How to Sustain the Nuclear Renaissance

Energy, Utilities and Chemicals the way we see it

How to Sustain the Nuclear Renaissance

Point of View by Colette Lewiner and Alva Qian Contents

A brief history of the nuclear energy industry 1

Global Energy Outlook 3 Population and economic growth will put high pressure on energy supply Energy security of supply is of strategic importance Huge investments, of the right kind, are needed Climate Change has become a major concern So what is the solution?

Nuclear Renaissance 9 Increasing the output from existing nuclear plants Investing in building New Nuclear Plants

Prerequisites for a sustained nuclear renaissance 13 Effective Nuclear Non-Proliferation control Stringent Safety Management Mastering exceptionally long project lifetimes and big investments Ensuring nuclear energy’s financial competitiveness Smooth industrial ramp up Public opinion acceptance

Conclusions 23 Energy, Utilities and Chemicals the way we see it

A brief history of the nuclear energy industry

At the beginning of the 20 th century, (Candu 3) design. There are others a nuclear incident was put under very significant scientific discoveries using CO 2 gas as cooling vector, such media scrutiny, therefore arousing happened in the nascent nuclear field. as Graphite-Gaz in France, Magnox tremendous public and political In 1939, nuclear fission and chain and AGR 4 in the U.K. and RBMK 5 in concerns. Rightfully, the American reaction were established. In May of the Soviet Union. New designs Nuclear Safety Regulators, along with that year, French Nobel prize winner continue to be developed. A breeder their counterparts in other western Frédéric Joliot Curie secretly technology using liquid sodium was countries, decided to revisit the registered the first patents on uranium developed, but has had limited nuclear plant safety criteria and to chain reaction. His first two patents success so far. The Pebbled Bed reinforce them considerably. As a defined the principle composition of Modular Reactor (PBMR) design was consequence, new US plants that were the nuclear power reactors of today: developed in South Africa. A already at 90% completion would moderator, cooling fluid, control rods demonstration PBMR plant will be have to incur huge extra costs in and protection shield. During World constructed at Koeberg, scheduled to order to meet the new safety War II, on December 2, 1942, Enrico start in 2010 and complete by 2014. standards. The industrial and financial Fermi and his team at the University These two latter technologies could risks became so high that many plants of Chicago produced the world’s first lay the foundation for a new era of under construction were abandoned. controlled and sustained nuclear nuclear power plants designs, beyond Nuclear energy in the United States fission reaction. After the war, the present third generation. was stalled. Westinghouse Electric Company developed its first nuclear reactor for The first oil shock in 1973 threatened In Europe, nuclear power plant submarine engines. The first many western countries’ security of construction continued unabated. prototype, Submarine Thermal energy supply. As a consequence, France, very conscious of its lack of Reactor Mark I, was completed in national nuclear energy programs domestic oil and gas resource, 1953, installed in the Nautilus and became strategic priorities. Uranium developed a sound nuclear energy launched the following year. The prices jumped to record highs and program based on a centralized and world’s first nuclear electricity was nuclear vendors had huge stacks of monopolistic utility company EDF, a generated in the Soviet Union in 1954 orders to build new plants. Nuclear top league research center CEA, and a from the 5 MWe Obninsk reactor. energy was booming! reactor vendor Framatome. The latter acquired the Westinghouse PWR During the following industrialization What happened then? technology after France decided to phase, many western countries as well Though a vast majority of these abandon its Graphite-Gaz design for as Soviet bloc ones started to build reactors were safely designed and scalability and safety reasons. France nuclear power plants with various operated, two major events choked had a very intensive nuclear plant technologies. Some use water as the industry’s growth. construction program from the mid cooling fluid, such as Westinghouse’s 70’s to mid 80’s. During the year of Pressurized Water Reactor (PWR 1), In 1979, the Three Miles Island 1981 alone, eight plants were Soviet Union’s VVER, and General incident, though generating very little commissioned. Also, France took a Electric’s Boiling Water Reactor real damage, stopped new programs sound decision on nuclear waste (BWR 2). Canada uses heavy water, in to build nuclear energy plants in the treatment by choosing the closed its Canada Deuterium Uranium United States. It was the first time that fuel cycle.

1 PWR: Pressurized Water Reactors. Originally developed by Westinghouse in the US, now other vendors such as Areva in France, Mitsubishi in Japan and CGNPG in China are all selling this type of reactor. Pressurized water is the coolant and nuclear reactor moderator. They use civilian grade enriched uranium. 2 BWR: Boiling Water Reactors. This technology was developed and is still commercialized by General Electric. Boiling water is the coolant and nuclear reactor moderator. They use civilian grade enriched uranium. 3 CANDU reactors use heavy water as the coolant and nuclear reactor moderator. They use natural (or slightly enriched) uranium. They are commercialized by AECL. 4 Graphite Gas was the historical French design. Magnox and AGRs are U.K. designs. These reactors use CO2 gas as coolant and graphite as moderator. They are no longer commercialized by western companies. France stopped its GGRs in the 80’s and U.K. has started to phase out its Magnox and will continue with its AGRs 5 RBMK is the Chernobyl type reactor. It uses CO2 as coolant and Graphite as moderator. Unfortunately, its design has big flaws that, among other things, were responsible for the 1986 Chernobyl accident.

