Three years on, uranium fuel transaction continues to yield Northwest ratepayer savings

Three years after the conclusion of a $687 million nuclear fuel transaction, Northwest ratepayers are reaping the rewards. Energy Northwest’s 2012 low-cost, below-market nuclear fuel purchase – enough unenriched fuel to last through 2028 – generated more than $40 million of dollars in current Bonneville Power Administration rate case savings, and will save tens of millions more through 2028.

The fuel will be used in Columbia Generating Station, the Northwest’s only commercial nuclear energy facility, generating 1,170 megawatts of electricity, which is sold at-cost to BPA. Ninety-two Northwest utilities receive a percentage of its output. In December, Columbia marked 30 years of commercial operation, and broke its third consecutive generation record.

Background

EN Uranium Product

Cylinder yard at DOE facility in Paducah, KY.

Contracts were signed in May 2012 between Energy Northwest, the Tennessee Valley Authority, the U.S. Enrichment Corporation, and the Department of Energy that began the process of turning depleted uranium into low-cost nuclear fuel. The depleted uranium, also called uranium tails, was enriched and a portion (about 10 percent) will be delivered to Energy Northwest’s fuel fabrication vendor in North Carolina next month. Energy Northwest is selling the bulk of the enriched uranium to TVA for use in nuclear plants, which will defray a large portion of Energy Northwest’s costs.

The uranium tails program was similar to a 2005 pilot project that reduced fuel costs for Columbia Generating Station by more than $100 million. The 2012 transaction is showing even more savings based on current spot market and forward market pricing.

Energy Northwest has a long, successful history of transacting in commodities to obtain the nuclear fuel needed to operate Columbia, and our fuel costs are among the lowest of all U.S. nuclear plants.

Columbia is licensed to operate through 2043, so we will need a continuing inflow of nuclear fuel for nearly 30 years. The price for most of that future fuel supply is unknown, and represents a source of financial uncertainty, or financial risk. We have extensive experience and capability in understanding the various markets in which we transact to ensure a stable and reasonably-priced fuel supply. Energy Northwest typically enters into contracts for components of nuclear fuel many years before fuel is needed to reduce the price risk of the fuel, to capitalize on advantageously priced opportunities, and to ensure that all necessary fuel processing is complete before the fuel needs to be loaded into the reactor.

Inside the nuclear fuel cycle

Taking a closer look at the nuclear fuel cycle helps to understand the benefits of our uranium tails fuel transaction.

Fuel Cycle v2

While the enrichment cost (listed in $/SWU, or separative work units) is a large part of nuclear fuel costs, the cost of uranium cannot be ignored while evaluating the benefits of fuel contracting. Unlike enrichment costs, uranium costs are projected to rise in the future, and are up 35 percent since last summer, increasing the value of contracted fuel. Any analysis of the transaction that doesn’t look at the whole is incomplete, at best.

Seeing the benefits

In the latest transaction, Energy Northwest kept both feed (UF6) and enrichment services (SWU).

The remaining material will be sold to TVA under a fixed price, long-term contract (2015-2022) for a net present value of approximately $622 million.

The cost to Energy Northwest for the material retained for our own consumption (feed + SWU) was about $65 million.

SWU1v2

The spot market value of this material, based on March 20 prices, was $256 million, a difference of $191 million.

SWU2

In the forward market, that same material was valued at $332 million, as of Feb. 28, a difference of $267 million.

SWU3

In both cases, just looking at the SWU row would lead one to believe Energy Northwest entered into a bad deal. But because of the well-below market price purchase of feed, the benefit of the total transaction becomes very apparent.

As mentioned above, Energy Northwest avoids purchasing nuclear fuel through the spot market because of the volatility and price risk involved.

Prior to the uranium tails program, Energy Northwest had enough fuel in inventory or under contract to meet its fuel reloading requirements through 2019. With the additional fuel, Columbia’s fuel costs will be reduced and predictable through 2028.

Benefit to ratepayers

Bonneville Power Administration markets more than one-third of the electricity consumed in the Pacific Northwest. The power produced at 31 Northwest federal dams and Columbia Generating Station is sold to more than 140 Northwest utilities. Every other year, BPA establishes a rate case that covers a two-year period; currently we are in the 2014/2015 rate case. During the formal rate proceeding, expected increases are outlined as well as mitigating factors that can slow the rate of increase.

Because of this strategic fuel transaction, Northwest ratepayers are seeing a $40 million savings in the current rate case. Not bad. Every approximately $20 million in savings lowers rate case increases by one percentage point.

Successful risk management

The benefits EN and BPA sought – less financial risk due to future fuel cost uncertainty, and lower fuel costs on an expected-value basis – are still being achieved.

