Nuclear Marathons

The restart of the US's nuclear construction is a mixed tale of painful progress, bankruptcy, scandal, and prison. And in an ironic twist, China is capitalizing on the lessons learned at our expense.

Building a nuclear power plant is a bit like training for and running a marathon. It is very difficult especially the first time you do it, but you won’t get any better if you quit after the first race.

Earlier this year, Vogtle #4 - the latest US nuclear power unit - connected to the grid for the first time. This marked a milestone in a very rocky road to restart the US nuclear construction business.

But before we dig in….

Vogtle’s Namesake

The Nazis thought the Stalag Luft 3 camp was supposed to be escape proof. Allied POW Airmen who kept escaping from other prison camps were sent there. Yet that didn’t stop the allied prisoners from tunneling 30 feet below the surface and out past the camp perimeter. After months of careful planning and preparation, on March 24, 1944, 76 POWs escaped before the guards caught on. The Nazis launched a massive manhunt, capturing or killing most: only 3 POWs made it to freedom. This “Great Escape” became the basis for the much fictionalized 1963 blockbuster movie of the same name, starring Steve McQueen.

While many POWs inspired the movie, Alvin Vogtle is credited as one of the inspirations for the story. Vogtle, an American Airman captured by the Germans, attempted to escape multiple times, including 3 failed attempts from Stalag Luft. While being transferred to another camp, he escaped from the train. He was recaptured but didn’t give up. On his 6th attempt, he managed to escape to Switzerland.

After the war, Vogtle went into the utility business and worked his way up to Chairman for Southern Company. In 1976, the Plant Vogtle nuclear power station began construction, named after him.  (Picture courtesy of Wikipedia.)

Plant Vogtle’s reactors 1 & 2 were among the last reactors constructed in the US for decades.

After the 1979 Three Miles Accident, nuclear construction went into a deep freeze: no new nuclear units successfully began construction until the Vogtle Expansion in the 2000s. Even the units that came online in the 1990s and the Watts Bar 2 Unit (2016) were initially started in the 1970s.

There were other factors at play as well. Large parts of the US grid shifted from monopoly-style integrated utilities to heavily regulated electricity markets where independent generators compete for short term sales. The problem with independent generators is that no one entity is both responsible for reliability and has the authority to build reliable generators needed for 24/7, 365 days a year grid stability. This coupled with regulatory uncertainty, heavy subsidies and mandates for renewables, and a natural gas drilling revolution, made it complicated to build new nuclear power stations.

Yet the nuclear industry made significant progress in less obvious ways. For example, plant operators learned how to time maintenance with refueling, leading to increased plant efficiency. In the 1980s, US nuclear plants operated in the 50s% & 60s% utilization range. By the 2000s, utilization rose to ~ 90% and remained steady ~92-93%  for the past number of years.

As a whole, the amount of global nuclear electricity changed little over the past decades. Since the late 1990s, the US produced around 30% of the world’s nuclear electricity. But while Japan and parts of Europe reduced nuclear output, Chinese production rose from about 1% of the global pie in 1999 to around 16% by 2022.

A Promising Re-Start, So It Seemed

To help jump start new nuclear power, Westinghouse designed a new reactor known as the AP1000. The reactor is designed to be safer than older models because it has Advanced Passive (hence AP) safety mechanisms to shut down the plant in an emergency even if the station loses all power. In addition, the AP 1000 was designed to be ‘mass produced’ with large portions assembled at centralized factories and then shipped to construction sites.

According to Westinghouse, the AP1000 is “the only operating Generation III+ reactor with fully passive safety systems, modular construction design and the smallest footprint per MWe on the market.”

Initially, the plan seemed promising.  Multiple US projects signed on or expressed interest including: 

• The VC Summer expansion project, South Carolina, with an original cost estimate at ~$9.8B

• Vogtle, Georgia, expansion project with an original estimate of ~ $14.3B

• Levy, Florida a planned new nuclear power station

But while the idea of new prefabricated reactors sounded good on paper, it had been a generation since the US ran a nuclear marathon, so to speak. Many of the skilled laborers that built those previous projects started in the 1970s had no doubt long since retired or moved on to other jobs.

Vogtle ran into regulatory issues.

Reuters reported that after the initial ground breaking at Vogtle, the backfill needed for the site “failed to meet regulatory approval, delaying the project by at least six months.” And in 2012, issues with “paperwork stalled construction at the site for 8 months.”

Reactor Redesign Issues

In the US, regulators gave the green light in 2005 with the Final Design Certification Rule for the AP1000. But there wasn’t anything ‘final’ about the design, with revisions and amendments in: 2007, 2008, 2010, and 2011 causing delays and costs overruns.

In addition, running the US’s first prefabrication business ran into supply chain and communications issues. Westinghouse’s HQ is located in the Pittsburgh, Pennsylvania area yet one of the main contractors (Shaw) had offices in Charlotte, North Carolina. The prefab factory was in Lake Charles Louisiana with construction sites in Georgia and South Carolina. 

Christopher Hartz, a former procurement quality-assurance manager at Shaw Nuclear Services, had this to say about the tangled web of communications that occurred when issues cropped up:

“Instead of having Westinghouse right there saying, ‘That’s no problem,’ we had to write a nonconformance report that was processed and reviewed by Shaw and then sent to Westinghouse for disposition. It was insane. From Lake Charles to Pittsburgh to Charlotte then back to Shaw Modular before the red nonconformance tag could be taken off, saying it’s OK now.”

