It is now almost ten years since the UK government stated its commitment to build new nuclear power stations. At first this was to replace the old advanced gas cooled reactors (AGRs) and then to expand the nuclear capacity by almost 100% to 16GWe, as part of its clean energy pathway for 2050. This nuclear plan was to be delivered by private funding. Once the arrangements for the support of low-carbon electricity (Contracts for Difference) were settled by the 2012 Energy Act, the nuclear plan seemed well set, with several power plant developers offering to construct a dozen or more of the largest and most modern reactors, initially with three different designs on five sites.
In 2017, the reality looks quite different. Progress has been very slow, nuclear electricity prices have turned out to be high and funding of the first project, Hinkley Point C, has been excruciatingly difficult. These problems have been mirrored around the world. Projects with the same reactor- type – Areva EPRs – are running late and over budget.
Four Areva EPRs are being built, in France, Finland and China. These projects are being completed many years later than expected. On current forecasts, the two EPRs in China (at Taishan) will be completed later this year or early in 2018, almost five years late. The Finnish EPR at Olkiluoto will be nine years late when it starts up in 2018 and the French EPR at Flamanville 3 is due to start operating in 2019, six years late, after a construction period of twelve years. These delays have led to huge project cost overruns with construction costs tripling in some cases.
With regard to the second design, the Toshiba-Westinghouse AP1000, four projects each with two reactors began in the last ten years. None is yet complete. The first AP1000 to produce electricity is expected to be at Sanmen in China, with completion at the end of this year, four years late. The two projects in the USA, at Vogtle and VC Summer, were due to start up in 2016/17. Current completion dates are 2019/2020 but their cost overruns have bankrupted Westinghouse and this will further delay completion, because the finances of the projects have to be restructured.
This was not how the nuclear renaissance was supposed to play out. The performance of these projects has had a chilling effect on plans to build other nuclear reactors. Additional AP1000 projects have been cancelled in the US and commitments to new nuclear in Europe have slowed. Only in India and China are new nuclear projects being promoted.
Do we need nuclear?
Energy policy studies of many developed and developing countries show that meeting 2050 carbon reduction targets, even with many times the current levels of renewables and energy storage, requires much more nuclear than we have now, or large CCS, to replace coal power generation.
A demand for more electricity will also be driven by the switch from fossil fuels to clean sources. For example, much more power will be needed to power electrical cars, buses and trains that replace the millions of petrol and diesel vehicles.
Forecasts for nuclear in 2050 are very variable. In 2016 the International Atomic Energy Agency (IAEA) gave a range of nuclear capacity in 2050 between 417GW and 898GW (5-10% of 2050 global power supply), compared with 382GW currently (11% of supply). Nuclear capacity may be anything from the current level, with old reactors being replaced with new, to a doubling. OECD-IEA gives similar forecasts in its Energy Technology Perspectives. The nuclear industry is seeking to provide 25% of electricity by 2050. This ambition would require nuclear capacity to grow by more than 400% to 2000GW.
In the past, the most pressing concern about nuclear power was safety. Now people are beginning to ask: Can we build affordable nuclear?
The truth is dawning that the current large reactors are too big to fund; too slow to build; and produce electricity which is too expensive for consumers and for business.
Too big?
In the past forty years, nuclear reactors have grown in size and in output – from 500MW in 1970s to more than 1500MW now. This trend has been driven by the idea of the ‘economy of scale’. The cost of building larger units does not rise as quickly as their output. As a result, energy costs fall.
The economy of scale is an idea that has a solid foundation in both the power industry and in other capital goods sectors. However, in nuclear there is no evidence that larger and larger reactors have reduced the unit capital costs. In fact, the evidence is in the opposite direction. Large economic studies in the US and French nuclear power programmes show that capital costs increased with size. Safety improvements and tighter regulation will have played a part. The evidence is that larger nuclear reactors are more difficult to build, take longer to complete and as a result cost more. Studies in the late 1980s pointing out this relationship observed that the industry was designing reactors (then 1000MW output) that were beyond their ability to construct in an efficient manner.
As a result of their size and cost, large reactors are extremely difficult to fund. Large reactors in the West have a capital cost of £4000 to £5000 per kW of capacity, triple the estimate of the UK government ten years ago in its White paper on nuclear. When the interest during construction is added, a single reactor may require £7-12 billion of funding. Such an amount is beyond the resources of any reactor vendor, or any nuclear utility.
If large reactors are to be built using private funds, they will require extraordinary forms of support and guarantees. This was apparent in the arrangements in Finland, where a consortium of energy users, banks and local authorities provided funding; in the USA, where state power authorities bankroll the construction; and in the UK, where financial support was provided by the vendor, supported by the French government and Chinese government-owned utilities.
Too slow
Current projects have shown that large reactors take 8-10 years to plan and 8-10 more years to construct. Faster construction has been seen in South Korea, where standard designs were constructed sequentially, on a limited number of sites and with a stable supply chain. The Koreans have achieved builds of less than five years. However, the desire in the UK to have several different reactor designs and the complexity and scale of nuclear projects mean that construction times are unlikely to meet those of South Korea in the next decade or two.
