Engineering prodigy makes big sales pitch for small reactors

Engineering prodigy makes big sales pitch for small reactors

Hannah Northey, E&E reporter
Published: Monday, June 24, 2013 by Environment & Energy Publishing

The nuclear industry is thinking small because Jose Reyes thought big.

Reyes, 57, is the brains behind NuScale Power LLC, an Oregon-based startup going toe-to-toe with engineering giants for federal grants for developing small modular reactors that some experts say could lessen the safety risks and construction costs of new nuclear power plants.

Just as entrepreneurs launched the likes of Apple Inc. out of a family garage, Reyes started NuScale in a vacant storefront in downtown Corvallis, home of Oregon State University.

"We started off in a really small bank building," he recalled in a recent interview. "When we got our first hire, he helped us carry furniture."

NuScale blossomed quickly, growing from 35 employees in the old bank to 230 employees and offices in Corvallis, Atlanta and Washington, D.C. -- thanks to Reyes' design for a 45-megawatt reactor that he boldly declares would cool itself indefinitely in an emergency.

His design has NuScale scrapping for Department of Energy grants against the likes of manufacturing behemoth Westinghouse Electric Co. and Holtec International Inc., which provides parts for more than 80 U.S. commercial reactors. DOE has already given one matching-funds grant to veteran reactor designer Babcock & Wilcox Co. for underground nuclear modules at the Clinch River site in Oak Ridge, Tenn.

Reyes is thinking bigger still.

The Oregon State University professor shares the Obama administration's long-range vision of building a new industry around making small modular reactors (SMRs) to replace old coal-fired power plants. Factories, he said, could be building as many as 50 small modular reactors a year by 2040 or sooner. His hope is to create a safe, affordable, emissions-free energy source for the United States that can be sold abroad.

But Reyes' nuclear dreams have taken some hits in the past and face a rough road ahead.

In March 2011, Reyes was forced to lay off dozens of employees after his company's biggest investor was sued by the federal government for running a Ponzi scheme.

"We hit a pretty bad bump in the road," Reyes said. "We got squeezed pretty bad, financially."

Days after the layoffs, worldwide confidence in nuclear power was rocked by a magnitude-9 earthquake and tsunami that slammed Japan's northeast coast, crippling three reactors and triggering massive protests across much of Europe and Asia.

Today, Reyes and his handiwork are facing tough questions from skeptics like Ed Lyman, a senior scientist with the Union of Concerned Scientists. Lyman said developers of the tiny reactors are chasing federal cash with questionable engineering and unanswered questions in hopes of building reactors that aren't needed.

"They keep talking about how wonderful these things are, but there aren't any customers," Lyman said.

Other industry critics question how nuclear power would fare when ambitious plans meet unexpected dangers. NuScale's design, for example, calls for placing up to 12 of the units in an underground building in a massive pool of water.

"All [small modular reactors] are still only paper designs," said Jonathan Hinze, a uranium market expert and international operations vice president at Ux Consulting Co. "There have been mock-ups and scale models of certain parts of the reactors, but you'll never be able to tell for certain whether their claim is for real until you build it."

But Reyes isn't shrinking from his critics.

"What I hope we can communicate is that it's not just that we went smaller and simpler, but we also added barriers and, even if the unthinkable once-in-100,000-years major earthquake did happen, you don't need power, water or operators," he said. "And even if you damage the core, it would result in no dose to the public."

'Perfecting the craft'

Small modular reactors may not be new, but Reyes' take on the technology is.

Reyes is a born tinkerer.

As a child growing up in New Jersey and Florida, Reyes was a fan of science fiction novels and Apollo moon launches. He remembers when his father, a 30-year naval veteran, would take him to Cape Canaveral to watch rocket launches.

Reyes earned a master's and doctorate in nuclear engineering from the University of Maryland and worked for more than a decade in the Nuclear Regulatory Commission's Office of Research before moving into teaching.

In 1987, he took a teaching position at Oregon State and led the school's Department of Nuclear Engineering and Radiation Health Physics.

"I was in the lab with the students shoulder to shoulder, perfecting the craft," Reyes said.

In the late 1980s, Reyes used a $4,000 grant to fund construction of a small-scale model of Portland General Electric Co.'s Trojan Nuclear Power Plant near Rainier, Ore., to help researchers understand how heat moved water within the system.

And he grabbed the attention of Westinghouse in 1991 when he presented a paper on the Trojan plant at the American Nuclear Society's annual meeting in Washington, D.C.

Westinghouse asked Reyes to build a scaled-down model of its AP600 reactor, a 600-megawatt unit that employed a "passive cooling system" -- using gravity instead of electric-powered pumps and moving parts that could break or leak -- to cool crippled reactors during emergencies.

He then worked on Westinghouse's AP1000 nuclear plant, which the company is today building around the globe.

In 2000, Reyes began working on what would become the NuScale reactor.

The model has 65-foot-deep underground steel vessels that contain the small reactors and uses passive cooling during emergencies, Reyes said.

Seven years later, Reyes found a business partner who would help him make NuScale a reality.

Reyes met Paul Lorenzini, an attorney, nuclear engineer and former president of Pacific Power & Light Co., through a commercialization program at Oregon State's College of Engineering that matched up researchers with business mentors to create "investment ready" startup companies.

"[Lorenzini] had the right vocabulary to speak with these people," Reyes said.

But NuScale's rapid rise from 35 employees to more than 200 ended in 2011, when Michael Kenwood Capital Management LLC and its manager Francisco Illarramendi -- NuScale's principal investor -- ran afoul of the Securities and Exchange Commission.

