Nuclear Energy Systems Economic Evaluations: Capital Cost
Operations & Maintenance Cost
Course 22.39, Lecture 18 11/13/06
Professor Neil Todreas
How to Think about Economics (and deal with economists)
Externalities are not generally accounted for. The playing field is not level.
• Carbon penalties
• E n e r gy s e c u r i t y
• Clean air
Courtesy of Tyler Ellis. Used with permission.
Tyler Ellis, “ A Sustainable Nu clear Energ y Sy stems Strateg y for T h e United States of America,” M IT Dept. of Nuclear Scie nce and Engi neering, Oct. 18, 2006.
Also s e e: Nu cl eonics Week , July 26, 2001, pp. 10-11 http://www.externe.info http://externe.jrc.es
Dealing with economists (cont.)
The poor nucl ear construction/operation experience of the 20 th century has stung them. Whereas
• engineers are typically willing to accept projected i m proveme nts which ste m from new design/operation regimes,
• econom i sts await demonstration of improved cost performance fro m fi rst mover construction and operation experience.
Hence MIT base case values became: Overnight cost $2000/kWe
O & M cost* $ 15¢/kWe-hr (includes fuel)
Construction period 5 years
Capacity factor 85%
Plant li fe 40 years
*MIT base O&M case is 25% reduc tion of non-fuel cos ts from recent $ 18¢/kWe-hr averag e fleet performance.
COE Issues
• C apital Cost (overnight and construction period)
• Financing Model
• O & M Cost
• Plant Size
• F uel Cycle Cost
11/13/06 22.39 Lecture 18 4
Profes sor Neil Todreas
N.E. Todrea s, “Perspecti ves on the Economi cs of Nucle a r Power f r om the MIT Stud y ,” N E ANS S ym posium , Tro y , NY 3/30/2006, p.7
Related Costs (Si m p lified e xpression of capital cost component contributing to Lifetime-Levelized Busbar Cost of Electric Energy
100 0 I
1
x y c
8 , 766 L K
c 2
Capital Cost Component fo r an Existing LWR Plant
41 mills/kw-hre
Driscoll, M.J., Chapt er 5 f r om “ Su stainable Energy - C hoosing A m ong Option s " b y J ef f erson W . Tester, Elisabeth M. Drake, Mic h ael W . Gola y , Michael J. Driscoll, and W illiam A. Pe ters. M IT Pres s, June 2005
11/13/06 22.39 Lecture 18 Profes sor Neil Todreas
Courtesy of MIT Press. Used with permission. 5
Cost Parameters
40 mills kWe hr
0 . 1 cents
mill
4 . 00
¢
kWe-hr
4 . 00
¢
kWe-hr
0 . 01 $ ¢
0.001 MW
kW
40
$
MWe hr
11/13/06 22.39 Lecture 18 6
Profes sor Neil Todreas
Equit y / Debt Equit y
Nucle a r 50/50%
15%
G as 40/60%
12%
(nom ina l n e t of in co m e tax )
Debt (Nomina l ) 8% 8%
Inflation 3 % 3 %
Income T a x 38% 38% Rate (after e x pen se s, interest + ta x d epreci a ti on)
MIT Study Results
1.5 ¢/kW h (inclu des fuel)
Re duc e co s t of C a p i ta l to gas/ c o a l (e)
Re duc e
O+M to 1.3 ¢ ( d )
Re duc e Co ns t r u c ti on C o st 25% (b)
Re duc e Co ns t r u c ti on T i m e from 5 to 4 y ears (c)
Base C ase
• $2000 / k W
• 4 0 ye ar life
• 8 5 % C F ( a )
9
8
7
(a)
6
(b)
5
