Shaping the Futures of Nuclear, What's Next for Legacy And

navigating complexity March 2017 2016

MasteringShaping the the future ofTransformation nuclear power Journey AWhat's comprehensive next for legacy guide and to reinventingemerging companies nuclear players? 2 Think:Act Shaping the future of nuclear power

THE BIG 3

63 The number of nuclear reactors currently under construction. Page 4

70 GW The capacity of nuclear power contracted since Fukushima. Page 4

29 tCO 2eq Lifecycle GHG emissions from nuclear power per GWH, three times less than solar PV. Page 6 Think:Act 3 Shaping the future of nuclear power Nuclear power can help meet the growing energy demand.

CHALLENGE AHEAD chased overseas, represents only around 5% of the cost Growth is on the horizon. Global electricity demand of nuclear energy. It is easy to store and is mined in will jump from today's 22 thousand TWh to 34 thou- many places, with Kazakhstan, Australia and Canada sand TWh by 2040, fueled by economic growth and im- today's top suppliers. proved electricity access in emerging countries, offset- Nuclear power has established itself as a cheap en- ting by far all energy savings initiatives. ergy source, with a median cost of 83 USD/MWh in Emerging countries are faced with a new challenge: 2015 (levelized cost of energy, or LCOE, which includes getting electrical power to the 1.3 billion people cur- all plant-level costs: investments, fuel, emissions, oper- rently left behind. One could draw parallels here to the ation and maintenance, dismantling, future waste 60s and 70s when mass electrification of daily life (e.g. management costs, etc.). This puts nuclear power ovens, refrigerators, appliances) and rising standards among the lowest -cost power generation technologies of living (e.g. electric heating, HVAC) led to a substan- available in the market. Nuclear is also one of the tech- tial increase in electricity demand in OECD countries. nologies with the lowest contribution to pollution and They tackled the issue through the rapid development climate change. Finally, compared to other low-emis- of large-scale fossil fuel power plants and the massive sions solutions, nuclear power is a high density energy roll-out of nuclear programs. Electricity output in- and nuclear plants require limited land area. B creased by over 50%, from 3.2 thousand TWh in 1971 to 4.8 thousand TWh in 1980. A NUCLEAR RISKS Today, however, the massive deployment of fossil Nuclear power also presents clear drawbacks. The safe- fuel solutions is no longer feasible. The global commu- ty risk posed by nuclear power generation is inherent nity has agreed to jointly address human-caused cli- to the technology, and cannot be fully mitigated de- mate change, and new solutions must be low carbon. spite safety mechanisms and measures put in place by While nuclear power remains a controversial option, it manufacturers and operators. Nuclear plants also pro- is worth exploring its benefits and risks. duce long-lasting and highly radioactive waste that places a burden on future generations. Additionally NUCLEAR BENEFITS worrisome is that nuclear technology may be misap- Nuclear power plants are reliable electricity generators. propriated by rogue actors or leveraged for military Indeed, they can generate electricity continuously programs, leading to nuclear terrorism or prolifera- throughout the day and the seasons and have load fac- tion. Yet another worry: Nuclear power relies on a tors in excess of 80%. It also does not depend on vola- non-renewable fuel available in limited supply. In the tile oil or gas supplies. Uranium, which is usually pur- high nuclear scenario laid out by the IAEA in its World 4 Think:Act Shaping the future of nuclear power

GROWTH ON THE HORIZON Forecast of electricity demand in non-OECD countries compared to past OECD demand.