How to Sustain the Nuclear Renaissance 1 Other European countries continued During the last two decades, many carbon-free schedulable energy their programs as well, including things happened. Four big trends are sources able to produce large volume Germany and Sweden. Asian now converging in favor of nuclear of electricity at affordable cost. countries, notably Japan and South energy: Korea, both natural resources poor, The nuclear energy industry is also started their nuclear power plant Global energy demand and supply maturing up: Thanks to institutions construction programs. balance tightens. Primary energy like INPO and WANO 6, plant supply is tight, especially oil and gas. operators now can exchange In May 1986, came the catastrophic Limited resources and insufficient experience and best practice through news from Chernobyl. Little was investment in the past decades, various channels—for example, peer- known at that time on nuclear compounded by increasing demands to-peer reviews. US nuclear operators activities behind the iron curtain. The from fast growing developing have considerably improved their Soviet Union first attempted to hide economies, have driven oil prices to plant safety and availability level. what had happened, but was soon record highs. Just as importantly, Also, mergers and acquisitions among forced to admit that a terrible accident electricity supply is also tight. Lack of operators have created larger players had occurred. It is probably the investment in electricity generation with better industry skill pools. biggest civilian nuclear accident so far infrastructures in western countries in Financially, these amortized nuclear in history, and hopefully ever. This the past few decades, combined with plants with high availability and was a wake up call on the risks posed considerable new demands coming high output became attractive to by certain Soviet reactors: poor from developing countries, created a investors again. designs and lack of safety and huge and urgent need to build new environmental concerns. As the power plants. Investing in nuclear These fundamental trends will be infamous radioactive cloud spread all power plants is one of the solutions to further analyzed in the following over Europe, this accident was no provide large volumes of electricity chapters. longer a Ukrainian/Soviet problem; it without relying on oil and gas supplies. triggered great fear all over Europe. So what’s next? Global energy security of supply is The hopes are high and the After Chernobyl, nearly all European a cause of serious concern. Energy opportunities are big. The challenge countries put their nuclear energy source diversification has becomes a now is to sustain this renaissance, and programs to a halt. Some, as Sweden strategic priority. Nuclear plants need to develop it into a reliable long term and Italy, voted for a moratorium or uranium supplies, which are energy solution. Many lessons can be even decided to phase out their abundant and well spread drawn from the short history of the operating plants. Germany also voted geographically. Also, uranium has civilian nuclear energy industry in to phase out its plants after 40 years high energy content and thus order to avoid the past errors. The of operations. This said, in reality, countries and power plants can easily construction and operation of nuclear only one Swedish plant, Baarsabeck maintain strategic stockpiles for multi- plants, while having common features and the Fast European Breeder, Super year supply. In addition, as the price with all large industrial projects, have Phénix, located in France, were stopped. of uranium is only a small component some very specific characteristics Germany did not start implementing of the total cost of producing nuclear around safety, nuclear non- its phasing out decision and it is not energy, uranium price volatility barely proliferation, very long construction sure whether it will ever do so. affects the cost of nuclear electricity. and operations time horizon, and This is why countries having public opinion management. Only Asian countries continued to implemented large nuclear programs Moreover, after years of decrease or actively develop their nuclear energy have increased their energy stagnation, the industry first of all has programs: Japan, South Korea, India, independence. to ramp up its facilities and grow its and as a new comer, China. human capabilities, and build a sound Climate change calls for carbon free business model ensuring its long term But the wind is changing… energy sources: Climate change financial viability. Certain Having been out in the cold for many issues, since their emergence, have prerequisites addressing these special years, nuclear is now once again being quickly become a serious concern for features need to be in place before the embraced as an important energy politicians and populations across the industry can truly take off. In later source. “Nuclear Renaissance” became globe. The need to build carbon-free chapters, we will examine these a much talked about phrase by media, electricity generation plants makes prerequisites in further detail. academics, and industry alike. So how nuclear energy a very attractive does it come about? option. At present, nuclear, together with hydropower, are the only

6 INPO: Institute of Nuclear Plant Operations. WANO: Worldwide Association of Nuclear Operators

2 Energy, Utilities and Chemicals the way we see it

Global Energy Outlook

We have to understand the energy Even with increased investments, oil dilemma the world faces nowadays— and gas resources are quite limited. It on one side is the huge pressure on is rare to find very large new fields energy supply, calling for massive and equally difficult to exploit some investments on energy infrastructures, that are found. At the current on the other side is the ever-increasing consumption rate, it is estimated that price tag on conventional hydrocarbon worldwide oil reserves (excluding resources, economically, geopolitically, heavy and non-conventional oils) will and environmentally. Let’s analyze last around 44 years, and gas will last some fundamental facts in more detail. around 67 years. Coal is much more abundant, with reserves estimated to Population and economic last 146 years, and is well spread growth will put high pressure on worldwide. In future, coal will energy supply certainly increase its share in From 2005 to 2030, the worldwide electricity generation. However, for energy demand is forecasted to have a environmental and climate change compounded growth rate of 1.2% per reasons, clean coal technologies and annum 7, with non-OECD countries Carbon Sequestration and Storage growing by 1.7% and OECD countries (CSS) should imperatively be by 0.6%. Such forecast is made on the implemented. Today, these back of strong population and technologies are not yet at an economic growth projections, industrial stage. especially in non-OECD countries. This trend of increased energy This squeeze from the increasing demand had been underestimated by demand and limited supply is one of many economists and business leaders the root causes of the big price surge until around 2005. As a consequence, in oil, gas, and to a lesser extent, coal, the much needed investment in oil that we have experienced since 2005. and gas exploration and production The market is betting short on energy started behind the curve. While supply going forward. mature fields are being depleted, major oil and gas companies are Energy security of supply is of unable to replace their reserves. It will strategic importance take some time to ramp up The world’s oil reserves are very infrastructures, and of course, much concentrated. Around 62% of the total more time for it to impact production. proven reserves are in the Middle East region. The distribution of natural gas reserves is only slightly better, with around 41% of the proved reserves in Middle East and around 27% of it in Russia.

7 Source: studies by International Energy Agency and Total

How to Sustain the Nuclear Renaissance 3 Figure 1: World population and economic growth Our world is too dependant on scarce oil and gas energy sources, thus giving a huge political and financial power to GDP Population Energy Demand a limited number of producing (at constant exchange rates) countries. In tight supply periods, Average annual growth, some of these producing countries are Trillion 2005-2030 Mboe/d tempted to use energy supply as a ($2000) Billion 1.2% means to achieve political objectives, 80 2.8% 10 350 1% adopting tactics ranging from covert 300 threats to bluntly turning off 8 1.8% 60 pipelines. With North Sea oil fields 250 depleting, OPEC will regain more 6 power. Let’s hope that OPEC will use 200 4.9% 1.7% this power in a sound way! On the 40 gas side, the European Union (EU) is 4 1.2% 150 becoming more and more dependant 100 on Russian gas supplies, which will 20 2 2.2% represent 50% of total gas supplies to 50 0.6% EU in 2030. So when Gazprom cuts 0.2% gas supply to Ukraine, as it did on 1980 2005 2030 1980 2005 2030 1980 2005 2030 January 1 2006, or to other countries in this transit zone, all European OECD Non-OECD countries are strongly affected, as was Italy in 2006. Source: United Nations, World Population Prospects 2006; IEA; Total.

Figure 2: LNG Imports and Terminals in Europe

Importing countries BALTIC & ATLANTIC UK 16 NORTH SEA FI 1,696 91 1,187 NO LNG flows ( TWh ) 2% EGYPT - 63 TWh 395 National Grid SE EE 139 Belgium Nominal annual capacity 34 LV by receiving zone DK 49 IE (in TWh ) LT 19% France Existing Forecast UK Fluxys 140 by 2012 184 NL PL 31% BE DE Gaz de France Italy LU 26 STMFC CZ Importing country 37 Portugal SK LNG imports ( TWh ) FR 3% Nominal annual capacity 25 CH AT ENHIU GNL Italia (TWh ) 59 SI RO LNG imports/annual 53% EAST. MED consumption (%) REN Main terminals 583 operators IT 15 PT ES BG LNG terminals WEST. MED Greece Existing 1,315 GR 9 TRIN & TOB - 29 TWh 15 Spain Under construction and/or included 20% within Mandatory Planning 261 458 DESFA 573 Under study or proposed 69% Enagas ALGERIA - 222 TWh Reganosa Saggas NIGERIA - 171 TWh EGYPT - 63 TWh

Source: GIE gle, BP statistical review of world energy 2008 - Capgemini analysis, EEMO10

