2008 11 05 Nuclear Fleet Strategies Final Notes Version

8/14/2019 2008 11 05 Nuclear Fleet Strategies Final Notes Version

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Nuclear Fleet Strategies

Edward Kee5 Nov 2008

Sponsored by Nuclear Engineering International

Crowne Plaza London DocklandsWestern GatewayRoyal Victoria DockLondon E16 1ALConference manager: Linda Dunkley, Progressive Media Markets Ltd+44(0) 208 269 [email protected]

[Photo: Doel nuclear power plant in Belgium]


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2 Nuclear Fleet Strategies

These slides do not provide a complete record of thepresentation and discussion.

The views expressed in this presentation are mine;these views may not be the same as those held by

CRAs clients or by others at CRA.

I am subject to several Non-Disclosure Agreements (NDAs) with clients.The material in these slides is in full compliance with those NDAs.The oral discussion of these slides must also comply with those NDAs, so that Imay not be able to answer all your questions.


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Introduction

Nuclear fleet strategy was (is) successful in France

But, world has changed since French fleet was built Is the nuclear fleet concept relevant (or even possible) today? Yes - a 21 st Century virtual nuclear fleet approach is evolving


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Agenda

Eskoms nuclear fleet aspirations

Nuclear fleet concept Review of the French nuclear fleet Fleet benefits

Feasibility of the French nuclear fleet approach today Virtual fleets


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Eskoms nuclear fleet aspirations

Large capacity build

40,000 MW of new capacityplanned by 2025 20,000 MW in new nuclear fleet

Nuclear fleet strategy 10 EPR units or 15 AP1000 units,

plus PBMR units in later years Eskom faces several issues

Large CapEx investment, even with single nuclear plant Nuclear fleet purchase requires large financial commitment Rating agency action in August reduced funding ability

Examined costs, benefits, and approaches to nuclear fleets

In 2008, I provided advice and consulting assistance to Eskom on their nuclearprocurement and investment process.The public strategy of Eskom is to build a new nuclear fleet, starting with theNuclear 1 power station.

The size of the Eskom nuclear fleet suggested that lessons might be availablefrom the French nuclear fleet experience.We provided a review of the nuclear fleet approach in France and othercountries; an analysis of the nuclear fleet benefits; and a review of the linkagebetween nuclear fleet benefits and nuclear fleet procurement.


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Sequentialbuild

Multipleprocurements

Potentiallycoordinatedconstruction

Learning curvebenefits may not becaptured by owner

Financial flexibility,vendor competition,more options forbuyer

Multiple identical unitsMultiple

unitsNo fleet

Single owner

Commonsimulators, specialtools, training

Co-ordination ofupgrades,maintenance,

Fungible operators,maintenanceteams, outageteams

Operationalimprovementthrough learningacross fleet

Smaller fleetoperators

Nuclear fleets,composed ofmultiple reactortypes (BWR andPWR and other),reactor designs,constructors, andvintages

A mix of units builtby owner andacquired

Benefits from singleoverhead,purchasing,engineering, andmanagement

Single nuclearunit/plantowner

Some multi-company efforts togain fleet benefitsthrough cooperation

US nuclearmanagementcompanies a moreformal approach tomulti-companyefforts

Some ability toshare learningthrough industrygroups

Bulkpurchase

Single procurementand vendor

Coordinatedconstruction,mobilizationbenefits

Learning curvebenefits captured

Large order meansupstreaminfrastructure

Large financialcommitment, lessflexibility

Nuclear fleet concept

This picture provides a simplified version of the framework for examiningdifferent approaches to nuclear fleets.A key insight is that there are significant nuclear fleet benefits that do not directlydepend on the procurement approach.


