How Nuclear Projects Failnuclear-economics.com/wp-content/uploads/2014/10/... · How Nuclear...
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Edward Kee How Nuclear Projects Fail
Transcript of How Nuclear Projects Failnuclear-economics.com/wp-content/uploads/2014/10/... · How Nuclear...
Edward Kee
How Nuclear Projects Fail
The NECG slides that follow are not a complete record of the presentation and discussion. The views expressed in these slides and the discussion of these slides may not be comprehensive and may not be the same as the views of NECG’s clients or the views of my colleagues.
© 2014 NECG
Disclaimer
8 Oct 2014 ANL/IAEA 1
“All successful nuclear power projects are alike;
each failed nuclear power project fails in its own way.”
Adapted from Anna Karenina by Leo Tolstoy - “All happy families are alike; each unhappy family is unhappy in its own way.”
October 2014 2IAEA / ANL
Financial failures– Canceled and written off before completion– Built, but never operated or retired early– Owner financial distress– US merchant nuclear projects stopped
Construction failures– US experience in 1970-1990– Recent global projects
Major accident or incident
How do nuclear projects “fail”
October 2014 IAEA / ANL 3
Between 1974-1982, U.S. electric utilities canceled more than 120 nuclear power plants -construction of many of these plants had started
Reasons included:– slower growth in electricity demand than projected– significant cost and schedule overruns– more complex nuclear safety regulatory requirements– an increase in public opposition– delays in licensing
October 2014 4IAEA / ANL
Canceled and written off
A significant capital investment is made, but no revenue produced– Shoreham (USA) – GE BWR; completed in 1984, only
operated at 5% for testing; led to financial issues for owner LILCO; decommissioning done by 1994
– Zwentendorf (Austria) – BWR; completed in 1978; operation prevented by referendum; partly dismantled; Austrian law prohibits nuclear power plants
Key lesson – political support is important
Built, but never operated
October 2014 IAEA / ANL 5
A nuclear power plant is retired early– Major Maintenance – Zion, Yankee Rowe, Trojan,
Crystal River 3, SONGS– Accidents – TMI 2, FD 1-4 and 5&6, Chernobyl– Safety – Soviet RBMK units in EU– Environmental – Oyster Creek– Economics - Kewaunee & Vermont Yankee
Built, but retired early
October 2014 IAEA / ANL 6
Nuclear problems led to financial distress for some US nuclear utilities in the 1980s and 1990s– Public Service Company of New Hampshire –
bankruptcy linked to Seabrook nuclear plant– Long Island Lighting Company (LILCO) nearly went
bankrupt due to Shoreham nuclear plant– Consumers Power neared bankruptcy due to Midland
plant, canceled after 10 years and $3.5 billion spent– Washington Public Power Supply System defaulted on
$2.25 billion in municipal bonds for 5 nuclear plants
October 2014 7IAEA / ANL
Financial distress
Regulatory risk for regulated nuclear plants; US disallowances in 1970s and 1980s, due to– Imprudence –utility decisions or actions were judged to
be imprudent or unreasonable– Excess Capacity – nuclear investment led to excess
capacity and deemed not “used and useful”– Cost Caps – cost exceeded cap on investment allowed
in rate base; some caps in place before project start, some negotiated later in settling rate case
– Economic Value – cost of a facility greater than economic value of that facility
October 2014 8IAEA / ANL
Financial disallowances
Efficient breach concept
Total termination
benefits
Significant benefits from terminating a long-term contract with above-market prices. Buyers may benefit but benefits may be sufficient to reimburse the seller for lost profits and provide benefits to the buyer if the seller’s production costs are above market prices.
Termination benefits can be shared between the buyer and seller. Large gains will provide powerful incentives to terminate.