4 Energy, Utilities and Chemicals the way we see it

Moreover, fast growing developing Figure 3: China electricity generation energy mix (GW) economies such as China and India have joined the international 40 competition to secure energy supply, 1200 40 making the fight ever fiercer. 85 1000 To reduce this over dependency, all 267 major energy import countries are 10 800 17 working hard to diversify their energy 35 supply, both geographically and in 600 798 terms of energy type. For example, in 0 165 9 order to reduce its dependence on 0 400 natural gas supplied by Russia 108 557 through pipelines, Europe plans to 325 significantly increase its capabilities of 200 handling Liquefied Natural Gas (LNG). This move will expand 0 2004 2010 2020 Europe’s geographical outreach, giving it access to 60% of the natural gas coal hydro gas nuclear others reserves worldwide. This move alone of course is not enough. Investing in developing alternative energy types is also vital. Wind, solar, biomass, geothermal, and of course, nuclear, worldwide total investment. Today, blackouts, investments have picked are all needed. about 1.6 billion people do not have up since 2005. access to electricity. The global Huge investments, of the right demand for electricity is expected to However, the energy mix choices are kind, are needed double in the next 20 years. questionable. The vast majority of the Worldwide: planned generation plants will be According to a report from If all that’s required is to meet this fossil fuelled, predominantly gas fired. International Energy Agency (IEA) increased demand, then one might Not only will these plants bear high published in November 2007, at 2% have some faith in the ability of the and volatile fuel costs and contribute global GDP 8 growth rate, the world market to cope. However, the to European countries’ increasing would need cumulative investments problem has become more complex dependencies on imported gas, but worth about $22 trillion in energy due to the need to curb CO 2 they will also be big CO 2 emitters if infrastructure (oil, gas and electricity) emissions in order to slow down built without Carbon Sequestration between 2006 and 2030. The global warming. Therefore, it needs and Storage (CSS) facilities. So far, investment need is created by the not just any investment but the right CSS technology is not yet at an conjunction of several forces. In kind of investment in energy industrial stage. Therefore, regarding developed countries, many efficiency, nuclear generation, the EU’s objective to reduce 20% of its components of energy infrastructure renewables and Carbon Capture and CO 2 emissions by year 2020, these installed in the decades after the Storage technologies. new investments are second world war, particularly power counterproductive. stations and electricity grids, are Europe coming to the end of their industrial Europe’s case is a good illustration of Climate Change has become a lives and will need to be replaced. It is these complex problems. In major concern in developing countries, however, that Capgemini’s most recent European Climate change issues have emerged the need is greater. The IEA estimates Energy Market Observatory 9, it is in the past decade or so. In recent that an investment of more than $11 estimated that investments totaling at years, due to the fear of a rapid rise of trillion is needed in emerging least €1 trillion are needed in the earth’s temperature, this topic economies, of which China alone electricity and gas infrastructures in quickly became a serious concern for accounts for $3.7 trillion. Europe. After years of insufficient politicians and populations across the investments in electricity globe. Majority of the scientists The focus will be on electricity supply, infrastructure leading to tense supply believe increased emission of CO 2 and accounting for more than half the and demand situations and even other greenhouse effect gases are the

8 GDP: Gross Domestic Product 9 http://www.capgemini.com/industries/energy/eemo/

How to Sustain the Nuclear Renaissance 5 Figure 4: Main European Utilities’ total investment as a % of sales

20.0%

18.0%

16.0%

14.0%

12.0%

10.0%

8.0%

6.0%

4.0%

2.0%

0.0%

1990 1991 1992 1993 1994 1 995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Figure 5 : Projects of new European generation capacities, in megawatts (2007)

NORDICS

45,254 38,654

19,876 UK/IE 3,413 69,256 55,886 Planned Applied Approved Construction

35,339 BALTICS

9,499 FI 4,042 4,042 2,199 459 Planned Applied Approved Construction NO Planned Applied Approved Construction

BENELUX SE GERMANY EE 70,154 68,092 19,883 18,252 LV 10,157 DK 3,458 IE 43,047 LT Planned Applied Approved Construction UK FRANCE NL 8,203 PL BE DE Planned Applied Approved Construction 17,785 17,257 14,777 LU 4,594 CZ EASTERN EUROPE Planned Applied Approved Construction SK FR CH AT 44,099 44,099 SWITZERLAND HU 27,369 SI RO 10,278 10,278 6,473 Coal 4,134 1,452 Planned Applied Approved Construction PT ES IT BG Planned Applied Approved Construction Gas Renewables GR IBERIA ITALY Hydro 51,137 48,917 39,307 39,307 GREECE 40,117 38,149 Nuclear

7,354 6,754 5,014 6,213 8,981 1,251 Other thermal Planned Applied Approved Construction Planned Applied Approved Construction Planned Applied Approved Construction

Note: All projects above 5 MW are considered. Bulgaria, Czech Republic, Hungary, Poland, Romania, Slovakia, Slovenia and the Baltics are added from 2006 geographical perimeter Source: Platt’s PowerVision – Capgemini analysis, EEMO10

6 Energy, Utilities and Chemicals the way we see it

major cause for global warming. IEA Figure 6: World’s total primary energy supply and carbon emission forecasts that by 2030, worldwide CO 2 emissions should increase by 46% in a reference scenario. 20 40 Hydro & Renewables 18 17.1 38 Nuclear 15.4 The EU is a front runner in trying to 16 14% 36 14.1 Coal 16% curb CO 2 emissions. Since 2006, it 14 5% 34 Gas 13% 11.2 7% Oil implemented the Emission Trading 12 6% 26% 32 2 8.7 O CO 2 (Alternative) e 13% System (ETS)—a cap and trade 22% C o

10 26% 30 f t 6% CO 2 (Ref. scenario) o system for CO 2 emission rights. In B 13% 23% T 8 6% 25% 28 23% B 2007, its member states agreed on an 21% 6 25% 26 21% 2 117 objective of 20% CO emissions 19% 105 4 99 M3b3/% d 24 82 Mb/d reduction by 2020. However, as seen 66 35% M3b4/% d 32% 2 36% Mb/d 22 on the following graph, these Mb/d objectives will be difficult to meet. 0 20 1990 2004 2015 2030 2030 Alter 15.4 Btoe

While fighting climate change is weighing heavy in Europe, the same Source: IEA, WEO 2006. questions are also keeping North American energy executives up at night, as revealed in the 2008 Figure 7: European CO 2 emissions Platts/Capgemini study 10 . Indeed, environmental issues are looming larger than ever. When asked to name 4,500 the top three challenges facing the industry, the vast majority (77 percent) of the surveyed executives

) 4,250 identified the environment—including t M issues such as global warming, climate ( s n

change and emissions/carbon o i Gap to reach s 4,000 requirements. This is indicative of the s

i 2020 objective increasingly pressing nature of the m e impact of environmental concerns on 2 O today and tomorrow’s business. C 3,750

