2008 05 13 edk cra global nuclear

Global Nuclear Power

Goldman SachsEighth Annual Power and Utility Conference

13 May 2008

2 Eighth Annual Power and Utility Conference

These slides do not provide a complete record of the presentation and discussion.

The views expressed in this presentation are mine; these views may not be the same as those held by

CRA’s clients or by others at CRA.


Four historical nuclear power regions


Five regions with new nuclear power plans


Russia• In 2007, Rosatom pulled together all parts of the nuclear industry• Centralized control and government involvement• Large internal build programme and strong push for exports• Increasing move to Western safety practices and partners• First floating nuclear

power plant under construction

• Building nuclear plants in Iran, China, Bulgaria and India

• In talks with other countries


China• State ownership

and control of electricity sector

• Large capacity build with major role for nuclear

• Localization is key strategy

• Several nuclear fleets

• Aggressive moves to secure uranium


India

• Existing units mostly PHWR• Goals

– 20,000 MWe by 2020– 25% of electricity from nuclear by

2050• Outside NPT due to weapons• Excluded from civil nuclear trade;

new deal with US still on hold• Developing nuclear fuel cycle to

use large thorium reserves• Russian PWRs at Kudankulam to

meet near-term demand

Kudankulam


North Africa and Middle EastProposed Planned Under construction


Source: Washington Post, 12 May 2008


South Africa

• Policy that half of new baseload capacity will be nuclear

– 20,000 MW by 2025– Global warming, over-

dependence on coal• Nuclear 1 is up for

Board Approval in June 2008

– 3,400 MW– EPC contract in 2008– Operational by 2016

• Nuclear Fleet to follow• PBMR is long-term

option


World view of new nuclear

• Electricity without fossil fuel or emissions– Energy independence (e.g., France, Japan, Korea)– More petroleum products for export (e.g., Middle East)– Clean and carbon-free (e.g., Scandinavia and US)

• Not lowest cost resource without carbon credits– High capital costs offset by stable and low energy costs– Upward pressure on electricity prices to recover capital investment– Easier for government utilities and government economies

• Vendor/design competition for world market share– Only a handful of new designs under construction; fewer in

operation– Buyers selecting designs now, before real outcomes known


Nuclear power plant design

• International vendors competing for market share• New designs have high cost; may present risks

Most operating commercial

power reactors

Early Prototypes

Generation I Generation II

1950 2000 2005 2010 2020

Generation IV

Advanced LWRswith evolutionary

designs

Generation III+ Near-Term Build

Generation III+

20151995

• Industry moving toward standardized power plants– Pre-approved & proven designs at multiple sites– Replicate nuclear fleet approach in France and US nuclear navy


Nuclear fleet concept

Sequentialbuild

Eskom?Coordinated construction process

Learning curve benefits captured by multiple parties in process

Mobilization of build teams, if sequence is coordinated well

Multipleidentical

units

MultipleunitsSingle unit

FranceCommon simulators, special tools, training

Co-ordination of upgrades, maintenance,

Fungible operators, maintenance teams, outage teams

Operational improvement through learning across fleet

US fleet operatorsFleet composed of mixed designs, vendors, vintages

Organizational and management scope benefits

Overhead

Purchasing

In-house expertise

US single unit ownersNo fleet

Few benefits

US style management companies formed to compensate

Some ability to share learning through industry groups

Planning flexibility

Bulkpurchase

France in 70’s & 80sCoordinated construction process

Learning curve benefits captured at multiple levels

Upstream infrastructure through large orders

Mobilization of build teams; moving from one unit to the next


Nuclear fleet strategy linked to industry structure

Ow

ners

hip

Gov’tNone

RegulatedIOU

Merchant

Electricity MarketsTotal

US vertically integrated IOUs

US merchant nuclear

companies

RussiaChina

France in ‘75


Source: CRA analysis

2 5

3

2

2

2

2

2

2

1

10

2

3

3

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4

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0 2 4 6 8 10 12 14 16 18 20

APWR

ESBWR

AES-91/92

ABWR

EPR

AP1000

In operation Under construction EPC contractCOL filed (US) Design selected (US) New Player (US)

Who is winning the global nuclear design race?

?

?

?

?

?

?



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APWR

ESBWR

AES-91/92

ABWR

EPR

AP1000


Haiyang TVA (Bellefonte)Ga Pwr (Vogtle)

Duke (Lee)SCE&G

(Summer)Progress (Harris)

FP&L (Turkey Point)Progress (Levy County)

Sanmen

AP1000 – Toshiba/Westinghouse

http://www.atomstroyexport.ru/index-e.htm

http://www.areva.com/servlet/home-en.html


US Evolutionary Power Reactor - AREVA


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APWR

ESBWR

AES-91/92

ABWR

EPR

AP1000


Olkiluoto 3 (Finland) Flamanville 3 (EdF)

Constellation (Nine Mile Point)Ameren (Callaway)

PP&L (Susquehanna)

TaishanAlternate Energy (Idaho)

Amarillo Power

Constellation(Calvert Cliffs)




Advanced Boiling Water Reactor – GE Hitachi


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APWR

ESBWR

AES-91/92

ABWR

EPR

AP1000


Kashiwazaki Kariwa 6 & 7 Hamaoka 5

Shika 2

Shimane 3 Lungmen 1 & 2

NRG & CPS(South Texas Project)

