Certain factors are crippling the U.S. supply chain. EPC and reactor vendors could help with a more direct approach.
Characterized by its complex business structure, the nuclear supply chain is a challenging environment, and even more so in the U.S., where many key suppliers have faced reduced nuclear production and lost experienced staff through downsizing of their nuclear business and retirements. This begs the question, what is crippling the U.S. supply chain at the moment and what are utilities looking for?
A few years ago, the U.S. nuclear industry thought that a renaissance had begun. At the time, Toshiba received an order for 2 ABWRs for South Texas Project; Westinghouse received orders for Vogtle 3 & 4, Summer 2 & 3, and Levy County 1 & 2; while GE Hitachi was awarded North Anna 3.
“These were thought to be the start of orders for up to 30 new nuclear builds in the U.S. and reactor suppliers were faced with the issue of how to obtain sufficient supply to meet the demand”, says Jeffrey Neubert, President of Supply Chain Management Group.
Then came the recession in late 2008, followed by Fukushima in Japan in early 2010, and the picture changed dramatically. “No one is saying, but the 4 U.S. units that survived (Vogtle 3 & 4 and Summer 2 & 3) will be the only plants under construction for some time, perhaps five years or more”, says Neubert.
Faced with the unknown
One of the challenges currently facing the U.S. nuclear supply chain is the “huge unknown in regards to what the engineering, procurement and construction (EPC) and reactor vendors are looking for in new builds”, says Robert Shepard, Senior Project Manager of Commercial Nuclear Projects at Longnecker & Associates.
“Although the EPC and reactor vendors say that they want to use vendors and ask them to register on their websites, many report that nothing has come from their efforts. In addition, most openings are not for consultants, but for direct hire personnel, so no services by consultants or vendors are being used”, explains Shepard.
Despite some activity in the industry, it still remains unknown what is needed and when, and the fact that there are four plants under construction only increases anxiety when there is no hint of what products or services will be purchased or contracted for.
Lack of vendors with proper quality programs is a major obstacle for the U.S. nuclear industry. “The NQA-1 compliant vendors are small in number and need some encouragement other than the lip-service currently coming from the EPC and reactor vendors”, says Shepard.
Moreover, many of the vendors that were key suppliers in the 70’s and 80’s have faced reduced nuclear production and lost experienced staff both through downsizing of their nuclear business and retirements.
“Re-establishing a workforce that is proficient at working under the requirements of 10 CFR 50, Appendix B is not as simple as hiring technically qualified personnel. These technically qualified personnel also have to accept the culture of the nuclear environment”, explains Laura Dudes, Director of the Division of Construction Inspection and Operational Programs at the Office of New Reactors, U.S. Nuclear Regulatory Commission.
Having a fully qualified workforce is a key to implementing the processes required to assure that problems are identified, documented and appropriately resolved, so that the goods and services provided are capable of performing their intended safety functions during normal operations as well as the most challenging conditions of the design envelope.
At the same time, quality assurance and safety requirements tend to narrow the field of vendors available to provide services and materials needed for both new projects and existing maintenance and modification projects, Eli Smith, President and Chief Operating Officer of Shaw’s Power Group tells NEI.
“U.S. companies can overcome these challenges by understanding the requirements up front and having experienced, qualified and trained staff available to follow the NRC’s regulations throughout the project”.
Dealing with a global supply chain
Complexities resulting from an increasingly global supply chain present another set of challenges for the U.S. nuclear supply chain, as supplying engineered or complex items often entails sourcing materials and parts manufactured in worldwide locations.
“Requirements and specifications can literally be ‘lost in the translation’ and significant resources are required to establish and maintain high-quality supply chains”, says Marc Tannenbaum, Project Manager for Plant Engineering at the Electric Power Research Institute (EPRI).
“Counterfeit and fraudulent item incidents continue to be reported around the globe; nuclear operators and their suppliers have no option but to remain vigilant to prevent non-authentic items from being introduced into their supply chains”, notes Tannenbaum. Thus, measures that extend beyond the first-tier suppliers must be implemented to address the threats posed by newly reported incidents.
Another challenging aspect, according to Laura Dudes, is that many vendors who previously supplied goods and services that met the NRC’s requirements have left the market completely. “This has forced our licensees and suppliers that previously purchased items as safety related to purchase these items as commercial products or in some cases procure these items from international vendors”.
For licensees and suppliers to utilize commercial products in safety related applications, they must implement a process known as Commercial Grade Dedication. Through this process, they are required to perform assessments and testing to verify the products are equivalent to an item that would have been procured under a safety related program.
However, dedication of commercial products can be costly and time consuming and requires a thorough knowledge of the safety function and failure modes of the item being dedicated.
“For items being procured from international sources the challenge is the oversight required by our licensees to assure the products are being manufactured under appropriate quality assurance programs that meet NRC’s regulatory requirements. Although these vendors generally have the necessary technical expertise, we have seen challenges in implementing programs that fully implement NRC requirements. NRC expects the licensees to compensate for these issues through increased oversight of their vendors”, Laura Dudes explains to NEI.
Other challenges have also resulted from the events at Fukushima, which have prompted the industry to undertake comprehensive evaluations. Although final recommendations are not formulated, discussions include deployment of equipment to defend against these events.
Meanwhile, any asset operated over a long period of time needs to combat obsolescence challenges, and in the nuclear power sector, obsolescence of equipment and spare parts is further challenged because supplier capabilities and product lines evolve over time.
“Maintaining the capability to fully support supply of replacement items that may have relatively minimal demand compared to other industries requires committed and dedicated suppliers”, notes Tannenbaum. Moreover, lead time can largely increase for items that are still available and significant work is involved in evaluation of non-identical replacements for items that are no longer available.
Narrowing the gap
For the time being, the issue for supply chain managers in the U.S. is how to obtain qualified components from qualified suppliers when faced with a very limited demand. “Supply chain qualifications are understandably extremely high but demand is low and spotty. Suppliers question whether their investment to produce nuclear grade components will pay off. This is one factor affecting the large amount of “off-shoring” of supply for Vogtle 3 & 4 and Summer 2 & 3”, says Neubert.
More demand would certainly drive business, but demand that everyone in the chain can depend on. The U.S. is suffering from lack of a clear cut, long term national energy policy; a deficiency which is stymieing supply chain management efforts to rebuild a robust global supply chain with a strong U.S. presence.
Shepard concludes that if EPC and reactor vendors publish a preliminary list of needs, it would be most helpful. “This would give something for the vendors to shoot for”.