The global nuclear-power industry is beset with problems
THERE are few more storied innovators than Westinghouse. Founded in 1886, it is the company that brought electricity to the masses. When you plug in your toaster or flip your light switch, you have George Westinghouse’s alternating-current system to thank. In the 21st century the firm seemed poised to unleash a new revolution in nuclear energy. Its AP1000 pressurised water reactor was supposed to make nuclear plants simpler and cheaper to build, helping to jump-start projects in America and around the world.
But those nuclear ambitions have gone awry. On March 29th the firm filed for Chapter 11 bankruptcy in New York. Its troubles have been a running sore at Toshiba, its Japanese parent, a headache for its creditors, and the latest bad tidings for a nuclear industry beset with problems.
Toshiba was triumphant in 2006 when it paid $5.4bn for Westinghouse after a bidding war, beating out General Electric (founded by George Westinghouse’s archrival, Thomas Edison). Around the same time, Southern and SCANA, two big utilities based in Georgia and South Carolina, respectively, chose the AP1000 design for new nuclear plants.
But these American projects soon faced the problems that have long plagued nuclear construction. In Westinghouse’s bankruptcy filing, the company explains a dismal chain reaction. Unexpected new safety and other requirements from American regulators caused delays and additional costs. That sparked a fight between the utilities, Westinghouse and its construction contractor, a subsidiary of Chicago Bridge & Iron (CB&I), about who should bear them. The brawl exacerbated delays.
In an attempt to push the projects forward, Westinghouse acquired CB&I’s subsidiary, then became mired in litigation over the terms of the deal. It also signed new contracts with consortia led by Southern and SCANA, agreeing to shoulder unanticipated costs. Those costs mounted. Construction continued swallowing more time and labour than Westinghouse had hoped. In February Toshiba announced a $6.1bn write-down for the two American projects. Stephen Byrd of Morgan Stanley, a bank, anticipates that the total costs of the plants, if completed, would be about twice Westinghouse’s original estimate.
The nuclear business has imperilled Toshiba itself. The company’s health had improved in the aftermath of a huge accounting scandal in 2015, but its nuclear unit dragged it back down. Toshiba now appears desperate to shrink as a way to grow. It was eager for Westinghouse to file for bankruptcy before the end of its financial year. It also intends to sell its lucrative chip business. Shrinking might indeed help Toshiba focus on its strengths, as a specialist in the design and production of heavy machines such as turbines, coolers, motors and control systems.
But the Westinghouse bankruptcy is unlikely to be neat. Southern and SCANA may go to court to seek payment from Toshiba: the Japanese company has guaranteed ¥650bn ($5.9bn) against the spiralling cost of the projects. Any suggestion that Toshiba is bilking the utilities would anger Donald Trump. The AP1000 projects’ future was recently discussed in a meeting of officials from America and Japan.
The degree of diplomatic friction depends on what happens to the projects. Westinghouse expects to continue working on the reactors in Georgia and South Carolina as bankruptcy proceedings go on, but the utilities may abandon the plants or seek another firm to build them. There have been rumours that Korea Electric Power, a state-controlled utility, might take over, but Westinghouse’s steep losses may keep it away. “This has bankrupted Westinghouse,” says Mr Byrd. “Why would another firm step into that situation?”
The future for other AP1000 reactors looks bleak. A plant in China is years behind schedule. In America, the troubles in Georgia and South Carolina may bolster support for more modest nuclear projects, says Tyson Smith, a nuclear-energy expert at Winston & Strawn, a law firm. On March 15th the country’s nuclear regulator said it would review an application for America’s first small modular nuclear reactor (SMR), from a company called NuScale, in Oregon. The SMR technology has been touted as a cheaper, easier way to build nuclear capacity. But it will have to compete with inexpensive natural gas, wind farms and solar plants. Those hoping for an American nuclear resurgence may have to wait a long time yet.