Power utilities used to plan for the long term, but the power market is changing. Growth in demand is not inevitable, renewables are bringing new types of competition and utilities cannot invest in projects which may take 20 years to mature. Nuclear projects are now too slow for power utilities that have other means of producing electricity.
Too expensive
Nuclear power is expensive to build and cheap to operate. Large power plants such as the EPRs at Hinkley have 70% of their lifetime energy costs linked to construction and 30% to regular fuel, waste, operations and maintenance spend. This was also true of the AGRs, which were very expensive to build but have provided reliable low cost electricity for forty years.
The price of electricity from new nuclear is clear. Figures were published for the CfDs for EDF’s Hinkley Point C and the follow-on station at Sizewell – unit prices of up to £92.50/MWh in 2012 prices. This is currently below the cost of other large scale low- carbon supplies such as offshore wind, but the price of renewables is falling. Nuclear costs seem to rise inexorably. Crucially, the cost of nuclear is well above that of new gas plants, which set consumer and business expectations for the cost of electricity.
In the UK, the recent arguments between politicians and power companies about energy prices reflect the politics of energy. Consumers may be willing to pay a small premium for low-carbon energy, but not the 50%, or more that is being sought. To be successful, low carbon energies, including nuclear, will have to reduce their power prices to below about £65/MWh. The question is: How?
Reducing costs
There are three main ways to make a significant difference to nuclear costs, all focusing on capital cost. These are:
- Standard designs of reactor constructed sequentially to a programme drum-beat;
- Completely new technologies that simplify the design of nuclear reactors;
- Small modular reactors based on light reactor technology but designed for construction in numbers in factories.
1. Standard design strategies
South Korea has shown the way in building a series of 900MW and 1000MW reactors of a standard design derived from a design licensed from Combustion Engineering. Since 1995, South Korea has built a dozen of these reactors, using the same elements in the supply chain. It learned from the experience of Japan, applying modern construction methods to nuclear – full CAD design, open-top construction, modular construction and skills development. In this way, it has minimised (though not eliminated) design change, made its factories more efficient and crucially improved site productivity by learning lessons from one project and applying them to the next project.
The results are clear from Figure 1. Construction time has fallen from 6.5 years to 5.5 years and capital costs by about 30%.
Some claim that these levels of cost apply only in the culture of East Asia. A recent reappraisal of the US build programme in 1980s by Ganda (2016) dispels this viewpoint. It is based on detailed data collected regularly by the EEDB, which show that the most important costs for nuclear construction are not the high technology vessel and turbine manufacturing costs, but the site construction work and its associated design and supervision overheads (Figure 2).
The complexity of nuclear construction is not in the primary systems, but in the detailed design and building of concrete structures, mechanical equipment and electrical systems. Though this equipment and systems looks superficially like any other power plant, the size, the complexity and the quality standards mark out nuclear construction. As a result, site costs are very high and variable and reflect the inherent low productivity of site work. Nuclear site costs are often 50% of the total project cost and are higher when a project is delayed.
Using standard reactor designs allows part of the site costs to be eliminated or reduced over the course of a programme of build. The initial costs of licensing and establishing a local supply chain are focused on the first project. Much of the repeated detailed design costs, which occurs when the supply chain is changed, are eliminated.
French experience shows that learning between projects does occur on a single site. When projects run for 8-10 years and when there is a change of sites, learning between projects is lost. However, the scope for site cost reduction through standardisation is clear.
Ganda reviews best practice in the USA and shows that construction cost of similar plants was 45% lower than the average, due to reduced site overheads and lower owner’s costs. These reductions mount as the size of the programme increases and are amplified by the lower interest during construction.
2. New technology
New reactor design has flowered in the last ten years, led by small entrepreneurial teams mostly funded by private individuals or venture capitalists. These start-ups are seeking to make nuclear cost-effective in combating climate change while avoiding the innate conservatism of the nuclear industry. They are proposing smaller and simpler designs based on advance technology.
The number and range of designs is large, with over 50 being identified. Most of the new designs make use of Generation IV reactor technologies – liquid metal-cooled, high temperature gas and molten salt reactor systems.
The new technology designers have three main strategies for cutting cost:
- Seek to avoid the high-pressure systems of water cooled reactors, with their attendant risk and costs;
- Make use of higher temperature power cycles – steam or gas – with higher thermal efficiencies, lower fuel usage and lower amounts of waste;
- Embody inherent or walk-away safety concepts, which either make them safer than current designs, or provide comparable levels of safety more simply at lower cost.
A recent report by the Energy Innovation Reform Project (2017) compares cost estimates for some of the leading designs (see Table).
All are at the concept design stage, though some are starting the process of assessment by national safety regulators. The comparative cost analysis uses the companies’ estimates and puts them on a common footing, linked to detailed cost definitions. In this way, they can be compared both with each other and with a baseline large PWR. The cost comparison is shown in Figure 3.