The transaction increased rate stability by removing eight years of cost risk from Columbia’s fuel budget, and the transaction continues to have positive value, resulting in lower rates. BPA’s ratepayers will benefit from this transaction for many years, as shown above.

Managing risks in power production is important, though not generally talked about, perhaps as being too “inside baseball.” But by managing risk effectively, the result can be stable, predictable and affordable electricity rates. In evaluating this uranium tails nuclear fuel transaction, Energy Northwest and BPA successfully turned uncertain fuel prices into current and future savings for Northwest electric customers through 2028.

(Posted by John Dobken)

Ecomodernism – a fresh approach to thinking about the environment

Blog post by Meredith Angwin

Calling Names

When looking at the fate of energy and mankind and the climate, what is a thinking person to think? Most of the information in the popular press seems to be more name-calling than thinking.

Increasing carbon dioxide will cause the death of our planet.

Attempting to cut carbon dioxide emissions will cause the death of Western Civilization.

People who fight renewables are NIMBYs.

Some people are Deniers.

Other people are Alarmists.

Pejorative terms fly about, and mere facts can get lost in the shuffle.

Getting an idea

Luckily, people are beginning to think about these issues, without all the rhetoric.  It’s hard to get a grip, though.  For example, an excellent recent article in the New Yorker by Jonathan Franzen is Carbon Capture: Has climate change made it harder for people to care about conservation?  He writes that, in the face of climate change, many “conservation” organizations ignore immediate threats to immediate habitats, or even ignore the extinction of species when habitats disappear… unless the situation is connected to global warming. Birds in the here-and-now seem to be of little interest, compared to climate change.

Franzen argues for a conservation ethic that mirrors St. Francis of Assisi’s love of the birds and animals of here-and-now. He feels this is inevitably in opposition to concern with climate change.  He doesn’t have an overarching plan for the big picture, but he does want us to value the habitat and diversity we have.  (The word “nuclear” does not even appear in his article, as even a possibility for decreasing the rate of carbon dioxide growth in the atmosphere.)

My own view from Vermont is less important than the view from The New Yorker.  Still, I have watched wind turbines be built on ridges, sometimes destroying rare high-country wetlands. I have listened to the rhetoric of “We must do this to save the planet.”  To me, it sounded a little like one of the failed doctrines of the Vietnam War: “We had to destroy the village in order to save it.”

I wrote a blog post about this: Farmers, City Folks and Renewable Energy (at ANS Nuclear Cafe). In this post, I wrote that if we could not “get” all the energy we needed from wind and sun, we would have to “take” this energy by turning the world into our energy farm.  I expressed my gratitude for every thermal power plant that meant that we didn’t need every bit of energy from every river and stream.  I was grateful for every waterfall that doesn’t have to host a hydro plant. The misty damp earth next to a small

Painted Trillium.

Painted Trillium.

waterfall can grow trillium, not concrete infrastructure. In this post, I talked about my early membership in the Sierra Club, back when the club fought for creating wilderness areas, not for creating ridge-top wind farms.

Franzen and I had good ideas, but neither article was really a plan.

Ecomodernism: More of a plan!

I am delighted to say that there is now the beginning of a plan, just in time for Earth Day!

Ecomodernism.org consists of an international group of conservationists, whose mission statement includes the words: both human prosperity and an ecologically vibrant planet are not only possible, but also inseparable.  They aren’t just whistling in the dark, here, either.  Their plan is outlined in a thirty-page Ecomodernist Manifesto, which you can download from their web site or the link above.

eco manifesto2

But what sleight-of-hand allows ecomodernists to claim that human prosperity and an ecologically vibrant planet are compatible?  Well, it is no sleight of hand.  The secret is density.  Many of the “destroy the village to save it” type ecologists envision a future of low energy consumption and dispersed dwellings in an imagined rural utopia.  In fact, this would be an ecological disaster of the first magnitude, as humans used every inch of the world’s surface to take energy and food from the environment. There would be no room for ecological vibrancy.

Luckily, humans are not going toward this rural future.  Worldwide, people are moving to cities. As the Ecomodernist Manifesto explains, this is a good thing.  The average city dweller takes up very little space, compared to someone in exurbia or on a farm. In a city, per person, land use and concrete use and gasoline use is far less. A city can be surrounded by greenbelts.  Farms would use every acre of that greenbelt. A city is people-dense.

An EcoModernist Manifesto envisions a future in which efficient low-carbon energy use and dense human settlements leave more of the planet for the growth of complex natural ecologies.  The energy use is crucial, and it must be low-carbon.  They look toward more efficient solar usage, and energy-dense nuclear power.

