Nuclear energy option — Is the Philippines ready?

By on June 20, 2018

By Fernando Penarroyo

Fernando “Ronnie” Penarroyo is the Managing Partner of Puno and Penarroyo Law Offices (www.punopenalaw.com). He specializes in Energy and Resources Law, Project Finance and Business Development.

 

Philippine energy regulators have taken a technology neutral stand on possible solutions to the country’s growing demand for energy.

Policy makers are now seriously considering nuclear energy as a possible alternative.

There is a pending need for more energy sources especially with the depletion of the Malampaya gas field and the country being relegated to third spot in the list of the world’s biggest producers of geothermal energy.

On the other hand, abundant and low-cost natural gas, renewable energy generation programs and the risk averse investment climate persisting since the global financial crisis in 2008, appear to be the main factors affecting investment decisions for nuclear power projects.

However, climate change and greenhouse gas issues, air pollution, energy supply security, energy mix diversification, and volatile fossil fuel prices, make it imperative for countries to develop or reconsider their nuclear development policies.

Economic and market factors, environmental goals, and natural resource constraints seem to be much larger drivers of deployment decisions on nuclear energy.

 The Bataan Nuclear Power Plant (“BNPP”) — the Great White Elephant

The 620MW BNPP, the country’s first attempt at nuclear power development, was identified as a solution to the 1973 oil crisis.

The project did not push through because of corruption scandals involving its commissioning and was discontinued after the fall of the Marcos administration.

Previous administrations have contemplated to revive the nuclear power option as a stable, carbon free energy source but the Fukushima Daiichi nuclear plant incident in 2011 brought concerns about the safety and integrity of nuclear plants.

Former Minister of Energy, Geronimo Z. Velasco believed the BNPP could have been the single biggest achievement of Marcos’ energy development plan, but the anti-Marcos opposition successfully packaged this pioneering project as the ultimate source of corruption.

Velasco quoted BNPP’s most prominent opponent, the late Senator Lorenzo M. Tanada, who said that the BNPP was a “monument to corruption, greed, and folly.” Ironically, Velasco remarked that the icon of the antinuclear plant movement was the same man who, as a senator in 1968, ensured the passage of the very law that enabled the Philippine government to venture into nuclear power development.

The most powerful argument made by anti-Marcos activists against BNPP was that it became the vehicle for the commitment of massive corruption, which supposedly involved Disini (the crony broker), Westinghouse (the favored contractor), and Marcos.

This issue has been thoroughly discussed by Juan Arturo Iluminado Cagampang de Castro in his book Philippine Energy Law (2012).

In Chapter III. II. A “Bataan Nuclear Power Plant (BNPP) the US$2.1 Billion White Elephant” of his book, De Castro cited numerous cases decided by Philippine and U.S. courts documenting the corruption involved in the project: Maceda vs. Macaraig, G.R. No. 88291 31 May 1991; Philippines vs. Westinghouse Elec. Corp., 714 F. Supp. 1362, 1366 (1989); Public Interest Center vs. Roxas, G.R. No. 125509, 31 January 2007; Philippine Commission on Good Government vs. Desierto, G.R. No. 132120, 10 February 2003; Philippines vs. Westinghouse, 774 F. Supp. 1438, 1441 (D.N.J, 1991); Philippines vs. Westinghouse Elec. Corp., 782 F. Supp. 972, 976 (1994); Philippines vs. Westinghouse, 139 F.R.D. 50, 5253 (D.N.J., 1991); Republic vs. Westinghouse Elec. Corp., 43 F.3d 65 (1994); Republic vs. Westinghouse Elec. Corp., 821 F.Supp. 292 (D.N.J., 1993); and, Constantino, Jr. vs. Cuisia, G.R. No. 106064, 13 October 2005).

The Ateneo School of Government made a case study using Sanderson’s (2011) framework in assessing the setbacks of the BNPP from its planning stage to its completion.

As per Sanderson’s framework, strategic rent seeking as an explanation of megaproject underperformance involves conscious tweaking of project proposals to win project bids.

It appears, however, that in the BNPP case, Westinghouse’s success in winning the BNPP contract was fueled more by a deliberate effort to strategically wield existing political ties to serve private interests than a conscious attempt to deceive project evaluators.

The case is also an example of how political considerations interfere with economic decision making, thus complicating the project management picture.

Historical content analysis of events would reveal that earlier discourses on the BNPP focused more on economic considerations (e.g. addressing power shortage concerns). Midway, the debates related to technical project implementations revolved around the issue of environmental sustainability (e.g. safety issues, environmental impacts). Latter discussions, meanwhile, focused on power contestations (e.g. alleged corruption, filing of legal complaints, etc). It appears that over time, BNPP project management discourses seemed to have deviated away from the project and its intended benefits and proceeded to tackle issues involving political interests.