(c) (d)
(e)
4
3
Gas Ra nge
Nu clear Ra nge
Real levelized co st, cen t s/kWe-hr
2
1
Carbon Tax, $/tonne C
11/13/06 22.39 Lecture 18
50 100 1 50 200 7
Profes sor Neil Todreas
N.E. Todrea s, “Perspecti ves on the Economi cs of Nucle a r Power f r om the MIT Stud y ,” N E ANS S ym posium , Tro y , NY 3/30/2006, p.5
MIT Study Results
Base C ase
• $2000 / k W
• 4 0 ye ar life
• 8 5 % C F ( a )
1.5 ¢/kW h (inclu des fuel)
Re duc e Co ns t r u c ti on Co st 25%
Re duc e Co ns t r u c ti on T i m e from 5
to 4 y ears
Re duc e O+M to 1.3 ¢
9
Real levelized co st, cen t s/kWe-hr
8
7
6
5
Nucle a r G as Equit y / D ebt 50/50% 40/60%
Equit y 15% 12%
(nom ina l n e t of in co m e tax )
|
Debt (Nomina l ) |
8% |
8% |
|
|
Inflation |
3 % |
3 % |
|
|
Re duc e co s t |
Income T a x |
38% |
38% |
|
of C a p i ta l to gas/co a l |
Rate (after e x pen se s, interest + ta x d epreci a ti on) |
||
All prices real lev e lized ov er 40 years
Gas, Hi gh pr ice
$6.72/MMbtu
Gas, Moderate Pri c e
$4.42/MMbtu
Gas, Low Pri c e
$3.77/MMbtu
4
Gas Ra nge
Nu clear Ra nge
3
2
1
Carbon Tax, $/tonne C
11/13/06 22.39 Lecture 18
50 100 1 50 200 8
Profes sor Neil Todreas
N.E. Todrea s, “Perspecti v es on the Economi cs of Nucle a r Power f r om the MIT Stud y , ” N E ANS S y m posium , Tro y , NY 3/30/2006, p.6
Overnight Capital Cost
(From Appendix to Ch apter 5, MIT Stud y )
|
$ Y e a r |
C o nstr u c tio n Ti m e Y e a r s |
Fin a n c in g |
In c o m e T a x |
Conti ng e n - cy |
||
|
US E I A (Ja n 03 ) |
Ref eren ce $ 2044 /kWe in 20 10 Case $ 1906 /kWe in 2025 |
200 1 |
5 |
|
|
|
|
Advanc ed $ 1535 / k We in 20 12 |
200 1 |
5 |
|
|
||
|
Cost Case $ 1228 / k We in 202 5 |
||||||
|
D O E – 2 010 R oadm a p ( O ct 01 ) |
$ 1000 - 1600 /kWe |
200 0 |
4.5 |
|||
|
NE A (2 00 1) |
USA $ 1831 /kWe |
200 2 |
4 |
|
||
|
OECD $ 1831 - 2737 /k We |
200 1 |
4- 9 |
||||
|
F I NLA N D |
$ 1600 /kWe |
200 2 |
5 |
100 % D e b t at 5% Re a l I n teres t |
None |
|
|
JAPAN |
On a g a w a 3 (B WR) - $ 2409 /kW e K - K 6 (ABWR ) - $ 2020 /kWe K - K 7 (ABWR ) - $ 1790 /kWe |
200 2 |
||||
|
K O REA |
Yong gwang 5 + 6 - $ 1800 /kW e ( K S N P- PW R s ) |
200 2 |
100 % D e b t |
|||
|
B R OW N’ S F E RRY (R est a rt ) |
$ 1280 /kWe |
200 2 |
100 % D e b t at 8 0 ba sis p o in ts ab ov e 10 yr Tr ea sur y |
None |
||
|
SEABR O OK ( Sa l e ) |
$ 730 /k We |
200 2 |
Plu s $25.6 MM for c o m p o n e n ts an d $61 .9 MM for fu el |
|||
Overnight Capital Cost
(post MIT report 7/03)
1) Univ. of Chicago (8/04) $1200-$1500/kWe
• A BWR & AP 1000/SWR 1000 + $300/kWe FOAK
2) French DIDEME (12/03)/E. Proust (5/05) $1283 €/kWe
3) J. Turnage (UniStar) (1/06) $1998/kWe
• R eturn on equity 15%
• E quity 20%/Debt 80%
4) R. Matzie (Westinghouse) (3/06) $1400-1600/kWe
• T win 1090 M W e units
Challenges
(from Turnage, 2005)
There remain a number of challenges:
Rulemaking
Public perception (how deep?)