Intensifying many human activities — particularly farming, energy extraction, forestry, and settlement — so that they use less land and interfere less with the natural world is the key to decoupling human development from environmental impacts. – An Ecomodernist Manifesto

My local nuclear plant took delivery on three semis worth of fuel every eighteen months.  A local coal plant of about the same size took delivery of 40 100-ton carloads of coal, every single day. The coal plant required huge mines, huge transportation infrastructure, and huge clean-up facilities to scrub the stack of nitrogen, sulfur, mercury and particulates. And I don’t want to talk about the ash ponds and slurry ponds, okay? Even for a small coal plant, these ponds are huge.  In contrast, the storage for spent fuel for the nuclear plant is a concrete pad of about the same size as a convenience store.

Ecomodernism: Thinking Outside the Box

Ecomodernism, indeed, is thinking outside-the-box. It’s thinking “density.”

By encouraging densely settled cities, the earth can support a large human population and ecologically diverse rural areas.  This runs in contrast to the in-the-box thinking of ‘destroy-to-save’ ecologists, who imagine a future of spread-out homesteads, each burning wood to keep warm. (Though somehow these homesteads still have transport to get themselves to central schools and hospitals, and those buildings are well equipped with energy.)

eco manifesto

By encouraging low-carbon energy such as advanced solar and nuclear, we can have a vibrant human culture as well as an ecologically diverse planet.

My description here is an overly simplified summary of the Ecomodernist Manifesto.  I encourage you to read the entire short document.  For Earth Day, we have to think outside the box.  The 70s slogan “back to the land!” will not work for the future of humans or animals on this planet.  We need dense settlements and dense energy.

The Manifesto is only a beginning.  It is a new way of looking at the world.  It shows a direction that can work.  With thought and love for the planet, we can have an Earth worth sharing with our children and our grandchildren.

Happy Earth Day!

Anti-Nuclear Climate Inaction: California

The consequences of losing nuclear energy resources… great piece by Andrew Benson via The Actinide Age.

The Actinide Age

Guest article: A eulogy for San Onofre

Andrew Benson works as an Energy Analyst for the California Energy Commission. The above was written in his capacity as a private citizen and represents his personal opinion. It does not purport to represent the opinion of the California Energy Commission or the State of California.

The author’s father is a 30-plus year reactor operator and nuclear engineer of San Onofre Nuclear Generating Station.
You can follow the author on Twitter at @A_G_Benson. He blogs at www.atoms4ca.tumblr.com

SONGS
California has a global reputation for its environmental policy. Most notably, the state was first in the US to enact comprehensive legislation regulating greenhouse gas emissions. The law, known simply as AB 32, set a statewide goal of returning to 1990 levels of emissions by 2020 and 80% below that by 2050. Unfortunately, California’s ban on the construction of new nuclear power plants in California…

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EN executive board members recognized for service

Two Energy Northwest executive board members will receive awards next month at the Northwest Public Power Association annual conference in Anchorage, Alaska.

Sid Morrison

EN Executive Board Chair Sid Morrison

Former congressman and Washington state Secretary of Transportation Sid Morrison will receive the Paul J. Raver community service award. The award is given to individuals and organizations that show superior leadership in the betterment of cities, locales, states or regions.

“Sid sets the bar quite high with more than 50 years of community service,” said Mark Reddemann, Energy Northwest CEO. “His diplomacy and grassroots-style leadership has helped Energy Northwest strive for the highest standards of excellence.”

Morrison joined the executive board in 2001 and has been the chair since 2006. During his tenure, EN has completed and expanded the Nine Canyon Wind Project and the White Bluffs Solar Station. Morrison was also instrumental in securing the 20-year license renewal for Columbia Generating Station.

Morrison’s accomplishments also include record generation or availability at all EN projects as well as agency-wide safety records, and developing the Excellence in Governance model, which has since been adopted by several state utilities.

As chairman, Morrison has teamed with other companies to promote a commercial, small modular reactor project in the western United States.

Morrison’s service record extends beyond Energy Northwest. He serves as gubernatorial appointee to the Central Washington University Board of Trustees and sits on the Central Washington State Fair Board. He served as Washington state Secretary of Transportation from 1993-2001 and the Washington state House of Representatives form 1967-1974. He served in the state Senate from 1975 to 1980.

EN executive board member Sen. Tim Sheldon will receive NWPPA’s John M. George public service award. The award recognizes policymaking officers of member systems that have demonstrated remarkable service to public power.

Tim Sheldon

EN Executive Board Member Sen. Tim Sheldon

“Tim has been a longtime friend and strong advocate of Washington state’s public utilities and has been intricately involved in the public power community during the last several decades,” said Reddemann.