TWh (base 100) 300 OECD 1990 Electricity demand 250

200 2040 Non-OECD 150 Electricity demand forecast 1970 100 2010 50

0 Years Source: IEA

Energy Outlook, the industry may face a shortage of THE NEW STATUS QUO uranium supply as early as 2025. Finally, the high Two recent developments have changed the nuclear CAPEX required to build a nuclear plant (at least sever- status quo in significant ways: the Fukushima disaster al hundreds of millions of dollars to build the smallest and the COP 21 Agreement. The events at Fukushima reactors and around 5 billion for a full-size reactor) are have made obvious to the public that the rate of inci- an obstacle for many countries. dents at nuclear power plants is higher than what nu- In summary, nuclear has been a controversial tech- clear proponents expected. It questions the future of nology from the start and will likely continue to be nuclear energy on the global scale. The nuclear indus- challenged by its detractors. Nonetheless, it has been try is facing this by reevaluating risks, upgrading safety part of the global electricity landscape for over half a in existing plants, enhancing industry governance, and century. It managed to grow more rapidly than any oth- calling for further innovation. It will certainly take er means of generating electricity, going from almost time and security breakthroughs to fully restore public zero to 300 GW of capacity in its first three decades. confidence. On the other hand, widespread recogni- Today, 30 countries are operating 444 nuclear reactors tion of human-driven global warming has spurred to generate electricity, 63 new nuclear plants are under greater focus on CO2 emissions reduction, favoring nu- construction in 15 countries, and 70 GW of capacity clear technology while also supporting growth of re- have been contracted since Fukushima. Altogether, the newable solutions. value proposition of nuclear power still holds today: providing cheap, reliable, carbon-free electricity in large quantities with a risk profile lowered by strong safety precautions. Think:Act 5 Shaping the future of nuclear power

LCOE AND SHARE IN GENERATION MIX IN EUROPE The global community has agreed to address climate change. Massive deployment of fossil fuel solutions to meet the energy demand is no longer a sustainable option.

Share in generation mix [%]

30%

30 110 NUCLEAR 20 60 25% Coal

40 60 Gas

15% 40 70 Hydro

10%

40 70 Onshore wind

90 130 Biomass 5%

70 130 Solar photovoltaic Concentrated solar power 100 Offshore wind 180 190 300

0% 0 50 100 150 200 300 LCoE [EUR/MHh 1] Average of competitive technologies

1 2015, Europe, including grid connection Source: IEA; Roland Berger 6 Think:Act Shaping the future of nuclear power A seriously low carbon world needs nuclear energy.

RISING EMISSIONS have to grow by 2.9% a year until 2030 in order to keep The goal to curb greenhouse gas (GHG) emissions has the door to the 2°C goal open. united the global community. In an effort to protect us Nuclear power is one of the most climate-benign ways from the consequences of global warming, 182 coun- of producing electricity. The lifecycle GHG emissions tries have ratified the Kyoto Protocol since 1998. The of nuclear power plants are among the lowest: Protocol, however, does not require emerging coun- 29 tCO2eq/GWh, on par with wind or hydro, 3 times low- tries to reduce emissions, and the United States even- er than solar photovoltaic (PV), and considerably lower tually decided not to ratify it. This has significantly than fossil-fueled electricity generation. Recognizing limited its impact. Indeed, energy-related GHG emis- this, the United States, China and India have already sions were 33.5 gigatons worldwide in 2015, up 56% pledged to use nuclear power to meet their emissions from the 1990 level of 21.5 gigatons. reduction goals. C Continuing on the current GHG emissions trajec- tory is likely to result in an increase in average global COMPETING WITH RENEWABLES ON COSTS surface temperature of more than 4°C by 2050 com- Wind and solar PV technologies have matured enough pared to pre-industrial levels, which would force hun- to challenge nuclear power as cheap sources of low-car- dreds of millions out of their homes due to a rise in bon electricity. Nuclear power costs are going up due to sea levels. Governments worldwide have recognized more complex generation III reactors and the CAPEX what is at stake here, and have been working together required to upgrade existing plants post Fukushima or towards a solution. Their efforts crystallized during extend their operating life. Meanwhile, costs for renew- the 2015 COP 21 in the Paris Agreement, which aims able energies are on a downward trend, led by stan- to limit the increase in temperatures to 2°C or less dardization and growing competition in these indus- through GHG emissions reduction. The Paris Agree- tries. Since 2009, solar module costs have fallen 90% ment has been ratified by 113 countries worldwide, and onshore wind LCOE has fallen 50%. Every year, a including the biggest emitters like the United States new record is set: a 24.2 USD/MWh solar PV project in and China. Abu Dhabi was submitted in September 2016, a 30 USD/MWh onshore wind farm in Morocco was award- CLIMATE-BENIGN NUCLEAR POWER ed in March 2016 for commissioning in 2018. However, following the Paris Agreement, the pledged And this is only the technological side of it. Compe- national reductions are insufficient to prevent a 2°C tition is further accelerated by a global shift of the mer- rise. To achieve further reductions, nuclear power gen- it order curve to the right. Renewables have a near-zero eration should be considered. The IEA "bridge scenar- marginal cost and often benefit from favorable legisla- io" estimates that worldwide nuclear production will tion on priority dispatch, meaning that they are called Think:Act 7 Shaping the future of nuclear power

