Navigant Research Blog

How Not to Build a Nuclear Plant

— January 27, 2012

The Utah state engineer, a man named Kent Jones, has approved the water rights for the proposed Blue Castle nuclear project in Green River, Utah.  The two-reactor plant would be the first nuclear power plant built in the West since the late 1980s.  Jones’ decision has caused outrage among environmental and anti-nuclear groups in the West, and justifiably so.  The Blue Castle project pretty much sums up everything that’s wrong with today’s nuclear power industry.

First, it’s huge: the twin reactors would produce up to 3,000 megawatts (MW) of power.  The future of nuclear power lies in small, modular reactors (SMRs) that are prefabricated, easy to transport, easy to assemble, and easier to win permits for than gargantuan reactors.  Recognizing this, the American Nuclear Society, among other groups, is campaigning for new licensing procedures for SMRs that could avoid the absurdly long lead times facing most nuclear-power projects in the United States (see below).

“Big” means “expensive,” and the Blue Castle project is nothing if not costly.  It will take on the order of $18 billion to complete the project, including $100 million just to shove it through the approval process.  Blue Castle Holdings, needless to say, does not have that kind of cash.  In its water-rights application, the company listed as a primary backer a Wall Street company called LeadDog Capital.  LeadDog, which Blue Castle said was putting up $30 million for the nuclear project, has been accused in a cease-and-desist petition filed by the Securities and Exchange Commission of running a scam operation.  Blue Castle CEO Aaron Tilton, a former Utah state legislator, says that he never “pulled the trigger” on the LeadDog financing and that his company no longer does business with the embattled funder; however Jones, the state engineer, listed the LeadDog funding as primary evidence that Blue Castle “has the financial ability to complete the proposed project.”  In interviews with the Salt Lake City Tribune, Jones admitted that he took Blue Castle’s word for that: “It was just a plan presented by them, and we didn’t do a lot of investigation into the plan, about the validity of the plan.”

Even if the money becomes available, Blue Castle is years, if not decades, away from actually producing power.  Tilton said his company is readying an Early Site Permit to be submitted to the U.S. Nuclear Regulatory Commission (NRC) in 2013.  The application could take three years to be approved.  Then a combined construction and operating license (COL) would be needed, which would add another four years to the process. “The earliest the project could break ground is 2020,” points out Dan Yurman on his nuclear blog, Idaho Samizdat.  Nuclear power that might come online sometime in the mid-2020s is not exactly going to help reduce carbon emissions from coal plants in the short term.

Inevitably, there’s the question of water.  The state specifically approved Blue Castle’s lease of water rights held by Utah’s San Juan and Kane counties.  As with all Western water rights, the San Juan and Kane rights are part of a complicated tangle of competing claims. They are set to expire in 2015 if not put to beneficial use.

“At times, the Blue Castle proposal looks like a water right in search of a project,” remarked High Country News in a 2010 feature on the project.

The design for the reactors at Blue Castle has not been finalized, but they are most likely to be boiling water reactors, which are considered “Generation III+” designs – in other words, hardly a real advance over today’s uranium-fueled light water reactors.  There is no plan in place for where nuclear waste from the plant would go.

Finally, the Blue Castle plant would require the construction of massive transmission lines to carry the power to the coastal cities Southern California, the project’s ultimate customers.  Most of those lines would cross federal lands, requiring yet more permits – and more years to approval.  Yurman calls Blue Castle “a continuation of California’s ‘colonial’ strategy of banning new reactors within its borders while buying nuclear powered electricity from plants in other states.”

As I’ve noted elsewhere, the NRC should not be in the business of sitting for years on grandiose plant proposals, backed by speculative (if not fraudulent) investors, based on obsolete technology, requiring huge amounts of scare water resources and new investment in transmission and distribution facilities.  The U.S. nuclear power industry badly needs to move into the 21st century. With Blue Castle, it’s still pursuing the failed strategies of the 20th.


Keystone Delay Nothing to Shout About

— January 20, 2012

The so-called “cancellation” of the Keystone XL pipeline, designed to bring heavy oil from the tar sands of Alberta, Canada to the Midwestern United States, is being trumpeted as a major victory for U.S. environmentalists as well as a controversial move by President Obama that will provide ammunition for his Republican opponents in the November election.  The latter is almost certainly true; the former is more questionable.

Briefly, Obama declined to issue a permit for the expansion of the Keystone pipeline, owned by TransCanada, which would increase imports from carbon-intensive oil sands into the U.S. by up to 830,000 barrels a day.  Mined (not pumped) from deep deposits found below the boreal forests of Alberta, oil sands comprise a gluey mixture of sand, clay, and bitumen.  Studies indicate that on a “well-to-tank” basis, fuel from oil sands release 82 percent more greenhouse gases than light crude from, say, Saudi Arabia.  In both North America and Europe, opponents are trying to label oil sands “dirty” and make their products too expensive to transport and sell.  In an ideal world, this would lead to more use of alternative fuels, solar power, electric vehicles, and so on.  Unfortunately we don’t live in an ideal world, and there are many misconceptions around the Keystone XL dust-up.

