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Artist's impression of the Moorside nuclear complex, built on a green field site next to the Sellafield nuclear complex. Image: Nugen.
Artist's impression of the Moorside nuclear complex, built on a green field site next to the Sellafield nuclear complex. Image: Nugen.
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Not just Toshiba - the global nuclear industry is in crisis everywhere

Jim Green

3rd February 2017

Global nuclear power capacity grew slightly in 2016, writes Jim Green, but it was more a dead cat bounce than the promised 'nuclear renaissance'. The collapse of Toshiba, the direct result of its failing nuclear ventures, is indicative of the crisis faced by nuclear contractors and utilities worldwide. Another sign of the industry's poor outlook: no major commodity had a worse 2016 than uranium.

Nuclear and fossil fuel utilities are struggling with a plunge in wholesale power prices, a shrinking client base, declining power consumption, high debt loads, increasing production costs, and stiff competition from renewables.

Recent revelations 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 have dominated the world's financial press.

Toshiba was only just recovering from a 2015 accounting scandal in which it padded reported profits by about US$1.3bn 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 US$7 billion.

As Toshiba, so the entire nuclear industry

Toshiba's 2006 acquisition of Westinghouse has turned out to be a "pivotal moment in Toshiba's decline" according to Bloomberg. Even pro-nuclear commentator Dan Yurman says the looming massive write-down has "doomed" the company's US nuclear business.

He adds that it "also apparently ends the so-called nuclear renaissance in the US 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."

But it's not just Toshiba. 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."

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.

Year

Global nuclear power capacity

Dec. 1996

347 GW

Dec. 2006

370 GW

Dec. 2016

391 GW (WNA - including reactors in long-term outage)

353 GW (WNISR - excluding reactors in long-term outage)

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.

To explain, let's first look at WNA figures on reactor construction starts:

Year

Number of power reactors under construction

2008

34

2011

63

2014

71

2017

60

The nuclear power 'renaissance' never materialised in the since that the number of 'operable' reactors has hovered between 430 and 450 for the past 20 years, with no clear trend in either direction. (The number of operating reactors is currently 406 according to the WNISR, which excludes reactors in long-term outage.).

But we can see the 'renaissance' manifest in the sharp increase in construction starts in the few years preceding the March 2011 Fukushima disaster. Those reactors are starting to come online, and more will come online in the next few years. Thus 10 reactors came online in both 2015 and 2016 (a number not previously reached since 1990). And the number of grid connections over the past five years (32 from 2012-2016) was considerably greater than during the five years before that (17 from 2007-2011).

How will this play out in the coming years? Here are predicted reactor start-up (grid connection) figures compiled by the WNA:

Year

Number of anticipated reactor start-ups

2016

12 (but only 10 actual start-ups)

2017

18

2018

10

2019

8

2020

7

We may have been premature in declaring the nuclear renaissance dead. Indeed we're right in the middle of the renaissance. It will likely span around three years and it will be more a dead cat bounce than a renaissance. Last year, 10 reactors were grid connected and four were permanently shut down. In 2017-18, the WNA anticipates 28 grid connections; the true number will fall short of that figure but grid connections will exceed permanent shut-downs.

But that's as good as it gets for the nuclear industry. In truth, the industry is in a world of pain.

The reactor fleet is ageing; most reactors are late middle-aged - the average age of the world's nuclear reactor fleet is 29 years. The number of permanent shut-downs is on the rise and that trend is certain to continue:

Thus 6-10 reactors will need to be commissioned each year for the next 20-25 years just to maintain current nuclear capacity.

The number of reactors under construction is slowly dropping. Using WNA figures, 71 reactors were under construction in January 2014 compared to 60 in January 2017. According to WNISR figures, the number is down from 67 to 55 over the same period. Again, that trend seems near-certain to continue because of a sharp drop in reactor construction starts: 50 from 2007-2011 compared to 31 from 2012-2016. Last year, there were just three construction starts.

Hollow, pyrrhic victories

Most of the nuclear industry's wins in 2016 may turn out to be hollow and pyrrhic.

The decision to go ahead with two EPR reactors at Hinkley Point in the UK may be a blessing or a curse for the industry. Other EPR projects face mounting problems - long delays; spectacular cost increases; ongoing inquiries into the integrity of EPR pressure vessels; and in the case of the EPR under construction in Finland, litigation.

EDF faces additional problems as a result of Brexit, the UK's impending withdrawal from the European Union, which will, significantly, include withdrawal from the Euratom treaty. The post-referendum fall in the value of Sterling will cut its income, while costs will remain roughly level; EDF's ability to import skilled workers to build the reactors is also in doubt. And the Euratom exit creates a host of additional uncertainties.