NUCLEAR PLANTS ARE ONE OF THE MOST CLIMATE-BENIGN WAYS TO GENERATE ELECTRICITY

Lifecycle greenhouse gas emissions [tCO2eq/GWh]

1,400

1,200

1,054 1,000

888 800 733

600

499 400

200

85 45 0 29 26 26 Lignite Coal Oil Natural Gas Solar PV Biomass Nuclear Hydroelectric Wind

Average emissions intensity Range between studies

Source: IPCC (2014) via NEA

first in the merit order. As a result, baseload plants get intermittency of power generation can be absorbed by a lower load factor, which increases their LCOE as the the system through existing backup solutions. fixed costs are split on a smaller number of MWh. However, at a higher share in the energy mix (20% This vicious cycle is already at work in Europe for to 40%), renewables require a combination of natural gas-fired plants, and will ultimately also impact nuclear balancing, a reinforced grid, energy storage solutions, power. As a result, nuclear power is expected to become backup installations, and some form of demand man- more expensive than both wind and PV before 2030. agement. This adds costs, called system costs, ranging from 24 to 47 USD/MWh according to the NEA. In 2015, AND THE WINNER IS... OECD countries already had 8% of their electricity Does this mean that renewables will win it all? Not quite. coming from non-hydro renewable sources, and this A high penetration of renewables comes with a hidden share is growing. Additional renewable system costs cost: balancing the network. Solar photovoltaic and and the ability of nuclear plants to track load when op- wind power solutions produce electricity on an inter- erating up to 25% (older design) or 50% (newer design) mittent basis because they rely on energy sources that below rated capacity support nuclear power as a solu- are variable in nature: sun or wind. At a low share of tion in the long run. renewables in the energy mix (up to 5% to 10%), the 8 Think:Act Shaping the future of nuclear power Nuclear can thrive in at least four market segments.

