2007 Koomey talk on historical costs of nuclear power in the US

A Reactor-Level Analysis of
Busbar Costs for U.S. Nuclear
Plants, 1970-2005
Jonathan G. Koomey* and Nathan Hultman**
*Staff Scientist, Lawrence Berkeley National Laboratory
and Consulting Professor, Stanford University
**Assistant Professor, Georgetown University
Presented by Koomey at DTE, in Detroit, MI
April 17, 2007
JGKoomey@stanford.edu
http://www.koomey.com

Copyright Jonathan Koomey 2007 1

Recent interest in nuclear power

• Climate change mitigation issues (e.g.
Blair announcement)
• EPACT 2005
– Subsidies
– Loan guarantees
• International investments (e.g. China)
• Expressions of interest by U.S. utilities

New plant status from NEI
Updated 4/2007

FY = Federal fiscal year, CY = calendar year Copyright Jonathan Koomey 2007 3

Goals of this work

• Creating fair, accurate, and comparable
historical cost estimates
• Explaining history using limiting cases and
statistics
• Comparing historical cost estimates to recent
projections of nuclear costs
• Characterizing mistakes to avoid if nuclear
power is to undergo a rebirth in the U.S.


Status of work
• Hultman, Nathan E., Jonathan Koomey, and Dan
Kammen. 2007. "What history can teach us about the
future costs of nuclear power." Environmental Science &
Technology. vol. 41, no. 7. April 1. pp. 2088-2093.
• Koomey, Jonathan, and Nate Hultman. 2007. "A reactor-
level analysis of busbar costs for U.S. nuclear plants,
1970-2005." Energy Policy (accepted, under revision).
January.
• Hultman, Nathan E., and Jonathan G. Koomey. 2007.
"Energy technology costs and public support for R&D:
Accounting for surprise by disentangling uncertainties."
Submitted to Environmental Research Letters. April 15.


The Generations of Nuclear Energy

Source: DOE Generation IV Project


Status of new reactor designs

Source: Energy Information Administration, “New Reactor Designs”.
http://www.eia.doe.gov/cneaf/nuclear/page/analysis/nucenviss2.html


Previous studies
• Komanoff
• Rothwell
• EIA (Hewlett)
• Zimmerman
• Navarro
• Marshall
• Many others


Focus on direct costs
• Capital costs
• Construction duration
• Interest
• Capacity factors
• Heat rates
• O&M costs
• Fuel costs
• Incremental capital additions
• Waste disposal
• Decommissioning

Some costs not included
• Taxes (these are transfer payments)
• Waste disposal costs beyond the 0.1
¢/kWh current fee (uncertainties on
Yucca Mountain)
• Externalities (e.g. accident risks beyond
those covered by insurance), routine
radiation emissions (generally small)
• Subsidies

Why levelized costs?

• ¢/kWh a common metric for comparing
supply and demand-side technologies
• Just analyzing capital costs ignores
other big effects (eg. ∆ capacity factors)
• Collapsing the time dimension can yield
useful insights


Levelization method

• Calculate present value of some future
expenditure or stream of expenditures
using the real discount rate (e.g.
decommissioning 40 years hence)
• Annualize that present value using the
capital recovery factor over the reactor
lifetime (generally 40 years) to get the
levelized cost

Weaknesses of levelized costs

• Method depends somewhat on forecasts
– less accurate for reactors completed most recently
• Method submerges discontinuous events
– long periods of a reactor being off-line
– rapid changes in O&M costs or capacity factors
• Levelized cost figures often are compared
inconsistently to other ¢/kWh numbers


Methods
• Calculate costs at the reactor level
– Discount rate = 6% real
– Use reactor specific data when possible
• Capital costs
• Construction duration
• Capacity factors
• O&M (needs improvement)
• Decommissioning (split by PWR vs. BWR)
– Use averages when necessary
• Fuel costs
• Incremental capital additions (better if by reactor)
• Waste disposal


Key data sources
• Capital costs: Komanoff (except 4 reactors)
• Construction duration: Komanoff
• Interest: Avg US electric utility ROI 1971-2001
• Capacity factors: Komanoff, IAEA
• Heat rates: NEI
• O&M (fixed and variable): NEI, EIA
• Fuel: EIA
• Incremental capital additions: EIA
• Waste disposal: MIT
• Decommissioning: OECD

Detective work on four reactors

Koomey with Joe Roy of MMWEC in August 2006. Roy
supplied monthly construction cost data for Seabrook. Updated
capital costs also compiled for Comanche Peak 1&2 and Watts Bar.

