Transcript Slide 1

the
University
of
Greenwich
The Economics of Nuclear Power
Myths of nuclear power: A guide
Moscow
5 April 2011
Steve Thomas
([email protected])
PSIRU (www.psiru.org), Business School
University of Greenwich
Teaching excellence for 100 years
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Why did ordering stop in the West?
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of
Greenwich
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Nuclear power orders were easy to finance as long as utilities
could pass on any costs to consumers – cost plus
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Financiers knew loans would be repaid so finance was cheap & easy
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In 1980 US regulators lost patience with nuclear plants that were
late, over-budget & unnecessary. They made utilities pay extra
costs from profits & utilities building nuclear risked bankruptcy
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New ordering stopped overnight and about 80 existing orders
were cancelled in mid-construction
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In Europe, the introduction of competition meant companies that
built plants that produced expensive power would fail
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What is the Nuclear Renaissance?
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Greenwich
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Introduction of competitive markets meant nuclear vendors knew
they had to compete to survive
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1998, they calculated construction costs had to be $1000/kW to
compete with gas - a 1000MW reactor would cost $1bn
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Nuclear designers claimed new ‘evolutionary’ designs would be
safer, but simpler and therefore cheaper, <$1000/kW
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New designs, Gen III+ emerged: AP1000, ESBWR, EPR
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Nuclear industry claimed these would be so attractive that
countries that had abandoned nuclear, eg, USA, Germany, UK,
Italy would re-start ordering – a Nuclear Renaissance
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Is the Renaissance happening?
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Greenwich
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Progress was slow and by 2008, people were asking if the
Renaissance would actually happen
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Since Jan 2008, construction work has started on 37 reactors.
Surely the Renaissance is now underway
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But 24 of these are in China, 6 in Russia, 3 in Korea. One is a 1975
order for Brazil. All in countries where electricity is still
effectively a monopoly and utilities are publicly owned
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Only 6 orders are for designs licensable in Europe or USA
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So for Gen III+ designs and for Europe and USA the Renaissance
is not happening
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Why?
1.
Economics and commercial risk?
2.
Designs/licensing issues?
3.
Opposition and bureaucracy?
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Gen III+ designs on offer
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5 Gen III+ designs being evaluated by the USA:
1. Areva EPR. Generic approval in France or Finland not
completed despite construction. No approval in USA or UK
until 2013. 2 orders China
2. Westinghouse AP-1000. Regulatory approval in USA not
before 2011. Under assessment in UK but no approval
before 2012. 4 orders (China)
3. GE ESBWR, based on SBWR. US regulatory approval
forecast for 2011, but all 6 potential orders in doubt
4. GE-Hitachi & Toshiba ABWR. Certified in US in 1997 but
approval runs out 2012. 1 possible US project
5. Mitsubishi APWR no NRC approval end 2013. 1 possible US
project
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Other designs
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Areva SWR/Kerena. Update of 1970s BWR. Not developed
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Areva Atmea. 1100MW PWR. At early design stage. 3-loop EPR?
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Korea APR1400. 4 sold to UAE but no aircraft protection or corecatcher. Lauvergeon: like a car with no seat-belts or air bag. Gen
III? Considered by S Africa, may be upgraded for Europe
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Russia AES-2006. 6 Russian orders, not assessed in West
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China CP-1000. 3 units in service, 15 under construction in China.
Based on 1970s French design. EDF and Areva separately thinking
about collaborating and S Africa thinking of buying. Gen II+?
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Regulatory Issues
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In 2002, US’s Nuclear 2010 programme assumed order for Gen
III+ design could be placed in 2003. Now likely that first US Gen
III+ order will be nearer 2013
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US NRC won’t complete generic review of 5 designs before 2012:
EPR mid 2013
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UK NII says Generic Design Assesment ends in June 2011:
interim approvals, which would not suffice for construction of the
reactors to begin in the UK, appear at the moment to be more
likely than final approvals for both designs for the June 2011
timeline.
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UK construction start not before 2013
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Impact of Fukushima on design reviews
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 Experience with TMI, Chernobyl suggests it will take a long
time – 5 years? - to work out what happened at Fukushima
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Designers will then take at least 5 years to modify designs
to take account of lessons
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How can UK and USA complete generic design reviews is
lessons from Fukushima are not known?
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What determines nuclear power cost?
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of
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Construction cost and time, cost of capital and reliability
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Paying construction cost & interest expected to account for
about 2/3 of cost of power. The reliability of the plant (load
factor) determines how thinly fixed costs can be spread
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Operations & maintenance cost. Expected to be low but
British Energy went bust because O&M more than revenue.
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Little impact for investment decisions, but
major commitment by public
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Decommissioning & waste disposal provision. If cost
accurately forecast, provisions collected and invested
safely, not a major cost today. Discounted away
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But no experience of high-level waste disposal and little
experience of decommissioning.
 How can we forecast what this will cost & how do we ensure
provisions are safe and earn interest at the rate expected?
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We are asking a future generation to clean up our waste. If
provisions are inadequate, they will have to pay as well
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Little impact for investment decisions, but
major commitment by public
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Fuel cost. Nuclear fuel purchase is a small part of the
generation cost. But if nuclear was expected to make a
major contribution on climate change, uranium resources
would be important
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Environmental impact of uranium mining substantial but in
developing countries
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Insurance and liability cover. International treaties mean
governments bear the main risk but even limited cover is
expensive.