A SEGMENTED MARKET countries will need to build new nuclear capacities When it comes to energy, each country has its specific- and will invest high CAPEX to meet their nation's en- ities related to geography and history. Utilities and gov- ergy demand. However, key considerations for these ernments consider at least six criteria when deciding to powerful economies are the development of their invest in a nuclear power plant: anticipated electricity home industries and the preservation of their inde- demand growth, existing generation assets, ability to pendence from foreign expertise and interference. For balance the production of a large power plant, availabil- these reasons, they will work to ensure sustainable ity of natural energy resources (e.g. fossil fuels in Saudi technology transfer to their local industries and will Arabia and Russia, wind in Denmark), existing infra- favor arrangements like extensive partnerships and structures (e.g. gas pipeline across Europe, grid inter- knowledge sharing. connections) and political stability. This has resulted in a segmented energy market, and nuclear can thrive in 3. DIVERSIFICATION at least four niches each having its own dynamics. Emerging countries such as Turkey, Saudi Arabia, Indo- nesia, Egypt, Vietnam and Iran are also high-growth 1. LEGACY countries that require fast baseload growth and diversi- Major legacy nuclear players with further nuclear am- fied energy sources. But these countries do not see high bitions like Russia, France or the United States will ex- enough demand to smoothly integrate large reactors tend the useful life of the existing plants and invest in into the grid. Consequently, they will invest in smaller limited capacity additions. They will use their national and more modular nuclear reactors alongside other installed base for experimentation and preservation of power generation technologies. They will most likely their industrial leadership. At the opposite side of the import nuclear technology and outsource plant ser- spectrum, legacy players opting out of nuclear power vices rather than invest in large-scale local industry de- like Germany or Switzerland will need to decommis- velopment. These countries thus form a long-term op- sion existing plants, an industrial capability which has portunity for legacy nuclear industries. yet to be developed at a global scale. 4. FOLLOWERS 2. FAST CAPACITY Finally, smaller nuclear legacy countries with serious High growth, high population countries such as Chi- ambitions such as Mexico, Argentina, South Africa, na, India and South Korea need to quickly add genera- Brazil, Hungary and Romania will also require small tion capacity to keep up with increasing demand from modular reactors (SMR) and rely on the international a booming population and a thriving economy. These nuclear industry to reach their goals. Think:Act 9 Shaping the future of nuclear power

DIVERSITY The global map of nuclear capacity additions will shift from west to east and will become more open and diverse. D From a technological standpoint, the future of nuclear power will be diverse as technologies like SMR and new designs (e.g. fast neutron, molten-salt reactors, thorium) are developed to target these niches. The 2030 nuclear landscape will look quite differ- ent from the giant reactors built by the nuclear legacy industry over the past 20 years. The private sector will play a larger role, as well, as can already be seen with the emergence of nuclear start-ups with strong financial backing, such as Transatomic and TerraPower, which are leading molten-salt technology development in the United States. E 10 Think:Act Shaping the future of nuclear power

D THE GLOBAL MAP OF NUCLEAR CAPACITY ADDITIONS

United States Sweden Canada Belgium United Kingdom

France

Spain

Mexico

Brazil

2000-2030 1 Legacy Semi-mature Emerging

1970-1999 1 Legacy Semi-mature Emerging

Source: Roland Berger

1 Selected top 27 countries with more than 5 GW in capacity additions over 1970-2030 Think:Act 11 Shaping the future of nuclear power

The global map of nuclear capacity additions will shift from west to east and will become more open and diverse.

Russian Federation

Finland

Germany China - Mainland

Japan Ukraine

South Korea Romania

Turkey Iran

Slovakia Pakistan

China - Taiwan

India Saudi Arabia

United Arab Emirates

Indonesia

South Africa 12 Think:Act Shaping the future of nuclear power

THE FUTURE OF NUCLEAR POWER

NUCLEAR START-UPS

Source: Roland Berger

CURRENT DEVELOPMENT STAGE OF GENERATION IV NUCLEAR TECHNOLOGIES

VHTR SFR SCWR GFR LFR MSR

CHINA

UNITED STATES

FRANCE

GERMANY

JAPAN

RUSSIAN FEDERATION

SOUTH KOREA

Development Prototype

Source: World Nuclear Association; Roland Berger Think:Act 13 Shaping the future of nuclear power Nuclear players need to adapt.

