Fukushima Reactors Same Age, Design as Vermont Yankee (ETR, GE)

It’s no surprise that the disaster at Japan’s Fukushima nuclear power generating site is causing a re-thinking of global nuclear policy. It is not even surprising that it took a disaster of this magnitude before the issue of nuclear power got the scrutiny it deserves. What is surprising is that the instant reactions are so much like the policies followed before the earthquake and tsunami struck Japan.

Just last week, the US Nuclear Regulatory Commission (NRC) approved a 20-year extension for the Vermont Yankee 650-megawatt plant currently owned by Entergy Corp. (NYSE: ETR). The plant generates electricity in a boiling water reactor (BWR) that was put into commercial operation in 1972, one year after the Fukushima Unit #1, also a BWR, which exploded earlier this week. The Fukushima unit was originally scheduled for decommissioning this year, but its license had already been renewed for another ten years.

The owner/operator of the Fukushima plants is Tokyo Electric Power Co., or Tepco. Fukushima units #1, #2, and #3 were constructed by Toshiba, using reactors supplied by General Electric Co. (NYSE: GE) for units #1 and #2. Toshiba supplied the reactor in unit #3.

Tepco has not exactly been a model provider of nuclear generation. In 2002, the company was charged with falsifying plant safety records and five executives, including the company’s president, were forced to resign.

Had there been no 1,000-year earthquake, could Fukushima’s 40-year old units have operated safely for another 10 years? We’ll never know the answer to that question, but one investment strategist told Bloomberg, “Nuclear is going nowhere. A lot of these plants are over 40 years old and should be replaced.”

The International Atomic Energy Agency doesn’t necessarily agree. The IAEA noted in a press release in 2007, “With proper management, vigilance and safety enhancements, nuclear power plants can operate beyond their typical design lifespan of 30-40 years.” The driver for this policy was undoubtedly cost. To be fair, maintaining an existing nuclear plant is far less costly and takes less time to acquire permits than does building a new plant.

Governments have attempted to build new capacity and increase the useful lifespan of existing plants. In the wake of the Japanese disaster, Germany has shutdown seven of its oldest plants and Switzerland has halted license renewals for three of its plants. New plant development has also been stopped in China, India, and Britain.

In the US, President Obama has reiterated his commitment to nuclear power and the NRC “remains confident” that all US nuclear generating plants are safe. One plant up for renewal is California’s Diablo Canyon, which is seeking a 20-year renewal even though a new fault was found near the site in 2008.

Whether license renewals or new plant construction will resume at all is an open question at this point. At the very least long delays should be expected as almost every government re-evaluates its safety regulations and its licensing rules.

Once the reactors at Fukushima are brought under control, Tepco’s safety systems will be subjected to intense scrutiny and, given the company’s checkered history, the review could simply kill it. GE and Toshiba are not likely to share culpability for the current disaster, but they, as well as Hitachi/Westinghouse, sure to see a slowdown in business for new nuclear power plants.

Paul Ausick

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