2010 12 07 Edward Kee - Nuclear Energy Asia

Global Nuclear Power DevelopmentsAsia Leads The Way

Nuclear Energy Asia 2010Hong Kong

7 December 2010 Nuclear Power Asia 2010 2

Disclaimer

The slides that follow are not a completerecord of the presentation and discussion.

The views expressed in this presentation and discussion are mine and may not be the same as those held by NERA’s clients or my colleagues.


Global marketsReactor design evolution


Global marketsGen III & III+ attributes

Attributes of Gen III, III+ designs– Large size

– Aircraft crash resistance

– Lower Core Damage Frequency (CDF)

– Passive safety (e.g. AP1000, ESBWR)

– Longer refueling cycle & higher fuel burnup

– Modular, top-down construction (e.g., ABWR, AP1000)

– 60 year operating life

– Load-following & part-load capability


Global marketsGen II+, III & III+ reactor designs

0 10 20 30 40 50 60 70 80

ESBWR

APWR

APR1400

OPR 1000

VVER-1000

EPR

ABWR

CPR 1000

VVER-1200

AP1000

In operation Under construction Planned Proposed


Global marketsGen II+, III, III+ by country

0 20 40 60 80 100 120 140 160

Vietnam

Turkey

UAE

Japan

ROK

USA

India

Russia

China

In operation Under construction Planned Proposed

Non-government utilities


Strategic issuesIndustry Consolidation

Framatome

Babcock & Wilcox (USA)

Siemens

Mitsubishi Heavy Ind.

Combustion Engineering

ASEA

Brown Boveri et cie

Westinghouse

Toshiba

Hitachi

GE

Framatome

Siemens


BNFLAsea Brown Boveri (ABB)

Westinghouse

Toshiba

Hitachi

GE

Framatome ANP


Westinghouse

Toshiba

Hitachi

GE

AREVA NP


GE-Hitachi

AREVA

Siemens


GE-Hitachi

Westinghouse

Toshiba

Westinghouse

Toshiba

MinAtom MinAtom MinAtom MinAtom Rosatom

1980s 1990s 2000s 2006 2010

BWR

PWR

Both


Strategic issuesNew industry competitors

South Korean companies – offering APR1400 to export market

Chinese nuclear companies – talking about selling Chinese version of AP1000 and CPR1000 into export market

India looking to sell its PHWR to smaller countries with new nuclear programs

New companies with small and innovative reactor designs (e.g., B&W, Hyperion, NuScale)


Strategic issuesOvernight capital costs

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

Swiss PWR BelgianPWR

French EPR USA GenIII+

JapanABWR

ChinaAP1000

ChinaCPR1000

ROKAPR1400

Source: OECD 2010, Table 3.7a, overnight costs in USD/kWe

2.5 times!


Strategic issuesProduct development cycle

Concept Mature

Conceptual cost

estimates

Actual cost first unit

Uni

t Cos

t

Years

Detailed engineering& licensing

EPC contracts

Learning on additional units

reduces time and cost

Long production lines for standard unit components

FOAK Learning


Strategic issuesCommercial approach (e.g., USA)

Concept Mature

Conceptual cost

estimates


Uni

t Cos

t

Years


EPC contracts




FOAK Learning

First Wave Buyers Later BuyersSecond Wave Buyers


Strategic issuesNational approach

Concept Mature

Conceptual cost

estimates


Uni

t Cos

t

Years


EPC contracts




FOAK Learning

Build capability Build fleet


Strategic issuesNew nuclear countries

High growth rate in developing world, but– Multiple smaller countries = multiple reactor sales

– Physical and administrative infrastructure lacking

– Financial viability

Nuclear power development models– IAEA – slow – build infrastructure, then NPP

– UAE – fast – buy infrastructure and build NPP

– Russia – faster – build and operate nuclear IPP


Strategic issuesSize of nuclear build programmes

Low costs come from large fleet/build programme

High demand growth = high nuclear potential– China, India, etc

Lower demand growth = lower nuclear potential– USA, Europe

– High cost to shift from fossil to nuclearShut down existing coal units?Impose significant carbon tax?


