its six million people. Its generating capacity currently stands at around 2400MWe but expects its requirement to reach 3600MWe by 2015 and a doubling in its electricity demand by 2030.

At the basis of this surge in electricity demand lies a mix of burgeoning population – currently at around six million – and the economic expansion of the country, which has led to the proposal of a swathe of infrastructure programmes. Realising this economic potential with its current fuel mix, which is mainly based on imported oil, would leave the kingdom with a considerable energy bill and not bode well for the country’s financial position.

Turning point

However, 2007 proved a turning point as Jordan’s energy minister announced that uranium deposits had been discovered, estimated at 80,000t, excluding a further 100,000t in its phosphate reserves – or two per cent of the global total. The event prompted a swift reversal of energy strategy, which hitherto had been reliant on fossil fuel imports and called for Jordan to be a nuclear-free zone. With encouragement from the US and the International Atomic Energy Authority, the country set on a course to develop its nuclear potential.

As opening gambit, King Abdullah II announced on January 19, 2007 in an interview with the Israeli newspaper Ha’aretz that his country would pursue a peaceful civilian nuclear programme for energy production, thereby positioning the country unequivocally as an emerging nuclear player. The announcement followed similar declarations by other Arab countries in the Middle East, including the GCC, which is considering the construction of a nuclear reactor that will serve the entire region.

Since then, Jordan’s Higher Committee for Nuclear Strategy has developed a programme for nuclear power to supply 30 per cent of electricity by 2030 and to provide for exports. Nuclear energy will also allow for the desalination of vast quantities of water and reduce the country’s dependence on limited winter rainfall, supplying Jordan with that other key commodity scarce within its borders: water. In addition, megaprojects such as the US$5bn Red-Dead Canal would also generate hydropower, driving desalination plants to supply water to its agricultural sector and to its thirsty booming cities.

Jordan’s uranium resources

Latest resource data estimate that Jordan has low-cost uranium resources of 140,000tU. An additional quantity of 59,000tU is locked away in four phosphate deposits, of which Shidia is the largest reserve but holds relatively low levels of uranium, ie averaging 50ppm. The government has announced plans to mine these areas and a feasibility study on recovering uranium as a by-product of phosphoric acid production is being carried out.

In October 2008, the Jordanian-French Uranium Mining Company (JFUMC), a joint venture between JAEC and Areva, was established to define and mine uranium resources in Central Jordan. After nine months of drilling and geological mapping in the 1469km2 concession area, large quantities of high-grade (400ppm) uranium were revealed, located close to surface levels in a 100km2 fertile zone in Sqawa as well as in the Khan Azzabib, Wadi Maghar and Attarat areas. Mining of the combined estimated reserve of 64,880t is envisaged to start in 2012 at a rate of 2000tpa. Areva anticipates that the agreement will lead to further cooperation with JAEC and a bankable feasibility study is the next step towards establishing an open-pit mine.

Large quantities of high-grade uranium were revealed in a 100km2 fertile zone in Sqawa after nine months of drilling and geological mapping by the Jordanian-French Uranium Mining Company.

The discovery of the ore has led to considerable interest from other foreign companies, which are keen acquire a stake in Jordan’s uranium exploration. China National Nuclear Corporation (CNNC) is prospecting for uranium at Hamra-Hausha in the north and Wadi Baheyya in the south.

Rio Tinto is searching in Wadi Sahra Abayad, close to the Saudi Arabian border. In February 2009, the Australian mining giant signed an 18-month agreement with the JAEC to fund the exploration of different areas of Jordan for uranium, thorium and zirconium.

Although foreign companies have assisted in the evaluation of its deposits, it is likely that Jordan’s state-owned company will have exclusive rights to mine and process the material.

As the United Kingdom continues to press on with its programme of new nuclear build, Marketforce’s annual Nuclear New Build Forum comes at an opportune time given the recent announcement of 10 approved sites by the UK’s Energy Secretary, Ed Miliband. The one-day event took place at the Radisson Blu Portman Hotel in November 2009 and was extremely well attended, to the extent that speakers were addressing a fully-packed banquet hall, indicating the growing interest in this key industry.

The forum was chaired by James Varley, Group Managing Editor of Nuclear Engineering International. He opened by commenting that many of the measures the nuclear industry had requested from government have been implemented, but a few clouds over the horizon remain, particularly that of financing, which will be crucial, if new build is to become a reality.

