new nuclear update 25nov14
TRANSCRIPT
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New Nuclear
Summary Points
The Case
The developing countries of the world need massive amounts of low-cost energy to buildtheir economies and to lift their citizens out of poverty.
Base-load power is essential to economic growth, and fossil fuel plants are the cheapest,most accessible alternative.
Data from the US Energy Information Agency (EIA) and the International Organizationfor Economic Cooperation and Development (OECD) is unambiguous; China, India, andthe developing countries of the world are telling us that they will continue to build coalpower plants to supply the lions share of their energy needs they have told the worldthat they will build more coal plants over the next 20 years than all other energy sourcescombined (i.e. natural gas, wind, solar, geothermal, nuclear, hydroelectric, etc. seeAppendix A).
Clean water, sanitation, and indoor air quality are public health priorities in developingcountries. China and India serve the near to mid-term public health of their citizens bytrading outdoor air pollution and CO2 emissions from burning fossil fuels in exchangefor affordable water/sewage treatment and displacement of indoor cooking fires (seeAppendix A).
Time is of the essence if we want to steer China and India from building out massivefossil fuel economies that in all likelihood will accelerate worldwide CO2 emissions tothreatening levels regardless of our own domestic energy choices. We need to show
them a concrete alterative within 5 to 10 years to make a difference. Fortunately, a new generation of nuclear technology (New Nuclear) is on the drawing
boards, created by American entrepreneurs and scientists. New Nuclear is both safe andpotentially cheaper than fossil fuel-based energy if the US government will allow the
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Allow progressive, nuclear-powered testing at appropriate stages in the licensing processto validate computer models and to verify performance, safety, and cost predictions.
Tailor the licensing review process and costs to credit innovate risk reduction, and to takeinto account different reactor designs (e.g., smaller vs. larger power output reactors);different physical sites (e.g., nuclear reservations vs. commercial utility sites); and specialpurpose applications (e.g., nuclear waste disposal, weapons-grade materials destruction,nuclear medicine).
Fast track nuclear exports to states with well-established nuclear capabilities and cultures,particularly China and India, negotiating the slowdown and ultimate phasing out of fossilfuel use in their domestic economies as well as in their ROW (Rest of World) exports.
Establish a United States Nuclear Power Agency, specifically chartered to promotedevelopment of low-cost energy and a secure energy supply to US citizens. The agencywould address policy and business (domestic and international) aspects of nuclear energywhile coordinating with DOE as a technology provider and NRC as a regulator.
Nuclear technology is here to stay. Countries around the world will continue to develop nuclear
technologies for energy, medicine, weapons, and other uses regardless of US national will orpolicy. We can lead or we can follow. If we lead, we can innovate, influence, and prosper; itwill protect everyone from the threat of global climate change, enhance our national and energysecurity, and quickly add a huge world-scale, high-growth industry to the US economy. If wefollow
We recommend assembling a small team with members from Congressional Staff, DOE, NRC,the nuclear industry, private investors, and business process/new product development experts.
This team should be tasked with identifying realistic, actionable steps that can be taken now andin the future to allow the US to regain and then to maintain its leadership position in the nuclearindustry.
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The Challenges and Opportunities ofCleantech and New
Energy
Joseph B. Lassiter, IIISenator John Heinz Professor of Management Practice
In Environmental Management
&Faculty Chair, Harvard Innovation Lab
Harvard Business School
September 2014
Copyright @ 2014 President & Fellows of Harvard College
Appendix A
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So,What Do We Know?
Its tough to make predictions,
especially about the future.
Yogi Berra
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China Leads and India Follows in
Reducing Poverty & Increasing Disparity
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Premature Deaths, Air Pollution
& the Choices of Nations
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Probabilistic Temperature Estimates for Magnitude and Timing of AR5 IPCC scenarios
Biological & economic models arelikely to be invalid at these levels!
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So, What Do We Do Now?
When you come to a fork in the road, take it.
