Introduction to New Build Colette Lewiner Nuclear Construction Summit Washington, October 26, 2009
Agenda Global Energy Outlook Present Crisis impact Nuclear renaissance Present status Impact of economic recession: contrasted situations Conclusion 2
Population and economic growth will redraw the map in 2030 Billion 10 OECD Population Average annual growth, 2005-2030 1% Non-OECD Trillion ($2000) 80 GDP (at constant exchange rates) 2.8% $ 000 per capita (2000$) 40 35 Per capita GDP 1.8% 37 Mboe/d 300 Energy demand 350 1.2% 8 60 30 250 1.8% 6 4 1.2% 40 4.9% 25 20 15 15 24 200 150 1.7% 2 0.2% 20 2.2% 10 5 0 1.0 1.5 3.2% 3.3 100 50 0.6% 1980 2005 2030 1980 2005 2030 1980 2005 2030 1980 2005 2030 IEA report estimates at $26,300bn the Oil, Gas and Electricity infrastructure worldwide investments needed by 2030 (IEA World Energy Outlook 2008) Source: United Nations, World Population Prospects 2006; IEA; Total. 3
How to limit our energy consumption and our CO2 emissions? Energy consumption: increase from BRICs and other developing countries will not be balanced by the stabilization of developed world countries resulting in an overall 1.2% per year growth Our planet fossil fuel resources are limited: 40 years in Oil, 60 years in Gas, 146 years in Coal. We need to use them cautiously and they generate CO2 We have to limit our Green House Effect Gases (including CO2) emissions in order to avoid global warming which would be very damageable for our planet Carbon capture and storage is at a development stage and very expensive (increases by 50% the kwh cost). It could eventually be implemented. World energy-related CO2 emissions abatement Source: IEA, Climate Change excerpt, Oct. 2009 Energy savings together with Renewable and Nuclear energy are needed. 4
Agenda Global Energy Outlook Present Crisis impact Nuclear renaissance Present status Impact of economic recession: contrasted situations Conclusion 5
Market Evolution: The crisis effect Prices Dropped Electricity Prices Carbon Price (CIF ARA) & Gas Price (Zeebruge) The oil price drop created a bigger relief in the economic recession than the cumulated stimulus plans Governments will try to avoid a significant oil price increase Spot gas prices historically low Source: Tendance Carbone, Sept. 2009 6
Market Evolution: The crisis effect Fall in Demand and CO 2 Emissions Main European countries H1 2009 electricity consumption fell by 5% and gas consumption by 8% compared to H1 2008 (mainly due to industrial sector decline of 10-20%monthly). 2009 electricity total consumption to drop worldwide by 3.5% & gas consumption by similar amount. CO2 emissions drop mainly resulting from fall in energy consumption: In 2008, the drop for the ETS sectors emissions in Europe was around 3.7% (compared to 2007) and the total European CO2 emissions should have dropped by 1.5%. A further 3% drop for 2009 anticipated. Renewables: The 2020 target is challenging: 20% in energy consumption translates into 33% in electricity generation shares we are at 16% Primary Energy Consumption European CO2 Emissions Consumption and CO2 emission drops are more cyclical than structural. More actions need to be taken at European and worldwide level. However in the USA the Waxman Markey bill and the cap and trade system are encountering difficulties. The Copenhagen summit outcome is very uncertain. Source: EEMO#11 no reuse before publication on Nov. 16, 2009 7
Financial Crisis Impact on Utilities companies To restore consumer buying power, governments could impose windfall taxes or set caps on energy prices. As a result of oil prices drop, Utilities are benefiting from lower gas prices but.. wholesale prices are strongly decreasing Utilities revenue is decreasing as a consequence of the economic difficulties of their clients. What about their margins? And credit rating? After an intensive activities in Mergers and Acquisitions, Their war chests have decreased Their gearing levels have increased Credit crunch and demand decrease are impacting negatively investments in plants, grids, and pipelines. Long-term Decline in Credit Quality (US Utilities) Source: The Financial Crisis and Its Impact On the Electric Utility Industry, Edison Electric Institute, Feb. 2009 Utilities with strong balance sheets are needed 8
After M&As, divestments are announced Main European Utilities War Chests Evolution* War chests have decreased Investments are delayed Early this year half of the top ten US utilities have announced reductions to planned capital investments 2.7 $ bn) In Europe big players are announcing investments cuts: E-ON from 36 to 30 bn, ENEL from 44 to 32 bn Divestment plans are announced E-ON & ENEL: 10bn, EDF: 5 bn Security of Supply: : In Europe, UCTE revised down its forecast from 50,000 MW to 20,000 MW of additional electricity generation needed to maintain security of supply. However many generation projects are delayed (Mds ) War War War chest *Source: chest SG Equity chest research 07/08 2006 2007 2008 change GDF SUEZ 16,0 19,9 30,9 + RWE 24,2 23,5 9,3 -- Centrica 6,9 10,2 3,8 -- Endesa -0,9-0,4 2,7 + EVN 0,2 0,1 2,1 + E.ON 28,2 26,6 1,5 -- Scottish & Southern Energy 4,0 3,5 0,03 - Verbund 1,3 1,5 0,01 + Iberdrola -1,9-4,0-0,02 - EDF 26,9 29,3-11,1 -- Gas Natural 2,6 2,9-14,1 -- ENEL 12,4-27,7-20,8 + War chest is the potential debt calculated as 3XEBITDA less the existing debt level Utilities appetite for new investments is decreasing. An upturn in investments after the crisis is unsure and could be insufficient 9
