2007 03 08 Euci Nuclear Renaissance
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Transcript of 2007 03 08 Euci Nuclear Renaissance
Nuclear Renaissance
Edward KeeWashington DC
2 EUCI - Who will build generating baseload capacity? - 8 Mar 07
These slides do not provide a complete record of the accompanying oral presentation and discussion.
This presentation represents the views of the speaker only and does not necessarily represent the views of
others at CRA International or the views of our clients.
3 EUCI - Who will build generating baseload capacity? - 8 Mar 07
Agenda
• Why nuclear?• Who?• At what cost?• How many MW?• When?• Where?• What next?
4 EUCI - Who will build generating baseload capacity? - 8 Mar 07
Why nuclear?
5 EUCI - Who will build generating baseload capacity? - 8 Mar 07
Excellent safety & performance record
• The result of decades of hard work• Longer periods between ever-shorter refueling outages• Pervasive culture of safety• Consistent record across plant designs, NSSS vendors and
vintages• Consolidation of nuclear plant ownership – best operators
and practices at more plants• Safety and performance linked to market value• Lessons, practices, culture, and staff will carry over to new
plants
6 EUCI - Who will build generating baseload capacity? - 8 Mar 07
Global warming
• Growing consensus about potential impacts• CO2 emissions from human activity seen as cause• Electricity sector accounts for about 1/3 of CO2 emissions• Nuclear power viewed as real, even dominant, way to
reduce electricity sector CO2 emissions– Proven technology– Low life-cycle carbon impact; comparable to green options– Base load operation rather than intermittent
• Programs or markets aimed at CO2 reduction will likely provide financial benefits to nuclear power plants
7 EUCI - Who will build generating baseload capacity? - 8 Mar 07
EPAct of 2005
• Significant US government commitment• Significant benefits to first wave of new nuclear plants• “Kick start” for next generation of nuclear power plants• Combines financial and risk management mechanisms
– Loan guarantees, Standby Support, Production tax credits, etc.• Major benefits only available to the first few plants• The first-come, first-served aspects of these benefits are
driving the current spate of announcements• Implementation and funding issues remain
8 EUCI - Who will build generating baseload capacity? - 8 Mar 07
Electricity industry changes
• Shift to electricity markets in many regions, with associated marginal cost pricing
• High gas prices have big impact on electricity prices• Industry restructuring – large national corporations have
replaced local vertically-integrated utilities• Purchase and sale of existing nuclear plants• Need for new baseload generation in many regions• Existing nuclear power plants have enhanced value
– As merchant unit in an electricity market– As a part of a regulated utility’s generating portfolio
9 EUCI - Who will build generating baseload capacity? - 8 Mar 07
NRC license process
• Changed to remove past problems– COL (combined construction and operation license) process– Operating license issued before start of construction– One-time design certification (DC) process– ESP allows early review and approval of sites that can be banked– Comprehensive DC and ESP will mean shorter COL process– Process encourages standardized plant design approach
• Final rules, final hearing/ITAAC, and other details not yet completed
• NRC funding
10 EUCI - Who will build generating baseload capacity? - 8 Mar 07
New nuclear power plant designs and approach
• Significant experience since the design of existing commercial nuclear power plants
• New designs are aimed at– Safer operation– Lower cost– Higher efficiency
• Standardized power plants– Allows NRC-certified design at multiple sites– Replicate success in France and US nuclear navy
• Several vendors competing to be the standard
11 EUCI - Who will build generating baseload capacity? - 8 Mar 07
Nuclear power outside the US
• Asia– Japan – 16 plants on line since 1990; 3 units under construction– Korea – 10 units on line since 1990; 8 units under construction– Big plans for nuclear power in China and India– Interest elsewhere (e.g., Thailand, Indonesia, Vietnam)
• Russia– By 2030, plans for 42 new units inside Russia and 40-50 units abroad
• Europe– New plants in Finland and France– Re-think of nuclear phase-out in several countries– EU report on nuclear power in January 2007– UK moving toward nuclear power option
• Other countries interested– Includes Canada, Argentina, Australia, Egypt, Persian Gulf states
12 EUCI - Who will build generating baseload capacity? - 8 Mar 07
There are still some concerns
• Timing to meet baseload needs, compared to coal• Uncertain electricity industry structure and markets• Infrastructure and staffing to support surge in nuclear• Potential for terrorist attacks
– Diablo Canyon spent fuel case – does a new facility increase threat?– NRC design basis threat and 9/11 type attacks
• Spent nuclear fuel disposition– Long-term storage - Yucca Mountain or PFS or on-site– Re-processing of used fuel – GNEP, MOX fuel
• Weapons proliferation - linked to re-processing
13 EUCI - Who will build generating baseload capacity? - 8 Mar 07
Uranium prices – a market indicator?
