Texas can take lessons from Finland's nuclear power plant delays

Sunday, December 21, 2008

Dallas Morning News

OLKILUOTO ISLAND, Finland - Three times a day, thousands of workers from across Europe tramp through the snow and rocks here to a bulbous concrete hulk looming beneath an aerial ballet of construction cranes.

TVO, the Finnish energy company building the new nuclear power plant at Olkiluoto Island, is two years behind schedule and may run more than $1 billion over budget on the reactor. It expects the plant's French and German construction firms to absorb the overruns, but they say the utility is to blame.

The round-the-clock shifts are trying to resurrect nuclear power, an energy option that fell out of favor in 1986 when the Soviet Union's Chernobyl reactor exploded.

The revival is not going well.

The new Olkiluoto plant is struggling with cost overruns and delays. These are especially vexing in Finland's deregulated electricity market, where utilities can't just pass on the added costs without risking a flight of customers to other power suppliers. The plant is at least two years behind schedule.

TVO, the Finnish utility buying the plant for $3.4 billion, expects the French and German builders to eat cost overruns and replacement power purchases. Those are likely to be well above $1 billion. The builders, in turn, blame the utility, and the two sides are headed to arbitration.

These sorts of problems exasperated North Texas ratepayers 20 years ago when the twin Comanche Peak nuclear plants in Glen Rose were under construction. Costs ballooned from $800 million to more than $11 billion. Dallas-based Energy Future Holdings Corp., now working in a deregulated Texas market, has applied to the federal government for licenses to build two more nuclear plants at Comanche Peak with hopes it can avoid Finland's struggles.

"While we don't know the issues they have there, I do think there are macro lessons learned that will not be repeated here," said Energy Future Holdings executive vice president Mac McFarland.

No contract to build the Comanche Peak plants has been issued yet, but Mr. McFarland said the cost could be roughly $15 billion.

The reasons Finnish and Texas utilities are looking at nuclear power are similar. Both have lots of energy-intensive industries. Coal-fired power plants are deeply unpopular and emit high levels of climate-warming gases. Finland and Texas both use lots of natural gas for power, but both find it a fuel choice with unpredictable prices. (Finland also wants to lessen its total reliance on Russian gas.)

Generating electricity in a competitive marketplace, however, raises barriers to nuclear power for utilities in Finland and Texas.

Before deregulation, utilities had captive customers. Regulators tried to keep the utilities from overcharging. As nuclear power plant construction costs soared, however, nearly all of the cost overruns were passed along to ratepayers.

A deregulated market means customers are free to shop around for better power prices. That means cost overruns that have been endemic in building nuclear power plants could drive customers away. Ultimately, they could ruin a utility.

TVO sought to avoid that risk by signing a contract with the builders, Areva NP of France and Siemens AG of Germany, that fixes the price of the Olkiluoto plant.

TVO senior vice president Anneli Nikula said the heart of the problem was Areva's failure to have its design and engineering documents ready when construction began in 2005. Until those documents are approved by TVO and Finland's nuclear regulatory agency, construction will reach a point where it can't move ahead.

"There are hundreds of thousands of documents to check," she said.

Areva argues that it is the utility's fault for taking too long to approve the plans. The contract stipulates documents should be reviewed within two months, while the utility is taking nine months, Areva said.

This "just-in-time" engineering reflects the complexity of building nuclear power plants. There are 104 nuclear power plants in the United States. Each one was custom-built to meet site specifications, changing safety requirements, and fluctuations in price and availability of tremendous amounts of concrete, steel and pipe.

The new nuclear plant at Olkiluoto - two others were built there in the 1970s - was supposed to avoid this customization. Using France's extensive nuclear experience, Areva's design was intended to act as a standard for a new generation of nuclear plants.

Its safety features include two giant concrete silos surrounding the nuclear reactor. After the Sept. 11 terror attacks, Finland wanted Olkiluoto-3 designed to withstand a crash of the world's largest airplane. The double containment buildings are supposed to meet that requirement.

TVO wanted to build Olkiluoto-3 in the 1980s and had an application ready to go in 1986.

On the morning of April 26, 1986, radiation alarms went off at Olkiluoto's two nuclear power plants. Safety inspectors could find nothing wrong. The next day, Olkiluoto plant operators got a call from their counterparts in Sweden. "What have you done?" the Swedes demanded.

It took yet another day before the Soviets admitted to a nuclear disaster at Chernobyl. Radiation up to 10 times above normal levels swept across Finland, Denmark and Sweden, more than 750 miles away. Fifty-six deaths among plant operators, firefighters and infants who contracted thyroid cancer were tied to the accident, and an estimated 4,000 others died prematurely out of the more than 600,000 people exposed to radiation from the explosions, according to a report prepared by the International Atomic Energy Agency and the World Health Organization.

After Chernobyl, TVO shelved plans for another nuclear plant for seven years.

In 1993, Finland's parliament voted against the project. It took a rising concern with global warming to win parliament's approval in 2002 by a vote of 107-92.

Three groups of Finnish utilities - including TVO - are trying to get Finland's parliament to approve construction of another nuclear power plant.

Former Finnish Prime Minister Paavo Lipponen is working with TVO to get its application approved.

"We've never had anything near a major incident," he said. "We have the toughest regulators anywhere in the world. The French building this new reactor weren't really prepared for our nuclear regulators."

Ms. Nikula said the current headaches over Olkiluoto-3 would fade once the plant starts operating - a date now estimated as 2012.

"If Areva has taken a little longer, we are convinced it will be a very good reactor - the best in the world," she said. "We expect it will last at least 60 years, so if it takes two or three years longer, that's still a good life."

Energy Future Holdings has its generating plant subsidiary, Luminant, preparing for a return to nuclear power construction.

The company has selected a reactor designed by Japan's Mitsubishi Heavy Industries for Comanche Peak Units 3 and 4.

In an effort to hold cost overruns in check, Mitsubishi will have 12 percent of the equity in the new plants. To avoid just-in-time engineering, Mr. McFarland said, Luminant and Mitsubishi would spend the next 3 1/2 years getting all the plans complete before starting construction.

Energy Future Holdings also hopes the federal government will put more money into an $18.5 billion nuclear power loan-guarantee program so that more than two or three new nuclear plants have a chance to qualify.

"We are establishing the potential for building new nuclear units," Mr. McFarland said. "It makes a lot of sense to use nuclear in Texas for base-load power to reduce our dependence on natural gas. But at the same time, do you want to go ahead with a $15 billion project? ... We need proof this is a project that is financially viable."

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