Financing
Infrastructure
Qualified labor pool
Issues with the back end of the fuel cycle
COE Differences (France vs. USA )
Finance model
• U S – d istinguishes between equity and debt (different costs & loan payback period)
• French – u niform discount rate (real Weighted Average Cost of Capital [WACC] before t ax)
O & M assumption
• U S – 2 nd best operating plant quartile (base case)
• France – E PR projected gains in availability, rating, cost performance
Financing Assumptions and Technical-Economic Parameters Adopted for Nuclear Power Plant Economic Studies (Proust 2005)
Explaining how to go from the nuclear MWh cost found by the French DIDEME study to the cost range given in the University of Chicago 2004 economic study (Proust, 2005)
Elements of Capital Cost ALMR (1994 $)
|
Overnight Cost Base construction Co ntingency Interest during Construction |
72% 84 % 12% 16% |
|
100% |
|
Nucl ea r Island |
BOP |
T otal |
|
|
Total Capital Cost Overnight Cost Interest During Construction |
0.73 0.61 0.12 |
0.27 0.23 0.04 |
1.00 0.84 0.16 |
|
Overnight Cost Base Construction Cost Total Contingency |
0.61 0.51 0.10 |
0.23 0.21 0.02 |
0.84 0.72 0.12 |
|
Base Construction Cost Di rect Co st Indirect Cost |
0.51 0.36 0.15 |
0.21 0.13 0.08 |
0.72 0.49 0.23 |
Elements of Capital Cost (Cont.) (ALMR (1994 $)
|
Nuclear Island |
BOP |
Total |
|
|
Direct Cost Acct 20 Land + Land Rights Acct 21 Structures + Improvements Acct 22 Reactor Plant Equip Acct 220 NSSS Acct 221-228 Acct 23 Turbine Plant Equip Acct 24 Electric Plant Equip Acct 25 Misc. Plant Equip Acct 26 Main Cond Heat Reject Sy stem |
0.36 0 0.071 0.27 0.25 0.02 0.0009 0.013 0.008 0 |
0.13 0.006 0.02 0 0 0 0.063 0.019 0.010 0.011 |
0.49 0.006 0.091 0.27 0.25 0.02 0.064 0.032 0.018 0.011 |
0.27
Elements of Capital Cost (Cont.) (ALMR (1994 $)
|
Acct 220 NSSS 220 A.211 R e actor V e ssels 220 A.22 Heat Transport Syste m s 220 A.26 Other Equipm en t – i nert gas, storage, puri fica tion, leak detection, impurity 220 A.27 I + C 220 A.211 Heat Transport Syste m s .221 Pri m ary Syste m .222 Inter m e d iate Heat Transport Syste m .223 Stea m Generat o r 220 A.26 Other equip .261 Inert gas .264 Na storage, relief, Mak e up .265 Na purification .266 Na leak detection .268 Maintenance equip .269 I m purity monitoring |
0.25 0.017 0.114 0.030 0.014 0.114 0.031 0.032 0.051 0.030 0.00099 0.0011 0.0043 0.0017 0.017 0.0042 |
0.175 * 0.114 0.030 |
*N ot an i n clu s i v e li st of NSSS a c c ou nts
The economy of FBRs
Comparaison of EFR and EPR generating costs (kWh)
|
10 |
|
19 |
|
71 |
|
20 |
|
17 |
|
55 |
Fuel Operation & Maintenance
Investment
EFR (100)
EPR (92)
Cost investment reduction of FBRs is an important R& D axis
Management cost of waste s hould be taken into account:
- F BRs have the potential of managing all their waste,
- LWRs may require a second stratum of dedicated reactors (ADS or critical burner reactors), the cost of which should be integrated in the production cost of LWRs
Courtesy of J. L. Carbonnier , CEA . Used with permission.