Results
• Key components of total levelized costs
– Installed costs
– Capacity factors
– Total O&M costs
– Construction duration
– Capacity
• Total levelized busbar costs
– Over time and rank ordered
• Comparison with current projections


Large increases in installed capital
costs for plants completed >1982
Installed costs include 6%/yr real interest during construction


Projected installed costs are at the
mid-to low end of historical costs


Projected and historical capacity
factors match up well
Early reactors for which we don’t have cost data
Main sample for which we do have cost data


Operational improvements led to
higher capacity factors for all plants


Projected construction durations
generally lower than historical data



Projected capacity similar to history


Projected O&M costs generally
lower than historical experience


Total levelized costs by date of
first operation


Projected busbar costs/kWh lower
than most historical experience


Comparison of best case historical
costs with current estimates


Implications for new reactors?
• Advocates for new plants say “So what? New
plants are totally different from the old ones”
– Need to prove this assertion by actually
building plants cheaply
• Some lessons have already been learned
– Streamline licensing
– Standardize designs
– Operate plants more effectively
• IT for construction management and operations
much more sophisticated now
• International experience accumulating

Opportunities for a nuclear revival
• Interest driven by
– Tax credits/R&D
– Need for reductions in
• Greenhouse gas reductions
• Imported oil (need electric vehicles)
– International markets
• Much improved
– Technology
– Design
– Management
– Construction processes
– Licensing

New nuclear infrastructure will be
more highly optimized
1978: Plastic models on roll-around carts 2000: 4-D computer aided design
and virtual walk-throughs

McGuire Nuclear Station Reactor Building Models.

2002 NRC processing time for 20-year
license renewal: ~18 months
1000 MW Reactor (Lianyungang Unit 1)
Source: Per Peterson, UC Berkeley Copyright Jonathan Koomey 2007 30

Uncertainties for a nuclear revival
• Plants still mostly site built
• Are there near-term construction bottlenecks?
• U.S. political system still decentralized
• Fuel prices up a lot recently
• Risk of accident anywhere in the world
• Link to proliferation (N. Korea, Iran)
• Need new repository?
• Competition more intense now
– More electricity generation options
– Deregulated markets
• Capital markets may be skeptical

Spot prices for Uranium Up!

$113/lb in
early
April 2007


Advice on evaluating projected
costs for new reactors
• Compare apples to apples ($/kW)
– Inflation adjustment
– 1st of a kind vs. Nth of a kind
– One vs. two reactors on a site
– Full reactor costs vs. power block
• Beware of
– Possible certification delays
– Lack of specificity of possible bottlenecks
– Lack of real world experience in construction
• Check modularization and parts counts
• DTE: First mover or fast follower?

Questions to consider on
projected costs of new reactors
• Can DTE afford to wait?
– Risks of early adoption
– Risks of delay
• Can contract be structured so vendor
bears some risk for cost overruns?
• What if uranium prices stay high?
• Has DTE considered a scenario exercise?

Comparing projected costs for other
new reactors (EPR, ABWR, ESBWR)

ABWR

ABWR
ESBWR


Future work
• Improved reactor by reactor O&M costs,
forced outage rates, and incremental capital
additions (sources?)
• Statistical analysis and development of
limiting cases (e.g., pairing of example
reactors).
• Compare cost estimates for site-built and
mass produced technologies
– is more cost variability guaranteed for site-built
technologies?
– How can cost variability be minimized?
• International comparisons

Conclusions
• Just examining capital costs gives an
incomplete picture of historical developments
• Reactor size interacted with regulatory delays
and slowing electricity demand growth,
affecting capital costs, financing costs, O&M
costs (and perhaps capacity factors)
• Projected capital costs, O&M costs, and
construction durations are low compared to
historical experience (but may still be correct)


Conclusions (continued)

• Larger, more sophisticated operators
have been able to increase capacity
factors and reduce O&M costs
• Key uncertainty is whether the
regulatory and technical changes
implemented thus far are enough to
result in real reductions in installed
costs and construction duration

EXTRA SLIDES


Another look at total busbar costs

PWR=Pressurized water reactor,
BWR=Boiling water reactor. Cohort
indicates one of eight predictive cost
categories described by Rothwell :
Category 1 denotes Westinghouse PWR
< 700 MW; Category 2 = Westinghouse
PWR 700-1000 MW; Category 3 =
Westinghouse PWR>1000 MW;
Category 4 = Babcock & Wilcox PWR;
Category 5 = Combustion Engineering
PWR; Category 6 = General Electric
BWR < 700 MW; Category 7 = GE
BWR 700-1000 MW; Category 8 = GE
BWR > 1000 MW. Levelized costs
(which exclude subsidies and
externalities) are calculated using a real
discount rate of 6% as described in
online supplemental material.