Historically, the nuclear industry developed exclusively 45% and 25% respectively by not only servicing the in OECD countries out of fear of nuclear proliferation owners of Russian-designed power plants but also in smaller emerging countries. Over the past few de- gradually conquering other developed markets with cades, some of the BRICS and upcoming emerging square-shaped fuel assembly. countries started building nuclear capacity in order to Rosatom has also demonstrated the strong reliabil- meet their growing electricity demand, with China ity of its nuclear assets, with an 86% utilization rate for leading the group. As new plants are set to be built over plants in operation and no events of rank 2 or above on the next decades, the current offering focused on large, the INES scale. The company harvests remarkable re- expensive and fuel-hungry reactors seems ill-adapted sults in applied innovations, including the world's first to evolving requirements. What opportunities are generation III+ reactor put online in 2015 (unit VI at available to industry leaders and ambitious outsiders Novovoronezh) and the first MOX fuel assemblies put to make the most out of the changing market? in operation in 2016 at the Beloyarskaya 800 MWe fast neutron reactor. RUSSIA Over the years, the country has managed to become Russia has been at the forefront of nuclear power devel- a "one-stop shop", with full coverage of the nuclear val- opment for 70 years, with 35 reactors now installed. ue chain, nearly 100% self-sufficiency in critical tech- These reactors amount to 26.2 GW of capacity and gen- nologies and equipment, and what is probably the erate over 18% of the country's electric power. Eight most important differentiating factor these days: a additional reactors are also under construction. track record for delivering projects on time and within The Russian nuclear industry is structured around budget, largely facilitated by the innovative digital in- three main businesses: Zippe, a gas centrifuge technol- formation model of nuclear power plants jointly devel- ogy to enrich uranium, considered very efficient and oped with Toshiba. In a single document, this 6D mod- well-proven globally; the WWER pressurized water re- el groups information on a three-dimensional design, actor; and a sizeable diversification into civil products, procurement and delivery of materials and compo- from nuclear medicine to particle accelerators, com- nents (4D), activity progress planning (5D), and hu- posites and high-temperature superconductors. man, material and technological resources (6D). Rosatom, Russia's nuclear monopoly, has achieved However, challenges are also abundant. State fi- impressive results over the past 10 years. The business nancing is expected to become more difficult against has gained truly global presence, a presence which the yearly budget deficit of 4% of GDP in Russia. Pay- continues to grow today. It has a backlog of 36 reactors backs from "build, own and operate" contracts (e.g. in to be built, worth in excess of USD 110 bn, with the Turkey or Jordan) might be affected by political and ambition to grow to 80 reactors worth more than USD macroeconomic risks. Rosatom will also need to ad- 240 bn by 2030. Russia also has a strong foothold in dress its competence gaps in some of the back-end nu- upstream , where it has global market shares of ~35% clear segments (e.g. silicon carbide casks for spent nu- for uranium enrichment and ~15% for fuel fabrication, clear fuel, mobile on-site nuclear waste treatment with the ambition to further expand in 10-15 years to units, graphite decontamination). 14 Think:Act Shaping the future of nuclear power

Finally, Russia needs to accelerate its programs for gies. First, the Chinese company buys a foreign tech- small and medium-sized reactors to catch up with the nology. Then it obtains a deal where it contracts knowl- recent advancements in other countries. Russian de- edge transfer in addition to buying the technology. signs, except those for marine and submarine reactors, Third, it co-develops an improved model of the tech- are either active but at the feasibility study stage (e.g. nology with the incumbent player and retains intellec- floating plants based on the VBER-300 reactor unit) or tual rights on it. at the detailed engineering phase but put on hold (e.g. This process is accompanied by a gradual transfer of lead-bismuth cooled SVBR-100 with desalination and the supply chain for construction and operations from industrial heat applications). the home country of the incumbent towards China, with an accompanying increase in local presence in this supply chain. Indeed, for the CPR-1000 technology developed from the Framatome/Areva M310, the World Nu- All challenges faced by clear Association estimates that the first plant at Daya Russia have a common Bay was ~1% local, while the latest Ningde reactor built in 2015 is ~85% local. Relying on this technology trans- characteristic – they can be fer model, China has grown into a nuclear power which is autonomous in R&D, design, engineering, construc- tackled if foreign partners tion and operation of 2nd and 3rd generation reactors.

