Fastest-Growing Nuclear Business Is Tearing Down U.S. Plants

(Bloomberg) -- The fastest growing part of the nuclear industry in the U.S. involves a small but expanding group of companies that specialize in tearing reactors down faster and cheaper than ever before.

After Entergy Corp. shut its Vermont nuclear plant in 2014, the utility planned to wait until 2068 to dismantle it using a $510 million decommissioning trust fund that would appreciate over time to cover $1.2 billion in anticipated costs. Instead, Entergy sold the plant in January to Northstar Group Services Inc., which plans to do the job by 2026 at a much reduced cost.

The trick: Northstar would avoid up to $8 million a year in fuel-storage costs, and use the trust fund to get paid for the work. And once the job’s done, they get 45% of whatever’s left in the fund. With nine other plants expected to shut by 2025, others are moving to replicate the strategy.

“This business really wasn’t there a few years ago,” said Scott State, Northstar’s chief executive officer, by telephone. “It’s a growth business, and will be for many years.”

The nuclear industry has struggled to compete against a flood of cheap natural gas, and the oncoming rush of solar and wind power. Besides Entergy’s Vermont Yankee facility, five nuclear plants have closed nationwide since 2013, and New York, New Jersey, Illinois and Connecticut have had to approve subsidies to keep others online.

Westinghouse Electric, once a global powerhouse in designing and building reactors, went bankrupt in 2017 after an anticipated renaissance of U.S. nuclear power failed to emerge. After exiting bankruptcy and getting bought, it’s now more focused on dismantling them.

New York-based Northstar has extensive experience with demolition projects and environmental remediation, as well as smaller nuclear facilities at research sites. While Vermont Yankee is its first commercial nuclear project, State said the company is in talks for four more accelerated decommissioning contracts.

When a reactor starts up, operators must establish a trust fund that will eventually cover the facility’s dismantling and cleanup. Under Nuclear Regulatory Commission rules, owners have 60 years to complete decommissioning after it shuts down.

In the past, utilities typically planned to let a shuttered plant sit unused for years, and often decades, while the trust fund grows and the radioactivity decays, said Rodney McCullum, senior director for decommissioning and used fuel at the Nuclear Energy Institute. “Business models we’re seeing now, though, are turning that thinking on its head,” he said.

Northstar, which acquired Vermont Yankee for a nominal $1,000, is the first to close this type of deal, buying the plant and taking control of its trust fund. But other companies are close behind.

Holtec International, based in Jupiter, Florida, has agreed to similar deals for Entergy’s Pilgrim plant in Massachusetts, which will shut down this month. It also has contracts for the Indian Point facility north of New York City that will close in 2021 and the Palisades site in Michigan that will be shuttered in 2022.

For utilities, the movement is a win-win. They no longer carry an unused asset on their books, and they don’t have to deal with the details of restoring the site. “Entergy’s expertise is in operating nuclear power plants rather than taking them apart,” company spokesman Jerry Nappi said by email.

The first step in shuttering a plant is moving the extremely hot fuel rods to cooling ponds. They must remain in so-called wet storage for several years before they’re transferred to dry storage casks. Northstar doesn’t handle that part of the process, and took over Vermont Yankee a few months after the last of the fuel was already moved.

Northstar expects to dismantle the plant for about $600 million. Besides the trust fund, the project will be covered by two other funds with an additional $90 million. “It’s in our interest to do it as efficiently as possible,” State said.

Quickness Incentive

Giving the company part of any surplus in the decommissioning fund creates an incentive to work quickly, adding to the challenges of completing the project safely, said Edwin Lyman, acting director of the nuclear safety project at the Union of Concerned Scientists.

“It’s a pretty risky business model,” he said.

Holtec follows a similar model, but expects to be able to start jobs sooner because it also handles wet storage.

Besides the Entergy deals, the company has agreed to buy and decommission Exelon Corp.’s Oyster Creek plant in New Jersey, which closed in September. The job is expected to take about eight years. Holtec formed a joint venture in July with the Montreal-based construction giant SNC-Lavalin Group Inc. to focus on the growing U.S. market for nuclear decommissioning projects.

Dry Casks

Holtec has developed storage systems that let spent fuel be moved into dry casks within three years. That means the dismantling can start sooner and the entire job is “shorter and less expensive,” spokeswoman Caitlin Marmion said by email.

Other companies are using slightly different models. Energy Solutions Inc. expects to complete decommissioning of Exelon’s Zion nuclear plant in Illinois by next year. The Salt Lake City-based company temporarily assumed ownership of the plant’s license, but it will revert back to Exelon when the job is done.

On other projects, including Edison International’s San Onofre facility in Southern California, it’s serving as a contractor.

Tackling these big jobs now means companies may avoid any wildcards if NRC policies are revised. “We know the regulations and requirements as they exist today,” said John Sauger, president of Energy Solutions’s reactor decommissioning group. “We cannot predict what these rules and regulations will be in the future.”

Eventually, after all the structures are gone and NRC has certified the land is safe, the decommissioning company is left owning potentially valuable property. Northstar, for one, doesn’t plan to profit from selling the land, State said. The company would consider selling it to the local community for $1.

Some ideas that have been proposed include building a solar farm or a data center -- the site already has power lines in place. “There’s a lot of things you can do with the site post-cleanup,” he said. “It’s a beautiful property.”

To contact the reporter on this story: Will Wade in New York at wwade4@bloomberg.net

To contact the editors responsible for this story: Lynn Doan at ldoan6@bloomberg.net, Reg Gale, Joe Ryan

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