Source: The Ux Consulting Company, LLC http://www.uxc.com/
14 EUCI - Who will build generating baseload capacity? - 8 Mar 07
Who?
15 EUCI - Who will build generating baseload capacity? - 8 Mar 07
Company Site Design (# of Units) COL
Constellation (UniStar) MD, NY, plus 3 TBD EPR (5) First submittal 4Q - 2007
Duke SC AP1000 (2) October 2007
TVA (NuStart ) Bellefonte, AL AP1000 (2) October 2007
Alternate Energy Holdings Bruneau, ID TBD 2008
DTE Michigan TBD Late 2008
Duke NC & SC TBD TBD
Toshiba Galena, AK Toshiba 4S (1) TBD
SCE&G Summer, SC AP1000 (2) October 2007
NRG Energy / STPNOC Bay City, TX ABWR (2) Latter part of 2007
Progress Energy NC and FL AP1000 (2), TBD (2) NC - Oct 2007; FL - Jul 2008
Southern Company Vogtle, GA AP1000 (2) March 2008
Amarillo Power Amarillo, TX ABWR (2) As soon as practicable after 2007
Texas Utilities TX, TBD TBD (2 – 5) 2008
Florida Power & Light FL, TBD TBD 2009
Exelon Clinton, IL TBD TBD
Dominion North Anna, VA ESBWR (1) November 2007
Entergy (NuStart ) Grand Gulf, MS ESBWR (1) November 2007
Entergy River Bend, LA ESBWR (1) May 2008
Exelon TX TBD 2008
New US nuclear plant announcements
16 EUCI - Who will build generating baseload capacity? - 8 Mar 07
Nuclear Plant Designs
Areva Nuclear Power US EPRGE/Hitachi ABWR, ESBWRToshiba/Westinghouse AP600, AP1000, System 80+, IRIS
AECL Advanced CANDU ACR-700General Atomics Gas Turbine-Modular Helium ReactorMitsubishi Heavy Industries US APWRPBMR, Pty Ltd (South Africa) Pebble Bed Modular Reactor (PBMR)Toshiba 4S (10 MWe sodium-cooled)
Blue = Certified NSSS designGreen = DC under review
17 EUCI - Who will build generating baseload capacity? - 8 Mar 07
At what cost?
18 EUCI - Who will build generating baseload capacity? - 8 Mar 07
19 EUCI - Who will build generating baseload capacity? - 8 Mar 07
Nuclear is competitive – without CO2 impacts
42424346
5057
69125
0 50 100 150
$/MWh
Solar PVWindGas CC ($6/mmBTU)Gas CC ($5/mmBTU)Nuclear ($1,400/kW)Coal IGCCCoal PCNuclear ($1,200/kW)
Source: NEI; “Investment Stimulus for new nuclear plant construction – frequently asked questions” September, 2006
20 EUCI - Who will build generating baseload capacity? - 8 Mar 07
EPAct of 2005 - Production Tax Credit
• Enhances financial performance after a new plant is built• Applies to new nuclear plants that
– File a COL application by the end of 2008– Start construction before 2014
• 6,000 MW of new nuclear capacity• First eight years of operation• DOE allocates credits if more than 6,000 MW of new plants• Allocated PTC = MW allocated / nameplate MW * 1.8¢
– e.g., 750 MW allowance / 1000 MW plant -- 1.35¢ PTC• Limited to $125 million per year per 1,000 MW allocated
21 EUCI - Who will build generating baseload capacity? - 8 Mar 07
EPAct of 2005 - Standby Support / Delay Insurance
• Safety net for investors to help manage risk of delays• Focused on mitigating impact of licensing/litigation delays
seen in earlier generation of nuclear plant development• Covers debt service and power market costs related to off-
take agreements– Regulatory failures (e.g., NRC licensing delays)– Litigation (e.g., intervention)
• Covers up to 6 reactors from no more than 3 designs– 100% delay costs up to $500 million for first two plants– 50% of delay costs up to $250 million for plants 3-6
• Significant progress on developing rules
22 EUCI - Who will build generating baseload capacity? - 8 Mar 07
EPAct of 2005 - Loan Guarantee / Title XVII