Strategic issuesFrench nuclear fleet

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,00019

58

1961

1964

1967

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

MW

e (b

y C

OD

)

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

MW

e

Annual Cumulative

1958 - Framatome founded; obtains

Westinghouse PWR license

1968 - Seven 900 MWe units

ordered

1974 - OPEC oil crisis; Sixteen 900 MWe units ordered

1976 - Ten 900 MWe units and

twenty 1,300 MWe units ordered

Four 1,500 MWe N4

units


Multiple Identical

Units

Organization & Management

A single organization with a unified approach and economies of scale to accomplish:

• Training

• Purchasing

• Management

• Engineering

• Regulatory affairs

• Training

• Simulator

• Operators and management

• Refueling outage skills & equipment

• New procedures & equipment modifications

• Shared spare parts, special tools, and strategic spares

Learning from:

• People involved in construction and operation of multiple units

• Modification of the design or the construction approach and schedule

• Documenting and sharing lessons learned

• Vendors build in learning for later bids

Volume orders may allow upstream component suppliers to invest in longer production lines due to bulk procurement

Volume orders may bring discounts from NPP vendors that reflect expectedlearning curve benefits and upstream component savings

Sequencing of construction is key

Teams move from one project to the next without interruption (also may allow simultaneous work on multiple units)

Teams could work on similar tasks for many units, allowing significant commitment to hiring & training

French nuclear industrial development is model

Investment in new production facilities

Over time, such local suppliers should be able to use their experience (and their own learning curve benefits) to become competitive suppliers in the export market

LearningCurve

Effects

VolumeOrders

MobilizeTeams

Industry&

Employment

Strategic issuesNuclear fleet benefits

Nuclear Fleet Concept


Sequentialpurchase

Multiple procurements

Potentially coordinated construction

Learning curve benefits may not be captured by owner

Financial flexibility, vendor market power, fewer options for buyer

Multiple identical unitsMultipleunitsNo fleet

Single ownerCommon simulators, special tools, training

Co-ordination of upgrades, maintenance, outages

Fungible operators, maintenance teams, outage teams

Operational improvement through learning across fleet

Smaller fleet operatorsNuclear fleets, composed of multiple reactor types (BWR and PWR and other), reactor designs, constructors, and vintages

A mix of units built by owner and acquired

Benefits from single overhead, purchasing, engineering, and management

Single nuclear unit/plant ownerSome multi-company efforts to gain fleet benefits through cooperation

US nuclear management companies a more formal approach to multi-company efforts

Some ability to share learning through industry groups

Bulkbuild

Owner is builder

Coordinated construction, mobilization benefits

Learning curve benefits captured

Large build allows upstream infrastructure

Large financial commitment, large benefits

Strategic issuesNuclear fleet development

China’s approach


Role of GovernmentRange of approaches

StateCapitalism

China

Russia

Electricitymarkets

UK

US marketregions

India

Mixed

US regulatedstates

Japan

US publicpower

SouthKorea

France


Role of GovernmentState Capitalism

Strategic and long-term state domination of markets

National Corporations & State-Owned Enterprises

Strategic goals above profits

Inside & outside host country

China and Russia leading examples


Gov’t long-term strategy

for nuclear power

Gov’t orders large reactor

fleet

Nuclear is low cost energy option

Fully integrated

nuclear supply chain

Gov’t captures

significant learning curve

benefits

Export market sales?

Nuclear industrial capacity

developed

Role of GovernmentState capitalism - nuclear power

Outside vendors

?


Role of GovernmentIntegrated nuclear power industry

Operation and maintenance

Front and back -

Nuclear fuel cycle

R&D

Financing

Training and

education

Licensing

Components and

construction

Engineering


Summary

Pivotal time for nuclear power industry, with high capital costs and project risk

Large nuclear fleet build by governments– Capture learning curve benefits of large orders

– Build confidence through completed projects

– Build integrated national nuclear infrastructure

Will commercial vendors be able to compete with state nuclear suppliers?

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© Copyright 2010National Economic Research Associates, Inc.

All rights reserved.

Edward KeeVice PresidentWashington, DC+1 (202) [email protected]

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2010 12 07 Edward Kee - Nuclear Energy Asia