Agenda Global Energy Outlook Present Crisis impact Nuclear renaissance Present status Impact of economic recession: contrasted situations Prerequisites for a sustained nuclear renaissance Conclusion 10
After the crisis the energy demand will pick up World energy-related CO2 emissions Source: IEA, Climate Change excerpt, Oct. 2009 World power generation capacity in the 450 scenario Meeting the demand while curbing CO2 emissions will become again the main issue; nuclear energy is part of the solution 11
Nuclear Energy development is key to meet the future challenges After the end of the crisis we will see many of the precrisis challenges come back: Tight global energy demand and supply Limited resources, insufficient investments and increasing demand from developing countries Aging infrastructure in Western countries creating need to build new power pants Global energy security of supply: Oil and Gas resources are concentrated in a limited number of countries Uranium is abundant and well spread geographically; it is only small component of total nuclear energy cost Climate Change issues calling for carbon free energy sources Nuclear with hydropower are the only carbon-free schedulable energy source able to produce large volume of electricity as at affordable cost Nuclear industry has matured up: safety, workers radioprotection, plant availability and economics have improved Nuclear energy is back in the game 12
We are witnessing a nuclear renaissance Worldwide, 436 reactors are in operation, 44 under construction and 382 planned or forecasted (April 2009, World Nuclear Association) The biggest future investors are in Asia (China, Japan and India), Russia, Ukraine and UAE Overview of existing nuclear plants and project capacities (as of April 2009) 0 20000 40000 60000 80000 100000 120000 140000 160000 USA China France Japan Russia Ukraine South Korea India Canada UK Germany In operation Under construction Planned Proposed South Africa Sw eden Spain Sw itzerland Brazil UAE Italy Vietnam Poland Source: World Nuclear Association 13
Impact of recent events on nuclear renaissance: Common points Negative: Fossil energy prices decline CO2 prices decline Demand slow down Credit crunch impacting project development However differences according to project owner: Whether it is in the public or private sector.: projects supported by State don t require the same ROI as do private investors The size of its market capitalisation The strength of it s balance sheet. Positive: Construction costs should decrease Public opinion getting more positive Decreasing incentives for renewables Security of supply back on the European agenda Global Green House Gases emissions reduction objective is widely adopted Electricity generating costs in selected regions Costs include a carbon value of $30 per ton of CO2 in the European Union. In 2015, coal refers to supercritical steam. In 2030, coal refers to IGCC for the United States, ultra supercritical steam for Europe and China, and supercritical steam for India. Gas refers to CCGT. Source: IEA World Energy Outlook 2008 Different regional impacts of the crisis on nuclear development lead to contrasted situations 14
Agenda Global Energy Outlook Present Crisis impact Nuclear renaissance Present status Impact of economic recession: contrasted situations Conclusion 15
US: a contrasted situation Negatives Stronger financial crisis impact than in other regions Smaller Utilities: Investment in a large PWR represents about 10% of the balance sheet of an average US Utility versus 3%-4% for EDF, RWE or E-ON) Impact of New US administration positions : No new nuclear or coal plants may ever be needed in the United States, Jon Wellinghoff chairman of FERC No solution for the used fuel after President Obama decision to cancel Yucca Mountain project A lot of funds going to renewable energies First delays and cancellation: Ameren is walking away from it s EPR plant project in Missouri Progress Energy Florida announced plans to put back by 20 month the construction schedule for two WAP1000 units Significance of the level of funding (3rd annual Platt s/capgemini Utilities Executive study) Very Significant Somewhat Significant Not Very Significant Not At All Significant Will Not Appropriate funding Renewable Energy Use Smart Grid Nuclear power 6 8 19 33 56 27 0 20 40 60 80 100 Percentage Electricity generation capacity additions by fuel type, 2008-2030 (gigawatts) 43 16 29 33 20 4 4 0 3 16
US: a contrasted situation Positives Many Utilities have new reactor projects Under the 2005 energy law, $18.5 billion Federal Loan Guarantee will be allocated. Projects are being assessed Vendors are investing in plants to manufacture components for these new reactors: Areva/Northrop Grumman, Westinghouse/the Shaw group, BWX Technologies Projections by CERA* 4 to 8 reactors operating by 2020 President Obama to set a commission on spent fuel disposal Investments in cutting-edge nuclear energy research and development: $44 million funds from DOE allocated In response to Jon Wellinghoff declaration Senator Lindsey Graham said: I m afraid if we follow his advice, we may be marching into darkness. * CERA: Cambridge Energy Research Associates Nuclear is on the mid-term agenda; Steven Chu I'm supportive of the fact that the nuclear industry should be part of the mix. 17
