Nuclear cost study captures global learnings as UK targets 30% cuts

2018-01-10 nuclearenergyinsider

A new study of global nuclear plant costs is seeking to maximize learnings from Asian and Russian construction efficiencies using an evidence-based approach which drove cost reductions in renewable energy technology, Mike Middleton, Strategy Manager at the UK’s Energy Technologies Institute (ETI), told Nuclear Energy Insider.

The ETI launched October 26 the first evidence-based study of nuclear construction costs, to identify key measures for cost reductions.

The study is led by the CleanTech Catalyst (CTC) consultancy with the support of Lucid Strategy and funded by ETI. Research teams are currently collecting nuclear cost data from completed, ongoing and planned light water reactor (LWR) projects around the world. Data will be collected until the end of January 2018 and a final report delivered by April.

Their goal is to capture qualitative and, where available, quantitative information that characterizes the delivery experience of completed projects...Their quantitative data will be supported by, and validated by expert qualitative insight,” Middleton said.

The study comes as the UK looks to accelerate nuclear cost reductions and apply learnings from the ongoing Hinkley Point C construction project, where costs have spiralled, to other projects planned in the coming years.

On December 5, the UK Nuclear Industry Council (NIC) pledged to reduce nuclear new build costs by 30% by 2030, as part of a nuclear Sector Deal within the UK government's new Industrial Strategy.

To meet this aim, industry and government must work together to maximize economies of scale and series, adopt advanced construction technologies to increase productivity, streamline development and regulation, and lower the cost of capital, the NIC said in a report.

              UK nuclear cost reduction drivers in proposed Sector Deal 

Source: Nuclear Industry Council's report on the nuclear Sector Deal


The ETI's cost analysis will be based on evidence-led research, an approach which has already been successfully applied by the renewable energy sector. The increasing competitiveness of wind and solar technology was one of the factors that prompted ETI to commission the research, Middleton told Nuclear Energy Insider.


For example, the cost competitiveness of future UK offshore wind projects comes as a result of focused cost reduction objectives and projects over a fifteen-year period. The cost competitiveness of the nuclear industry could benefit from a similar approach,” he said.


Building data


The ETI’s research is expected to include pressurised water reactors (PWRs) and boiling water reactors (BWRs).


Regarding SMRs [Small Modular Reactors], we hope that the project will consider a range of reactor technologies configured as SMR power plants; but the breadth does depend on the extent of engagement by SMR vendors,” Middleton noted.


CTC and Lucid are currently developing a detailed, comprehensive nuclear cost database, leveraging extensive literature research and detailed plant-specific investigations on construction and operations and maintenance (O&M) costs.


The research teams are conducting interviews with a range of global companies and nuclear cost experts, Middleton said.


Discussions have covered the cost reduction strategies and best practices that have “enabled the delivery of highly cost-competitive plants,” he said.


The researchers have been particularly keen to learn about nuclear power projects by Chinese, South Korean and Russian consortia that have achieved low costs and fast construction schedules, Middleton said. For instance, China General Nuclear Power Group (CGN) is building six 1 GW reactors at Yangjiang in southern China for a total projected cost of $11.5 billion. EDF’s latest estimate for the 3.2 GW Hinkley Point C plant is 19.6 billion pounds ($26.2 billion).


                      US power plant costs by generation type


Source: Lazard group (November 2017)


When completed, the ETI’s report will be independently reviewed by Tim Stone, Non-Executive Chairman of Nuclear Risk Insurers (NRI). Stone is also a senior advisor at law firm Norton Rose Fulbright, independent non-executive director at Arup Group and non-executive director at Horizon Nuclear Power, which is developing nuclear plants in the UK. Previously, he served as expert chair of the UK’s Office for Nuclear Development and senior advisor to the Department of Energy and Climate Change.


It has long been recognized that the only two numbers which matter in nuclear power are the capital cost and the cost of capital. This important project is the first to approach the first of these on a thorough and independent basis,” Stone said in a statement.


Industry support


At this stage, the research partners do not want to draw any conclusions on the key cost drivers. However, Eric Ingersoll, Managing Partner of Lucid Strategy told Nuclear Energy Insider that productivity was key to delivering affordable projects.


In its new report on the UK nuclear Sector Deal, the NIC recommended the nuclear industry UK maximises the adoption of innovative construction methods "to increase productivity, quality and performance."


Other cost reduction measures recommended by the NIC include the deployment of reactor designs already deployed in the UK and abroad, to avoid repeated regulatory and manufacturing costs, and cross-industry collaboration on improved construction methods.


The NIC also recommended the government evaluates a range of financing models to reduce the cost of capital.


Last month, a committee of UK MPs slammed the government's negotiations of EDF's 3.2 Hinkley point C project, which locked UK consumers into a 92.50 pounds/MWh contract for difference (CFD) for 35 years.


EDF and its Chinese partners are bearing all construction risks for the Hinkley Point C project and the UK government should have analysed alternative financing methods, including sharing the early stage project risk between the government and the developer, the committee noted.


In its report, the NIC said a 1% reduction in the cost of capital for a new nuclear project could lead to a 10% reduction in the CFD strike price.


The evaluation of new financing models should “take into account the changing risk profile across the life time of a project and look at opportunities for lower cost financing of early stage risks and subsequent refinancing, within the current legislative framework," the NIC said.


By Neil Ford



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