Alan Raymant, Chief Operating Officer of Horizon Nuclear Power, the recently formed joint-venture between arch rivals RWE and E.ON, explained that his company is aiming to provide 6GW of nuclear power by 2025, enough to supply the whole Greater London area. He also highlighted the two companies’ nuclear expertise in the form of over 20 reactors currently being managed. The point was made that Horizon has yet to select the reactor technology, which will be provided by either Westinghouse or Areva. Mr Raymant made it clear that the lack of a long-term price signal was a major concern for investors and that regrettably, calls for the government to provide this in the form of a price floor for carbon are often labelled as a clamour for subsidies. He discussed the major benefits of new build, indicating that if Horizon’s projects were to go ahead they would generate 10,000 construction jobs at their peak and 800 permanent positions once the plants were operational.

“The problem can’t be solved by nuclear alone, but it can’t be solved without it.” – Alan Raymant, Chief Operating Officer of Horizon Nuclear Power

Paul Rorive, Group Senior Vice-President – Nuclear of GDF Suez, reaffirmed his company’s commitment to UK nuclear build and mentioned its goal of establishing its first new reactor by 2020 as part of a consortium with Spain’s Iberdrola and Scottish and Southern Energy. Construction is expected to start by 2015 and the consortium has already succeeded in securing an option to purchase land from the Nuclear Development Agency (NDA), adjacent to Sellafield in Cumbria.

Paul Spence, EDF Energy’s Director of Strategy and Regulation, was next to speak, indicating that his company’s target of building the UK’s first new reactor by 2017 remains unchanged. The site will be at Hinkley Point in Somerset and it, along with its sister site at Sizewell, will use APR reactors. EDF’s longer-term aim is to have four new units up-and-running by 2025 in the UK, “subject to a robust investment framework.” Mr Spence echoed Mr Raymant’s comments about the need for a clear carbon price, but added that he wanted to see a level playing field for all low-carbon technologies. He also indicated that there are positive signs that the UK government is moving forward on this issue, primarily in terms of altering the CO₂ market in the UK above and beyond the EU ETS. Another concern raised was the possibility of changes being made to the process by a future Conservative government and the fact that delays and uncertainties cannot be afforded if the current targets for the completion of new build are to be met.

During a panel discussion, the question was asked by IFandP as to what would be an acceptable rate of return for investors. No direct answers were forthcoming, highlighting the sensitivity surrounding the future profitability of any new nuclear projects. A related question regarding long-term price signals bore more fruit, with Mr Rorive commenting that generally-speaking, energy will be more expensive in the long term and that the problem in terms of investment is demonstrating that the UK is a worthwhile proposition, given the recent fluctuations in energy demand and prices, resulting from the financial crisis and the global economic downturn.

An insightful question regarding what could be done to minimise the impacts on host communities was answered by Paul Spence, who said that in the case of Sizewell, there was a clear need to think creatively regarding logistics, particularly in terms of the movement of men and material due to the site’s remote location and the fact that it is served by small country lanes.

Perhaps most telling was Mr Spence’s response to a question from a delegate asking whether EDF would press on with the investment programme: “If it looks like financial suicide, we won’t do it.”

Figure 1: Approved sites for UK new nuclear build. Source: Department of Energy and Climate Change

After a short break for refreshments, Mark Higson, CEO of the Office for Nuclear Development, DECC, gave a presentation on the recent developments in planning reform and the National Policy Statements, which will dictate the nature of the UK’s planning system for years to come. Some key points from his presentation included the expectations that the generic design process will be complete in mid-2011, at which point construction is predicted to begin, culminating in commercial operation at the start of 2018.

Mr Higson explained that the government’s current commitments in terms of renewables, coupled with the phasing out of old nuclear and coal-fired power plants, will require the construction of 60GW of net new capacity by 2025, of which 35GW will have to be in the form of renewables, with a further 25GW coming from conventional capacity. He also stated that “the government expects that a significant proportion of the 25GW will in practice be filled by nuclear power.”

He went on to indicate that “the government is satisfied that effective arrangements will exist to manage and dispose of the waste that will be produced from new nuclear power stations.” He also said that this was an ongoing requirement, rather than a simple one-off checkpoint.