And there were quality control issues at the Lake Charles plant, as it was discovered that workers reportedly used the incorrect welds to assemble the modules and the factory lacked sufficient quality controls. In 2013, Vogtle’s owners ordered a work stoppage because of the quality control issues. The on-going issues resulted in lost time and additional expenses including a reported instance where workers on site at Vogtle had to grind out and redo piping shipped from the factory.

Lawsuits, Bankruptcy, and Prison

As costs began to spiral up, a circular firing squad formed up. Multiple lawsuits were filed between the owners of the plant and Westinghouse, and even a lawsuit in-between the plant owners over who was going to pay for the cost overruns. During all of this, Westinghouse filed for bankruptcy in March of 2017.

Shortly after, in July of 2017, the owners of VC Summer abandoned the partially completed expansion project in South Carolina. In what became known as Nukegate, investigators charged that executives at SCANA, the majority owner VC Summer, had lied and misled stakeholders on the progress of the project. As a result, SCANA’s CEO and CFO were sentenced to prison.

The US DOJ also went after leadership at Westinghouse. Charles Churchman, the project manager for the VC Summer project, pleaded guilty to lying to the Feds.

But it didn’t end there. Jeffery Benjamin, Westinghouse’s Senior VP for New Plants and Major Projects, also became the target of a DOJ criminal investigation. According to the DOJ, he “supervised all new nuclear projects worldwide for Westinghouse during the V.C. Summer project.” He was “charged in a federal indictment with sixteen felony counts including conspiracy, wire fraud, securities fraud, and causing a publicly-traded company to keep a false record.” The case was thrown out and then refiled and Benjamin ultimately pleaded guilty in late 2023.

After the bankruptcy, Westinghouse was restructured and sold off to Brookfield Asset Management and Cameco, one of the world’s largest uranium mining companies.

Despite the fiasco, the Vogtle expansion pushed forward. The question now was how to pay for the project that ballooned to roughly $30B. Unlike many parts of the US, Vogtle is located in what’s left of the integrated (monopoly -like) power markets. The State Public Services Commission oversees the rates charged to customers. Rates are, in large part, determined by the approved construction costs. And in December of 2023, the Georgia PSC agreed to pass on a large chunk of the increased construction costs to the consumers via a rate increase.

Vogtle Unit 3 began commercial operations in 2023 and Unit 4 connected to the grid for the first time in early 2024. If unit 4 becomes operational as planned, Plant Vogtle will be the largest nuclear power station in the US, with a combined capacity of approx 4.6GWe, with ~2.2GWe from the expansion project.

This is no small achievement, despite the many bumps in the road. To put into perspective, this combined plant will be capable of producing more electricity than some small European countries use. For reference, Scotland uses 2.6-4GWa (net), and Ireland ~3-4GWa of electricity.

And despite the AP1000 woes in the US, in February of 2024, Westinghouse announced that it signed a feasibility contract with the Dutch government to evaluate the development of 2 new reactors. China is building 6 variants of the AP 1000 and ~ 19 additional AP1000 reactors are either under contract or selected for development in other countries. Here is a screenshot from Westinghouse’s website:

There’s long been a theory that standardized designs could drive down construction costs of nuclear power, and it’s one of the main theoretical appeals of small modular reactors. While AP1000s are large reactors, they are arguably the most standardized and modular large reactors on the market.

In the US, the 2 AP1000 reactors took about 121.5 month to construct while China took an average of 104.75 months to build 4 reactors. China arguably has more experience building reactors as it has ramped up reactor construction and continues to ‘run that marathon.’

So far, the AP1000 reactors were built in 3 pairs of 2. According to data from the World Nuclear Association, in China, the 2nd reactor at both of their locations was constructed ~6-7 months faster than the first reactor. But in the US, Votgle 4 took about 3 more months to build.

China is currently building 6 more under a ‘licensed’ variant, the CAP1000. And, 4 of the new CAP1000s are extensions of the existing Haiyang and Sanmen projects. We’ll see if the time reductions continue.

Of China’s capacity under construction, roughly 25% are CAP1000s.

Recently, on a Decouple Podcast, guest James Krellenstein highlighted lessons learned from Vogtle. These lessons included the struggles in developing a new supply chain, a work force inexperienced in mega projects, and the problems with beginning a project before the supposedly standardized design was truly completed.

James mentioned that there were around 188 or 189 license amendments and requests on the AP1000 design.

“The incomplete design was just driving so many delays, (with) so many needs to go back to the NRC on the standardized design that it… really started to (drive)… project costs and project schedule overruns. And when you’re talking about a nuclear power plant where literally because of interest and financing costs, we’re talking about a single day of delays, $1million in excess costs, roughly speaking, that’s a huge, huge factor.”

Now, we have a design that is complete. And we have a workforce that went through the growing pains of learning how to build massive projects. The question is will the US capitalize on the very expensive lessons learned or will China and other countries benefit the most? And can China drive down construction times -without impacting quality- of the new CAP1000 reactors, suggesting that repeated projects can lead to learning curves and faster deployment?

Looks like we’ll have to wait and see!

As always, thanks for reading!