Delays in Finland Highlight Problems Facing Nuclear Power

May 29, 2009
OLKILUOTO, FINLAND - The massive power plant under construction on muddy terrain here was to be the showpiece for a coming nuclear renaissance.
The most powerful reactor ever built, its modular design was supposed to allow it to be built quickly and with greater certainty about costs, just in time to meet the clamor for cleaner sources of energy to combat global warming. The plant was to be the first in a wave of simpler and safer nuclear plants.
But things are not working out as planned.
After four years of construction and thousands of recorded defects and deficiencies, the original €3 billion, or $4.2 billion, price tag on the Olkiluoto reactor has climbed at least 50 percent. The reactor was supposed to be completed this summer, but work is so far behind schedule that Areva, the French company building the facility, and Teollisuuden Voima, the utility that ordered it, no longer are willing to predict with certainty when it will go online.
"We have had it easy here," said Jouni Silvennoinen, the project manager at Olkiluoto. At least it is a geologically stable site: Earthquake risks in places like China and the United States or even the threat of storm surges mean that building these new reactors will be even trickier elsewhere, he said.
The story is likely to be the same around Europe and in the United States as governments reopen the door to nuclear power.
Areva and its backers maintain that a new fleet of reactors known as EPRs would be standardized down to "the carpeting and wallpaper," resulting in significant cost benefits, according to Michael J. Wallace, the chairman of UniStar Nuclear Energy, a joint venture between Constellation Energy, the east coast utility, and Areva.
Yet despite streamlined approvals, government loan guarantees and other incentives for utilities, early experience suggests that these new reactors will be no easier or less costly to build than those of a quarter-century ago, when soaring cost overruns - as well as accidents at Three Mile Island and Chernobyl - brought the construction boom to a halt.
A clone of the Finnish reactor now under construction in Flamanville, France, is also behind schedule and over budget, raising doubts about the industry's contention that standard designs lead to lower costs as more reactors are built.
In the United States, Florida and Georgia have changed state laws to raise electricity rates so that consumers will foot some of the bill for new nuclear plants before construction even begins.
"I know a number of U.S. companies have looked with trepidation on situation in Finland and at the magnitude of the investment there," said Paul L. Joskow, a professor of economics at the Massachusetts Institute of Technology, who co-authored an influential report in 2003 on the future of nuclear power. "The roll-out of new nuclear reactors will be a good deal slower than a lot of people were assuming in the last few years."
For nuclear power to have a high impact on meeting the rising demand for power and reducing greenhouse gases, the Nuclear Energy Agency at the Organization for Economic Coordination and Development in Paris estimates that an average of 12 new reactors would have to be built each year until 2030, reaching 54 reactors per year in 2030-2050. Yet not enough reactors are under construction to replace those that are reaching the end of their working lives.
Of the 45 reactors being built around the world, 22 have encountered construction delays and nine do not have official start-up dates, according to an analysis prepared this year for the German government by Mycle Schneider, an energy analyst and a critic of the nuclear industry.
Most of the construction is under way in countries like China and Russia, where strong central governments have made nuclear energy a national priority. India also has long considered nuclear energy as part of its drive for self-sufficiency and is seeking new nuclear technologies to reduce reliance on imported uranium.
In contrast, "the state has been all over the place in the United States and Europe on nuclear power," Mr. Joskow said.
The United States generates about one-fifth of its electricity from a fleet of 104 reactors, most built in the 1960s and 1970s. Coal still provides about half of the country's power.
To streamline new construction, the Nuclear Regulatory Commission in Washington has worked with the industry to provide a handful of approved designs. Even so, certification for the most advanced model from Westinghouse, a unit of Toshiba of Japan, has slipped during an ongoing review of its ability to withstand an airplane impact. The commission also has said it will delay review of a construction site for Areva's latest reactor until its certification for the U.S. market is complete.