And even if construction at Hinkley Point goes to plan and to budget, the obscene subsidies will turn the British public against nuclear power for decades to come. Eight of the UK's 15 power reactors are scheduled to be shut down over the next decade, and it's unlikely that new reactors will keep pace with closures.

Toshiba's problems, meanwhile, are adding significant doubt to the future of the Moorside nuclear project next to the notorious Sellafield site in Cumbria, where the company is meant to be building three Westinghouse AP1000 units.

Last August, Russia announced plans for 11 new reactors but there is no likelihood that all will be built and every likelihood that few if any will be built. Already there is some backsliding from the August 2016 announcement.

In a November 2016 referendum, voters in Switzerland rejected a proposal to impose time limits on the operation of the country's five power reactors. Nonetheless, pre-Fukushima plans for new reactors have been abandoned. Switzerland is tracking towards a nuclear phase-out by attrition. One of its five reactors is to be closed in 2019, and the others will likely all be closed by the end of the 2020s (or by 2034 according to Nuclear Energy Insider) ... much the same outcome as that envisaged in the defeated referendum proposal.

The nuclear industry in Sweden certainly had some wins in 2016, but they may not amount to much. There is no longer an end-date for nuclear energy in Sweden other than a non-binding aspiration to exit the industry by mid-century and a (contradictory) aspiration to be 100% renewable-energy powered by 2040; existing reactors can be replaced with new ones (at the same sites); and a nuclear capacity tax will be abolished.

But there are no plans for new reactors and no likelihood of any in the foreseeable future. Keeping existing reactors operating is proving quite a challenge. One reactor closed in 2015 (leaving Sweden with nine), and three more closures are scheduled by the end of 2020.

'South Africa formally launches new build programme', Nuclear Engineering International reported in December 2016. But in fact, plans to build new reactors have been deferred - the latest projection is 1.4 GW of new nuclear capacity by 2037 followed by more later - and plans for new reactors may be scrapped altogether once President Jacob Zuma is ousted.

Corruption has undermined South Africa's nuclear new-build program and developments in a widespread kick-back and bribery corruption scandal in Brazil's nuclear program was one of the biggest stories of 2016. Corruption has claimed numerous scalps - not least Othon Luiz Pinheiro da Silva, considered the father of Brazil's nuclear program, who was sentenced to 43 years in prison in August 2016. The partially-built Angra-3 reactor remains frozen due to the corruption scandal and a lack of funding.

Belgium: 10-year extensions for two of Belgium's seven reactors were approved in late-2015. But all reactors are still scheduled to closed by the end of 2025. There has been ongoing controversy over the safety of Belgium's reactors - in particular Doel-3 and Tihange-2 - including strenuous efforts by politicians and the public in neighboring countries to force the closure of the reactors.

USA: The nuclear industry had a couple of wins last year, convincing state legislatures in New York and Illinois to stump up billions to keep ageing reactors operating. However the number of operable reactors has decreased from 104 to 99 in recent years and the pattern of slow decline is certain to continue - 44 out of the 99 reactors have been operating for 40 years or more.

Misery

In some other important nuclear countries, there were no victories for the nuclear industry last year, pyrrhic or otherwise ... just misery.

France: The French nuclear industry is in its "worst situation ever", former EDF director Gérard Magnin said last November. Just one reactor is under construction - the Flamanville EPR that is many years behind schedule and three times over-budget.

EDF will need to spend around €100 billion (US$107 billion) upgrading its fleet of 58 reactors by 2030, the country's state audit office has said, to meet new safety requirements and to extend the lives of the units beyond 40 years.

In 2015, concerns about the integrity of some EPR pressure vessels were revealed, prompting investigations that are still ongoing. Last year, the scandal was magnified when the French Nuclear Safety Authority (ASN) announced that at least 400 of the 10,000 quality documents reviewed by Areva contained anomalies, affecting a range of reactor components in many countries.

Both Areva and EDF are financially stressed, to put it mildly - hence a taxpayer-funded bailout agreed last year. A government-led rescue of Areva and the wider nuclear industry may cost the state as much as €10-billion, Reuters reported in January 2017, and in addition to its "dire financial state, Areva is beset by technical, regulatory and legal problems."

French finance authorities raided the offices of EDF in July 2016 as part of a probe into EDF's disclosure of information to the market regarding domestic nuclear maintenance costs as well as planned reactors in the UK.

Last year, former Areva chief executive Anne Lauvergeon was placed under formal investigation for the "publication of inaccurate accounts" and the "spreading of false information" in relation to the acquisition of a number of African uranium mines.

