GLOBAL MARKETS-Stocks near highs, dollar drifts after Fed see hike "fairly soon"
* Policymakers see rate hike "fairly soon" but uncertainty remains
* Decision on $452 mln in federal funds due in Sept
* Established player B&W seen as favorite for half
* NuScale design touted by new backer Fluor for safety
By Braden Reddall
CORVALLIS, Ore., Aug 31 Nuclear power startup NuScale Power LLC is competing against some of the biggest names in the business for a U.S. federal grant to develop the next generation of nuclear reactors -- and it is playing the safety card.
The smart money may be on Babcock & Wilcox Co, a long-time provider of reactors for U.S. submarines, in the competition to be one of two companies to split a $452 million grant, according to industry experts.
But NuScale is trumpeting the safety aspects of its new technology, and has found helpful supporters including U.S. engineering giant Fluor Corp, which bought a majority stake in the 5-year-old company last October.
Besides the money, winning a vote of confidence from the Department of Energy is perhaps worth more to NuScale, which was on the verge of collapse in early 2011 after finding out that its main backer, hedge fund manager Francisco Illarramendi, had been running a Ponzi scheme.
Then, only days after Illarramendi pleaded guilty, came the Japan earthquake and tsunami that crippled the Fukushima nuclear power plant and curtailed global demand for new reactors.
Until then, advocates had talked of a nuclear renaissance because of its low carbon footprint. But public reaction to the months of scary headlines out of Japan put many nuclear investment plans on hold.
In the wake of Fukushima, the Corvallis, Oregon-based company has been trumpeting the safety of its own small modular reactors (SMR), and continues to believe that gives it a winning edge over competitors for the federal SMR grant. Applicants also include Toshiba Corp's Westinghouse, supplier of the first U.S. nuclear reactor in 1957, and Florida-based Holtec International Inc, a maker of casks for storing nuclear waste.
NuScale's 45-megawatt reactor, which can be grouped with others to form a utility-scale power plant, would sit in a 5 million-gallon pool of water underground, meaning it would require no pumps to inject water to cool it in an emergency.
"When we first started talking about SMRs, it was all about economics," Chief Executive Paul Lorenzini said in an interview. Piecing together many small reactors, which are 60 percent-built in a factory, would be easier to finance than the $6 billion minimum for existing reactor designs of 1,000 MW or more.
After Fukushima, NuScale reversed its approach to promoting the design, and safety now overrides all other concerns, he said.
Charles Ferguson, president of the Federation of American Scientists, said Babcock & Wilcox was clearly a favorite to be one of the two winners of the grant, pointing to the company's strong track record and long service for the U.S. Navy.
"But I'd be disappointed from a technological standpoint" if NuScale didn't get the second spot, said Ferguson, who served on a ballistic missile submarine and studied nuclear engineering at the Naval Nuclear Power School.
THE GREAT PAUSE
NuScale staff half-jokingly refer to the first half of 2011 as the "Great Pause," when NuScale could not pay its bills and dozens among its 100 employees at the time had to be let go. It now employs 260 people, and hopes to add another 70 by year-end.
The firm's forest-covered home state certainly seems an unlikely place for anything nuclear to emerge. It was 20 years ago this month that Portland General Electric decided to close Oregon's only nuclear plant, Trojan, due to chronic steam generator problems. A few months later the plant was shut down permanently after 16 years in operation.
Yet the NuScale design has managed to win over Oregon's national representatives, who tend to be against nuclear power. Senator Jeff Merkley, a self-described "proud progressive," surprised Lorenzini by throwing his support behind SMRs.
Nonetheless, critics are quick to point out that they do not solve the long-debated problem of storing nuclear waste.
"SMRs are just the next chapter in a nuclear industry that can't stand up on its own," said Don Hancock, director for nuclear waste safety at the Southwest Research and Information Center. "So it always has to be funded by the government."
B&W is known as a politically savvy operator. The Charlotte, North Carolina-based company garnered public support from Ohio's two U.S. senators for its memorandum of understanding for SMRs with Ohio utility FirstEnergy, signed late last month.
Five days later, B&W opened a fuel technology center for its mPower 180 MW design in Virginia -- about a three-hour drive from Washington, D.C. On top of that, mPower has the backing of leading U.S. engineering company Bechtel.
Westinghouse, for its part, can point to a long relationship with the U.S. government, starting with its work with the Atomic Energy Commission that led to its pioneering commercial reactor in Pennsylvania in 1957. Westinghouse has the backing of utility Ameren Missouri, which committed to applying to build its 225 MW SMR if Westinghouse gets a piece of the DoE money.
The Oak Ridge National Laboratory has cited advantages in the NuScale reactor and Holtec's HI-SMUR 140. The laboratory found the natural water circulation force in both was strong enough to cool them - "thus eliminating the need for pumps entirely."
NuScale Chief Technology Officer Jose Reyes, who spent nearly a decade at the Nuclear Regulatory Commission, said it would take 30 days for the water to boil off after any accident that shut down a NuScale reactor.
The NuScale design was originally developed with a Department of Energy grant in 2000, before it was refined with backing from Oregon State University in Corvallis. The firm secured the patents by giving OSU an equity stake.
As for its main shareholder, Fluor says it is committed regardless of whether NuScale wins in the "FOA" - or funding opportunity announcement, as the DoE grant award is known. Fluor has its eyes on deploying the reactors for clients, like miners, who need power in remote places without access to the grid.
Lorenzini said he would simply have to reassess strategy if NuScale does not win the award. Yet it clearly weighs on the minds of many at NuScale headquarters, where there was audible chatter about the FOA among junior staff in one conference room.
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