11/13/06 22.39 Lecture 18 21
Competitiveness o f Gen IV systems
Long te r m in te res t rates
5% 8% 10 %
450
400
350
Ura n i u m co st / price ( $ / kg)
300
c o ût d e l 'ur a n i u m ($ /k g )
250
200
150
100
50
0
+ 0% ( E P R ) + 10% ( E PR) + 20% ( E PR) + 30% ( E P R )
Breake v en Ove r cost fo r Gen IV co mpared to Gen III s y s t e m s
11/13/06 22.39 Lecture 18
Courtesy of J. L. Carbonnier , CEA . Used with permission. 22
Plant Size
Economics of Scale versus Economics of Serial Production
11/13/06 22.39 Lecture 18 23
Profes sor Neil Todreas
N.E. Todrea s, “Perspecti ves on the Economi cs of Nucle a r Power f r om the MIT Stud y ,” N E ANS S ym posium , Tro y , NY 3/30/2006, p.14
Economy of Scale
Econo m y of scale refers to the genera l proposition that “bigger is cheaper” per unit output. In quantitative terms:
C K n
C C K
n 1
i i ; or
i o
i
(5.25)
where
C o K o
K i K o
K o
C i , C o = cost of size i and reference ( o ) units, respectively
K i , K o = size or rating of subject units
n = scale exponent, typically ~ 2/3
Thus if a 50 MWe p ower station costs 2000 $/kWe, a 1000 MWe u nit would be predicated to cost:
2 1
C 1000
$ 1000 3
2000
K kWe
50
737 $ / kWe
1000
Caveats Using Economy of Scale Projections
1) Learning curves apply to replication of the same design, by the s a m e work force, in the same s e tting (e. g . , factory), all of which are likely to change in the long run.
2) Larger size ma y lead to lower reliability (i.e., capacity factor) and therefore net unit cost of product ma y increas e, i.e., there m a y w ell be dis-econo mies of scale.
3) I m portant fa ctors such as m a te rial s resource depletion or technological innovation are not taken into account in an explicit m a nner.
4) At so m e point, size increases m a y re quire switching to new materials – f or exa m ple, to acco m m o date higher stre sses, in which case the economy -of scale relation has to be renor m a lized.
5) Shared costs of many units on a si ngle site are also i m portant: e.g.,
m u lti-unit stations s a ve cons iderably on ad m i nistrative infrastructure c os ts.