Sir Michael Pitt, Chairman of the Infrastructure Planning Commission (IPC) then spoke regarding the nature of the UK’s new planning regime, which as currently envisaged, will involve the IPC making all major decisions regarding large-scale developments of national strategic value in accordance with 12 National Policy Statements, each relating to a different type of project. The consultation for the NPSs relating to energy policy (including nuclear) are to close on February 22, 2010. Sir Pitt explained that the IPC commissioners in charge of implementing policy will be independent, selected for their professional knowledge and judgement and will be required to operate to a strict ethical code. The IPC is expected to process applications for eight power stations, eight windfarms, 15 upgrades to the national grid, a rail freight depot and 13 large highway improvements over the course of 2010.

Although oil prices have recently retreated, the highs seen back in July are still uppermost in peoples’ minds in terms of our long-term energy needs. Indeed, there are a number of factors that make a pressing case for the development of new and cleaner ways to produce energy. These include forecasts that suggest the world’s population will exceed a staggering 9bn by 2050, the rapid urbanisation underway in developing economies and the growing threat posed by global climate change. One well-known means of eventually solving the world’s energy problems is the harnessing of nuclear fusion to generate energy in a manner which maybe more familiar to the man or woman on the street, given that it is the very same process which fuels our Sun and every star in the night sky.

The most popular form of nuclear fusion research is in the form of Torus or Tokamak machines, which are usually doughnut-shaped and use magnetic fields produced by superconducting coils to trap plasma (gas heated to the point where it loses its electrons), in such a way as to prevent it from hitting the sides of the machine. Generally, the vessel must be heated up to over 100m^oC before fusion reactions can occur. This is typically done by passing an electric current through the plasma, although other methods such as using the magnetic fields to compress the plasma are also used.

One recent step towards the goal of a sustainable fusion reaction is the news that the Korean Superconducting Tokamak Advanced Reactor (KSTAR) succeeded in generating plasma for 0.3 seconds at a temperature of 10m^oC. Korea’s National Fusion Research Institute, which operates KSTAR has set itself the target of bettering this result by a factor of 100 by 2016.

The world’s largest Tokamak is the Joint European Torus (JET), located in the UK. It features plasma heating systems, which have the capacity to deliver up to 30MW and other refinements. One of JET’S most impressive successes has been reaching the so called ‘break-even point’, when the fusion reaction is producing the same amount of energy as that being fed into the reactor.

Although JET has helped to expand our knowledge and expertise in working with plasma, many scientists are increasingly looking to what will be the next major research project in the field: the International Thermonuclear Experimental Reactor (ITER). Its purpose is to demonstrate that electrical power can be produced from fusion and to obtain the data needed to produce a commercial plant. The project is being funded by the EU, USA, Russia, China, India, Korea and Japan. The EU is expected to provide half of the funding, with the other partners contributing equal shares. However, the USA has suspended its funding for budgetary reasons, which affected the entire US physics establishment, causing many redundancies in the process. Yet, according to ITER’s Neil Calder, the proposed budget for 2009 is more favourable, although it is still subject to review. He also explained in an interview, that ITER’s international nature gives it a certain amount of resilience, but this is not limitless and therefore the extent of future US funding is a serious matter.

ITER once built, will be the largest Tokamak in the world.
It is expected to be complete by 2016.

The project had been delayed for over 18 months due to fierce competition between France and Japan for the right to host the project. Eventually a compromise deal was reached in which Japan received 20 per cent of the research posts and won the right to host a materials research facility, to be half funded by the EU, while ITER itself is to be built in Cadarache in the south of France.The project has been set more ambitious goals than KSTAR, with scientists looking to maintain the plasma for 500-1000 seconds at a time, generating 500MW of power. Nevertheless, the energy produced is not expected to be a net gain and will not be connected to a grid.

ITER, like the projects before it, will benefit significantly from the openness and the good communications that characterise the field of nuclear fusion research. However, it is expected to result in novel technologies with highly-valuable applications and therefore will be subject to intellectual property rights. These will no doubt be convoluted, given the number of countries providing funding.

ITER’s Torus is to be made from nine sectors, each one 13m high and weighing a heavy 250t. The organisation called for EU companies to place tenders for seven of the sections in a July 17 note in the EU Official Journal. The first full experiment is to take place in 2018.

Although ITER will steal a great deal of JET’s limelight, JET will be able to support the efforts of its successor, particularly as it is better suited to the study of fast alpha particles, which need to be contained during a fusion reaction. Its unique tritium handling capacity also means that JET can investigate burning plasmas, which have a high rate of deuterium-tritium reactions. JET was significantly updated in 2004-5 and a further programme of development is in progress, with an “ITER-like wall”, “Neutral beam enhancement” and a “high frequency pellet injector” due for installation over the course of this year.