So what is the solution? Eu 2020 objective = -20% compared to 1990 level How do we respond to an increasing 3,500 energy demand, with limited and 1990 1995 2000 2005 2010 2015 2020 unevenly distributed fossil fuel reserves, and without increasing CO 2 emissions? There is no simple answer to this complex question, but rather a combination of different actions is required, including energy savings, consumption. Individuals and renewable energies development and businesses are becoming more improvement, clean coal environmentally sensitive and are implementation, carbon capture and changing behavior. New technologies storage technologies development, and processes are continually being and nuclear energy development. The invented to conserve energy use. impact of these measures is shown in However, these positive signs are not IEA’s alternative scenario for CO 2 enough. Tougher measures should be emission projection. taken in developed countries in order to reduce energy consumption and We are in a critical situation but there CO 2 emission. Adapted measures, are some reasons for hope. High oil including energy efficiency prices have started to reduce improvement programs, need to be

10 http://www.us.capgemini.com/PlattsStudy/

How to Sustain the Nuclear Renaissance 7 designed for developing countries. In Figure 8: IEA alternative scenario on CO2 emission projection by taking all saving these countries, energy consumption measures (in billion tons of CO2) and CO 2 emission per capita are still very low and will surely grow because Bt CO people want, rightfully, to reach better 2 standards of living through industrial 42 development. We should not forget 10% that the tons of CO 2 present in the 12% Nuclear atmosphere today are linked to the 38 IEA reference 13% Renewables activities of developed countries in the scenario 65% Enhanced past! power generation Nuclear energy is an important 34 efficiency part of the answer Efficiency Among all the alternative sources of measures to energy, nuclear, together with hydro, 30 IEA alternative curb demand scenario are the only sources that can provide large volume of schedulable and CO 2 free electricity. It is worth noting that 26 in IEA’s “alternative scenario,” nuclear 2005 2010 2015 2020 2025 2030 alone is expected to contribute 10% of the total CO 2 emission deduction, almost the same weight as all other alternative sources of energy added together. Also, the relatively better spread of uranium resource makes nuclear energy a strategic counterbalance for many countries How do we respond to that are currently over-dependent on oil and gas import. an increasing energy demand, with limited Around the world, across political spectrums, there is a wider and unevenly distributed recognition nowadays that nuclear is an important part of the solution to fossil fuel reserves, and the energy problem the world is without increasing CO2 facing. This is why we are witnessing a worldwide Nuclear Renaissance. emissions?

Among all the alternative sources of energy, nuclear, together with hydro, are the only sources that can provide large volume of schedulable and CO2 free electricity.

8 Energy, Utilities and Chemicals the way we see it

Nuclear Renaissance

In recent years, we are witnessing two investing in uprating their plants in types of efforts in reviving the nuclear order to increase their output. These energy industry: moves usually have a very good Return on Investment. Figure 9 below Increasing the output from shows the planned and potential existing nuclear plants results of nuclear power plants’ During these last years, and before uprating and lifetime extension new investments in nuclear plants programs in selected European were launched, utility companies have countries. focused on plant uprating and lifetime extension. In many European Operators have also launched countries, nuclear plants initially programs to improve the availability designed with a lifetime of 25 years of their nuclear reactors. These have been extended to 40 years. programs have given spectacular Further extension to 60 years is being results in the United States where considered. Operators are also operators that were once laggards are

Figure 9: Nuclear power plant uprating and long term operations in selected countries

Country Capacity Uprating Long Term Operations

Belgium Yes Phase-out policy

Czech Republic Planned Planned for 40 years, potentially can be extended to 60 years (4 units)

Finland Capacity increase of 18 megawatts completed in 2005 Planned for 60 years for Olkiluoto units 1 and 2, as well as for unit 3 for Olkiluoto unit 2 and in 2006 for Olkiluoto unit 1. (EPR). Loviisa’s 2 units have been extended to 50 years

France No Lifetime of 40 to 60 years (58 units)

Germany Yes Phase-out policy

Hungary Under way for 4 units, capacity increase of up to Planned for 50 years (4 units) 150 megawatts

Slovenia Yes Lifetime of 40 to 60 years

Slovak Republic Under way for 4 units, capacity increase of up to Planned for 40 years, potentially extend to 60 years (4 units) 220 megawatts

Spain Completed for 8 units, capacity increase of up to Planned, possibly will extend to 60 years (8 units) 220 megawatts

Sweden Under way for 8 units, capacity increase of up to Planned, may extend up to 60 years or more (8 units) 1,296 megawatts

Switzerland Yes Lifetime of 40 to 60 years

United Kingdom No Planned for 35 years (5 plants) or 30 years (2 plants); further extension possible

Source: Nuclear Energy Agency, Newsletter No. 24.2; 2006: P. Kovacs: “Impacts of Nuclear Power Plant Life Management and long term operation”.

How to Sustain the Nuclear Renaissance 9 now “best in class” performers. These Figure 10: US Reactors’ Capacity Factor evolution programs are often based on nationwide or international benchmarking methods, for example 100 peer-to-peer reviews, that are 90 7 1 8

supported by institutions such as 7 6 r . . 3 . o 9 0 80 0 t 8 8 9 INPO and WANO. 2 c . 8 8 a 3 f 0 2 . 70 8 y 6 9 . t i 7 4 3 c

Worldwide, this industry now has 5 7 . a 4

60 5 8 p 7 4 4 9 . 6 . more than 12,000 reactor years of a 1 5 2 1 . . c

50 6 6 9 0 experience. The global average t 5 6 e nuclear plant availability during 2006 n 40 R E reached 83%. Progress has been made D 30 n not only on plant electricity output a i

d 20 measured by the Unit Capability e Factor (percentage of maximum M 10 energy generation that a plant is 0 1975-77 1978-80 1981-83 1984-86 1987-89 1990-92 1993-95 1996-98 1999-01 2002-04 2005-07 capable of supplying to the electrical grid), but also on workers’ protection Note: All reactors. For the most part, median capacity factor has leveled off, but there has still been roughly a 1-point gain in each three-year period since 1999-2001. The chart shows only reactors that are still in service now; there were 32 such and Industrial Safety Accident Rate. reactors in 1975-1977, and in each succeeding period there were 49, 55, 65, 85, 99, 102, 103, and 104 in each of the last three. If closed reactors were included in the periods during which they operated, no median would change by as much as Worldwide results show that the 1 percentage point. nuclear industry continues to provide Source: "Nuclear News" May 2008, American Nuclear Society. one of the safest industrial work environments. 11

Investing in building New Figure 11: Worldwide Nuclear Plants safety improvement Nuclear Plants Today, there are 439 reactors in operation, 34 under construction and Industrial Safety Accident Rate around 320 nuclear projects planned 6 in all the regions around the world. 5,2 5 Asia is the most active area: China currently has eleven operating 4 e

plants, mainly in coastal areas. Eight t

a 2,9 reactors are under construction, R 3 among which some are based on Chinese technologies. Eight more 2 1,63 reactors are planned. In October 1,21 2007, China’s National Development 1 and Reform Commission released the country’s blueprint for nuclear energy 0 1990 1995 2000 2006 development from 2005 to 2020. It aims to raise generation capacity to 40 * Number per 1,000,000 man-hours worked gigawatts by 2020, with an additional 18 gigawatts still being built at that time. Plans include spending about $70 billion to construct scores of new 1,000 megawatts reactors during this period. By 2020, nuclear energy is expected to account for 4% of China’s total energy consumption, up from the current 2%. Since the publication of the NDRC report, there have been calls for faster speed of development.

