Nuclear Power – Is the Renaissance Nuclear Power – Is the Renaissance Real? Real?

Jim Harding

Wisconsin Public Utility Institute Seminar

March 2008

Madison, WI

Let’s Start With the EconomicsLet’s Start With the Economics

• Capital cost is growing rapidly and is most important• EIA - $2083/kW (2005)• MIT - $2000-2500/kW (2003)• Keystone - $3600-4000/kW (June 2007)• S&P - $4000/kW (May 2007)• Moody’s - $5000-6000/kW (October 2007)• FP&L - $5700-8020/kW (Fall 2007)• Puget Sound Energy - $10,000/kW (January 2008)

• Operating costs less important but not insignificant• Discounted life cycle cost estimates range from 5-18

cents/kWh.

Estimating Cost is ToughEstimating Cost is Tough• No recent North American or European nuclear construction

experience• Historical estimates were “targets” more than estimates

• Software assumes Asian construction practices, and excludes owner’s costs – contingency, escalation, interest during construction, land, transmission, and oversight. No delays

• No incentive to be accurate; no real money being spent• Often not considered:

• Escalation during construction; first of a kind premiums and learning curves instead

• Supply-chain problems (key parts, leadtimes, skilled labor, sub-suppliers, uranium)

• Transmission costs and lead time• Finance and siting challenges

Recent Asian ExperienceRecent Asian ExperiencePlant MWe COD Yen@COD 2002$s/kW 2007$s/kW

Onagawa 3 825 Jan 2002 3.1 Billion 2409 3332

Genkai 3 1180 Feb 1994 4 Billion 2643 3656

Genkai 4 1180 Jul 1997 3.2 Billion 1960 2711

KK 3 1000 Jan 1993 3.2 Billion 2615 3617

KK 4 1000 Jan 1994 2.2 Billion 2609 3608

KK 6 1356 Jan 1996 4.2 Billion 2290 3167

KK 7 1356 Jan 1997 3.7 Billion 1957 2707

Y 5 (SK) 1000 Jan 2004 1700 2352

Y 6 (SK) 1000 Jan 2005 1656 2290

Average 2354 3257

Cost data from MIT 2003 Future of Nuclear Power study. Average does not include South Korean units, owing to labor rates. Real escalation from 2002-2007 at 4 percent/year.

Real Escalation is the Biggest Real Escalation is the Biggest ProblemProblem

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x Chemical Engineering Plant Cost Index

Marshall & Swift Equipment Cost Index

Provided to Keystone panel by EPRI

Chemical Engineering Plant Cost Index

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1950.00 1960.00 1970.00 1980.00 1990.00 2000.00 2010.00

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avg. slope from 1959 - 2005 ~ 3.5 %/yravg. slope from 2002 - 2005 ~ 7.4 %/yr

Steeper Curve Than in the Mid 80s

Commodity Esc 86-03 Esc 03-07 Ratio vs. History

Nickel 3.8%/yr 60.3%/yr 15.9x

Copper 3.3%/yr 69.2%/yr 21x

Cement 2.7%/yr 11.6%/yr 4.3x

Iron/Steel 1.2%/yr 19.6%/yr 16.3x

Heavy construction

2.2%/yr 10.5%/yr 4.8x

Source: American Electric Power

Four Percent Real May Be Too Low

Nuclear is in Worse Shape Nuclear is in Worse Shape

• Industry moribund in Western Europe, US, and Russia since TMI and Chernobyl

• Twenty years ago (US): 400 suppliers, 900 N-Stamp holders; today 80 and 200

• Only one forge for large parts – Japan Steel Works• Long lead times for key equipment, e.g. simulators• Skilled labor and contractor limits• World uranium production well below current

consumption

Recent EstimatesRecent Estimates• Keystone - $3600-4000/kW; 8-11 cents/kWh

• Real 2007 dollars, 5-6 years of construction, for operation in 2012/2013. Would be $5600/kW (16-17 cents/kWh) at AEP escalation rate to 2013.

• Standard & Poor’s - $4000/kW; 9-10 cents/kWh• Basis not stated; levelized fixed charge rate• Life cycle costs reflect Keystone O&M and fuel costs

• Moody’s - $5000-6000/kW• Basis not stated; operating and fuel costs not estimated

• Florida Power & Light - $5700-8020/kW• Completion in 2018-2020, no new real escalation. Current dollars at

COD• Puget Sound Energy - $10,000/kW

• Basis not stated, but consistent with FP&L plus AEP escalation rate through completion.

“Updated” Lifecycle Costs

Cost Category Low Case High Case

Capital Costs 6.0 7.9-12.7

Fuel 1.6 2.0

Fixed O&M 1.3 2.5

Variable O&M 0.5 0.5

Total (Levelized Cents/kWh) 9.4 12.9-17.7

Low case is Keystone, without South Korean units. High cases cover Keystone through Puget capital cost estimates. First year 1.7 times higher.

What’s Wrong Here?What’s Wrong Here?