Total levelized costs vs. capacity


For plants started > 1968 (with one
exception), capacity was ≥ 800 MW



For plants finished > 1975,
capacity was ≥ 800 MW


Overnight costs vs. reactor
capacity


Construction duration increased
for reactors started >1972


As reactor capacity became > 800 MW,
construction duration varied more


U.S. average nuclear capacity
factors improved substantially after
1985


Lifetime capacity factors have also
improved, partly due to retirements



Reactor efficiencies don’t vary much


Limited data on incremental
additional capital expenditures


Avg costs for O&M, fuel, and incremental
capital additions vary over time


Improvements in capacity factors affect
total O&M costs after the mid 1980s


Total O&M costs vary widely


Without New Investments U.S.
Nuclear Capacity Declines Capacity With and Without License Renewal
120000
Capacity with 100% license renewal
Current licensed capacity
100000

80000
Capacity (MW)

60000

40000

20000

0
60
63

66
69

72
75

78
81

84
87

90

93
96

99
02

05
08

11
14

17
20

23
26

29
32

35
38

41
44

47

50
53
19
19

19
19

19
19

19
19

19
19

19

19
19

19
20

20
20

20
20

20
20

20
20

20
20

20
20

20
20

20

20
20
Source: Dominion Resources, 2005, via Joskow (MIT)

RECENT CONSTRUCTION COST
EXPERIENCE ($2002)
Genkai 3 $2,818/kW (overnight)
Genkai 4 $2,288/kW (overnight)
Onagawa $2,409/kW (overnight)
KK6 $2,020/kW (overnight)
KK7 $1,790/kW (overnight)
Yonggwang 5&6 $1,800/kW (overnight)

Browns Ferry RESTART $1,280/kW (overnight estimate)

Finland EPR (AREVA-Seimens contract only)
$2,350/kW (nominal estimate 2005)

Bruce RESTART $1,425/kW (nominal estimate 2005)

Source: Paul Joskow, MIT Copyright Jonathan Koomey 2007 55

New U.S. Reactor Licensing Process
Old Process: The two-step licensing process (10 CFR 50)

Construction Build Operating
License Plant License

New Process: Combined licensing process (10 CFR 52)

Early Veriﬁcation
Site of
Combined Inspections,
Permit
Construction Tests,
and Build
Plant Analysis,
Operating and
Standard License
Design Acceptance
Speciﬁcation Criteria

Source: Berger and Parsons (MIT CEEPR 2005), via Joskow (MIT)

Energy Policy Act of 2005
• Loan guarantees for up to 80% of project cost
– Valid for all GHG-free technologies
– Higher leverage, lower debt cost reduces overall project cost
• Production tax credit of $18 per MWh for new nuclear capacity
through 2021, subject to 2 limitations:
– $125 million per 1,000-MW per year
– 6,000-MW eligible, allocated among available capacity
• Insurance protection against delays during construction and until
commercial operation caused by factors beyond private sector’s
control
– Coverage: $500 million apiece for first two plants, $250 million for
next four
– Covered delays: NRC licensing delays, litigation delays

Source: Joskow (MIT)


Energy Policy Act of 2005

• Renewal of the Price-Anderson Act of 1957
– Liability protection extended until 2025
• Legislation updates tax treatment of nuclear decommissioning
trust funds to reflect competitive electricity markets
– All decommissioning trust funds will qualify for tax
deductibility (not only those of regulated utilities)
• Federal commitment on R&D portfolio ($2.95 billion authorized)
• Creates Assistant Secretary for Nuclear Energy at DOE

Source: Berger and Parsons (CEEPR, 2005), via Joskow (MIT)

2007 Koomey talk on historical costs of nuclear power in the US

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