11 Source: World Association of Nuclear Operators, 2007 Performance Indicators

10 Energy, Utilities and Chemicals the way we see it

There are suggestions that nuclear announced by the French president. condition to their European Union energy should account for 5% of France derives over 75% of its accession. Most of the affected national energy consumption by 2020. electricity from nuclear energy. This is companies received financial due to a longstanding policy based on compensation for the energy output India has seventeen nuclear power energy security of supply. France is losses. They are now pursuing plants with a total installed capacity of the world's largest net exporter of programs to invest in new nuclear 4,120 megawatts in operation. Six electricity due to its very low plants, typically third generation additional units, with a total capacity generation cost from nuclear, and Russian design reactors. Their projects of 3,160 megawatts, are under various gains over €3 billion per year from are sometimes carried out in partnership stages of construction. Hopes are high exports. France has always been very with Western European utilities. that following agreements with the active in developing and exporting International Atomic Energy Agency, nuclear energy technology. At the very Romania managed to cut its the Nuclear Suppliers Group and the beginning of its nuclear energy electricity imports by nearly 30% in US congress, nuclear trade with global program, France chose the closed fuel the first half of 2008 compared with players will open up. If so, the Indian cycle for waste treatment. This the same period in 2007, thanks to a government, which was originally method involves reprocessing used massive increase in nuclear energy targeting 20,000 megawatts of nuclear fuel so as to recover uranium and output after its second nuclear reactor power by 2020, hopes to double the plutonium for reuse, and reduces the Cernavoda 2 started up. Romania's nuclear capacity to achieve an volume of high-level wastes for disposal. next two nuclear reactors, also at installed capacity of 40,000 Cernavoda, will be built by a megawatts over the next twelve years. U.K. has aging Magnox and AGR consortium of six European The US-India Business Council nuclear plants that need to be companies in a joint venture with estimates that at least $100 billion replaced. Moreover, because of the Romania's Nuclearelectrica SA. worth of investment will be needed to North Sea gas reserves depletion, it develop such a program. has become a net gas importer since Bulgaria: Units 5 and 6, the most 2006. After a long debate, the UK modern at Kozloduy, are the only In Japan , nuclear energy is already government has committed to the ones still producing energy. The other providing 50% of the total electricity continued use of nuclear power and four were shut down as a price for generation. In addition, eleven new wants the first new nuclear station to Bulgaria's EU membership. To offset units are scheduled to start come online before 2020. The current the loss of production at Kozloduy commercial operation by 2014. estimations are 25,000 megawatts and to regain its position as a major by 2030. electricity exporter to the rest of the In South Korea , six reactors are Balkans, Bulgaria has revived plans for under construction. There are plans Italy: After the 1987 nuclear phase a second nuclear power plant at Belene. for eleven new ones by 2035 that out referendum, the new government should increase the nuclear share to is now planning new nuclear power Slovakia has five nuclear reactors 60% in electricity. plant construction. generating half of its electricity. Two more are under construction. In Europe is becoming an active Swiss operator ATEL has submitted February 2007, Slovak Electric region again. an application to build a new third announced that it would proceed with Finland is the first European country generation light water reactor. the construction of Mochovce 3 and that has decided to re-launch nuclear 4. Italian utility ENEL has agreed to energy. After a long debate, the The Netherlands: Delta, a Dutch invest €1.8 billion on this project, Finnish government launched a utility company, has announced with an operation date set for 2012-13. tender for its fifth’s nuclear plant. proposals to build a second reactor Areva won the bid after fierce unit at Borssele, with generating Lithuania: Due to strong EU concerns competition. The first Areva third capacity of between 1,000 and 1,600 about the safety of its two Ignalina generation European Pressurized megawatts, envisaged to be RBMK type reactors, when Lithuania Water Reactor (EPR 12 ) reactor is under operational by 2016. applied to join the EU, it was required construction at Olkiluoto, with a two to close them both down. Since then, year delay and 50% cost overrun. Former Eastern European unit 1 was closed in December 2004 It should be online in 2011. Countries: and unit 2 should be closed by the These countries often have legacy end of 2009. It will leave Russia as the France has one EPR reactor presently Soviet designed nuclear plants. Amid only country that still operates RBMK under construction. In June 2008, the safety fears, many of these countries reactors. In July 2008, Lithuanian construction of a second one was had to close such reactors as a Energy Organization together with

12 European Pressurized Water Reactor, the Franco-German 3rd generation 1600 megawatt reactor

How to Sustain the Nuclear Renaissance 11 energy companies from Latvia, Estonia Ukraine’s best known nuclear power South Africa’s nuclear operator and Poland established the Visaginas plant was Chernobyl, the only RBMK Eskom launched a consultation for 12 project development company. This type reactor in the country. Unit 4 was new nuclear power plants a few project will build a new 3,200-3,400 destroyed in the 1986 tragic accident. months ago. megawatts nuclear power plant. Unit 2 was shut down after a turbine hall fire in 1991. Unit 1 and 3 were Czech Republic has six nuclear closed in 1997 and 2000 respectively, Finally, Gulf countries that are facing reactors generating about one third of due to international pressure. Ukraine high domestic electricity demand its electricity. In July 2008, the is still heavily dependent on nuclear growth, wish to generate nuclear nuclear energy company CEZ energy. It has fifteen VVER type electricity in order to comply with announced a plan to build two more reactors generating about half of its their oil and gas exportation reactors at Temelin, totaling up to electricity. The government plans to commitments. In 2008, United Arab 3400 megawatts. Construction is to maintain the current nuclear share in Emirates has signed an agreement start in 2013 and the first unit will be electricity production till 2030, which with several French companies to operational in 2020. may involve substantial new build. build new 3rd generation EPRs. It has signed a similar Nuclear Agreement Russia and former CIS countries North America: with the US as well. Russia has thirty one operating US companies and consortia are reactors, totaling 21,743 megawatts. pursuing licenses for more than thirty This worldwide scan demonstrates a Its first nuclear power plant, which is four nuclear power plants at 23 sites. growing demand for nuclear power in also the first in the world to produce The Nuclear Regulatory Commission “old” nuclear countries as well as in electricity, was the 5 MW Obninsk has received construction/operating new ones, in developed countries as reactor started in 1954. license applications for 7 sites and well as in the developing world, in more are expected in 2008. Georgia countries with experienced nuclear The efficiency of Russian nuclear Power has passed the first firm order authorities and also in places were generation has increased dramatically to Westinghouse for two AP1000 they don’t exist yet, in nations with over the last decade, with capacity reactors. savvy, established nuclear operators as factors leaping from 56% to 76% well as those with no or relatively less (1998-2003). Russia has seven Canada: Ontario is moving forward to experience. According to International reactors under construction. Its replace its nuclear fleet and is Atomic Energy Agency (IAEA), global nuclear energy program aims at launching a request for proposal to nuclear energy capacity in 2008 is increasing the share of domestic select vendors. Alberta is considering 372 gigawatts. By 2030, it is expected nuclear electricity generation from building up to two twin unit plants. to range from a low case scenario of 15.6% to 18.6% by 2015. This 473 gigawatts to a high case scenario program should cost about $67 of 748 gigawatts. billion. By 2015, ten new reactors totaling at least 9,800 megawatts should start operating. From 2012 to Figure 12: High case scenario projection of new nuclear energy capacity added 2020, two new nuclear reactors of worldwide 2007 – 2030 (in gigawatts) 1,200 megawatts each should be commissioned each year. 350 Africa Electricity and gas consumptions are 300 rising strongly in Russia. Though Russia has abundant gas resources, it Asia 250 prefers to export more to the 200 international market when prices are high, instead of consuming this gas Americas 150 locally with heavy subsidies. The 100 more nuclear power plants Russia builds, the less gas it burns for Europe 27 + CIS 50 domestic electricity generation. 0 Exporting nuclear reactors is also a 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 major policy and economic objective, which is why Russia is commercially active in many international bids.