The first of these developments reflects the fact that many of the challenges involved in nuclear fusion revolve around finding and developing materials capable of surviving the enormous temperatures associated with superheated plasma, while at the same time, without interfering with the experiments. Currently, JET uses carbon composite tiles for the first wall between the reactor and the plasma. However, this is not suitable for experiments involving tritium. Therefore, JET is to be refitted with a wall which uses carbon, tungsten and beryllium in the areas most suited to each material. Such an approach is also to be employed with ITER. Tungsten is highly temperature resistant but does ionise, which can cause energy losses, while beryllium melts at just 1284°C, but due to its low atomic number, does not ionise to the same extent as tungsten.

Interestingly, materials scientists have gained insight into how steel is affected by high temperatures due to the meticulous research into the collapse of the World Trade Centre on September 11, 2001. The current theory is that steel loses a great deal of its strength at high temperatures, as tiny flaws in its structure disrupt its internal magnetic fields, making it softer. This explains why the steel supports of the towers collapsed despite temperatures well below the metal’s melting point. Scientists at the UK’s Atomic Energy Authority (UKAEA) are now looking to alter the composition of the steel to be used in ITER to eliminate this phenomenon.

ITER certainly won’t be the last word in large-scale magnetic containment research projects. Its successor, DEMO (Demonstration power plant) is already being discussed. It is expected to one day produce 2GW of power continually (25 times that required for break-even). To achieve this, it would have to be 15 per cent larger than ITER and boast a plasma density 30 per cent higher than its predecessor. DEMO is still a long way off, with initial estimates suggesting that it will go into operation in 2033.

Other magnetic containment fusion projects on the drawing board include the KTM in Kazakhstan, the Next Step Spherical Torus (NSST) in Princeton, USA, Proto-Sphrea in Italy and QUEST, which is expected to be commissioned soon in Kasuga City, Japan.

There seems to be a healthy trade in secondhand Tokamak reactors. The Czech Republic received delivery of the Compass Tokamak in October 2007, which was originally used by British scientists and became surplus to requirements thanks to a larger reactor called Mast. Compass will replace a small Tokamak called Castor, developed by Russia in the 1970s. The field of nuclear fusion owes much to Russia. Even the word ‘tokamak’ is of Russian origin and although the first patent associated with nuclear fusion was registered in the UK, much of the early development occurred in Russia in the 1950s.

Chris Llewellyn Smith, the former Director-General of CERN, has made it clear that the timescales involved are long, with perhaps a decade needed to fully understand the results from ITER and “considerably more than 30 years before fusion can be rolled out on a large scale,” (CERN Courier). However, he pointed out that given the finite nature of fossil fuel resources, “we have to go with fusion as fast as we can.”

Neil Calder is of a similar opinion. In an interview with IFandP, he explained that the main limitations in terms of nuclear fusion research are funding and labour. He pointed to the Manhattan project and the Apollo programme as examples of incredibly technically demanding goals that were realised quickly thanks to huge financial backing and massive amounts of manpower.

While speculating as to what could trigger such an attitude towards nuclear fusion research, Mr Calder suggested that dramatic impacts from global warming could be more significant than increasing energy prices, although he cited the latter as a key reason behind the level of backing already provided to ITER. In his opinion, a major obstacle to further support for nuclear fusion is its association with conventional nuclear power within the public mindset, along with related concerns regarding radiation, nuclear waste and safety.

While environmentalists attack nuclear fusion on the grounds that its benefits will take a long time to materialise in comparison to the same investment in renewables, Mr Calder believes that fusion is a long-term solution to the problem of global warming and fossil fuel depletion, especially as while climate change may be a pressing issue, “the world doesn’t end 50 years from now.”

Fusion through laser technology

There is another method by which a successful nuclear fusion reaction could be achieved. Known as inertial fusion energy (IFE), this makes use of incredibly highly- powered lasers. To a certain extent, the basic processes are an exaggerated version of those seen in the internal combustion engine: compression, followed by ignition. A small spherical capsule containing a mixture of deuterium and tritium is cooled, so the gas freezes as a film on the inner surface of the capsule. A laser pulse, which can be a mere few billionths of a second, would then heat the interior of the capsule to several hundred times the temperature of the sun. The resulting plasma is under immense pressure, equivalent to hundreds of millions of atmospheres. The intense conditions are theoretically enough to trigger a propagating nuclear fusion reaction within the residual gas at the centre of the chamber. With refinement, it is expected that this technique can generate 70 times the energy required for ignition.