 Reactivating the BNPP

Previous administrations particularly the Ramos presidency, have indicated that the Philippines’ willingness to have nuclear power, but that power will come from a new plant and not the BNPP.

In 1994, Ramos announced that the BNPP reactor would be converted to a 1000MW combined cycle gas plant. M.E.T.T.S. Pty. Ltd. Consulting Engineers of Australia (“METTS”) conducted a “Study of the Conversion Options for the Bataan (Philippines) Nuclear Power Station.”

METTS found that conversion was technically possible, but economically unwise.

New and dedicated coal or natural gas fired power plants would give much higher efficiencies than converting BNPP.

The study concluded that the only way of obtaining a reasonable return from the BNPP is to use it as a nuclear power plant.

METTS’ conclusion was summarized in a study presented by Clarke, Ebeling and Cordero at the First Philippine International Conference on Energy Efficiency and Demand Side Management in Manila on January 1995:

  • That the use of the present ‘nuclear’ turbine/generator in a fossil fired system would be highly wasteful of energy (fuel),
  • A new pulverized coal power station and/or combined cycle natural gas power stations at other site(s), would be a better investment in terms of fuel efficiency and levelized power costs,
  • The Bataan site is inappropriate for coal fired plant, due to environmental constraints and materials (coal and ash) handling problems,
  • More assessable sites could be found for combined cycle natural gas fired plants around Manila Bay and Batangas,
  • The Bataan reactor has been maintained in a good condition since mothballing, and
  • The reactor is of basically sound design and construction and could with modest expenditure become one of the most modern and safest light water reactors in East Asia.

The study also noted that the perceived problems at the Bataan power plant are its greatest liability.

These problems include seismic instability, claims of faulty workmanship and the lack of experience of the operators.

Many geological and seismic inspections have been carried out on the site, with the result being that no significant risk was apparent.

METTS recommended that to convince Philippine society of the seismic safety of the plant, an educational programme would need to be carried out that emphasized the sites stability, and the high seismic safety factor of the plant.

If consideration was given to running the Bataan power station as a nuclear plant, then the environmental and economic benefits (as well as safety) should be emphasized, to overcome social and political opposition.

The International Atomic Energy Agency (“IAEA”) also prepared a report in 2008 on the feasibility of rehabilitating the inactive plant, wherein it made two primary recommendations.

First, BNPP´s status must be thoroughly evaluated by technical inspections and economic evaluations conducted by a committed group of nuclear power experts with experience in preservation management.

Second, the mission advised the Philippines on the general requirements for starting its nuclear power programme, stressing that the proper infrastructure, safety standards, and knowledge be implemented.

The IAEA is an independent body that not only requires stringent measures to safeguard against nuclear incidents but also continuously monitors operations of power plants.

The agency has assisted countries on various nuclear projects including delayed or suspended nuclear power plants.

However, the IAEA is not able to provide support for commercial decisions for nuclear power plants as this falls outside of the agency´s mandate.

As a global best practice in minimizing the risks in nuclear power plant projects, before any plant can be approved for operations, it must first pass the stringent requirements of the IAEA.

The Duterte administration has hinted its interests in nuclear energy but has taken an ambivalent stand on the BNPP.

On 13 November 2017, the Department of Energy (“DOE”) signed a Memorandum of Cooperation (“MOC”) with Russian state nuclear firm, Russian Federation State Atomic Energy Corp. (“ROSATOM”).

The MOC would support the Philippines in coming up with a national nuclear energy policy development and program implementation.

The DOEROSATOM cooperation involves the undertaking of specific projects and tasks, exchange of experts, workshops, training, and education of personnel and sharing of technical information.

Under the MOC, the Philippines and Russia will also cooperate on the audit and assessment of the Bataan Nuclear Power Plant’s (“BNPP”) technical condition, including the option of its rehabilitation.

 The Fukushima Daiichi Accident and its Impact to Nuclear Development

On 11 March 2011, the Great East Japan Earthquake, the largest ever recorded in Japan at a magnitude of 9 on the Richter scale, created massive tsunami waves triggering a serious accident at the Fukushima Daiichi nuclear power plant.

This led to significant offsite radiation releases from fuel meltdowns in the three reactors in operation at that time in the six unit facility.

According to the Japan National Police Agency, over 18,000 lives were lost as a direct result of the earthquake and tsunami.

However, no loss of life occurred or was expected to occur because of the radiation releases from the nuclear accident, although there remains some scientific debate about the health impacts of long-term exposure to low levels of radiation.

Following the accident, the Organization for Economic Cooperation and Development Nuclear Energy Agency (“OECDNEA”) came out with a report in 2017 reviewing the impact of the accident and the subsequent changes in nuclear energy policies.

As a direct result of the accident it is clear from a country-by-country review by OECDNEA that despite changes in some countries particularly in Western Europe, which have made clear policy changes, most countries with nuclear power or with plans to add nuclear power to their energy mix have maintained an interest in developing the technology.