Yogi Berra
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To Materially Change The Worlds Climate Future,
Cleantech & New Energy Alternatives
Must Be Cheaper Than Coal In China and In India The Chinese and India governments are committed to raising the standard of living in their countries to Western per
capita economic and public health standards
The Chinese and Indian government actions say that the certain short-run benefits of low-cost coal energy are likely
to offset the uncertain long-run costs of coals climate change impacts to their citizens.
The Chinese and perhaps Indian government actions say that they will build green supply chains if needed for
export sales to Europe and North America while serving themselves and their ROW exports with brown supplychains. The Chinese and perhaps the Indian governments will clear up local pollution that impacts their own citizens
directly even if that energy required for that clean-up increases their net CO2 emissions.
The world will need to adapt to their choice.In my opinion, there is a material likelihood that our world is very
already changed forever ..
In my opinion, most of the rich will not materially feel these changesBut, many of the poor will materially
suffer from these changes
In my opinion, we need to use markets to drive efficient, effective change by fully-pricing each uniquesource of energy to consumers, utilizing tax-revenue neutral escalating carbon taxes, catastrophe/
remediation taxes and security-of-supply taxes, enforced with international border tariffs
In my opinion, all nations should encourage the hunt for an energy miracle that can significantly impact
Indian and Chinese energy choices and CO2 emissions as well as their own within 5-10 years..No nation is inthe lead.. It is an open game for the bold. That energy miracle is probably *new* nuclear
In the end, in my opinion, we will all need to move to zero net carbon emissions as well as quite possibly supporting
a geo-scale carbon dioxide capture and storage miracle in the next 10-20 years. And, we all need to prepare foradaptation to what quite possibly is an already very changed and rapidly changing world.12
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The Challenges and OpportunitiesFinancing New Nuclear
Joseph B. Lassiter, IIISenator John Heinz Professor of Management Practice
In Environmental Management
&Faculty Chair, Harvard Innovation Lab
Harvard Business School
October 2014
Copyright @ 2014 President & Fellows of Harvard College
Appendix B
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Time
Value, Money&
Information
Produced
Seed
Stage
1st
Round 2nd
Round
3rd
Round
Value
Progression
Time
PurchasedIn Round
Cumulative
Cash Flow
Staged Investment: Cash Flows , Information and Value
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Staging & Experiments
Staging is the central entrepreneurial method of financingthat is distinct from the traditional capital budgeting method
Allows for
A series of experiments
Information-gathering
Option to abandon
Option to re-negotiate
Option to pursue
You raise money to buy time for experiments, you buy
experiments to produce information, you produceinformation to make decisions, you make decisions to open orclose options.You raise enough cash at each stage to getyou to that decision point and to deal with its consequences
UNCERTAINTY- REDUCTION
and PAY-OFF DEFINITION
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62.4%
20.1%
9.1%
5.3%
3.1%3.5%
12.6%
15.3% 15.7%
52.8%
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
10X
%o
fTotalCostorTerminalV
alue
Multiple on Invested Capital
Venture Capital Return Profile 1995 - 2009!"!#$%&'()&$('
$1,200 MM Cost / $3,000 MM Value - 2.5X
% of Cost % of Value
Does the Fund get into the Big Deals?4
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*+)
*+,,-
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.,,, .,,+ .,,/ .,00
Open Source +
Horizontal Scaling Cloud +
Amazon Web
ServicesDevelopers Start
Companies
The Number of Internet Ventures Has Exploded
As the Cost of Experimentation Has Fallen
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Private Investors Runs Multi-Billion Dollar Experiment
When the Payoff Is Promising and the Rules Are Fair
Research Spending Per New Drug
Company TickerNumber of drugs
approvedR&D Spending Per
Drug ($Mil)Total R&D Spending
1997-2011 ($Mil)
AstraZeneca AZN 5 11,790.93 58,955
GlaxoSmithKline GSK 10 8,170.81 81,708
Sanofi SNY 8 7,909.26 63,274
Roche Holding AG RHHBY 11 7,803.77 85,841
Pfizer Inc. PFE 14 7,727.03 108,178
Johnson & Johnson JNJ 15 5,885.65 88,285
Eli Lilly & Co. LLY 11 4,577.04 50,347
Abbott Laboratories ABT 8 4,496.21 35,970
Merck & Co Inc MRK 16 4,209.99 67,360
Bristol-Myers SquibbCo. BMY 11 4,152.26 45,675
Novartis AG NVS 21 3,983.13 83,646
Amgen Inc. AMGN 9 3,692.14 33,229
Sources: InnoThink Center For Research In Biomedical Innovation; Thomson Reuters Fundamentals via FactSetResearch Systems
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The Investors Context.