Capital Flow
Total
11/13/06 22.39 Lecture 18 26
Profes sor Neil Todreas
N.E. Todrea s, “Perspecti ves on the Economi cs of Nucle a r Power f r om the MIT Stud y ,” N E ANS S ym posium , Tro y , NY 3/30/2006, p.15
Potential Economic Advantages of Smaller
Nuclear Plants
|
John Taylor |
Hayns & Shepherd |
|
1. Ne w capacit y pla nning flexibility 2. High content of repetiti v e factory fabrication w i th uni t standardiz ation 3. Shorter construction period 4. Potential market m u ch larger 5. Reduced financial risk resulting in low er financing rates 6. Lo wer co s t s of first-of -a-k ind engineering in multi-modula r s y stems |
1. Reduction in planning m a rgin 2a) Increased factory fabrication 2b) More replication 3. Reduced construction tim e 4. Better match to de mand 5. Smaller front end investm e nt 6. Bulk ord e ring |
|
More rapid return on investment from single module “Pack agi ng” f lexibili ty |
Multiple units a t a sing le site Improved avail a bil i t y (fast and efficient repair/replacement of defective modules) Faster progression al ong learning curve Increased station lifeti me (easier refurbishme nt) Eliminatio n of some en gineered safety systems and the dow n grading (in term s of safety) of some other plant features Design appropriate to the size |
John J. Taylor, “Economic and Market Potent ial of Small Innovative Rea c to rs,” Ric e Universit y , Houston, Te xas, March 19-21, 2001
M.R. Ha yns & J. Shephe rd, “R educing Cost b y R e ducing Size,” IAEA Sp eci al ist Meeting, Helsinki, 3-6 Sept. 1990
11/13/06 22.39 Lecture 18 27
Profes sor Neil Todreas
Operating & Maintenance (O&M) Cost Calculation
1000 O
8 , 766 L K
1
O
yT plant
2
O & M Cos t Component for an Existing LW R Plant 22 mills/kwhre
Driscoll, M.J., Chapt er 5 f r om “ Su stainable Energy - C hoosing A m ong Option s " b y J ef f erson W . Tester, Elisabeth M. Drake, Mic h ael W . Gola y , Michael J. Driscoll, and W illiam A. Pe ters. M IT Pres s, June 2005
11/13/06 22.39 Lecture 18 Profes sor Neil Todreas
Courtesy of MIT Press. Used with permission. 28
US O&M Performance (including fuel)
|
the 1990s |
Fleet Average |
> $20 / MWe-hr |
|
by 2001 |
Fleet Average Lowest Quartile |
$ 18 / MWe-hr $ 13 / MWe-hr |
O
K
Elements of (O/K) o Cost
Plant Upgrade/Repa ir Projects - in the $ Millions
Source: C.A. Shuf fler, “Opti m ization of H y d r ide F u eled Pressurized W ater Reac tor Cores,” M.S. Thesis, MIT , Dept. of Nucle a r Sci e nc e & Engineering, p. 135, Sept. 2004, as a m ended b y N. Todreas 11/2006
References
1) Coûts de reference de la production électrique (Decem ber 2003) DGEMP- DIDEME, Paris, France.
2) Co mpetitiveness Co mparison of the Electr icity Production Alternatives. (2003) R. Tarjanne, K. Luostarinen. Lappeenranta University of Technology Research Report EN B-156.
3) The Cost of Generating Electricity: A Study Carried out by PB Power for the Royal Academ y of Engineering (2004). London, UK.
4) The Future of Nuclear Power. An Interdisciplinary MIT Study. Massachusetts Institute of Technology. July 2003, USA. http://web.mit.edu/nuclearpower/
5) The Econo mic Future of Nuclear Power. A study conducted at the University of Chicago, August 2004.
6) Stricker, L. and J. Leclercq. An Ocean Apart? A co mparative review covering production perfor m ance, costs and hu m a n resources of the US and French nuclear power fleets. in Nuclear Engineering International, December 2004, pp 20-26.
7) Proust, E. Econo mic Co mpetitiveness of New (3 rd Generation) Nuclear Plants: A French and European Perspective. Proceedings of ICAPP 2005, Seoul, Korea, May 15-19, 2005
8) Matzie, R., Personal com m unication, Feb. 2006
9) Turnage, J., Cam b ridge Energy Research Associates Week, Houston, Feb. 2006
10) Driscoll, M.J., Chapter 5 fro m “Sustainable Energy - Choosing A m ong Options" by Jefferson W. Tester, Elisabeth M. Drake, Michael W. Golay, Michael J. Driscoll, and William A. Peters. M IT Press, June 2005
11/13/06 22.39 Lecture 18 31
Profes sor Neil Todreas
N.E. Todrea s, “Perspecti ves on the Economi cs of Nucle a r Power f r om the MIT Stud y ,” N E ANS S ym posium , Tro y , NY 3/30/2006, p.20