Uranium Production Boost

Uranium Production Boost

May 22, 2009

Pamela Coyle

Demand for enriched uranium is escalating. Three facilities in the works will help fill a gap that will hit in 2013, when an agreement with Russia to supply the material for U.S. nuclear power plants expires.

The nation's existing fleet of 104 reactors must find alternative sources of uranium. Recently, the U.S. Nuclear Regulatory Commission had 27 applications for new ones. Some of those could come online as early as 2015, and the companies must line up their supplies well in advance, said John Donelson, vice president of marketing and sales for USEC, which is building a massive enrichment plant using new gas-centrifuge technology in Piketon, Ohio.

Since 1995, about 40 percent of enrichment uranium used in U.S. reactors has started as bomb-grade uranium from dismantled Russian warheads.

"Right as the deal expires, you are looking at a demand increase of 30 to 35 percent," Donelson said.

Centrifuge technology will anchor all three facilities, which is a new development for the U.S. nuclear industry. The technology is said to be a modern way to enrich uranium for use in nuclear plants. European plants have long used centrifuge enrichment, and USEC has developed its own version. The only current domestic source of enriched uranium is from a USEC subsidiary in Paducah, Ky., that uses older and energy-gobbling gaseous diffusion technology.

Louisiana Energy Services' $3 billion facility in Eunice, N.M., is expected to start commercial production by the end of 2009. USEC's $3.5 billion facility, the American Centrifuge Plant, will run its first tests this summer as a demonstration project and bring some product to market by the end of this year. In December, Paris-based Areva filed its application for a $3.5 billion enrichment plant near Idaho Falls, three months ahead of schedule. Its first phase at Areva's Eagle Rock facility in Idaho is set for 2014.

Capacity is a big issue. Louisiana Energy, which got its federal license in 2006, already plans to expand its annual production from three million "work units" to six million by 2015. The company, a subsidiary of U.K.-based Urenco, is working with the Nuclear Regulatory Commission on submitting an amendment to its license, said Clint Williamson, LES vice president for governmental affairs.

"We have great hopes that the utility industry will move forward with new plants," Williamson said. "If we decide the market conditions are there and customers are there and we maintain community support, I can see a lot of things happening."

National Investment

All three plants under development are modular and can expand while online. USEC will turn out 3.8 million "work units" at initial capacity. But it studied the possibility of seven million annually.

"An amendment to the license is simple process," said Elizabeth Stuckle, USEC's director of corporate communication. "We've already covered ourselves to double our capacity."

Areva applied for 3.2 million work units, but the company has enrichment facilities elsewhere to help meet U.S. and global demand, said Sam Shakir, vice president of Areva Enrichment Services, a new U.S. subsidiary that will run the Idaho plant. "Our base case is the existing fleet, and we fully expect new reactors to be built. Many other countries are moving forward with new reactors. Existing capacity is way short. It takes time for the capacity on the enrichment side to expand."

Applications from both Areva and USEC for $2 billion in loan guarantees from the U.S. Department of Energy could impact project time lines. Tight credit -- plus the market's historic reluctance to back nuclear projects -- makes access to capital critical. USEC said it should receive priority because it is the only wholly owned U.S. enrichment facility. It also is a better play for better energy security as well as national security and uses more advanced technology.

"The other two enrichment plants are not U.S. technology and they are not U.S. owned or operated," Stuckle said. "They are foreign enrichment plants on U.S. soil."

Areva said market conditions justify its application, citing technology with a proven track record and known economics.

"The project is a U.S. project, it is going to build in Idaho, it will employ U.S. citizens, and it contracted to deliver enrichment services to U.S. utilities," Shakir said. "If anything, we should be encouraging foreign investments in this economy."

Centrifuge technology is new for the United States, but third-generation technology is already on the way. Global laser enrichment, a subsidiary of GE Hitachi nuclear energy, wants to use Australian laser technology to enrich uranium at a site near its headquarters in Wilmington, N.C. The Nuclear Regulatory Commission approved a license for building a test loop last year.

Even with the current fleet of nuclear reactors, uranium is in high demand. But if the global communities shifts to low-carbon generation forms that include using more nuclear power, then the demand for uranium will spike. That's what some companies are banking on and why they are developing sites in this country.