  1. Less oil imported from oil sands does not lead directly to more use of renewables.  This is not a zero-sum game.  Total U.S. imports of fossil fuels are not going to go down because one pipeline doesn’t get built, or expanded, nor is investment in solar power, wind, hydrogen infrastructure, or any other cleantech energy source going to rise as a direct result.
  2. Keystone is only one front in a wider war.  Texas oil company Kinder Morgan, for example, has proposed an expansion that would more than double the capacity of its Trans Mountain pipeline carrying Canadian oil to Vancouver, to 700,000 barrels per day.  “The expanded capacity would likely enable more tankers to ship Albertan crude to refineries along California’s coast,” writes Maria Gallucci on InsideClimate News.
  3. The Keystone XL project, and the oil it’s designed to carry, are not going away. “As for the oil sands, the initial new volumes will reach the United States aboard trucks and railroad tankers, providing time for Obama or his successor to approve the pipeline in the beginning of 2013, and for Keystone to be finished just in time for the bulk of the bitumen in 2015,” observes Steve LeVine, on his blog The Oil and The Glory.

Environmentalists who want to limit the imports of nasty oil from Canada’s oil sands are fighting the wrong battle, argues Lisa Margonelli, on  “We need to stop fighting oil development project by project — and instead focus on passing a Low Carbon Fuel Standard (which could make the Keystone XL economically unviable), and on reducing oil consumption overall.”  Opponents of the Keystone project are like drug warriors trying to interdict cocaine shipments along America’s borders: they need to lower demand at the point of consumption rather than trying to block the supply.  As long as Americans want to drive gas-guzzling vehicles, the market will operate to supply them with the fuel, no matter how unclean or expensive or distasteful the stuff is.

“Once the oil’s flowing, it has to go somewhere,” Tony Clark, chairman of the North Dakota Public Service Commission, told CBS News in a nice summary of economic doctrine.

In fact, economic forces alone may eventually stop big, dirty oil projects like Keystone XL.  Oil sands become unprofitable when the price of oil on the world market drops below a certain level – perhaps as high as $80 a barrel, certainly anything lower than $50 a barrel. I predicted more than a year ago that oil prices were going to drop; right now they are being propped up by Iran’s threats of gunboat diplomacy in the Strait of Hormuz.  Nick Butler, the chair of King’s Policy Institutes at King’s College London, agrees with me: On balance, … the main worry for the world’s oil producers is that prices will fall. Three factors support this view – supply, demand and politics. … The reality is that oil demand is peaking.”

In 2007, Butler notes, the International Energy Agency forecast that demand would rise to more than 116 million barrels a day over the next two decades.  The most recent IEA forecasts see demand barely reaching 100m b/d.  Like a weak-willed cokehead, the world is slowly, reluctantly overcoming its addition to fossil fuels.  Regardless of political maneuvering, that makes the future of the oil sands dubious.  One delay of one pipeline, though, is nothing to shout about.


China’s Cleantech Gap With U.S. Grows

— January 18, 2012

Following the announcement of a major renewables-plus-energy storage project in Hebei Province, the Chinese government has released its “Second National Assessment Report on Climate Change,” which concludes that “global warming fed by greenhouse gases from industry, transport and shifting land-use poses a long-term threat to China’s prosperity, health and food output.”

Among the consequences of climate change in China, the world’s largest emitter of carbon dioxide, will be declines in grain production of 5 to 20 percent by 2050, “severe imbalances in China’s water resources,” with catastrophic flooding in some areas countered with severe drought in other regions, and increased public health problems from air pollution, particularly in the country’s coal-producing regions.

“China faces extremely grim ecological and environmental conditions under the impact of continued global warming and changes to China’s regional environment,” concludes the 710-page report.

The United States released a similar report, Global Climate Change Impacts in the United States, in 2009, with an update scheduled for 2013. That report’s findings are equally grim, but have mostly been muted by a political environment in which a sizable components of the Republican Party, including all of the candidates for president save the front-runner, Mitt Romney, continue to deny that global warming is even real. We live in interesting times, when the leaders of a nominally Communist government that restricts its citizens’ access to the Internet are more candid and realistic on the issue of global climate change than the leaders of one of the two major political parties in the United States.

China’s efforts to slow climate change also contrast starkly with the near-complete inaction of the U.S. government. China’s struggle to limit the disastrous effects of its burgeoning coal power industry was detailed in this Atlantic feature by James Fallows. “In the search for ‘progress on coal,’ like other forms of energy research and development, China is now the Google, the Intel, the General Motors and Ford of their heyday—the place where the doing occurs, and thus the learning by doing as well,” Fallows wrote.

“You can think of China as a huge laboratory for deploying technology,” a U.S. official posted in China told the Atlantic. China has also moved to the forefront in developing new nuclear power reactors, including liquid-fuel reactors that use thorium, rather than uranium, as their primary fuel, as I detailed in this report on

The “cleantech gap” between China and the United States recalls the so-called “missile gap” between the Soviet Union and America in the late 1950s and early 1960s, a scientific and technological divide that was crystallized by the Sputnik launch. The missile gap turned out to be an invention. The cleantech gap becomes more real by the month. The reasons are manifold, and they include the capability of a command economy, which China’s to a large degree still is, to move quickly on major projects like clean coal and advanced nuclear plants. Free markets are, according to theory, more nimble and responsive than centrally planned ones. But when it takes a decade just to get a permit for a new nuclear plant (much less build one) in the U.S., and a couple of years to go from conception to completion in China, economic theory doesn’t hold up.