These figures show the potential of the designs for making nuclear competitive. All the new reactor capital costs are lower than the reference case, with values ranging between just over $2,000/kW to almost $6,000/kW, compared with the baseline LWR of $6,755/kW. It is worth noting the low level of indirect cost (overheads) in all the new reactor estimates compared with the baseline PWR ($2,400/kW). Low capital costs are matched by similarly low electricity costs, with a mean of $60/MWh (LCoE) compared with the conventional reactor’s $100/MWh.
These designs may also benefit from more factory manufacture, potentially reducing costs, improving quality and improving schedule certainty. Also, it is recognised that some designs have features which may increase capital costs. Smaller units may be more expensive, as may those, such as gas reactors, with a lower power density. Additional chemical and fuel processing for PRISM and the molten salt reactors may also increase costs.
The key issues for these new designs is certainty. Until a prototype reactor is built and has been operated successfully for a number of years, there will remain questions about their estimates of cost. But there is no large- scale funding in either the USA or Europe to test these designs. This lack of political drive together with the conservatism of safety regulators will mean new technology designs will not be available for commercial deployment for at least another decade and perhaps much longer.
3. Small modular reactors
The key idea for Small Modular Reactors (SMR) is using modular design to transfer much of the complex construction work from site to factory conditions. In factories, productivity is much higher: tools and jigs can be deployed to improve both constructability and quality. Also, the higher volumes required from SMRs to produce the same amount of power can be concentrated in a single supply chain, allowing the ‘economies of multiples’ to progressively bring down costs.
Modular construction is not new. It is widely used in other construction sectors and it has been attempted in nuclear. Hitachi has constructed large modules close to site in constructing ABWRs. As part of a wider design and construction strategy, it has enabled cost reduction and timescale compression.
Westinghouse used modular methods for the AP1000, but it has not worked out well. Design delays and quality problems have led to cost increases. The project was based on earlier studies of modularisation by Stone & Webster (1977) for the US DoE. One can see these large reactors are too big to break down into modules for transport by road. Large barges are required to carry the ~200 ton modules. If designed with smaller modules, they become so small that little of the work is done in factory conditions. Much of the construction work is done close to site, to create mega-modules of 3-600t which are then lifted into their final position. Also, in adopting modularisation it is important to use contractors and suppliers that are knowledgeable about modular design methods and can work to the closer tolerances and higher quality standards that are required.
The economic opportunity for SMRs is driven by four factors: power scaling, standardisation, modular build and production learning. These drivers will affect different parts of the capital cost in different ways.
Though power scaling – where unit costs fall as power increases (and vice versa) – does not work in nuclear at the overall plant level, it can be expected to apply for fully designed and engineered equipment such a reactor vessels, turbines etc. Standardisation of the design removes the need to repeat design work.
Standardisation is the precursor for successful modularisation and production learning. Modularisation provides for a step- change in productivity. This is recognised in both ship-building and in chemical plant construction. It has been demonstrated in the construction of nuclear submarines. Design for modular build and assembly is key to achieving the short build periods that are claimed by SMR designers.
Production learning is routine in other industrial sectors, where costs fall progressively with increased volume of manufacture. It is also present in most other energy sectors. It is the reason behind the falling costs of competitors to nuclear such as wind turbines. Why does it not occur in nuclear? The reasons are simple. Nuclear projects are marred by frequent design changes. Supply chains are changed often, losing the benefits of experience. The frequency of nuclear production is too low for learning to be captured and transferred.
SMRs provide the opportunity to address all these issues. They can be standardised, modularised and could have the volume to drive production learning.
But there is no certainty about these things. If SMRs are the wrong size, are not standardised or designed for modular construction, or are built in small numbers with constantly changing supply chains, they will cost even more than their large reactor cousins. This is why the SMR project is about developing a new way of making nuclear reactors rather than the pursuit of new technology.
Applying these factors to SMRs for a range of sizes and programme sizes we can see the effect of the cost drivers. An SMR of about 300MW in a large programme (>10GW) could have electricity prices close to £65/ MWh, resulting from its lower capital costs and shorter construction times (Figure 5). At these price levels, nuclear power would be competitive with new CCGT in the UK and affordable and attractive to investors.
References
[1] IAEA Energy (2016), Electricity and Nuclear Power Estimates for the Period up to 2050. [2] Ganda (2016). Reactor capital costs breakdown and statistical analysis of historical US construction costs. ICAPP 2016 pp. 961 San Francisco CA. [3] EEDB (1988) Nuclear Energy Cost Database. A reference database for nuclear and coal-fired power plant power generation cost analysis. DoE NE-0095 September 1988. [4] EIRP (2017). What will advanced nuclear power plants cost? A Standardized Cost Analysis of Advanced Nuclear Technologies in Commercial Development Energy Options Network. [5] Stone & Webster (1977), Plant systems and components – Modularisation Study S&WEC. Boston Ma. Rep. COO-4039-1 Jul 1977. [6] Roulstone (2016) Programme Design Factors for competitive SMRs. 3rd World Nuclear New Build Congress London 2016.About the Author: Tony Roulstone established and teaches on the Nuclear Energy masters programme at the University of Cambridge with research interests in the economics and safety of nuclear power. Previously, he was MD of Rolls-Royce Nuclear.