+


AES-91/92 VVER – Гидропресс (Gidropress)


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APWR

ESBWR

AES-91/92

ABWR

EPR

AP1000


Tianwan 1 & 2 Bushehr Belene 1 & 2

Kudankulam 1 & 2




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APWR

ESBWR

AES-91/92

ABWR

EPR

AP1000


Dominion (North Anna)Entergy (Grand Gulf)

Entergy (River Bend)Exelon (Texas)

Economic Simplified Boiling Water Reactor –GE Hitachi



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AES-91/92

ABWR

EPR

AP1000


Luminant/TXU(Comanche Peak)

US Advanced Pressurized Water Reactor -Mitsubishi Nuclear Energy Systems


Race has just started


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ESBWR

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ABWR

EPR

AP1000


+




Not much activity without US units


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APWR

ESBWR

AES-91/92

ABWR

EPR

AP1000


+




COL application and approval;3-4 year process, ~$90 million

US first wave projects

Major expenditures for equipment procurement and construction

Final NRC review/hearing, ITAAC; fuel load, startup and testing; commercial operation

0 1 2 3 4 5 6 7 8 9

Design and engineering;NRC Design Certification

-1-2

Financial commitment; execute EPC contracts

Procure long-lead components; sort regulatory/market/financing issues; negotiate EPC contracts


New nuclear plant designs may be risky

• Little hard information available now• New construction approaches

– TVO lessons– Modular construction – how & who & where?

• Technical issues (some may lead to COL delay)– Digital I&C – generic issue for all designs– Cable connectors (modular construction)– Very large turbine generators

• Operational performance– New round of latent defects?– French N4 experience


2,000 2,500 3,000 3,500 4,000 4,500 5,000 5,500 6,000 6,500

$/kW

TVA (AP1000, '08)EdF (EPR, '07)

China (EPR, '07)NRG (ABWR, '08)

TVO (EPR, '05)S&P ('07)

FP&L (AP1000, '07)Progress FL (AP1000, '08)

Moody's ('07)Ga Pwr (AP1000, '08)


New nuclear plants will be expensive


A new generation of nuclear power plants is on the drawing boardsin the U.S., but the projected cost is causing some sticker shock:$5 billion to $12 billion a plant, double to quadruple earlier rough estimates.

New Wave of Nuclear Plants Faces High CostsMay 12, 2008

By REBECCA SMITHMay 12, 2008; Page B1


Nuclear essential for carbon control• Nuclear not low-cost option without benefit of CO2 reduction• Still no clear way to monetize nuclear CO2 reductions

– Will lender carbon protocols raise cost of coal capacity?– Will ad-hoc cap & trade approaches be enough?

• Uncertainty is problem, given timing and size of investment

1,041

622

46 39 18 17 15 14

Coal Natural Gas Biomass Solar PV Hydro Nuclear Geothermal Wind

Life-cycle tons of CO2 equivalent per GWh

Source: "Life-Cycle Assessment of Electricity Generation Systems and Applications for Climate Change Policy Analysis," Paul J. Meier, University of Wisconsin-Madison, August 2002.


Nuclear plant risk over timeN

RC

Tech

nica

lFi

nanc

ial

COL Commercial operation

Now


Nuclear project risk mitigation• Technical

– Design Certification process; international build/operation– EPC contracts with delay penalties; Vendor performance guarantees

• Nuclear Regulatory– NRC one-part combined Construction and Operating license

• Financial– Revenue certainty - merchant and regulated plants– Keep options open; exits and off-ramps in contracts– Investment large; 10% or more of market cap for US electric utilities– Government role in financing; DOE loan guarantees are US equivalent

• Overall– Avoid or manage early mover risk


Nuclear power development

Real information about cost, performance of new nuclear designs

US initial wave of COL DC filings (well after selection of design/vendor)

First COL approvals US first wave plants begin

operation

US first wave plants start construction

Middle East, North Africa nuclear programmes

Eskom (South Africa) vendor selection

Ontario vendor selection

China, Finland & EdF

building

US & global second wave development

20102008 2020

Olkiluoto EPR unit

operational

Eskom Nuclear 1 units begin operation

Chinese AP1000 & EPR units operational

Ontario Power new units operational

Flamanville EdF EPR unit operational

2015


Nuclear SpinPro-Nuclear Anti-Nuclear

Capital costsThe past is over, lessons

were learned; nuclear looks competitive

Doomed to repeat past cost overruns and delays;

Olkiluoto EPR is proof

Operating costs Excellent experience; lowest fuel costs ever

High uranium prices not yet in nuclear fuel costs

Weapons use National policy issue Nuclear power = nuclear weapons

Safety High levels of safety TMI, Chernobyl, “close calls”

Performance Excellent recent performance; best ever

Long outages; issues with some new units in 90s

Nuclear CO2 Carbon-free energy High life-cycle C02 emissions

Spent fuel Current approach is fine; 50 years with no problem

Need million-year solution before building new plants


What’s my spin?

Nuclear capacity essential to control carbon emissions

Nuclear is good technology . . .. . . but expensive to build, operate and maintain

Large investment decisions need more than spin– Investor economic outcomes are key– Identify and resolve issues & risks– Optimism is good; realism is better


Edward KeeVice President

CRA International1201 F Street, NW

Washington, DC 20004(202) 662-3953

[email protected]

2008 05 13 edk cra global nuclear

Technology