This month, the U.S. Department of Energy produced a short list of four reactor projects eligible for some loan guarantees. But the industry's hope of winning $50 billion worth of loan guarantees evaporated when that money was stripped from President Barack Obama's economic stimulus bill in February.
The industry has had more success in pushing states to help it raise money. This year, authorities permitted Florida Power & Light to start charging millions of customers several dollars a month to finance four new reactors. Customers of Georgia Power, a subsidiary of Southern Company, will pay on average $1.30 a month more in 2011, rising to $9.10 by 2017, to help pay for two reactors expected to go online in 2016 at the earliest.
Yet resistance is starting to materialize. In April, Missouri legislators balked at a pre-construction rate hike, prompting the state's largest electric utility, Ameren UE, to suspend plans for a $6 billion copy of Areva's Finnish reactor.
Areva, a conglomerate largely owned by the French state, is heir to the extensive French experience in building nuclear plants. France has gone further than any country to generate its electricity from nuclear plants, getting about 80 percent of its power from 58 reactors, most built in the 1970s and 1980s.
But even in France, no new nuclear reactors have been completed since 1999.
After designing an updated plant originally called the European Pressurized Reactor with German participation during the 1990s, the French had trouble selling it at home because of a saturated energy market as well as opposition from Green Party members in the then-coalition government.
So Areva turned to Finland, where utilities and energy-hungry industries like pulp and paper had been lobbying for 15 years for more nuclear power, and to reduce dependence on natural gas from Russia, and strongly supported the project, which initially was budgeted at $4 billion.
Executives of Teollisuuden Voima pledged it would be ready in time to help the Finnish government meet its greenhouse gas targets under the Kyoto climate treaty, which runs through 2012.
For its part, Areva said that electricity from its reactor could be generated more inexpensively than from natural gas plants. Areva also said its model would deliver 1,600 megawatts, or one about one-third more than many of the reactors built in the 1970s and 1980s, covering 10 percent of Finnish power needs.
In 2001, the Finnish Parliament narrowly approved construction of a reactor at Olkiluoto, an island on the Baltic Sea.
Construction began four years later. Today, the site still is teaming with 4,000 workers on round-the-clock shifts. Banners from dozens of subcontractors around Europe flutter in the breeze above temporary offices and makeshift canteens. An estimated 10,000 people using at least eight different languages have worked at the site since construction began. About 30 percent of the work force is Polish, and communication has posed significant challenges.
Serious problems first arose regarding the vast concrete base slab for the foundation of the reactor building. When Areva changed the composition of the concrete to aid pouring, the slab became more porous and prone to corrosion than the Finnish Radiation and Nuclear Safety Authority said was acceptable.
Since then, the safety authority has blamed Areva for allowing inexperienced subcontractors to drill holes in the wrong places on a vast steel container that seals the reactor.
The schedule set by the Finnish utility - and then accepted by Areva - "had been unrealistic from the beginning," the authority wrote in a report two years ago. In December, the authority warned Anne Lauvergeon, the chief executive of Areva, that "the attitude or lack of professional knowledge of some persons" at Areva was holding up work on safety systems.
Areva has acknowledged that the cost of a new reactor today would be as much as €6 billion, double the price offered to the Finns. But Areva said it was not cutting any corners in Finland. The two sides have agreed to arbitration, where each seeks more than €1 billion in damages.
Areva announced a steep drop in earnings last year, which it blamed mostly on growing losses from the project. The debacle is potentially costly for French taxpayers as well - losing the arbitration "could lead to reduced dividends" for the state, a spokeswoman for Areva acknowledged.
In addition, nuclear safety inspectors in France have found cracks in the concrete base, and steel reinforcements in the wrong places at the site in Flamanville. They also have warned Électricité de France, the utility building the reactor, that welders working on the steel container were not properly qualified.
On top of such problems are the recession, weaker energy demand, tight credit and uncertainty over future policies, said Caren Byrd, an executive director of the global utility and power group at Morgan Stanley in New York.
"The warning lights now are flashing more brightly than just a year ago about the cost of new nuclear," she said.