A nuclear revival in Europe Europe Finland: First EPR reactor in construction at Olkiluoto. Government to decide about a 6th unit France: EPR reactor in construction at Flamanville Second EPR at Penly to be built from 2012 Italy: The new government plans new nuclear build. In February 2009, EDF formed a JV with Enel to conduct feasibility studies for 4 EPRs Sweden: The government decided to cancel the present phase out policy Germany: After the recent elections, the Phase Out policy will be abandoned. An important move for Europe too. Former Eastern Europe Countries Programs to invest in new nuclear plants This winter gas crisis has strengthen these plans Russia and the former CIS Russia: By 2030 nuclear share of electricity is expected to grow to 25% (16% now). However, scale back of the construction program due to economic recession. Ukraine: Plan to build and commission 11 new reactors by 2030 Support for nuclear production has grown significantly in the European Union The crisis should have a limited impact on this renaissance. Don t know 18
United Kingdom: a steady progression for an ambitious program Target of 25 GW new nuclear built by 2030 European Utilities are targeting new UK reactors build: EDF acquired British Energy RWE/EON consortium formed GDF-Suez/ Iberdrola and Scottish & Southern UK government is following its path for launching new nuclear plants: National Policy statement by end 2009 Sites selection process: NDA sites allocated to E.ON and RWE at Wylfa E.ON and RWE at Oldbury EDF Energy at Bradwell Some British Energy sites will be auctioned by EDF Waste and Decommissioning policy (end 2009): Consultation launched for establishing a fixed price for the disposal of intermediate level waste and spent fuel from new nuclear reactors Generic Design Assessment (early 2011) International collaboration decided Indicative Pathway to Possible New Nuclear Power Stations Despite this progression, commissioning new plants in 2018 will be challenging Source: A White Paper on Nuclear Power; in: The Centre for International Governance Innovation: Nuclear Energy Futures 19
India: a new play ground Very large electricity growth and large investment needs Diversification of fuel mix to benefit India on commercial, environmental and security of supply fronts Nuclear is part of the energy mix 17 existing nuclear plants 6 reactors under construction Big government push Plan for 20 000 MW nuclear capacity operational by 2020 and for 25% of electricity from nuclear power by 2050 Boosted by The new international agreements allowing India to access international technology despite them not signing the Non Proliferation Treaty Nuclear vendor s competition BU 4500 4000 3500 3000 2500 2000 1500 1000 500 0 By 2032 778 GW needed to sustain 8% growth 761 153 1097 220 1524 306 2118 425 2866 575 3880 2006-07 2011-12 2016-17 2021-22 2026-27 2031-32 Energy Requirement Installed Cap 778 1000 800 600 400 Election s results confirmed the government nuclear policy 200 0 MW 20
China: a strong acceleration Operation 1. Nuclear Power Development Under Construction Early Stage Anhui Wuhu NPP Hubei Xianning NPP Hongyanhe NPP Haiyang NPP Rushan NPP Rongcheng NPP Jiangsu Second NPP Tianwan NPP Qinshan NPP I,II,III In March 2009, China Nuclear Energy Agency proposed to increase the nuclear capacity from 40 to at least 75 GW in 2020. Nuclear will account then or 5% of total installed capacity and 8% of power generation. Each year, for the following 10 years, China needs to launch around 6 new large reactors Fangchenggang NPP SanmenNPP The Extension Project of Qinshan NPP Phase II The Extension Project of Qinshan NPP (Fangjiashan) Fuqing NPP Ningde NPP Daya Bay NPP Ling Ao NPP I Ling Ao NPP II Yangjiang NPP Taishan NPP Hainan Changjiang NPP 21
Agenda Global Energy Outlook Present Crisis impact Nuclear renaissance Present status Impact of economic recession: contrasted situations Conclusion 22
Conclusion The economic crisis could delay the implementation or expansion of nuclear power programmes in some countries for a limited period, but in the medium and long term global demand for energy will continue to increase significantly as countries everywhere seek to improve living standards, the director-general of the International Atomic Agency said The OECD Nuclear Energy Agency s (NEA) high projection is for global nuclear power capacity to grow by around 66 percent by 2030, However many prerequisites need to be in place for this worldwide nuclear renaissance to sustain and turn into a success. Effective nuclear non-proliferation control Stringent safety management Mastering the exceptionally long project lifetimes and large investments Ensuring nuclear energy s financial competitiveness Smooth industrial ramp up and Re-build the human competencies Public opinion acceptance 23