Nuclear Energy & Economic Competitiveness in Various Regulatory Systems

Transcription

1 Nuclear Energy & Economic Competitiveness in Various Regulatory Systems Presentation at: The re-emergence of nuclear energy: An option for climate change & emerging countries? UNAM, Mexico City, April Steve Thomas PSIRU ( University of Greenwich November 2005

2 Outline The world market for nuclear plants Key determinants of nuclear economics The economics of Olkiluoto and recent studies on nuclear costs Market prospects for nuclear orders in the next decade What factors are necessary for a nuclear revival

3 World Market for Nuclear Plants Reports of a revival in nuclear orders are premature 18 units are actively under construction worldwide Of these, 15 use Indian, Russian, or Chinese designs For 5 of the plants, construction started before 1990 The Western vendors have one order: Olkiluoto

4 Current nuclear designs Westinghouse AP Full certificated by NRC but only bid in China. No orders yet Areva EPR. One order (Olkiluoto) and second order (Flamanville) likely GE ESBWR not now expected to get NRC Certification before Not yet offered System 80+, APWR, ABWR and AES-91 WWER Not likely to be offered in the West Orders for Candu ACR-700/1000, Westinghouse BWR-90+, Areva SWR, and PBMR not likely in next few years

5 Why no agreement on nuclear costs Always assumed that new plants would be much cheaper and more reliable than existing plants Optimistic forecasts of nuclear costs and performance are made by those with a vested interest in nuclear Few orders have been placed in the past two decades on which to base forecasts Very little real data on construction and operating cost is published All the designs being considered in the West unproven

6 Most important economics factors Construction cost and time. Repaying construction cost and interest accounts for two thirds of the cost of power Cost of capital. For a publicly owned company in a monopoly, the cost of capital is low (5-8%) but for a private company in a market, it is high (>15%). Utilities with guaranteed markets are rare Operating performance. The more output, the more thinly fixed costs can be spread. Load factors expected to be 90% but not generally achieved

7 Other important factors Operations and maintenance (O&M) cost. Usually assume running costs are very low but British Energy went bust because it could not even cover its operating costs Decommissioning & waste disposal provisions. If costs are accurately forecast and provisions invested safely, not a major cost. But no experience of high-level waste (HLW) disposal and little experience of decommissioning so cost estimates are guesses

8 Forecast Canadian Nuclear Ass Chicago University Construction cost ( /kw) Constructio n time (months) Cost of capital (% real) Load factor (%) Non-fuel O&M ( c/kwh ) Fuel cost ( c/kwh ) Operating life (years) Decommissioning scheme Fund. 0.03p/kWh IEA/NEA Lappeenranta Univ m Included in construction cost Generating cost ( c/kwh) OXERA 2372 first plant 1679 later unit m in fund after 40 years life Massachusetts Institute of Technology Performance & Innovation Unit Royal Academy of Engineers < > Included in construction cost UBS EPR[1] Sizewell B Part segregated, part cash flow -

9 How are low costs produced? Olkiluoto Construction cost reported to be 3.2bn, 2000/kW, about 25% higher than all recent forecasts. Is it a loss-leader? Will this cost be achieved? Is the cost really fixed? The project is already 6 months late Bayerische Landesbank (BLB) gave 1.95bn loan (60% of cost) at 2.6% nominal. Loan guarantees of 720m from the French and Swedish export credit guarantee agencies TVO, the customer, is a not for profit organisation owned by energy intensive companies Output of Olkiluoto is contracted to TVO owners Are these conditions representative and the cost repeatable?

10 Western Europe: phase-out countries Germany, Sweden, N lands, Belgium, Italy, Switz lnd Some publicity for attempts to withdraw phase-out Plants likely to be allowed to stay in service longer than decided But reversing public opinion sufficiently to allow new orders is far away Are new nuclear orders compatible with the EU Electricity Directive?

11 Western Europe: revival countries UK, France, Finland. UK is key because little scope for new orders in France and Finland In UK, a programme of 8-10GW of plants would be needed to replace plants about to be retired How would they be financed, who would provide the guarantees and subsidies? Where would they be sited? Who would build the plants? Are new nuclear orders compatible with the EU Electricity Directive?