Cost of production
Profit
Marketprice
Existingcontract
Seller
Buyer
October 2014 IAEA / ANL 9
New projects – failure to proceed– South Texas Project 3&4– Calvert Cliffs 3– Comanche Peak expansion– Others
Existing units – retired early– Kewaunee– Vermont Yankee
October 2014 10IAEA / ANL
US Merchant nuclear
Early USA projects
Recent Projects– Bushehr– Flamanville-3– Lungmen 1&2– Kudankulam 1&2– Olkiluoto-3
October 2014 11IAEA / ANL
Cost overruns & Delays
October 2014 12IAEA / ANL
Levelized electricity costs - US nuclear
October 2014 13IAEA / ANL
US nuclear construction costs
October 2014 14IAEA / ANL
US Nuclear cost overruns
Year Construction Initiated Average - Utilities’ Projections of Overnight Costs ($000/MW)
Average – Actual Overnight Costs
($000/MW)Overrun (%)
1966 to 1967 $612 $1,279 109%1968 to 1969 $741 $2,180 194%1970 to 1971 $829 $2,889 248%1972 to 1973 $1,220 $3,882 218%1974 to 1975 $1,263 $4,817 281%1976 to 1977 $1,630 $4,377 169%
Source: U.S. Congressional Budget Office, Nuclear Power’s Role in Electricity Generation, Pub. No. 2986, May 2008; Table 2-1, page 17.
October 2014 15IAEA / ANL
Construction time in US
A recent client study looked at recent projects to assess cost and schedules and reasons for delays and cost increases
Some charts and insights from the study to show information for recent projects
Main findings– There is a lot to learn from a few troubled projects
using public information– Much harder to learn about good projects
October 2014 16IAEA / ANL
Recent project survey
October 2014 17IAEA / ANL
Capital cost in US$/kWe
Bushehr‐1
Rostov‐2
Angra‐3
Flamanville‐3
Olkiluoto‐3
Ostrovets‐1
Summer
Vogtle
Watts Bar‐2
0
2,000
4,000
6,000
8,000
10,000
12,000
‐100 ‐50 0 50 100 150 200
Capital cost in $/kW
e
Longitude in degrees
Longitude v Capital cost in $/kWe
October 2014 18IAEA / ANL
Time to build
Bushehr‐1
Kalinin‐4
Rostov‐2
Angra‐3
Flamanville‐3
Kudankulam‐1
Lungmen‐1Lungmen‐2
Olkiluoto‐3
Ostrovets‐1
0
2,000
4,000
6,000
8,000
10,000
12,000
‐100 ‐50 0 50 100 150 200
Time‐to‐build in
days
Longitude in degrees
Longitude v Time‐to‐build in days
October 2014 19IAEA / ANL
Time to build v Capital cost
Bushehr‐1
Flamanville‐3
Olkiluoto‐3
R² = 0.3634
0
2,000
4,000
6,000
8,000
10,000
12,000
0 1,000 2,000 3,000 4,000 5,000 6,000 7,000
Capital cost in $/kW
e
Time‐to‐build in days
Time‐to‐build in days v Capital cost in $/kWe
Reasons for recent project delays and cost overruns
Sponsor and political issues
Country and builder maturity issues
Reactor design issues
Project issues– Workforce and contractor issues– NSSS component problems– Welding and concrete issues– I&C issues– Safety culture issues and Nuclear Regulator issues
October 2014 20IAEA / ANL
October 2014 21IAEA / ANL
Construction approach
Hamaoka‐5
Kashiwazaki Kariwa 6&7 Shika‐2
Haiyang
Lungmen
Ohma‐1
Sanmen
Summer
Vogtle
R² = 0.378
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Capital cost in $/kW
e
Construction approach
Construction approach v Capital cost in $/kWe
Traditional Top‐Down Modular
Nuclear power plants– Incredibly large and complex projects with very
stringent quality control and safety requirements– A wonder that any of them get built at all
Some things to help avoid failures– Strong safety culture and nuclear regulator relations– Strong and clear political support– Economic benefits that are clear– Builders and vendors with prior successful projects– Reactor designs used in earlier successful projects
Summary
October 2014 IAEA / ANL 22
© Copyright 2014 NECGAll rights reserved.
Edward Kee
Nuclear Economics Consulting Group+1 (202) [email protected]