• Finance – capital cost for 2 units may be larger than utility’s book value. Bet the company…

• Rate shock and physical bypass – 25-30 cents/kWh. Not appreciably better than today’s photovoltaics. Bet the company…

• Delays and further cost escalation. Bet the company…

• Huge capital commitments diverted from more promising options. Bet the consumer…

Efficiency and Renewables Can Be Efficiency and Renewables Can Be Disruptive TechnologiesDisruptive Technologies

A disruptive technology is often cheaper than the operating cost of the existing system

Demand is not limited to growth in serviceEfficiency resources cost less than operating costs for

existing gas (or coal with carbon taxes); they pay for themselves with +3x more carbon savings per dollar

Wind was disruptive from 2002-2005 and may be againPhotovoltaics may soon become oneOnly disruptive energy technologies can grow fast enough

to solve climate challenges

Rapid Worldwide Growth in Renewables

Technical Innovation Driven by Technical Innovation Driven by StandardsStandards

Figure 1 - Annual Lost-Opportunity Achievable Potential Supply Curve

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Levelized Cost (2004$/MWH)

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Northwest Power Planning Council, Achievable Savings, August 2007

Utility Programs Are Also Important

Figure 10 - Annual Utility Program Conservation Savings1980 - 2005

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Historical Northwest Utility Programs

Northwest Power Planning Council, Achievable Savings, August 2007

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NW CFL Market Shares

US CFL Market Shares

Figure 8 -Estimated ENERGY STAR CFL Market Share for the Northwest and U.S., 2000-2006

Sources: NW CFL sales 2000-2006: PECI and Fluid Market Strategies sales data reports; and NEEA estimate of an additional 1.5 million WAL-MART CFLs sold region-wide in 2006 (See Appendix A [Section 9.1.1] of MPER3 for more detail); U.S. and NW population estimates 2000-2006: U.S. Census 2004; U.S. market shares and non-CFL sales 2000-2005: Itron California Lamp Report (2006); U.S. market share 2006: D&R International (personal communication).

Compact Fluorescent Market Penetration

The Bottom LineThe Bottom Line

• Twenty years from light water reactor technology will be roughly the same as it is today – it is an expensive distraction

• Efficiency resources, wind turbine technology, and photovoltaics are improving rapidly

• Take one example --- Nanosolar• started by the Google founders, backed also by Swiss Re• Building two 430 MW/yr thin film PV production facilities this year in

Germany and California, using a technology they equate to printing newspapers

• Currently shipping and reportedly profitable at $0.99/watt (not including installation and balance of system)

• Take another – Arizona Public Service concentrating solar purchase – 14 cents/kWh

• The cheapest, least risk strategy is rapid development of efficiency resources. Wind, concentrating solar, geothermal, PV come next

Supplemental SlidesSupplemental Slides

Pulverized Coal

Gas (CCCT) Eastern IGCC

Wind Nuclear

Capital Cost ($/kW)

2438 700 2795 1700 4000

Total cost (cents/kWh)

5.8 6.8 6.8 7.1 8.9

CO2 Capture Cost ($/kW)

940 470 450 NA NA

Cost for CCS (cents/kWh)

6.2 2.8 3.4 NA NA

Cents/kWh 12.0 9.6 10.2 7.1 8.9-9.8

Cents/kWh (credits $10-30)

6.2-7.9 7-7.7 7.1-8.7 7.1 8.9-9.8

With Carbon Taxes and Low Nuclear Costs - S & P Found no Advantage

Keystone O&M and fuel costs are used instead of those estimated by S&P

Jeff Combs, President, Ux Consulting Company, Price Expectations and Price Formation, presentation to Nuclear Energy Institute International Uranium Fuel Seminar 2006

Fuel cycle steps MIT This analysis

Uranium $30/kg $300/kg

Enrichment $100/SWU $140-340/SWU

Fabrication $275/kg $275/kg

Disposal $400/kg $400/kg

Reprocessing $1000/kg $1500-2000/kg

Fuel cycle cost

Open 0.5 cents/kWh 1.6-2 cents/kWh

Closed 2 cents/kWh 3.4-4.3 cents/kWh

Differential 4x 2-3.5x

Reprocessing Is Still ExpensiveReprocessing Is Still Expensive

Approximately 5.25 kgs of spent fuel must be reprocessed to obtain 1 kg of MOX.

The International ChallengeThe International Challenge

• 370 GWe of existing nuclear capacity in 20+ nations• All retired, with or without life extension, by 2030-2050• Socolow/Pacala wedge – 1 GTe of carbon avoidance; 7

GTe are required• 700+370=1070 GWe of nuclear capacity required by 2050-2060• 21 GWe per year on average• 23 new enrichment plants • 10 Yucca Mountain repositories• 36 new reprocessing plants and 100+ MOX plants, if fuel is

recycled• Is it possible? Can it happen without weapons

proliferation?

Loccum, 19 January 2007M ycle Schneider C onsulting

Source: IAEA PRIS

Projection 2005-2047 of Net Nuclear Reactor/Capacity Start-up and Shut-down of Units operating or Under Construction in the World in 2005

Estimate on the Basis of 40 Years of Mean Lifetime (32 years for Germany)(in MWe and Number of Units)

-33,000

-28,000

-23,000

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Capacityin MWe

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Number ofreactors

Capacity connection / retrieval

Reactors added / retrieved

Net decennial balance:- 47,069 MWe- 80 reactors

- 171,323 MWe- 197 reactors

- 100,570 MWe- 106 reactors

- 38,212 MWe- 44 reactors

Retirements Quicken by 2020

Source GW 2030 GW/yr % world electricity

Net additions

Outside OECD

and Russia

IEA Reference (WEO)

415 2 GW 10% 45 100

IEA Advanced 519 6.5 GW 15% 149 50

US EIA 481 4.7 GW 12% 110 72

Institute for Energy Economics (Japan)

480 4.7 GW NA 110 100

Forecasts of International Capacity by 2030

GW per year is calculated by assuming no existing worldwide capacity is retired before 2030

Proliferation is the Big ProblemProliferation is the Big Problem

• 700 GWe net additions make a wedge• EIA and IEA forecasts show near zero net

growth in non-Asia OECD through 2030• Projected growth in India and China keeps

nuclear at current fraction of supply (2-6%)• Bulk handling facilities are the problem –

reprocessing and enrichment