In several cases, visible delays in programme implementation have resulted from safety reviews and resultant required actions to bolster defenses against rare but severe natural events.

Political support for nuclear energy became generally weak in the years immediately following the Fukushima Daiichi accident, owing to public safety and cost concerns.

Despite of this, several countries continue to evaluate and plan for the deployment of nuclear power.

Since the accident, public distrust of nuclear power has clearly increased.

In Southeast Asia, there were no operational power reactors as of mid2016, but several countries are considering adding nuclear power generation to their energy mix, suggesting growth in nuclear generating capacity in the longer term as the region is experiencing strong economic growth and rising energy demand.

Overall, outside of Japan, there appears to be little ultimate change to energy policies directly attributable to the Fukushima Daiichi events.

In general, countries with previous commitment to nuclear power remained committed, and those with plans to phase out nuclear power accelerated those plans.

However, a few countries that seemed to be actively considering the adoption of nuclear power have delayed or deferred such decisions.

 Present Philippine Legal Framework on Nuclear Energy Law

Whether a State is creating a framework for nuclear legislation or revising an existing framework, or merely updating one aspect of its nuclear legislation, the first step in the process should be a thorough assessment of current and expected programs and plans involving the use of nuclear techniques and materials.

Presently, three (3) laws exist covering nuclear energy:

  • RA 2067 (The Science Act of 1958);
  • RA 5207 (Atomic Energy Regulatory and Liability); and
  • Presidential Decree 1586 (Philippine EIS System Law) In the Philippines, there are two (2) separate regulatory authorities which have the jurisdiction:
  • Philippine Nuclear Research Institute (“PNRI”), Department of Science and Technology (“DOST”) is the national authority responsible for the regulation, licensing and safeguards of radioactive materials and atomic energy facilities.

The PNRI has the roles of promoting nuclear technology, providing services, and regulating the use of nuclear and radioactive materials.

PNRI’s own nuclear and radiation activities are exempt from licensing

  • Center for Device Regulation Radiation Health and Research/Food and Drug Administration under the Department of Health is the national agency in charge of radiation protection and safety of the ionizing and nonionizing radiation emitted from electrical/electronic devices.

DOST Undersecretary Yorobe believes that the present legislative framework creates a potential for differing regulatory policies and safety standards governing activities involving the use of ionizing radiation.

The framework for the control and regulation of sources of ionizing radiation needs to be modernized and rationalized.

She added that the primary legal instruments, which mandate the PNRI with the dual function of promoting and regulating the peaceful applications of nuclear energy are outdated.

 The Need for a Comprehensive Philippine Nuclear Energy Law

The IAEA defined nuclear law as: “The body of special legal norms created to regulate the conduct of legal or natural persons engaged in activities related to fissionable materials, ionizing radiation and exposure to natural sources of radiation.” This definition comprises four key elements:

  • First, as a body of special legal norms, nuclear law is recognized as a part of general national legislation, while at the same time comprising different rules required by the special nature of the technology;
  • Second, the element of regulation incorporates the risk benefit approach that is central to managing activities that present both hazards and advantages for social and economic development;
  • Third, as with all legal regimes, the special legal norms relate to the conduct of legal persons, including commercial, academic, scientific, and governmental entities, as well as of individuals; and
  • The fourth element focuses on radioactivity (produced through the use of fissionable material or ionizing radiation) as the defining feature justifying a special legal regime.

The primary objective of nuclear law is to provide a legal framework for conducting activities related to nuclear energy and ionizing radiation in a manner which adequately protects individuals, property, and the environment.

Where the risks associated with a nuclear activity are found to outweigh the benefits, priority must be given to protecting public health, safety, security, and the environment.

In the Philippines, draft laws on nuclear regulation are currently being deliberated.

To promote safety, a comprehensive nuclear law now in advanced stages in both houses of Congress, will guarantee independence of a nuclear regulatory commission separate from the promotion and research thrusts of the PNRI:

  • “AN ACT PROVIDING FOR A COMPREHENSIVE NUCLEAR and RADIATION REGULATION, CREATING FOR THE PURPOSE, THE PHILIPPINE NUCLEAR REGULATORY COMMISSION, AND APPROPRIATING FUNDS THEREFOR” known as the “Comprehensive Nuclear Regulation Act” filed under HB No.00025/01691/0 2977/03651/04369 17th Congress
  • “AN ACT PROVIDING FOR A COMPREHENSIVE NUCLEAR REGULATION, CREATING FOR THE PURPOSE, THE PHILIPPINE NUCLEAR REGULATORY COMMISSION, AND APPROPRIATING FUNDS THEREFOR” known as the “Comprehensive Nuclear Regulation Act” filed under SB No. 1352 17th Congress

The Philippine government’s policy regarding nuclear energy development seems to have taken what is described by the IAEA as a “promotional” policy involving support for research and development, and the streamlining of administrative and regulatory procedures.