• Most important part of the EPAct of 2005 incentives• Loan guarantee up to 80% of project cost:
– Permits highly leveraged capital structure (e.g., 80% Debt)– Facilitates off-balance sheet, project-financed entities– Reduces cost of debt
• Offsets higher cost of initial plants due to FOAK issues• Allows access to capital and helps ensure financing• Slow progress on DOE implementation
– Initial draft solicitation for small projects oversubscribed– NOPR for nuclear loan guarantees delayed– Debate over details of DOE approach– Questions about funding and need for appropriations
23 EUCI - Who will build generating baseload capacity? - 8 Mar 07
Risk over timeDesign Certification & ESP COL ITAAC
Design & engineering
Construction contracts & procurement
Construction Comm’l Ops
Reg
ulat
ory
risk
Pla
nt-s
peci
fic ri
sk
24 EUCI - Who will build generating baseload capacity? - 8 Mar 07
• Qualified suppliers of nuclear equipment, components, materials and commodities
• Fabrication capability and capacity for forging large components such as reactor vessels
• Long lead times for major components• Adequate supplies of commodities (e.g., SS pipe,
specialty metals)• Transportation of large components• Competition for scarce resources should worldwide
demand for reactors surge• Political and economic risks of offshore production
Other risks related to infrastructure constraints
25 EUCI - Who will build generating baseload capacity? - 8 Mar 07
Risk mitigation
• Regulatory/licensing risk– DC, ESP processes; minimize issues in COL and NRC final hearing
• Construction risk – risk-sharing with vendors, contracts– Delays– Cost overruns
• Market risk – during financing & after completion– Market prices, offtake agreements (merchant plants)– Regulatory treatments, prudence reviews (regulated plants)– Upside from global warming actions
• Infrastructure constraints– Early procurement of critical components– Invest in critical suppliers– Establish cross-border partnerships
26 EUCI - Who will build generating baseload capacity? - 8 Mar 07
How many MW?
27 EUCI - Who will build generating baseload capacity? - 8 Mar 07
Existing US nuclear power capacity
Source: DOE/EIA
0
20
40
60
80
100
12019
5719
59
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
GW
28 EUCI - Who will build generating baseload capacity? - 8 Mar 07
0%
5%
10%
15%
20%
25%19
5719
5919
6119
6319
6519
6719
6919
7119
7319
7519
7719
7919
8119
8319
8519
8719
8919
9119
9319
9519
9719
9920
0120
0320
05
Source: DOE/EIA
Nuclear share of U.S. net electricity generation
29 EUCI - Who will build generating baseload capacity? - 8 Mar 07
Nuclear capacity additions - EIA forecast
0
2
4
6
8
10
12
14
2007
2009
2011
2013
2015
2017
2019
2021
2023
2025
2027
2029
GW
Net cumulative additionsSource: EIA; includes 2.7 gigawatts of uprates through 2030
30 EUCI - Who will build generating baseload capacity? - 8 Mar 07
Nuclear capacity to maintain 20% share of US generation
05
101520253035404550
2007
2009
2011
2013
2015
2017
2019
2021
2023
2025
2027
2029
GW
Net cumulative additionsSource: EIA forecast; CRA analysis
31 EUCI - Who will build generating baseload capacity? - 8 Mar 07
EIA forecast of steam coal additions
020406080
100120140160
2007
2009
2011
2013
2015
2017
2019
2021
2023
2025
2027
2029
GW
Net cumulative additionsSource: EIA forecast
32 EUCI - Who will build generating baseload capacity? - 8 Mar 07
When?