12 Eastern Europe and the FSU Russia, Ukraine, Bulgaria, Lithuania, Hungary, Slovakia, Czech Rep, Slovenia & Romania. Common factors include: Use of unsafe designs: RBMKs (Lithuania, Russia), first generation WWER-440s (Russia, Bulgaria, Slovakia) Difficulty of accommodating more nuclear in national electricity systems: Bulgaria, Slovakia, Slovenia & Ukraine Difficulties of funding decommissioning of retired plants: Ukraine, Lithuania and Bulgaria Planned use of existing sites where part-built plants exist: Russia, Slovakia, Ukraine, Romania and Bulgaria; A desire to create surplus generating capacity to allow exports of power to Western Europe Lack of realism about prices of nuclear plants and other costs e.g., waste disposal; Are new nuclear orders compatible with the EU Electricity Directive?

13 US Initiative: Nuclear Power 2010 There is an extensive set of guarantees and subsidies to back this programme including: Production tax credits: 1.8c credit per kwh from reactors for 8 years for 6 reactors: cost to US treasury $5.7bn; Loan guarantees for first 6-8 reactors. Congressional Research Service estimate taxpayer liability at $14-16bn; Support framework against regulatory or judicial delays, worth up to $500m for the first two reactors and $250m for the next four; Further research and development funding worth $850m; Assistance with historic decommissioning costs (up to $1.3bn); The total cost of this programme is around $12bn

14 US Initiative: Nuclear Power 2010 Progress slow and no commitment to order plants CEO of Dominion (Thomas Capps) said: We aren t going to build a nuclear plant anytime soon. Standard & Poor s and Moody s would have a heart attack [referring to debt-rating agencies]. And my chief financial officer would, too Nuclear orders must be placed with the support of financiers The financial community sees nuclear as a big economic risk on the basis of its poor track record

15 Canada Canada has 22 potentially operable units, but 8 were closed long-term in 1990s due to managerial and technical issues All 22 units need a costly, possibly prohibitive repair after about 20 years service Most of the 8 closed units have been or are being refurbished

16 Latin America Capacity very small and only in Brazil, Argentina & Mexico Constructions costs high, construction times very long and performance sometimes poor Stalled sites in Argentina and Brazil New orders face huge barriers

17 Central Asia (inc Indian sub-continent) Iran, Pakistan & India. Common features include: Difficulties of financing nuclear orders from western suppliers; Serious weapons proliferation issues making sales of nuclear plants to these countries controversial; Use of technologies not tested in the West or long out-dated, including first generation Candus (in India and Pakistan), first generation BWRs (India), Chinese designs (Pakistan), and Russian designs (Iran and India); and Often poor operating reliability.

18 Pacific Rim Japan, South Korea & Taiwan. Common features include A wish to create a national nuclear power plant supply capability (except Taiwan); Ambitious nuclear expansion targets, which in the past have not been met; and Except in Japan, authoritarian regimes have allowed governments to suppress local siting opposition. In South Korea and Taiwan, the current regimes are more democratic and establishing new sites is now proving very difficult in these countries.

19 China China forecast in 2004 it would build 40GW of new nuclear by But similar forecasts have existed for 25 years and have not been fulfilled Only 9GW of plant in service of which 4GW was supplied by Chinese companies Companies supplying China must transfer technology fully, so not attractive Westinghouse may win current bidding because Areva not prepared to transfer technology

20 What factors for a nuclear revival? Political support is not enough if the economics are poor and there is no public support for the programme. Some necessary factors include: No further nuclear accidents. The impact of TMI and Chernobyl is often over-stated, but a further major accident would stop any nuclear revival; Availability of turn-key contracts. If buyers are not sure the contract price is the final price, ordering a nuclear plant will be too risky for the buyer Public guarantees and subsidies, paid for by tax-payers or consumers that take the plant out of the electricity market; Progress towards solutions to waste disposal A convincing non-proliferation regime

21 Conclusions Cost-reducing factors - learning, technical change, scale economies, economies of number - have little impact on nuclear costs. Why? Skills in the nuclear area are eroding rapidly and forgetting is more likely than learning Economies of number not possible for a long time Little recent experience with current designs Waste disposal and decommissioning costs guesses Liberalisation of electricity industries raises the cost of capital and shifts economic risk to share-holders Olkiluoto is unique. In most other countries, nuclear orders would need public subsidies and guarantees China will not provide enough orders