12 Energy, Utilities and Chemicals the way we see it

Prerequisites for a sustained nuclear renaissance

Despite all the trends in favor of spread of nuclear weapons. Opened nuclear energy, we need to recognize for signature in 1968, the treaty that this industry is still relatively entered into force in 1970. A total of young and fragile. This emerging 187 parties have joined the treaty, nuclear revival could easily derail if it including the five nuclear-weapon is not properly nurtured. There are States 13 . The treaty establishes a many prerequisites that need to be in safeguards system under the place for this worldwide nuclear responsibility of the International renaissance to sustain and turn into a Atomic Energy Agency (IAEA). success, and not be halted as it Safeguards are used to verify happened in the past. compliance with the treaty through inspections conducted by the IAEA. As other large scale industrial projects, The treaty promotes cooperation in nuclear plants construction carries the field of peaceful nuclear multidimensional risks. In addition, technology and equal access to this the nuclear industry has some unique technology for all State parties. It is and especially stringent requirements worthwhile to note that, as a to comply with. Capabilities to meet testament to the treaty’s significance, these requirements are paramount more countries have ratified the NPT prerequisites for the industry to than any other weapon limitation and succeed. disarmament agreement.

The most important prerequisites are: Only four recognized sovereign states

I Effective nuclear non-proliferation are not parties to the treaty: North control Korea, India, Pakistan and Israel. India and Pakistan both possess and I Stringent safety management have openly tested nuclear bombs. I Mastering the exceptionally long Israel has had a policy of opacity project lifetimes and large regarding its nuclear weapons investments program.

I Long term financial viability I North Korea acceded to the treaty, I Smooth industrial ramp up violated it, and later withdrew.

I Public opinion acceptance. Presently, through the mechanism of six-party talks 14 , North Korea is in The following sections elaborate each discussions with other countries to of the above prerequisites one by one: close its small Yongbyong proliferating reactor and to stop the Effective Nuclear Non- other Magnox type of reactors Proliferation control: currently under construction. The Treaty on the Non-Proliferation of I India: In December 2006, United Nuclear Weapons, also known as States Congress approved the United Nuclear Non-Proliferation Treaty States-India Peaceful Atomic Energy (NPT or NNPT) is a treaty to limit the Cooperation Act. However, this

13 They are: the United States, the United Kingdom, France, Russia, and the People's Republic of China (the permanent members of the UN Security Council). 14 Six party talks: the People's Republic of China; the Republic of Korea (South Korea); the Democratic People's Republic of Korea (North Korea); the United States of America; the Russian Federation; and Japan.

How to Sustain the Nuclear Renaissance 13 legislation was not approved by the Effective non-proliferation control and when the first operator would apply Indian government at that time. compliance with the IAEA requirements for a new plant.

After some changes in the Indian necessitate implementing a holistic I Existing nuclear countries need to parliament, it should be accepted control. Many countries have, in reinforce their safety authorities in now. This legislation allows for the addition to the IAEA inspection order to meet the new growth transfer of civilian nuclear material systems, established national demands. In mid 2008, the British to India. Despite its status outside inspections in order to supply Business Secretary John Hutton the Nuclear Non-Proliferation Treaty, required information to the Vienna launched an action plan on human India was granted these transactions based agency. Nuclear operators have resources. It included measures to on the basis of its clean proliferation installed a comprehensive set of improve recruitment and retention record, and its unusually high instrumentation and data collection of staff at Nuclear Installations energy need fuelled by its rapid systems in their facilities to enable Inspectorate (NII), which regulates industrialization and billion-plus them to respond to inspection and nuclear safety in UK. population. IAEA and Nuclear reporting requirements. Through this I Today, seasoned nuclear safety Suppliers Group (NSG) have given process, the operators have experts are in short supply. A holistic their agreements. The final step now subsequently also gained transparency approach should be taken, including is for it to be approved by the US and operational reliability. building a strong talent pool and Congress. If passed, this legislation optimizing its usage. The latter will open up the $150 billion Indian New nuclear countries and operators could be achieved by streamlining nuclear market not only to US should not underestimate the review and control processes. Within vendors, but also to vendors from importance of these non-proliferation one nation, this means seamless other countries, notably French and systems and organization. Only relationship with other government Russian ones. transparent and trustworthy operations bodies. For example, UK’s BERR 15 can succeed in the long run. I Attempts by Pakistan to reach a Ministry, in charge of new nuclear similar agreement have been installations, created an Office of Stringent Safety Management rebuffed by the U.S. as well as by Nuclear Development in June 2008. In the past, the nuclear energy the international community. The This office will connect with expansion was impeded by nuclear argument put forth is that not only environment agencies, health incidents (Three Miles Island) and does Pakistan lack the same energy agencies, decommissioning bodies, accident (Chernobyl). These events requirements (as India) but that its and the research and education had mainly regional impact. Since track record as a nuclear proliferator ministry, in order to coordinate then, global communication has makes impossible for it to have any among these different entities and developed tremendously and similar sort of nuclear deal in the near create a one stop shop. Across unfortunate events would have a future. borders, this means international global impact and would kill the I Iran is a signatory state of the NPT cooperation, such as the one taking nuclear renaissance. Therefore, it is of and has resumed the development of place among British, French, utmost importance to apply stringent uranium enrichment program in American and Finnish nuclear safety safety management across the entire 2006. Iran claims it is part of its regulators. Also, international safety lifetime of nuclear power plants. civilian nuclear energy program. training centers should be launched However, the IAEA Board of to enable seasoned safety authority The first step is to put in place strong Governors found Iran in teams to share their experiences with and independent safety authorities. As noncompliance with its NPT new ones, and to train engineers successful practices in some countries safeguards obligations. Following from both “old” and “new” nuclear show, independent safety authorities IAEA’s report, the United Nations countries. are critically important in working Security Council passed a resolution with operators to establish rigorous demanding that Iran suspends its The importance of safe design and operations processes and to monitor uranium enrichment. Negotiations safe build is obvious. The Chernobyl their enforcement. on this critical issue are underway plant didn’t have an intrinsically safe and sanctions have been applied I New nuclear countries need to functioning mode and, as many Soviet to Iran. establish the right safety structure design plants, lacked a containment with the right governance and I South Africa deserves a special building. The new third generation independence towards the mention as the only country that nuclear plant design, which is the governments. They need to start developed nuclear weapons by itself core design for most of the newly recruiting and training their staff and later dismantled them. planned constructions, is much safer. ahead of time in order to be ready