get involved in order to Domestic capability achieve common goals. Chinese nuclear companies have placed particular focus on building domestic capabilities for heavy components such as the manufacturing of reactor vessels, for which several foundries now exist in China. Through CHINA cooperation with Areva, China has also been able to de- Tremendous roll-out velop its own domestic fuel cycle. Chinese capabilities Since the 1990s, China has undergone one of the most cover uranium mining to enrichment and fuel fabrica- tremendous nuclear power roll-outs in the world. It is tion, although current capacity does not cover all do- the country with the fourth largest installed power ca- mestic needs. Additional capacity is planned, as well as pacity – with 29 GW in operation and another 25 GW capability build-up for fuel recycling and reprocessing. under construction. After a setback in government ap- The ambition is to grow beyond a successful indepen- proval of nuclear projects following the Fukushima in- dent domestic developer and operator of nuclear power cident in 2011, the development of nuclear power plants to supporting economic development and the plants has resumed and China is on track to achieve its fight against coal pollution. It is also determined to 13th Five-Year Plan target. As a latecomer to nuclear conquer the international market through the intellec- power generation, China has been able to leverage the tual property and experience it has accumulated, not knowledge and technology developed by incumbents unlike France in the 80s. and, with its export ambitions, is now posing a threat to large foreign players. Exports The development of nuclear technology in China To reach international markets, China is relying on the was not implemented in a turnkey fashion by OECD two large generation III pressurized water reactor de- experts locking in construction, operations and supply signs for which it owns full intellectual rights and will chain for themselves, but rather the Chinese govern- be capable of delivering turnkey solutions. The HPR- ment incentivized extensive technology-sharing agree- 1000 (a.k.a. Hualong One) is a design co-developed by ments in order to foster the development of a strong CNNC and CGN based on transferred French M310 domestic industry. The strategy of the three Chinese technology, and the CAP1400 is a reactor based on the nuclear companies CNNC, CGN and SPIC has been the AP1000 co-developed by SPIC and Westinghouse. The repetition of a similar pattern across reactor technolo- strategy is to supply both reactors to the international Think:Act 15 Shaping the future of nuclear power

market while China also invests in developing genera- projects, China will have to convince international au- tion IV reactors, including several SMR models, fast-neu- thorities that it will contribute to the fight against nu- tron technology and high-temperature gas-cooled reac- clear proliferation by protecting technological secrets. tors that will likely be commercialized after 2030. China will not only have to maintain discipline and China relies on its formidable economic power, report to regulatory bodies to be successful. It will also since financing is the first foot in the door of a coun- likely face a competitive response from nuclear incum- try's nuclear development. The preferred Chinese ex- bents. China poses a serious threat to existing interna- port strategy is to first jointly finance, build and oper- tional nuclear players as it has demonstrated its ability ate a foreign-design reactor in an international country to execute and operate nuclear projects domestically, and to include agreements to reproduce this set-up effectively adopt technology, and as it is already start- with the construction of a Chinese-built reactor as a ing to gain market share in foreign countries – even second step. Indeed, the contract between CGN and legacy ones like the United Kingdom. China has built EDF for Hinkley Point with an option for a Hualong plants more quickly and cheaply than incumbent play- One at Bradwell follow this logic. This leverages Chi- ers, with considerable localization, and is therefore nese financial resources and construction experience very dangerous as it becomes independent from West- while building trust with the international counter- ern technology and the supply chain. part. CGN and CNNC have entered into a similar agreement in Argentina and have also reached an Competition on execution and safety agreement for a foreign technology plant in Romania. So how should incumbent players respond to China? As the Chinese industry matures, the first step to lever- One option is to stop sharing technology in order to age a foreign technology will likely be skipped, as indi- hinder Chinese development. However, China is past cated by the 2015 memorandums of understanding in the tipping point in terms of technology and now has Kenya and Egypt by CGN and CNNC respectively: to its own resources to undertake R&D work. The second support the countries in developing their nuclear option is to play on equal footing with the Chinese, i.e. strategies with the Hualong One design under consid- design offers which are just as attractive. The key suc- eration. cess factors for an attractive nuclear offer include safe- The export of Chinese nuclear technology is part of ty, execution and price. However, international compa- the One Belt, One Road strategy promoted by Xi Jin- nies cannot wield financing means to the like of what ping that focuses on traditional eastern European and the Chinese government is offering to support their continental Asia allies as well as Southern Asia and export efforts. Indeed, on recent projects awarded in East African partners. In that respect, the Chinese ex- the UK, Argentina, Pakistan and Romania, China has port strategy is most mature in Pakistan, where it has been able to offer several billions of dollars' worth of already financed and built two smaller reactors (300 concessional loans. MW) currently in operation at the Chashma nuclear power plant. CNNC is also financing and building two additional smaller reactors in Chashma and two larger PWR reactors in Karachi based on Hualong One tech- The playing field is thus on nology. The ongoing cooperation with Pakistan is fol- execution and safety, where lowed closely by international stakeholders as an ex- periment of the Chinese ability to safely export its incumbent players can come technology to a foreign country. together to develop projects International challenges As China progresses in the implementation of its do- where they bring the best of mestic and international strategy, it will face several what they do to deliver fast challenges. It will have to maintain discipline in order to guarantee consistent high quality and safe construc- and secure plants. tion at numerous plant sites. Specifically for foreign 16 Think:Act Shaping the future of nuclear power