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French nuclear fleet strategy

OPEC oil crisis was primary motivation for French government EdF nuclear fleet strategy was the French national nuclear strategy Resources of French government were committed to nuclear French government influenced other sectors of the economy French government controlled the electricity industry

France made a national investment in nuclear value chain - supported bybulk reactor purchases Uranium mining, milling and processing Uranium enrichment; starting with diffusion and moving to centrifuge Fuel design and fabrication Forging facilities for reactor pressure vessels and other forged components Various components, systems and engineering for nuclear plants Spent fuel reprocessing and MOX fuel fabrication

The French nuclear supply chain is now largely consolidated into Areva

Nuclear Fleet Concept

The French nuclear fleet was the result of a coordinated national governmenteffort as France sought to end its dependence on imported energy after theOPEC oil shocks in the 1970s.EdF, the government-owned electric utility, made large single-design fleetpurchases from government-owned nuclear vendors and constructors.A non-national utility, a commercial company, or even a smaller country mightnot be able to do this.This approach was so successful that the French national nuclear team alsoexported nuclear plants (e.g., Eskom in South Africa, Daya Bay in China, andBelgium). These export units expanded the French nuclear fleet, even thoughthe actual units were owned by others and located outside France.The nuclear industry of France today is the result of earlier national investmentin the nuclear industry, both in the nuclear power plant fleet and in thecommercial and physical infrastructure and supply chain needed to build the

nuclear fleet.Today, the French nuclear industry (through Areva) is seeking to gain additionalfleet benefits by offering their own standard PWR design (the EPR, supportedby the French nuclear industry supply chain) to other countries.


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Multiple

IdenticalUnits

Organization

&Management

A singleorganizationwith a unifiedapproach andeconomies ofscale toaccomplish:

Training

Purchasing

Management

Engineering

Regulatoryaffairs

Training

Simulator

Operators andmanagement

Refuelingoutage skills &equipment

Newprocedures &equipmentmodifications

Shared spareparts, specialtools, andstrategic spares

Learning from:

Peopleinvolved inconstructionand operationof multiple units

Modification ofthe design orthe constructionapproach andschedule

Documentingand sharinglessons learned

Vendors buildin learning forlater bids

Volume ordersmay allowupstreamcomponentsuppliers toinvest in longerproduction linesdue to bulkprocurement

Volume ordersmay bringdiscounts fromNPP vendorsthat reflectexpected learning curvebenefits and

upstreamcomponentsavings

Sequencing ofconstruction iskey

Teams movefrom oneproject to thenext withoutinterruption(also may allowsimultaneouswork onmultiple units)

Teams couldwork on similartasks for manyunits, allowingsignificantcommitment tohiring & training

French nuclearindustrialdevelopment ismodel

Investment innew productionfacilities

Over time, suchlocal suppliersshould be ableto use theirexperience (andtheir ownlearning curvebenefits) tobecomecompetitivesuppliers in theexport market

Learning

CurveEffects

VolumeOrders

MobilizeTeams

Industry

&Employment

Nuclear fleet benefitsNuclear Fleet Concept

This chart shows some of the benefits of a nuclear fleet.Many of these nuclear fleet benefits are available without the full French nationalfleet approach.One example are the US nuclear fleet operators. These companies have built

or acquired nuclear fleets with units of differing designs and vintages, yet haveachieved many nuclear fleet benefits by adopting Organization andManagement approaches.


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Is the French approach feasible today?

Role of Government

French fleet based on Government sponsorship, investment, and control Only China and Russia have a nuclear fleet strategy today Smaller fleets in Japan and Korea have strong government involvement

Few utilities could commit to nuclear bulk purchase today High cost and high perceived risk Few new nuclear plans involve bulk purchases

Bulk reactor procurement has risks Little buyer bargaining power after initial decisions May be little competition for on-going costs (e.g., outage services)

Hard to predict the winning world standard reactor design

France built a successful fleet based on its own internal purchases.Today, only Russia and China are adopting the French nuclear fleet approach.Both countries have strong government control of the entire economy, similar toFrance in the 1970s and 1980s.

Russia is more active in the export market, with China more focused on theinternal fleet build and localization of imported reactor designs.Today, few countries with market economies could undertake the Frenchnuclear fleet approach and it would be even more difficult for private utilities totake this approach.The French were also lucky in their choice of PWR technology. France hadcompleted several smaller PWR plants and decided to scale up this design forits fleet. The PWR design has proven to be a good one, even if it is not the bestreactor design in theory.In the world of real reactors, experience and learning mean a lot.

While there may be some new reactor designs that promise to be better than thePWR design, these new designs remain theoretical and do not have the manydecades of experience across hundreds of actual units that has refined theworld PWR nuclear fleet.