China’s climate change dilemma, particularly around increasing use of coal, is stark, and it may not be solved without wrenching environmental and social changes that could tear at the fabric of society. But at least they’re trying to do something about it.


Biofuels Rulings Shift Geopolitical Landscape

— January 17, 2012

A series of recent policy-related developments within the biofuels industry may have set the stage for what could prove to be a significant shift in biofuel geopolitics over the next decade. 

To recap: the European Court of Justice (ECJ) affirmed an earlier ruling that held the imposition of carbon taxes on flights touching down or taking off on EU soil did not infringe international law or the Open Skies Agreement; a U.S. District Court ruled that California’s Low Carbon Fuel Standard (LCFS) violates the U.S. Constitution; and the long-standing U.S. ethanol producer credit (aka “VEETC”) slipped quietly into the history books.

Where do these developments leave the industry?

While the inclusion of airline emissions in the EU’s ETS indicates that the buzz around aviation biofuels won’t fade anytime soon, the threat of costly trade wars by the United States and China in response to the ruling could put a crimp on the expansion of international biofuel trade flows.

Meanwhile, just as the expiration of VEETC eliminates an estimated $6 billion worth of annual subsidies to the ethanol industry, the lucrative California fuel market is (at least for now) once again open for Midwest ethanol producers, and likely at the expense of Brazilian ethanol (more on this below).

On the whole, the decisions are generally good for advanced biofuels and corn-based ethanol alike.

Aviation Biofuels Lack Production Volumes, Not Willing Buyers

In the case of advanced biofuels, the decision to uphold the carbon fee suggests that international carriers will not escape the added costs associated with doing business in Europe, adding further incentive to integrate carbon-cutting technologies.  As I discussed in an earlier blog, the combination of impending offset purchases and high oil prices appears to be forcing the aviation industry’s hand when it comes to fossil fuel alternatives, which has been signaling strong demand for sustainable advanced biofuels in recent years (note that first-generation biofuels lack the performance characteristics necessary to power commercial and military aircraft).

Although expected, the ruling is generally good news for energy feedstock producers looking to commercialize next generation feedstocks like camelina, jatropha, switchgrass, and algae, and seeking reliable markets and off-take contracts to offset the risk associated with growing relatively unknown crops.

But the advanced biofuels story is not about lack of demand, which suggests that the ECJ decision may actually not have much impact at all.  In the case of the aviation industry, rising oil prices mean that demand for biofuel alternatives is deep, durable, and widespread.  Even without the EU tax, assuming adequate supply, price parity with petroleum-based fuels, and sufficient distribution logistics, aviation fuel buyers would be clamoring to lock-up every last drop of advanced biofuels production.

Meanwhile, with the threat of trade wars from the United States and China among others, costly tariffs and other punitive measures could actually stifle biofuels development, an unintended consequence of the aviation tax.

Corn-based Ethanol Gets a Boost

Over on the other side of the pond, Judge Lawrence J. O’Neill’s December 29 decision declaring California’s carbon fuel standard unconstitutional represents a significant victory for Midwest corn ethanol producers (see my 2010 article on the LCFS and Green Federalism for more on the legal issues).  The California Air Resources Board’s (CARB) policy, introduced in 2007, aims for a reduction in the “life-cycle carbon intensity” of fuels consumed in the state by 10 percent over the next decade.  Due to corn ethanol’s inherent inefficiencies, the policy excludes most of the corn-ethanol produced in the United States from one of the world’s largest fuel markets.

Implementation of the policy had led to the peculiar situation where Midwest ethanol producers were shipping their offending product 6,000 miles to Brazil to make up for a shortfall in sugarcane ethanol production.  Midwest corn’s exclusion from California, coupled with a national blending wall policy, put a serious constraint on U.S. producers’ scale-up ambitions.  The ruling may put corn ethanol back in the domestic driver’s seat, at least for now.

Looking Beyond 2012

As discussed in Pike Research’s report, Biofuels Markets and Technologies, we expect the production of conventional biofuels – namely corn- and sugarcane-based ethanol – to increase steadily over the next decade as demand for alternatives to petroleum-based fuel outstrips advanced biofuels production volumes.  The corn-based ethanol industry appears to have established viability, and even without the VEETC, we foresee an increase in production as access to markets like California and the likely raising of U.S. blend walls (e.g. implementation of E15 or expansion of E85) opens up new opportunities for producers.

The key question raised by these decisions: where will the production go over the next decade?  As corn-based ethanol ventures beyond VEETC, the industry will need to fight for market access at home and abroad despite this most recent victory.  Meanwhile, the EU may be positioning itself as the primary market for advanced biofuels at the expense of U.S. and China.


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