Nuclear Energy No. 24, 24/11-01
BE SAYS REPROCESSING OF AGR SPENT FUEL
IS UNECONOMIC, CALLS ON BNFL TO HALT WORK
Generator British Energy (BE) pitched into battle with
U.K. fuel cycle operator British Nuclear Fuels plc (BNFL) this
month when BE called for an immediate moratorium on
advanced gas-cooled reactor (AGR) spent fuel reprocessing.
Such reprocessing is uneconomic and adds unnecessarily
to the U.K.'s civil separated plutonium stockpile of more than
60 metric tons , BE said in a submission to the U.K.
government's consultation on future nuclear waste management.
BE said that if all spent fuel from its seven AGR stations
were to be reprocessed under current contracts with BNFL, it
would result in the production of about 25 MT of separated
plutonium. Currently BNFL has only separated about 2.5 MT,
it said, so the production of 22.5 MT "is potentially avoidable."
BE has never used any of the recovered plutonium
"because it would be uneconomic to do so," it said. It therefore
proposed the moratorium on AGR spent fuel reprocessing, it
said, "until the future status of plutonium and uranium is
These materials should not in the meantime be declared as
"waste," it said, because they would then need to be treated to
make them unavailable for use. That might foreclose using
their potential energy value at some future point.
BNFL declined to comment last week over its escalating
war of nerves with the world's biggest private nuclear
generator that began around early March 2000 with BE
cautiously trying to persuade BNFL to store more of its spent
fuel rather than have it reprocessed through Thorp. "We don't
want to conduct our commercial negotiations through the
media," said a BNFL spokesperson.
However, BNFL's stance on the issue has noticeably
hardened from 20 months ago when it declared its willingness
to explore with BE how spent fuel management might be
improved, given growing electricity market competitiveness.
On that earlier occasion, BNFL pointed out that it had
made "significant concessions" in negotiating its 1997
contract with BE which enabled BE "to fix most of its back
end liabilities at a lower level than was previously possible.
BE judged the contract to be acceptable," it said at the time,
"and shortly after signature was able to release some 100-
million pounds from provisions as a special dividend" to
shareholders (Nucleonics Week, 23 Mar., '00, 4).
The catalyst for the current bad relations between the two
companies is plummeting electricity prices. BNFL might argue
that BE knew prices were expected to fall when the two firms
signed the 1997 contract. But BE executives are in shock at
the extent of the drop caused by the latest developments in the
"Electricity prices have fallen by 30% since 1996," said
one BE source, "the bulk of that in the last 18 months." Yet
spent fuel management has increased 11% in line with
inflation, he said.
"Crippling reprocessing costs" are ruining profitability and
might eventually force BE to abandon its U.K. nuclear
generation business and move abroad, he said.
BE has now engaged in a battle with BNFL over reprocessing,
he said, "because the government's energy policy review
and its waste review (both now ongoing) are exactly the right
contexts for this issue to be raised.
"We have been talking with BNFL," he noted, but not
much had happened. "It's become a heightened issue because
we are now facing a completely different set of market
conditions," he stressed.
If the same spent fuel option applied in the U.K. as in the
North American market, where U.S. utilities pay the government
a spent fuel management cost of $1/megawatt-hour of
nuclear-generated electricity sold-a system that effectively
exists in Canada as well-then "we'd be paying 50-million
pounds (U.S.$73-million) per year," he said. Instead, BE is
paying 300-million pounds/year up-front to BNFL for
reprocessing services-"six times as much," he said.
In a speech late last year to industry executives, BE
Executive Chairman Robin Jeffrey noted that BE's much
larger back-end fuel costs are a consequence of the way the
previous Conservative government restructured the U.K.
electricity industry and its decision that, in the U.K., "spent
fuel should be reprocessed and not disposed of directly as
done in the U.S. and most other countries."
The form restructuring took meant that BE also had the
responsibility for paying all the outstanding costs of spent fuel
produced prior to its privatization in 1996, he said. In other
words, BE had to pay "the cost of dealing with fuel used
during government ownership of our nuclear reactors. From
1996 to today our costs have been increased by $3 per MWH
as a result of these liabilities," he said (NF, 8 Jan., 10).
In a book on BNFL's Thorp reprocessing plant published
in late 1999, William Walker, professor of International
Relations at St. Andrews University, Scotland, discussed the
government and BNFL's "systematic campaign from the 1970s
onward to keep storage off the agenda lest Thorp suffer from
the competition." Walker noted it was "equally extraordinary"
that "no study of extrication from Thorp has been carried out
by any British government despite the enormous hassle that
the project has caused and the doubts about its prospects."
In March 2000, an unnamed U.K. minister floated the idea
in the media that the government was shortly to propose
abandoning reprocessing altogether. This was immediately
refuted by Prime Minister Tony Blair's office, which declared
government policy toward reprocessing remained unchanged.
In May 2000, Martin O'Neill, chairman of the U.K.'s Trade
& Industry Select Committee, called for the U.K. government
to address reprocessing strategy later that same year as no-one
would want to be involved in a proposed partial privatization
of BNFL (now expected in 2004) without a clear direction.
What needed to be determined, he said, was Thorp's future
after it had fulfilled its original first 10-year customer contracts.
These have since been rescheduled to be completed by
March 31, 2005.
Said O'Neill, "It is an unhappy state of affairs where BNFL
feels obliged to insist on carrying out work for its largest single
customer-BE-against its expressed preference."
Should BE be successful in its current effort to rescind the
reprocessing aspects of its contract with BNFL, Thorp might
not be able to operate much past that 2005 date, according to
industry observers. Roughly a third of its first 10-year business
is provided by BE. Post-2005 Thorp has only German and BE
reprocessing business, except for some "almost insignificant"
quantities of business from elsewhere in Europe.
BNFL, however, is seen as likely to invoke the specter of
stiff penalties with BE as it has done in the past with its
Cogema Isn't Happy
The potential for BNFL's retirement from the reprocessing
market in a few years' time in the wake of BE's appeal for a
moratorium has ramifications for the rest of the world.
Cogema isn't happy about the possibility of losing its
main competitor for reprocessing and back-end fuel services, a
senior official of the French company said Nov. 19.
"We've never hidden the fact that we don't want to be
perceived as the lone (supplier) for certain market segments,"
Cogema senior executive vice president Christian Gobert told
Separately, French industry sources said Cogema doesn't
expect to find itself alone on the reprocessing market any time
soon. For one thing, Thorp, which has been plagued with
technical difficulties, could be forced to operate longer than
the anticipated end of its baseload contracts, if design throughput
cannot be maintained, suggested one source. Another
possibility, he suggested, is that the British government and
the two nuclear companies-one privatized, the other a
candidate for partial privatization in the next few years-
could come to an agreement on BE's back-end liabilities
that would lighten the nuclear utility's financial burden
while preserving BNFL's business.
More fundamentally, Cogema expects Russia's Ministry
of Atomic Energy, or a commercial successor, to take a
prominent place on the world market for back-end fuel
cycle services, whether BNFL persists on that market or not.
Minatom could also serve as a partner for BNFL; the two
companies are known to have discussed such arrangements.
Cogema doesn't "expect to be precisely alone" on the
reprocessing market even if BNFL withdraws, said a source
close to Cogema.
-Pearl Marshall, London; Ann MacLachlan, Paris