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Global reactor design race

Source: CRA analysis; Updated 15 October 2008

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0 5 10 15 20

USAPWR

APR1400

ESBWR

ABWR

EPR

VVER

AP1000

In operation Under construction Under contractCOL filed (US) Design selected

&

This chart shows global Generation III reactor plant development.There are several insights from this chart:1. There are only a few new reactor plants in construction today, despite the

nuclear renaissance

2. The relatively large number of competing designs seems to contradict thenew industry standard designs approach how many reactor designs is toomany?

3. A lot of the new units on this chart are in the US, where no utility hasfinancially committed to invest until an NRC license is issued (expected inabout 2012); it is possible that some of these new US nuclear units will notbe built.


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Very different ranking without US units

Source: CRA analysis

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APR1400

EPR

AP1000

ABWR

VVER

In operation Under construction EPC contract Design selected

NB: Given the recent separate competitive offeringsby GE/Hitachi and Toshiba/NRG, the existing units

might be divided into two groups

Outside the US, there are 6 Generation III units built and operating and 17 underconstruction.The two designs that are leading, the Russian VVER and the ABWR could bebroken down into several categories by design detail and by vendor.

The Russians offer several versions of the advanced VVER, the AES-91,AES-92 and AES-2006.The AWBR was built by several companies in Japan and there are twodifferent versions offered in the market today (the GE-Hitachi version andthe Toshiba version). Also, the 3 ABWR units under construction includethe 2 Lungmen units in Taiwan that were started in 1997.

Bottom line: Reactor buyers should think very carefully about the design andvendor that they select. The global fleet benefits might be significant if a populardesign is selected, but there are no clear winners yet.


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Virtual global nuclear fleets

Multiple identical nuclear units, but different owners

Nuclear fleet benefits through: Global vendor arrangements Formal, member-only, users groups who share learning and

investment in studies and special equipment Vendors bring learning in early units to bids for later units Public information about issues and problems

Owners of units gain benefits by sharing: Construction and design issues for new units Safety, procedures, and equipment issues for operating units Special tools, strategic spares, other items Purchasing of services or other items

The move to a global standard design approach is an attempt to capture someof the nuclear fleet benefits that were created in the French nuclear fleet build(e.g., large orders, long production lines for component manufacturing, etc).Unlike the French nuclear fleet approach, the market today consists of multiplebuyers in multiple countries.Owners and vendors seek to gain some of the benefits that a single large fleetpurchase would bring these benefits will come from a combination of thedesign selected, the timing and location of a new plant, and the negotiatedcontracts associated with the purchase.The virtual global nuclear fleet approach will not be easy.

Different electrical frequency standards mean that each design will havea 50 Hz and a 60 Hz variant (this means different turbines, generators,pumps, electronics, and even reactor safety systems).Some countries use metric measurement and some do not. A standarddesign must either have a metric and a non-metric variant or a singledesign with converted measurements (i.e., if metric was the originaldesign standard, the non-metric measurements will be in fractions).


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Virtual global nuclear fleets - issues

How will early adopters/buyers of new designs get benefits

from learning that will accrue to later buyers? Which designs/vendors will win & stay in the game? How many world units are needed to get fleet benefits? Will formal owner/user groups (e.g., APOG in US) raise

competition issues? Fleet benefits and competition in conflict

Fewer designs/vendors larger world fleets and more fleet benefits More design/vendor competition more competitive prices Vendor business models may or may not support virtual fleets

The global virtual nuclear fleet concept is not well developed yet.Reactor buyers may not fully realize their own options with respect to a largerfleet where decisions by other buyers are important. Vendor actions are beingdriven, in part, by attempts to gain nuclear fleet benefits for themselves.

Clearer thinking about the virtual global nuclear fleet concept can lead to astronger industry and more gains for all participants.Each buyer of a new nuclear power plant must select a reactor design; thisreactor design selection means that the buyer is a part of a virtual global nuclearfleet.The buyer must look beyond its own requirements and examine the benefits andcosts associated with membership in the global nuclear fleet (big or small) thatis associated with each reactor design.


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Edward KeeVice President

CRA International1201 F Street, NW

Washington, DC 20004(202) 662-3953

[email protected]

2008 11 05 Nuclear Fleet Strategies Final Notes Version

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