The new nuclear legislation must include a comprehensive assessment of the status of all laws and regulatory arrangements relevant to nuclear energy.

The IAEA recognized that in addition to general environmental laws, legislation concerning economic matters (e.g. taxation, liability, regulatory fees, monetary penalties, and the setting of electricity rates) worker health and safety, criminal enforcement, land use planning, international trade and customs, scientific research, and many other areas, may impinge on enterprises engaged in nuclear related activities.

Also, the use of nuclear energy typically involves numerous parties, such as research and development organizations, processors of nuclear material, manufacturers of nuclear devices or sources of ionizing radiation, medical practitioners, architect engineering firms, construction companies, operators of nuclear installations, financial institutions, and regulatory bodies.

The IAEA believes that a very important step in the development of nuclear legislation is to obtain a clear perspective on how a new or revised regulatory law could affect persons and institutions having interests in the nuclear field.

Stakeholders have typically included the following: the regulated industry or professionals; scientific bodies; governmental agencies; the media; the public; and other States (especially neighboring States that have entered into agreements providing for an exchange of information concerning possible transboundary impacts, or States involved in the export or import of certain technologies or material).

 The Regulatory Body

A fundamental element of an acceptable national framework for the development of nuclear energy is the creation or maintenance of a regulatory body with the legal powers and technical competence necessary to ensure that operators of nuclear facilities and users of nuclear material and ionizing radiation, operate and use them safely and securely.

The regulatory body should be structured in such a way as to ensure that it can discharge its responsibilities and carrying out its functions effectively, efficiently, and independently.

The regulatory body should have the freedom from unwarranted interference in regulatory functions with clear and established relationships with other governmental bodies, the regulated industry, and the public.

Crucial to the independence of the regulatory body are its technical capabilities since it is charged with making complex technical judgments.

If a regulatory body must rely entirely on the assessment of others, its independence may be compromised.

The organization should be backed by financial resources, which must be sufficiently predictable and reliable, adequate, and not subject to undue control by external bodies.

Further, the head of the regulatory body must have the highest level of competence in nuclear technology, law, public administration, or some other relevant discipline, and possess the relevant experience and sound character.

 Conclusion

Despite the need to accelerate the response to climate change and energy sufficiency, nuclear energy use in the Philippines has always been associated with safety issues thus bringing the debate from purely scientific to outright political.

Also, it must contend with the fossil fuel industry lobby, and renewable energy and environmental advocates.

All available options for energy self-sufficiency must be carefully investigated by the government.

The enactment of a national legislative framework covering the use of nuclear energy and ionizing radiation is a vital element in establishing the institutions and rules necessary for the safe management of these technologies.

However, it is important to emphasize that laws alone, however well drafted, cannot ensure nuclear safety and security.

In applying these safety concepts, it is always important to return to the fundamental requirement that both the risks and the benefits of nuclear energy be well understood and taken into account with a view to achieve a sensible balance in the framing of legal and regulatory measures.

 References:

Clarke, Michael C., Ebeling, Douglas R., Cordero, Donato L., Options for the Conversion of the Bataan Nuclear Power Plant to Fossil Fuel Firing, M.E.T.T.S. Pty. Ltd. Website (1995), http://www.metts.com.au

De Castro, Juan Arturo Iluminado Cagampang, Philippine Energy Law (2012), pp. 283-303

IAEA Advises Philippines on Next Steps for “Mothballed” NPP, 12 July 2008 https://www.iaea.org/newscenter/news/iaea-advises-philippines- next-steps-mothballed-npp

Impacts of the Fukushima Daiichi Accident on Nuclear Development Policies, Nuclear Development 2017, OECD-NEA

Mendoza, Ronald U., Paras, Yla Gloria Marie P., Bertulfo, Donald Jay, The Bataan Nuclear Power Plant in the Philippines: Lessons from a White Elephant Project, September 2016

Sanderson, Joe, Risk, Uncertainty and governance in Megaprojects: A Critical Discussion of Alter-native Explanations, International Journal of Project Management, 30 (2012), 432- 443

Stoiber, Carlton; Baer, Alec; Pelzer, Norbert; Tonhauser, Wolfram: Handbook on Nuclear Law, International Atomic Energy Agency, 2003

Velasco, Geronimo Z., Trailblazing – The Search for Energy Self Reliance, (2006), Chapter Three – The Tragedy of the Bataan Nuclear Power Plant, pp. 89 – 130

Yorobe, Carol M., Department of Science and Technology, The Philippine Legislative and Regulatory Infrastructure for Nuclear and Radiation Safety, Nuclear Energy Forum, Quezon City, Philip-pines, 22 August 2017

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