SEC sued Illarramendi for improperly diverting the investment firm's money into his personal accounts, forcing NuScale to lay off a third of its 100 employees and cut hours and pay for the remaining staff.

That year, NuScale stopped contract work and paid only critical operating bills (Greenwire, Feb. 4, 2011).

Workers who stayed on didn't receive a paycheck for seven months. Reyes kept trudging along but admits he was happy his kids -- now grown -- were already out of the house. His daughter, 33, is now in Oregon with two children, and his son, 30, lives in Philadelphia.

Then NuScale got a big break.

In October 2011, Fluor Corp., a global construction firm with experience building nuclear plants, bought a majority stake in NuScale, restoring the company's stability and giving Reyes' research a chance to shine.

"Our 60-plus history -- both in the nuclear industry and across coal-fired, gas-fired, renewables and everything else -- we knew about this, we had heard about Jose and the technology," Fluor spokesman Keith Stephens said in an interview. "It was very ... overnight, because [NuScale] was cooking along at a nice pace and then it was, 'Oh wow, these guys are really hurting!'"

'A pretty bold claim'

Reyes admits it's difficult to convince the public the tiny reactor is safe. But he's trying.

He believes NuScale's design speaks for itself.

Whereas aboveground, traditional plants are exposed to the air and need power to operate switches and pumps that cool a reactor during an emergency, NuScale's reactors are underground, submerged in 4 million gallons of water inside high-strength steel containment vessels.

The units share a pool, which NuScale says provides cooling for the reactors during an emergency when electronic equipment fails. The water would also capture radioactive material during an emergency that can later be filtered out or "scrubbed," unlike existing plants that release radioactive material directly into the atmosphere.

NuScale's biggest claim is that the reactors can cool themselves indefinitely, without operator interaction, connecting power lines or backup diesel generators. "We're saying we can [cool the plant] on as long as you generate heat. That's a pretty bold claim," Reyes said. "We can do it without generators, power lines or anything."

His assertions are being matched by competitors for federal grants and questioned by nuclear skeptics.

Holtec also claims its single 160-megawatt underground small modular reactor can cool itself indefinitely without outside power or human interference, and, like NuScale, uses gravity and convection to circulate water as opposed to electric systems that can fail.

Pierre Oneid, Holtec's senior vice president and chief nuclear officer, said his company's design also uses fewer parts compared to competitors. "That's less equipment, less things to go wrong, safer and more secure, and economical," Oneid said.

Moreover, Holtec has the capacity to manufacture in-house SMR parts -- steam generators, condensers, heat exchangers -- whereas the competition needs to buy parts from vendors, Oneid said.

"The real question is whether they'll be economic, and I think this is where Holtec will shine," he said. "In order to have a place at the energy table, we've got to be safe, secure, but also economical."

Ux Consulting's Hinze said NRC will question any claims that a plant can cool itself indefinitely without human interaction.

"I'm pretty sure when [developers go] to the NRC and files for a license, they're going to pull back from that claim," Hinze said. "Any nuclear regulator would say, 'We're not going to let you walk away from that plant.'"

Questions are also being raised about the actual costs of small modular reactors.

NuScale, Holtec and Westinghouse cited similar cost estimates for the first-ever reactor and expressed hopes those costs would fall as the industry blossoms and reactors are made more quickly in factories.

NuScale officials maintain that it is expected to cost about $1 billion to license the first unit at NRC -- a number that could drop precipitously -- and that a "reasonable gauge" for the first-of-a-kind NuScale SMR is about $5,000 in kilowatt-hours in overnight costs.

"We've done several bottom-up cost estimates with Fluor, and we keep coming up with, 'Wow, this is competitive!'" Reyes said.

Holtec's Oneid said his company is aiming for the first unit to cost about $1 billion and the second and third to cost about $800 million. But those, he cautioned, are merely goals.

"For anyone to tell you with absolute certainty, you'd have to review their business acumen because no one has built a new SMR yet," he said.

'A real challenge'

But Reyes envisions building many small modular reactors.

"Our idea is not to build one plant; we really want to build an industry with a large manufacturing base," he said.

The Obama administration is betting on the same economies of scale. A DOE spokeswoman recently said the White House wants to establish an industry that would manufacture as many as 50 small modular reactors a year by 2040 or sooner with the support of production tax credits and feed-in tariffs (Greenwire, March 13).

Reyes believes industry interest is strong enough to make that happen.

NuScale's customer advisory board, comprising 22 utilities -- three Canadian and the rest American -- has said it is looking to small modular reactors to replace large, old coal plants that are upward of 50 years old and no longer economical.

But NuScale is also looking abroad. Big markets in India and China promise customers, and Fluor has a strong international presence in gas-to-liquids that small reactors could support, Stephens said.

"Not just power, but how do we come up with the liquid gas and desalinization and district heating?" Reyes said. "They're not just looking for power."

Utilities want to diversify their portfolio and protect themselves against overinvesting in natural gas and experiencing price shocks, Fluor spokesman Stephens said.

Larger plants are also no longer a viable option, whereas smaller plants offer a more flexible option for scaling up, he said.

"They'd be taking on debt that's equivalent to their worth; that's not something they want to tackle, especially not knowing about loan guarantees," Stephens said.

But jump-starting an industry when the power markets are awash in cheap natural gas is going to be difficult, said Lake Barrett, a former DOE official and nuclear consultant.

Regulations, the cost of carbon and safety will also determine whether small modular reactors become a reality.

"If the world was putting a price on carbon, which it's not, that'd be very successful," Barrett said. "But it costs a lot to get them started. When gas is so cheap, it's a real challenge."