15 the UK Department for Business, Enterprise & Regulatory Reform, in charge of the new nuclear installations development

14 Energy, Utilities and Chemicals the way we see it

During long years of operations, Used fuel cycle and radioactive wastes in MOX fuel, vitrifying the high-level nuclear power plants need not only are the most controversial topics radioactive wastes and storing them in strictly procedures, but also a safety around nuclear energy. Some high geologically stable repositories. It is culture to guide their personnel. level radioactive wastes have very long the French, British, and Japanese Multiple studies have proved that lifetimes that are measured in million option. In France, where nuclear accidents are usually the result of a years. They need to be disposed in the energy contributes more than 75% of conjunction of events. Accidents safest way possible, and as such are the total electricity generation, the could have been avoided if minor awaiting scientific and industrial volume of high level radioactive precursor incidents would have been progress that will allow them to be wastes generated per habitant per year reported and analyzed thoroughly. converted into low level/short lifetime is that of a bead. Recycling uranium This is why, many savvy nuclear wastes, for example, by and plutonium in MOX fuel allows operators promote a safety culture transmutation. 30% more energy to be extracted from based on which personnel are the original uranium and leads to a encouraged to report—as soon as A sound treatment of these wastes is great reduction in the amount of possible—the smallest incident or the nuclear energy industry’s utmost wastes to be disposed. It preserves non-compliance with the operations important social responsibility. It is uranium resources which may become processes. Finally, implementation of also critically important for the more scarce in the future. Overall, the the International Nuclear Event Scale industry’s long term survival. cost of closed fuel cycle treatment is (INES) introduced by IAEA comparable with that of open fuel considerably improved nuclear There are two main used fuel cycle. operators’ transparency towards safety treatment options. The open fuel cycle authorities and the public. A number consists of storing the used nuclear The United States stopped nuclear of criteria are defined to assure fuel in geologically stable repositories. fuel reprocessing under President coherent reporting of nuclear events It is the Swedish and Finnish option. Jimmy Carter’s mandate. In 1982, it by different official authorities. There The closed fuel cycle consists of elected to directly store the used fuel are 8 levels on the INES scale as reprocessing the used fuel, recycling in the Yucca Mountain site. According shown in figure 13 below. the extracted uranium and plutonium to the original plan, the site should have been opened in 1998. However, this project is still not accepted by the US congress nor by the local Figure 13: International Nuclear Event Scale (INES) population. The project costs have skyrocketed. In August 2008, the US Department of Energy estimated its 7 Major Accident costs at $96 billion, a 67% increase A

C from the 2001 estimation. This 6 Serious Accident C I 5 Accident with D unsettled situation represents a E

Wider Consequences N serious obstacle for nuclear T 4 Accident with renaissance in the US. Local Consequences

3 Serious Incident New nuclear countries will have to choose between the open fuel cycle I N

C and closed fuel cycle. If they choose

2 Incident I D closed fuel cycle, they could either E

N buy reprocessing services and MOX 16 T fuel fabrication from a foreign 1 Anomaly supplier or they could build these

Below Scale/Level 0 facilities domestically, as China seems NO SAFETY SIGNIFICANCE to have done. The former is a better solution regarding the nuclear non- Source: International Atomic Energy Agency, INES proliferation control.

If all the above points on safety management are strictly adhered to, there will be much better chances that we will witness a safe nuclear renaissance this time.

16 MOX: Mixed (Uranium/Plutonium) Oxide Fuel

How to Sustain the Nuclear Renaissance 15 Mastering exceptionally long 80% of the project cost of advanced Construction and Operation License project lifetimes and big Nuclear Power Plants. agreement (COLA) once the plant investments I Standby support for delays beyond design is accepted. Up to mid-2008, The construction of a nuclear plant 180 days in the commencement of the NRC had received 7 COLA costs a few billion dollars and its full operation due to litigation or the requests and more are expected. lifetime extends to sixty years. U.S. Nuclear Regulatory Moreover, seven to ten years of Commission approval (up to 6 There are also other regulations that construction time has to be reactors for a total of up to $2 have an impact on plant operation, envisioned, including several years billion). such as the maximum river water needed to get clearance on all the heating authorization, or on I Funding support for construction of regulatory requirements—design, decommissioning costs, such as the advanced new nuclear power plants: location, construction, and impact on low level radioactivity limit for wastes. $1.18 billion over 2007-2009. health and environment—before building work can start. If there is I Price-Anderson Act Amendments All these regulations have to be strong local opposition, these lead extending liability protection to sustained on the long term. times could be even longer. For such 2025. a long project involving a large Ensuring nuclear energy’s amount of investment, risks could The US and U.K governments are also financial competitiveness come from many fronts: technical simplifying their complex approval With today’s high oil and gas prices, complexity, contractual or processes into three steps: reactor nuclear energy is cost competitive. environmental concerns, complex and design approval, site approval, and Figure 14 below shows comparisons volatile regulatory requirements, construction and operation license between the cost of generating suppliers’ scalability, skilled human approval. The U.K. is drafting the electricity through nuclear, coal and resource scarcity, local communities’ Planning Reform Bill and the new gas energy respectively. This trend opposition, etc. All of these factors Nuclear National Policy Statement, should continue into the future as oil can lead to construction delays and creating a new independent and gas supply will continue to be cost overruns which have to be paid Infrastructure Planning Commission, tight. On top of that, CO 2 and other first by shareholders and at the end of consulting on the Strategic Sitting greenhouse effect gases costs are likely the day by final customers. Some of Assessment process and the Strategic to increase. All these factors are these risks can be mitigated to a Environmental Assessment policy. The favorable for nuclear energy. certain extent through careful US has established a combined planning and learning existing best practices, but others are beyond the Figure 14: Electricity generating cost (US$ c/kWh) projections for 2010 on 5% capability of nuclear operators alone. discount rate, 40 years lifetime, 85% availability, with no CO 2 price factored in for These areas call for regulatory fossil fuel generation protections and incentives from governments. nuclear coal gas