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Construction cost
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Greenwich
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Renaissance sold to public on a promise of US$1000/kW
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Most serious recent estimates & bids are for about
$6000/kW
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EPR, AP1000 and ABWR have bid more than $6000 in all
contests entered (UAE, Canada & S Africa) in past 3 years
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Have real costs escalated or was $1000/kW an unrealistic
target?
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Cost of capital: Is nuclear too risky?
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Banks not willing to be exposed to commercial risk of
nuclear power, who can take that risk?
• Consumers via cost pass-through, tax-payers via government
loan guarantees or vendors via ‘turnkey’ contracts
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Are tax-payers, elec consumers or vendors willing?
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Are turnkey contracts credible after Olkiluoto?
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Will the Electricity Directive allow cost pass-through?
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Is fixed ‘C’ price desirable or feasible? Would it be enough?
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Loan guarantees
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 Central to US efforts. Loan guarantees allowed for 100% of borrowing
up to 80% of cost. EPR offered loan guarantees worth about $8bn
 If fee is ‘economic’, no advantage to loan guarantees because risk is
same if you are a bank or a government
 Loan guarantees for Olkiluoto not state aid according to Commission
because fee paid, but what was the fee?
 Vogtle (USA) selling to monopoly market & guaranteed cost recovery.
Loan guarantees not essential and fee 1-1.5%
 Calvert Cliffs (an EPR) selling to competitive market (PJM). Fee 11.6%.
Project expected to be abandoned
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Generation III+. Simpler or more complex?
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US Department of Energy (2003): New Generation III+ designs
... have the advantage of combining technology familiar to
operators of current plants with vastly improved safety features
and significant simplification is expected to result in lower and
more predictable construction and operating costs
ESBWR = Economic Simplified Boiling Water Reactor
Lauvergeon (2010): the cost of nuclear reactors has "always" gone
up with each generation, because the safety requirements are
ever higher. "Safety has a cost,"
Roussely (2010): The resulting complexity of the EPR, arising
from the choice of design, specifically the level of power, the
containment, the core catcher and the redundancy of the
security systems is certainly a handicap for its construction and
therefore its cost.
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Generation III+. Too much or too little
redundancy?
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HSE, ASN, STUK (2009): ‘The EPR design, as originally
proposed by the licensees and the manufacturer, AREVA,
doesn't comply with the independence principle, as there is
a very high degree of complex interconnectivity between
the control and safety systems.’
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Roussely (2010): The resulting complexity of the EPR,
arising from the choice of design, specifically the level of
power, the containment, the core catcher and the
redundancy of the security systems is certainly a handicap
for its construction and therefore its cost.
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Impact of Fukushima on construction costs
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of
Greenwich
All significant accidents to date beyond design basis: Browns Ferry,
TMI, Chernobyl, 9/11
 Browns Ferry: Need for independent systems for each unit
 TMI: Need for redundancy
 Chernobyl: Need for ‘passive’ safety – if everything fails, plant
will naturally revert to safe state
 9/11: Need for containments to be strong enough to withstand
collision with large aircraft
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Are we asking too much of designers to imagine all possible
events sequences?
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Too early to say what design modifications will be needed but
likely to be extensive and expensive
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Multi-speed regulatory requirements?
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 Lauvergeon (2010): [Is] there is going to be a nuclear
[market] at two speeds — meaning a high-tech, high-safety
mode for developed countries and a lower-safety mode for
emerging countries?
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S Africa may buy from China (Gen II+), Korea (Gen III)
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NRC Commissioner Apostolakis (2010): The core catcher
included in designs of new reactors to be constructed in
Europe will not be required in the US because its benefits
cannot be shown to outweigh its costs
 Is AP1000 licensable in Europe?
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The myth of the French nuclear programme
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Greenwich
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France built 58 large reactors in 20 years under ideal conditions.
Scale economies, standardisation, technical progress, learning,
cheap component production methods, no public opposition,
supportive regulation
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But real construction costs tripled over 20 years
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Roussely: while the average capacity of nuclear power worldwide measured by the capacity factor - has increased significantly
over the past fifteen years, the French nuclear plant capacity has
sharply declined in recent years
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After 2 years construction, Flamanville is 2 years late and 50%
over-budget
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Why no Renaissance?
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Greenwich
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US NRC Commissioner Jaczko (2010): ‘What utilities are
looking at right now, is developing and preserving the option
... to construct a reactor at some point in the future, if they
receive a license. I think the process really now is more
about the option to build, than it is about construction.’
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Gen III plants are too expensive & will only be built if
consumers pay the extra and consumers or taxpayers take
the risk
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To protect reactors against core melt and aircraft crashes
makes them too expensive
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Other impacts of Fukushima
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Reviews needed of:
 Accident liability arrangements – who pays for accidents
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Siting criteria – earthquakes, evacuation zones
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Decommissioning arrangements
 Use of Mixed Oxide Fuel
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Spent fuel ponds – a major risk if not in the containment
 Are existing plants safe enough?
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Conclusion
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of
Greenwich
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Why for entire 50 years of commercial history have nuclear
costs always gone up?
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Yet again, nuclear industry has promised: ‘we have learnt from our
mistakes, we have new designs that will solve past problems, this
time we will get it right’. How many last chances will we give them
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Main problem is not money wasted on uneconomic plants or that
large numbers of reactors will be built, but opportunity cost of
continuing to neglect options that will deliver
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Delays and extra costs from Fukushima may be the final straw
for the Nuclear Renaissance
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