USA provision for early site permits (ESPs), and the com- The United States of America is the world's largest pro- bined construction and operating license (COL) pro- ducer of nuclear electricity, with an installed capacity cess. All have some costs shared by the Department of of 100 GW and 100 reactors spread over 30 states. The Energy (DOE). Today, four units (4,468 MW), all West- two main technologies used are pressurized water reac- inghouse AP1000, are under construction. All in all, tors (65 units with a combined capacity of 65 GW) and however, the country will lose around 11 GW of gener- boiling water reactors (35 units with a combined capac- ation capacity by 2020, according to the US Energy In- ity of 35 GW). Nuclear power accounts for close to 20% formation Administration. of the electricity produced in the US and over 63% of The associated US industry reflects the state of the the carbon-free electricity. nuclear market. Westinghouse Electric Company, which has built approximately one-half of the world's operating nuclear plants, was acquired by Toshiba in 2006. In December 2016, Toshiba said it expected to write down Over the past few years, its investment in Westinghouse by "several billion", nuclear power plants have adding that it was possible that its investment in West- inghouse could ultimately have a negative worth due to seen growing market cost overruns at the US nuclear reactors it was building. GE Hitachi Nuclear Energy, a provider of nuclear reac- pressure. Electricity prices tors and services, was established in June 2007 as a joint venture between General Electric and Hitachi. It has a dropped because of cheap strong focus on innovation, leveraging Hitachi’s experi- thermal electricity produced ence in advanced modular construction. Meanwhile, the DOE has been funding research from abundant shale gas. and partnerships with the private sector to design the next nuclear reactor. Examples of successful cooperation are the Next Generation Nuclear Plant (NGNP) In- dustry Alliance, or TerraPower. With Donald Trump's On top of that, load factors decreased because renew- election, chances are that more actions will be taken to ables capacities were added everywhere, with low mar- reinforce these partnerships and US competitiveness ginal cost and grid priority, moving the entire supply in that sector. curve to the right. As a result, investing in nuclear power has become riskier.

A turning point While the US nuclear The US nuclear industry is at turning point. Almost all industry has been hit by American nuclear reactors were built between 1967 and 1990. The Nuclear Regulatory Commission (NRC) renewable development and has extended the operating licenses of 87 nuclear reactors, provided that significant safety works are con- low gas prices, public and ducted. Nonetheless, many large players have an- nounced the shutdown of their units, uncomfortable private investments offer with upgrading investments which could turn unprof- new opportunities for itable given the current state of energy markets. US players. A much needed stimulus In recent years, three regulatory initiatives provided a much-needed stimulus for investment in nuclear power: improvements in the design certification process, a Think:Act 17 Shaping the future of nuclear power

