How Nuclear Projects Fail. Edward Kee

Transcription

1 How Nuclear Projects Fail Edward Kee

2 Disclaimer 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 NECG 8 Oct 2014 ANL/IAEA 1

3 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. 2

4 How do nuclear projects fail 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 Recent global projects Major accident or incident 3

5 Canceled and written off Between , 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 4

6 Built, but never operated 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 5

7 Built, but retired early 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 6

8 Financial distress 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 7

9 Financial disallowances 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 8

10 Efficient breach concept 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. Profit Cost of production Existing contract Market price Total termination benefits Seller Buyer Termination benefits can be shared between the buyer and seller. Large gains will provide powerful incentives to terminate. 9

11 US Merchant nuclear New projects failure to proceed South Texas Project 3&4 Calvert Cliffs 3 Comanche Peak expansion Others Existing units retired early Kewaunee Vermont Yankee 10

12 Cost overruns & Delays Early USA projects Recent Projects Bushehr Flamanville-3 Lungmen 1&2 Kudankulam 1&2 Olkiluoto-3 11

13 Levelized electricity costs - US nuclear 12

14 US nuclear construction costs 13

15 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, % 1968 to 1969 $741 $2, % 1970 to 1971 $829 $2, % 1972 to 1973 $1,220 $3, % 1974 to 1975 $1,263 $4, % 1976 to 1977 $1,630 $4, % Source: U.S. Congressional Budget Office, Nuclear Power s Role in Electricity Generation, Pub. No. 2986, May 2008; Table 2-1, page

16 Construction time in US 15

17 Recent project survey 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 16

18 Capital cost in US$/kWe 12,000 Longitude v Capital cost in $/kwe Bushehr 1 10,000 8,000 Olkiluoto 3 Capital cost in $/kwe 6,000 4,000 Vogtle Summer Watts Bar 2 Angra 3 Flamanville 3 Rostov 2 Ostrovets 1 2, Longitude in degrees 17

19 Time to build Longitude v Time to build in days 12,000 10,000 Kalinin 4 Rostov 2 8,000 Time to build in days 6,000 Olkiluoto 3 Bushehr 1 Kudankulam 1 Lungmen 2 Lungmen 1 4,000 Flamanville 3 2,000 Angra 3 Ostrovets Longitude in degrees 18

20 Time to build v Capital cost 12,000 Time to build in days v Capital cost in $/kwe Bushehr 1 10,000 8,000 Olkiluoto 3 Capital cost in $/kwe 6,000 Flamanville 3 R² = ,000 2, ,000 2,000 3,000 4,000 5,000 6,000 7,000 Time to build in days 19

21 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 20

22 Construction approach 7,000 Construction approach v Capital cost in $/kwe 6,000 Vogtle Summer 5,000 Capital cost in $/kwe 4,000 3,000 R² = Lungmen Shika 2 Hamaoka 5 Sanmen Kashiwazaki Kariwa 6&7 Ohma 1 Haiyang 2,000 1,000 0 Traditional Top Down Modular Construction approach 21

23 Summary 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 22

24 Edward Kee Nuclear Economics Consulting Group +1 (202) Copyright 2014 NECG All rights reserved.