Japan: Only two of the country's 42 'operable' reactors are actually operating. The future of Japan's nuclear program remains a guessing game, but projections are being steadily reduced. According to the OECD's Nuclear Energy Agency and the IAEA, installed capacity of 42.4 GW in 2014 could fall to as little as 7.6 GW by 2035 "as reactors are permanently shut down owing to a range of factors including location near active faults, technology, age and local political resistance."

Another reactor was permanently shut down in 2016 (Ikata-1) in addition to five shut-downs in 2015 and the six Fukushima Daiichi reactors shut down in the aftermath of the March 2011 disaster. Japan also decided last year to permanently shut down the troubled Monju fast breeder reactor. For all the rhetoric about Generation IV fast reactors, and the US$100+ billion invested worldwide, only five such reactors are operating worldwide (three of them experimental) and only one is under construction (in India).

Late last year, Japan's Ministry of Economy, Trade and Industry revised the estimated cost of decommissioning the Fukushima Daiichi nuclear plant, and compensating victims of the disaster, to around US$187 bnillion (€175 bn). The latest estimate is four times greater than estimates provided in 2011/12. Indirect costs (e.g. fuel imports, adverse impacts on agriculture and fishing, etc.) are likely to exceed the direct clean-up and compensation costs.

India has 22 operable reactors (6.2 GW capacity) and five under construction. In early 2015, India claimed to have resolved one of the major obstacles to foreign investment by announcing measures to circumvent a liability law which does not completely absolve suppliers of responsibility for accidents. But that hasn't led to any construction starts; indeed the last construction start was in 2011.

Newcomer countries: The WNA claims that "over 45 countries are actively considering embarking upon nuclear power programmes." Codswallop. Only two newcomer countries are actually building reactors - Belarus and the United Arab Emirates. Numerous potential newcomers have deferred or abandoned nuclear plans over the past two years, including Chile, Indonesia, Vietnam and Lithuania (which operated reactors until 2009).

Newcomers will be few and far between. Moreover, some countries - including Germany, Belgium, and Taiwan - are deliberately phasing out nuclear power, while nuclear power faces attritional phase-outs in some other countries (e.g. Switzerland).

The July 2016 World Nuclear Industry Status Report noted that over the past two decades, only two countries started power reactors for the first time (Romania in 1996 and Iran in 2011) while two countries closed theirs (Kazakhstan and Lithuania).

China: With 35 operable power reactors (up from 30 at the start of 2016), 22 under construction, and many more in the pipeline, China remains the only country with significant nuclear expansion plans. There are indications of a slow-down with only two construction starts in 2016. There were 25 construction starts from 2008-2010 and 15 in the six years since.

Yellowcake blues

"It has never been a worse time for uranium miners", said Alexander Molyneux from Paladin Energy in October 2016.

"No major commodity had a worse 2016 than uranium", Bloomberg said in January 2017. "In fact, the element used to make nuclear fuel has had a pretty dismal decade."

Uranium mining ramped up 5-10 years ago in anticipation of the nuclear renaissance that never materialised. Hence a glut, hence the low price. The price has fallen for seven of the past nine years. The spot price fell 41% in 2016, sinking to a 12-year low (US$18 / lb U3O8 in November).

The spot price averaged about $26 last year, and is expected to average just $23 in 2017 according to the median forecast of analyst estimates compiled by Bloomberg in December 2016. "I don't think there's a mine profitable at current spot prices", Leigh Curyer from Canadian uranium miner NexGen Energy told Bloomberg.

The long-term contract price fell from $44 in January 2016 to $30 in December. It would need to double to encourage the development of new mines. KPMG noted in December that "uranium producers are expected to reduce production and cut costs through 2017 and 2018, with high cost mines likely to scale back or close. New projects are expected to remain on hold." RBC expects the sector will be oversupplied until around 2024.

The uranium enrichment industry is in much the same place as uranium mining. The spot uranium enrichment price has fallen consistently since the 2011 Fukushima disaster, and it fell by a third between early 2015 and late 2016 to reach an all-time low.

And since cheap, abundant enrichment capacity can substitute for newly mined uranium (either by extracting more uranium-235 during uranium enrichment, or re-enriching tails), this has and will continue to keep uranium prices down.

 


 

Dr Jim Green is the national nuclear campaigner with Friends of the Earth Australia and editor of the Nuclear Monitor newsletter, where a longer version of this article was originally published.

Also on The Ecologist today: 'Endgame for Cumbria's nuclear nightmare - Moorside or Doomrise?'.

Nuclear Monitor, published 20 times a year, has been publishing deeply researched, often critical articles on all aspects of the nuclear cycle since 1978. A must-read for all those who work on this issue!

 

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