“Tim personifies the ideal candidate that has outstanding industry and personal achievements during his career and involvement with NWPPA and the public power community,” said Karl Denison, Mason County Public Utility District 1 board president. “He is a great ally and friend of PUD 1, Energy Northwest and public power.”

The Energy Northwest board of directors appointed Sheldon to the executive board in 2003. He has been the committee chair of the Administrative, Energy and Members Services committee since 2006. Sheldon also served as a PUD commissioner at Mason County PUD 1 from 1999 to 2002.

Energy Northwest nominated Morrison. Mason PUD 1 and Energy Northwest co-nominated Sheldon.

(Posted by Kevin Shaub)

Update on EN, BPA Demand Response Project

Energy Northwest and the Bonneville Power Administration integrated an additional demand response resource into the Energy Northwest Aggregation Demonstration project that first went live Feb. 9. This project is the first-of-its-kind for the region. The system will help BPA test balancing loads on its Northwest transmission grid through industrial resource partners.

Over the long run, demand-side resources have the potential to defer or displace the need for new generation in the region and make the most efficient use of existing generation − resulting in overall cost savings for Northwest ratepayers. Since the launch of the pilot program in February, BPA has called for 11 tests lasting up to 90 minutes; each was a success.

Mark Reddemann, Energy Northwest CEO

Mark Reddemann, Energy Northwest CEO

“This is a testament to Energy Northwest’s mission to provide our public power members and regional ratepayers with safe, reliable, cost-effective, responsible power generation and energy solutions,” said Energy Northwest CEO Mark Reddemann.

In the past, BPA provided balancing services such as this solely with capacity from the federal hydropower system. However, growing demands on the hydro system along with the dramatic increase of wind generation have limited its flexibility to provide enough balancing reserves to meet reliability standards. This has necessitated that BPA explorethird-party capacity sources.

“The hydro system provides many benefits to the Northwest, but it has been stretched to its limit,” said BPA Administrator Elliot Mainzer.

Elliot Mainzer, BPA Administrator

Elliot Mainzer, BPA Administrator

“Moving forward we will need smart, sound measures, including demand response to cost-effectively maintain hydro and transmission system flexibility and deliver value and reliable service to our customers and the region.”

Following the agreement to start a pilot program, Energy Northwest assembled the demand response resource from asset loads served by regional public utility partners and took the role of the resource aggregator. The contract currently provides up to 35 megawatts of reliable “fast reaction” demand response-capacity resource.

Conceptually, demand response builds on the idea that while individual electricity loads are relatively minor compared to the scale of a regional transmission grid, many loads lowered and raised at once may serve as a cost effective alternative to building or purchasing the output of additional electric generating stations.

Demand Response

Energy Northwest has developed its Demand Response Aggregation Control System, a comprehensive data gathering, monitoring, control and communications infrastructure system, for the project. Communications devices are installed by each participating utility to report to and receive direction from the DRACS via secure cloud-based data paths. DRACS is hosted within Pacific Northwest National Laboratory’s Electricity Infrastructure Operations Center, a U.S. Department of Energy funded incubator facility built and operated for such roles.

Energy Northwest and its public utility partners continue to look for diverse electric loads from customers willing and able to reduce their electric demand on short notice. The participating public utilities that provide the customer loads for the demand response resource are expected to include utility participants in Idaho, Oregon and Washington.

How it works

BPA meets balancing obligations in real-time. When Balancing Authority conditions require BPA system operators to activate reserve system balancing resources – including demand response – BPA operations generates a signal calling on demand response assets for an event.

Energy Northwest’s Demand Response Aggregated Control System (DRACS) picks up BPA’s signal, acknowledges its receipt, and forwards the signal to multiple demand response assets. Upon receipt of the forwarded signal, each asset begins automatically to reduce its loads. The load changes must be complete within 10 minutes and sustained through the event, which can be up to 90 minutes in duration.

During events, DRACS collects detailed metering information from each of the assets and reports total capacity response delivered to BPA. Once an event ends, DRACS sends terminating signals to the assets which can then resume normal operations.

(posted by John Dobken)

Congratulations to Atomic Insights – 20 years and still going strong!

It’s no joke – nuclear energy blog Atomic Insights is 20 years old and still going strong.

Rod Adams, Atomic Insights blog. (Courtesy Atomic Insights)

Rod Adams, Atomic Insights blog. (Courtesy Atomic Insights)

Our congratulations to Rod Adams for continuing to produce a high-quality, informative blog about nuclear energy.

Read his anniversary post here.

Love this snippet from his very first post, featured at the above link:

“One pound of uranium contains as much energy as 2 million pounds of oil. Releasing that energy from the uranium results in less than one pound of waste material that can be stored in a simple container for decades with no effect on the environment.”

True that.

Enjoy!

(Posted by John Dobken)