Staged Capital Supply Chain Probably Variants of
Biotech for New Nuclear
Money-Time-Information-Value
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FDA Approval Process
Stage
Elapsed
Time
(years)
Capital Required
($ million USD)
Purpose and
Objective
Market Value
($million USD)
Historical
Success
(probability)
Pre-clinical 1 5 10 50 Pre-human
validation
10 20 10%
Phase I 1 2 5 20 Safety 10 50 65%
Phase II 2 3 20 50 Efficacy and dose 50 100 50%
Phase III 3 40 100 Registration Trial 200 400 65%
New Drug
Application
1 20 50 Manufacturing
and FDA
Approval
500 1000 90%
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6-7-4%
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A New Nuclear Approval ProcessDiscussion with Ray Rothrock
Stage
Elapsed
Time
(years)
Capital Required
($ USD)
Purpose and
Objective
Market
Value
($million
USD)
Historical
Success
(probability)
Science &
Economics
1 3 $5-10M Economic and technicalconcept, computer simulation,
critical materials or neutronics
assessments
1st Option to
Abandon
Phase I
Viability
2 3 $10 150M Sub-critical pile to testneutronics. thermal hydraulics
test Update economics. NRC
prelim review.
Phase II
Scalability
2 5 $200 500M Build, characterize and testcritical pile. NRC review.
Phase III
Full Power
2 $500M Small scale reactor forpower. Produce steam only (at
DOE facility), but full run and
final modelling, economics,
control, and training process.
Full NRC approval
1st Utility
Evaluation
1st Option
for Financial
Exit
Approved
NPP IPP
Total 5-7
yes
$1B Including
Licensing
Site-Specific Licensing,
Training & Supply-Chain
Audit
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New Nuclear Approval ProcessDiscussion with Jack Devanney 24 November 2014
Martingales ThorCon Reactor 2x250 MWe MSR Converter
No New Technology & Physical Testing-Based-Development &Licensing
Stage
Elapsed Time
(years)
Capital Required
($ USD) Purpose and Objective
Market Value
($million USD)
Historical Success
(probability)Seed
Full-Scale
Prototype Bidding
& Vendor Selection
1 $10M Prepare Specs for Yard /
Vendors , Get Quotes &
Execute Selected
Experiments. Raise
Phase I Round
Phase I
Non-Nuclear
Full-Scale
Demo
1 - Build
1- Non-
Nuclear Test
$50M Build, commission, then
full scale pre-nuclear
tests, Confirm thermo-
hydraulics, stresses at
operating temperature,exercise instrumentation,
safety, replacement
systems.
Approval of zero power
tests. Raise Phase II a
&b Round
Phase IIa
Nuclear
Full-ScalePrototype
1 $130M Ramp-Up by Must
Pass Test Stages to
Full Power then
CharacterizationApproval of Design Basis
Casualty Tests.
Phase IIb
FOAK Nuclear
Power Plant
1 $225M Staged Physical Testing
of Design Basis
Casualties , Training &
Supply Chain Audit
Approved
NPP IPP
Total 4-5 yrs $415M
SupportingLicensing
Site-specific Licensing
50GWe/yr Reactor Yard
Test-While -Licensing- Build at Korean Yard- Move to Nuclear Prototype Park
License-by-Testing- Sell Power to Grid
- Operator Training