ECONOMICAL VIABILITY OF THE NUCLEAR OPTION IN MEXICO

ECONOMICAL VIABILITY OF THE NUCLEAR OPTION IN MEXICO

Instituto Nacional de Investigaciones Nucleares

Combined Cycle25.9%

Dual4.5%

Turbogas6.1%

Geothermal and Wind2.1%

Nuclear2.9%

Hydro22.6%

Internal Combustion0.3%

Conventional Thermal30.0%

Coal5.6%

45,576 MW

Installed Capacity

Fossil Fuel 66.8%

Gas 32%

CFE-2005

Electricity Generation

Fossil Fuel50.560%

Coal8.740%

Nuclear5.390%

Hydro9.627%

Geothermal3.290%

Independent22.390%

Wind0.003%

215.63 TWh

Nuclear contributes with about 5% since 1996

CFE-2005

Gas 52%

Forecast for Electricity Gross Consumption

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,00020

00

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

YEAR

GR

OS

S C

ON

SU

MP

TIO

N (

GW

h)

An increase of about 60% from 2005 to 2014

2000-2014

Required Capacity There should be an addition of

22,126 MW 6,184 MW already Committed 15,942 MW Non Committed

9,764 Technology already specified 6,178 Free Technology

The Case for Nuclear High Volatility of Gas Prices

Concern for CO2 Emissions

Balanced Fuel Mix

Economical Competitiveness

Levelized Cost Methodology

Quantifies the unitary cost of electricity (the kWh) during the lifetime of a power plant

The methodology considers the total

electrical energy that the power plant will deliver in its lifetime

Levelized Cost Methodology Levelized cost is the sum of:

Investment cost: which is the one generated during constructionProduction cost: is the one generated during the life of the plant, it includes

Fuel cost and Operation and maintenance costs

OECD-2005

Levelized Total Generation CostBenchmarking

PlantType

DR%

OECDUSD/MWh

ININUSD/MWh

Min. Max. Min. Max.

Gas 5 37 60 38.73 56.36

Nuclear 5 21 31 23.03 31.39

Gas 10 40 63 41.79 59.42

Nuclear 10 30 50 32.75 45.76

Scenarios

DR%

510

Gas Price $/MBTU4.445.207.00

Nuclear Construction Cost

(Output 1350 MWe)$/kWe

120014001600

AssumptionsPlant Type Gas Coal Nuclear

Lifetime (Years) 25 40 40

Capacity Factor (%) 80 80 90

Proper Uses (%) 3.1 7.3 3.1

Power Output (MWe) 560 700 1350

Thermal Efficiency (%) 52 37.24 34

Construction Time (Years) 2 4 5

Overnigth Cost (USD/kWe) 450 1000120014001600

Fuel Cost*USD/mmBTU

+USD/MWh

4.44*

5.20*

7.00*

1.78* 6.80+

O&M cost (USD/MWh) 2.77 4.75 7.83

Generation Cost (DR)

0

10

20

30

40

50

60

US

D/M

Wh

Gas 1 37.86 39.52 40.74

Gas 2 43.01 44.67 45.89

Gas 3 55.2 56.86 58.08

Coal 32.83 38.16 42.18

Nuclear Low 25.26 30.51 34.53

Nuclear Medium 26.99 33.13 37.81

Nuclear High 28.73 35.74 41.09

5% 8% 10%

Capital Cost (DR)

0

500

1000

1500

2000

2500

3000U

SD

Mil

lio

ns

Gas 282.42 293.00 300.00

Coal 882.19 942.80 984.16

Nuclear Low 1933.71 2080.61 2182.96

Nuclear Medium 2256.00 2427.37 2546.78

Nuclear High 2578.28 2774.14 2910.61

5% 8% 10%

0

20

40

60

US

D/M

Wh

5% 25.78 27.6 29.42 26.32 28.24 30.15 26.9 28.9 30.91

8% 31.77 34.59 37.41 33.12 36.17 39.21 34.58 37.87 41.16

10% 36.49 40.1 43.71 38.66 42.63 46.6 41.04 45.4 49.77

Low Medium High Low Medium High Low Medium High

1 year 2 years 3 years

Nuclear Generation Cost Assuming Delays

Levelized electricity generating cost assuming different capacity factors

0

10

20

30

40

50

US

D/M

Wh

5% 27.28 29.24 31.19 26.21 28.05 29.88 25.26 26.99 28.73

8% 33.2 36.14 39.07 31.78 34.54 37.31 30.51 33.13 35.74

10% 37.71 41.4 45.09 36.03 39.5 42.97 32.42 37.81 41.09

Low Medium High Low Medium High Low Medium High

80% 85% 90%

Cash Flow*

Type of Plant

InvestmentCost

USD/kWe

PowerMWe

AnnualGross

EnergyMWe

0&MCost

x106 USD/yr

Gas 450 560 3,802,821 10

NuclearMedium

1400 1350 10,359,292 76

*Without fuel costs

Present Value of the Cash Flow (DR 8%)

0

1000

2000

3000

4000

5000

6000

-4 0 4 8 12 16 20 24 28 32 36 40

years

mill

ion

s o

f d

olla

rs

Nuclear Medium Gas1 Gas2 Gas3

Gas1 4.44 $/mmBTU; Gas2 5.20 $/mmBTU; Gas3 7.00 $/mmBTU

Generating Cost variability Due to Fuel Price

Gas price at 0% is 4.44 USD/MBTU and Nuclear Fuel Cost is 6.80 USD/MWh–40% it is about 2.50 USD/mmBTU for the Gas price

0

10

20

30

40

50

60

70

80

-40 -20 0 20 40 60 80 100

% of change in the fuel cost

US

$/M

Wh

Gas-5 Nuclear Medium-5 Nuclear-Medium-10 Coal-10 Gas-10 Coal-5

Summary Even with delays of up to 3 years nuclear

is competitive with the gas option, and it is still cheaper when gas price is greater or equal to 7 USD/mmBTU.

Considering an 80% capacity factor, instead of 90% results in an increase of 4 USD/MW in the levelized cost.

Summary (cont.) When the price of gas is not less

than 5.20 USD/mmBTU, the levelized cost of nuclear generated electricity is lower than the cost resulting from using natural gas, as long as construction time is not longer than 7 years.

Conclusion Nuclear power is competitive in all

the scenarios considered, and it should be given serious consideration in the definition of Mexico’s additional electrical capacity program.