FRANCE Even better would be for France to invest in developing With Areva, EDF and the CEA, France has one of the a set of complementary generation IV reactors. In fact, world's largest nuclear industries. The government it has already started doing so by building ASTRID, the heavily invested in the technology in the 1960s and prototype of a fast-neutron reactor. It would lead to through the 1990s to ensure the country's energy opportunities worldwide, but take 10 years or so to im- self-sufficiency. With 58 nuclear plants, the share of plement if French players attempt to tackle this formi- nuclear power in the French electricity mix is the high- dable adventure on their own. est in the world, standing at 76% in 2015. Although Instead, France could choose to focus its expertise the French industry has developed extensive knowl- on high value-added lifecycle steps where it has an es- edge of construction and operations thanks to its in- tablished leadership. It would accept strategic part- stalled base, the ongoing construction of European ners on other steps to accelerate its development, Pressurized Reactors (EPR) in France and Finland transitioning from an integrated industry to a service highlight the struggles of the French nuclear industry provider and a components manufacture targeting the in a changing global context. Not only does the French international market. industry experience difficulties in the construction of ever larger and more complex reactors but the focus on this single product (large, ultra-redundant reactors) is also ill-adapted to a market looking for smaller, To be successful, France more flexible nuclear solutions. Over the next 15 years, must engage in a strategic the French nuclear fleet will reach the end of its planned lifetime, and the French government faces a review of its capabilities in critical choice between supporting the national industry's short-term survival or setting the industry up for the industry, identify future long-term success. allies and clearly choose one A dilema for government of the three strategies The government may choose to prolong the life of most of its nuclear base by revamping and upgrading presented above. the reactors to heightened safety norms. This is the consensus in France at the moment, with the government planning to invest EUR 50 bn in this "Grand Carénage". The initiative would avoid expensive decommissioning and dismantling of the plants in the short term and maintain cheap electricity. However, this is only a temporary solution, lifetimes can only be extended by 10 to 20 years, and it does not chal - lenge the French industry to develop experience in new construction that could be used in other market segments. Alternatively, France may close some of its nuclear plants as they reach the end of their planned lifetimes. This will trigger demand for decommissioning and new construction of baseload capacity. New EPRs nuclear reactors could serve this purpose, but that would not help the French industry extend its offering. Small- er, more flexible reactors would help France export its unique experience and expertise in the nuclear industry to emerging countries. 18 Think:Act Shaping the future of nuclear power Among the many evolutions that will occur over the next decades, three are at the forefront.

NUCLEAR IS ON THE PRIVATE SECTOR IS AT THE HEART Nuclear power will keep growing over the next decades. OF NUCLEAR INNOVATION Despite criticism and growing competition from re- Governments remain involved in nuclear development newable sources, nuclear power remains a relevant op- for safety reasons, but we may very well see disruptions tion to quickly deploy large capacities, offset renew- coming from private pure players in SMR, 4th genera- ables with predictable baseload generation, and tion or fast neutron technology. severely reduce greenhouse gas emissions. LEGACY PLAYERS NEED TO ADAPT NEW PLAYERS WILL SEIZE GROWTH In the nuclear future, legacy players must define a clear New players will either have a full offer and the ability and flexible strategy around national policy, export to commit on schedule, cost, and quality (like Russia, strategy or innovation to retain market share. France the largest nuclear exporter today) or a strong internal should build a national consensus around a long-term market (like China). This is a clear shift from west policy that engages all major stakeholders in a large (France, US, Germany, Japan, etc.) to east (China, India, nuclear symposium ("Grenelle du Nucléaire"). Russia Russia, etc.), which calls for a reaction from legacy play- should define a strategy to defend its export leadership ers. To maintain their position, they must innovate, against rising China and India. And the US should fa- partner with the new leaders, or position themselves as vor its industry and privately-funded R&D to disrupt tier one or two suppliers to global nuclear providers. the market. Think:Act 19 Shaping the future of nuclear power ABOUT US

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