33 EUCI - Who will build generating baseload capacity? - 8 Mar 07
34 EUCI - Who will build generating baseload capacity? - 8 Mar 07
Design and engineering / NRC Design Certification; ESP
COL application and approval3-4 year process, $50-90 million
Long-lead procurement of major components and commodities
Construction and procurement
Getting to commercial operation
Final NRC hearing; fuel load, startup and testing; commercial operation
0 1 2 3 4 5 6 7 8 9
35 EUCI - Who will build generating baseload capacity? - 8 Mar 07
Why schedule might slip
• Potential sponsor commitment delays– State regulatory proceedings/prudence reviews for regulated units– Arranging financing and off-take arrangements for merchant units
• Utilities shift attention away from nuclear– Coal projects become first priority– Priority on reliability and near-term need for baseload
• NRC licensing process takes longer– Funding slows pace of NRC activity in critical period– Intervention in COL process or final hearing/ITAAC process
• Construction delays
36 EUCI - Who will build generating baseload capacity? - 8 Mar 07
Where?
37 EUCI - Who will build generating baseload capacity? - 8 Mar 07
Locations of new U.S. nuclear plants
• Announced units (see earlier list)• Near existing units
– Initial site permit for more units than were actually built– Local acceptance or even embrace of new nuclear– Positive utility, state and community experience
• Where state laws permit• Where markets (or regulation) provide incentives
38 EUCI - Who will build generating baseload capacity? - 8 Mar 07
Company Site Design (# of Units) COL
Constellation (UniStar) MD, NY, plus 3 TBD EPR (5) First submittal 4Q - 2007
Duke SC? AP1000 (2) October 2007
TVA (NuStart ) Bellefonte, AL AP1000 (2) October 2007
Alternate Energy Holdings Bruneau, ID TBD 2008
DTE Michigan TBD Late 2008
Duke NC & SC? TBD TBD
Toshiba Galena, AK Toshiba 4S (1) TBD
SCE&G Summer, SC AP1000 (2) October 2007
NRG Energy / STPNOC Bay City, TX ABWR (2) Latter part of 2007
Progress Energy NC and FL? AP1000 (2), TBD (2) NC - Oct 2007; FL - Jul 2008
Southern Company Vogtle, GA AP1000 (2) March 2008
Amarillo Power Amarillo, TX ABWR (2) As soon as practicable after 2007
Texas Utilities TX, TBD TBD (2 – 5) 2008
Florida Power & Light TBD TBD 2009
Exelon Clinton, IL TBD TBD
Dominion North Anna, VA ESBWR (1) November 2007
Entergy (NuStart ) Grand Gulf, MS ESBWR (1) November 2007
Entergy River Bend, LA ESBWR (1) May 2008
Exelon TX? TBD 2008
Some new locations; others TBD
39 EUCI - Who will build generating baseload capacity? - 8 Mar 07
Existing nuclear units
40 EUCI - Who will build generating baseload capacity? - 8 Mar 07
State laws
Source: Nuclear News, November 2006
41 EUCI - Who will build generating baseload capacity? - 8 Mar 07
Electricity markets and RTOs
Source: FERC
42 EUCI - Who will build generating baseload capacity? - 8 Mar 07
Conclusions
43 EUCI - Who will build generating baseload capacity? - 8 Mar 07
Conclusions
• US nuclear renaissance is inevitable• A lot of hard work to do; some hurdles to overcome• COL applicants racing to obtain limited EPAct benefits• Vendors competing to become standard
• What happens after the first wave?• Not a panacea for global warming• May be too late to meet need for new baseload
44 EUCI - Who will build generating baseload capacity? - 8 Mar 07
Edward KeeCRA International1201 F Street, NW
Washington, DC 20004(202) 662-3953
Mr. Kee leads CRA’s work in nuclear matters and is a specialist in the electricity industry. He has experience in industry restructuring, electricity markets, nuclear generation, private power, and related issues. He has testified as an expert witness on a range of electricity industry issues.
Prior to re- joining CRA in mid-2006, Mr. Kee was a consultant at PA Consulting Group and Putnam, Hayes & Bartlett. Prior to joining Charles River Associates the first time, Mr. Kee was a consultant at McKinsey & Company and a merchant power plant developer.
During service as a naval officer, Mr. Kee was engaged in construction, start-up and testing of the nuclear power plants on the aircraft carrier USS Carl Vinson (CVN-70). During this time he qualified as a watch office and as Chief Engineering Officer.
Mr. Kee received an MBA from Harvard University and a BS in Systems Engineering, with honors, from the United States Naval Academy.