A step towards this goal has already been taken. Earlier this year, the Vulcan laser, located at the Central Laser Facility, concentrated power equal to 100 times the entire world’s electricity generation, into a target a few millionths of a metre across. The pulse lasted for one trillionth of a second and the target reached 10m^o, one-tenth that required for fusion.

According to Richard Petrasso, a senior research scientist at MIT’s Plasma Science and Fusion centre, a successful reaction requires a perfect spherical shape to be maintained for the duration of the implosion. Having invented methods by which the magnetic fields around the pellet can be monitored during implosion, the centre is working to fine tune the process.

As with magnetic confinement fusion reactors, the resulting heat would be captured and used to generate steam. According to Professor Peterson of the University of California, Berkely, large-scale commercial IFE plants will one day be made up of three separate facilities: a target chamber with an attached heat recovery plant, a target fabrication plant and a driver.

The American National Ignition Facility (NIF) in California is looking to use 192 lasers, each of which is more powerful than any currently in operation, to induce inertial fusion. The facility is expected to be up and running by 2010.

2014 is anticipated to see the completion of HiPR, the High Power Laser Energy Research Facility. Currently, the UK is favourite to host the project, which will represent a collaboration between 11 European countries and has already entered a three year preparatory phase, with detailed design to follow in 2011. As the facility’s official site indicates, inertial fusion is expected to be achieved by 2010, HiPR’s role is likely to be concerned with refining the technology to the point where it can actually be used in a power plant.

Implementing nuclear fusion

Once nuclear fusion has developed to the point at which it can deployed, it won’t immediately result in limitless energy for everyone. As Mr Calder points out, once it is suitable for commercial use, the costs and construction times of fusion plants will be comparable to those of current nuclear plants. Although fusion reactors will be safer and produce far less radioactive waste, he expects planning permission and other regulatory processes to still take around the same amount of time.

However, it will mean that countries that are deemed too unstable and are today considered nuclear proliferation risks will be able to build their own fusion reactors.

Importantly, both nuclear fusion technologies once they mature to the point where they can be used by power utilities, will not represent a total reinvention. They will use many of the technologies already used by today’s nuclear reactors and coal-fired plants, primarily in terms of electricity generation from steam and heat recovery. However, it is anticipated that nuclear fusion reactors will be used solely to provide baseload power, due to economic reasons as such high levels of availability and reliability will be an essential requirement.

One idea that has recently been proposed, has gained much of its inspiration from the rapidly growing LNG industry. The concept – that of “fusion islands”, proposed by William Nuttall and Bartek Glowacki – involves using nuclear fusion to produce hydrogen by electrophoresis or the more thermodynamically favourable high temperature sulphur-iodine cycle, which can then be cryogenically cooled and transported in a manner similar to today’s LNG carriers, before being used in hydrogen-powered fuel cells or internal combustion engines, to power vehicles.

Too much of a good thing?

One of the hopes associated with nuclear fusion is that it will eventually lead to limitless and clean energy to be harnessed for the good of civilisation. What could be the effect of such an abundance? Well, for one thing, a great deal of waste. Given that essentially free energy would remove the incentive for consumers to be efficient in their usage, it is easy to envisage a scenario where energy consumption rockets upwards and with it, heat. Although nuclear fusion doesn’t produce greenhouse gases, which trap heat in the earth’s atmosphere, a great deal of heat is produced by the electrical devices we use. Taken to an extreme, we could find ourselves warming up the earth, even after decarbonising our energy system.

That said, if fusion reactors, as and when they become a reality, cost as much as the current nuclear fleet, then that combined with the practical constraints in building huge numbers of reactors, should prevent such a scenario. Additionally, at the point where the cost of energy reaches close to zero, it is to be hoped that we will have matured to the point where we can use energy in a ecologically responsible way.

In any case, perhaps as Mr Calder points out, “it is a much safer and better situation to have too much energy, as opposed to everyone fighting over it.”

For more information, consider visiting the following websites:
www.hiper-laser.org/
www.iter.org
www.jet.efda.org/