For investors and operators to have Finland 2.76 3.64 -- confidence in nuclear energy projects, there is a strong need for a simple, France 2.54 3.33 3.92 long term and sustained regulatory Germany 2.86 3.52 4.90 framework from the governments. Switzerland 2.88 -- 4.36

Some countries are setting legislations Netherlands 3.58 -- 6.04 aiming to provide such frameworks. Czech Rep 2.30 2.94 4.97 For example, the 2005 US Energy Bill Act includes these provisions to limit Slovakia 3.13 4.78 5.59 risks for nuclear operators: Romania 3.06 4.55 -- I Electricity produced from a qualifying advanced nuclear power Japan 4.80 4.95 5.21 plant can claim credit of 1.8 cents Korea 2.34 2.16 4.65 per kilowatt hour for the first eight years of operation. This provision USA 3.01 2.71 4.67 applies up to 6,000 megawatts. Cnada 2.60 3.11 4.00 I The Secretary of Energy is authorized to provide a loan guarantee of up to Source: OECD/IEA NEA 2005

16 Energy, Utilities and Chemicals the way we see it

Does this mean that once a nuclear Figure 15: CO 2 emission prices (2007-H1 2008) energy plant is successfully constructed and safely run, there will be no financial risks for the future? In 35 reality, they are a few. Four risk EUA Dec 8 elements have been identified below: 30 CER Dec 8 EUA S po t P ha se 1

Need for a long term price index on 25 greenhouse effect gases 20 As analyzed earlier, climate change 2 O C t /

issues and the subsequent € 15 governmental objectives to limit CO 2 emissions in many developed countries is a clear driver for nuclear 10 renaissance. Nuclear energy competitiveness and acceptance is 5 significantly enhanced by this factor. 0

Though developing countries may not 7 7 7 7 7 7 7 7 7 7 7 7 7 8 8 8 8 8 8 8 8 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 1 1 2 1 1 1 0 0 9 8 8 7 7 6 5 6 5 5 4 4 3 /0 /3 /0 /0 /0 /3 /3 /3 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 yet put CO 2 emissions as high priority, 1 1 3 4 5 5 6 7 8 9 0 1 2 1 2 3 4 5 6 7 8 0 0 0 0 0 0 0 0 0 0 1 1 1 0 0 0 0 0 0 0 0 they have their own strong case to invest in nuclear energy.

In order to assess the long term financial viability over the very long lifetime of nuclear plants, and to compare it with that of other energy sources, a clear and long term CO 2 pricing is a fundamental possibility of a “de-bundle”. If oil and indication on CO 2 prices is needed, component in the effort of bringing gas prices go too high, triggering large and perhaps also on other greenhouse environmental costs into economic effect gases. investments into coal mining, then a measurements. The question now is significant coal price drop is not how to build on the base of ETS to Since 2005, the European Union has impossible. Currently, costs of come up with a long term CO 2 price electricity generated by nuclear power implemented an Emission Trading index that is realistic and fair. Scheme (ETS), sometimes also plants and by coal fired plants are referred to as a Cap and Trade System. comparable. A sudden coal price drop The long term direction of CO 2 prices will break this balance. This system gives CO 2 spot prices and will greatly impact the financial “year ahead” prices. If the new viability of nuclear energy However, the above analysis doesn’t European energy package is adopted, investments. Given the seriousness of ETS will enable calculations on the take into consideration the the climate change issue, we have environmental factors. Pollution emission prices until 2020. However, reasons to hope some kind of long this is still a short term method, control and CO 2 emission costs are term pricing model will emerge soon. likely to become heavier, so there knowing that a nuclear plant decided If so, it will clear a lot of uncertainty in 2008 would not start operations should be more requests for clean coal for the nuclear energy industry and plants and carbon capture and storage before 2015 in the best case and has a surely accelerate its growth. lifetime of 60 years afterwards. So far, facilities. This will push up ETS is only applicable to large investment costs. The first estimations Coal are that these new clean coal fired business entities that are heavy CO 2 Among the conventional energy power plants would have at least a emitters. Critics of the system point to resources, coal is the only one that problems of complexity and 100% price increase compared to poses serious competitive threat to conventional plants. monitoring. A tax system could be nuclear energy. Coal is abundant and better adapted to the dispersed widely spread around the world. residential and small business market. Competition from publicly Financial investments and technology subsidized renewable energy All these imperfections aside, ETS is requirements are quite low to build still the most advanced mechanism in source(s) up infrastructures around coal Renewable energies that are not quantifying CO 2 costs. It is being mining, coal transportation, and coal economically competitive today are adopted in other parts of the world, fired power plants. Though coal price for example Australia and several US growing, largely thanks to public is often connected to the oil and gas subsidies. Wind, solar, biomass are states. prices, we can not exclude the

How to Sustain the Nuclear Renaissance 17 the most prominent ones. It is environment. In the past monopolistic usually already facing a ramp up estimated that $117 billion was situation, utilities had a big and stable challenge in their own countries, so it invested on the “clean tech” area, market share in their local area, is more difficult for them to respond around 10% of total investment in all usually near to 90%. Now they have to projects in other countries. forms of energy in 2007. Most of to compete with new entrants, local However, EDF, the largest nuclear these renewable energy sources have and international rivals. operator worldwide, has included big drawbacks. Biomass uses up land nuclear investment and operations in that is needed for food production. To achieve long term financial foreign countries as part of its growth Wind and solar are not schedulable, competitiveness, nuclear energy strategy. Today, EDF is obviously the so they require reserve energy from operators have to build sound preferred partner for the British grid operators. Because of their business models, carefully assess and government on its new nuclear plant relative small size, grid connections manage risks (especially demand programs. In China, many years ago, are very costly, especially for offshore risks), and optimize operations in EDF helped China Guangdong wind mills. However, under public order to succeed in the open market. Nuclear Power Group (CGNPG) in subsidy programs, utility companies starting and operating the Daya Bay have to buy a certain amount of Smooth industrial ramp up plants. The two are now joint renewable electricity at a higher price As analyzed earlier, in most parts of venturing for the construction of than from other sources. the world, except Asia, nuclear plant CGNPG’s two new EPR reactors. construction was nearly stopped for Other European nuclear operators So, should nuclear energy also 20 years. The whole value chain was also have ambitions to expand demand for subsidy? The answer is dormant. Only the active nuclear internationally. Such collaborations no. Nuclear power should be built operators have been working on between experienced and less without public subsidy. improving the security and availability experienced nuclear operators are of their plants. In many developed very helpful. There is a need for more Subsidies are necessary for some countries, vendors, suppliers, utilities, of them in order to bring the new nascent forms of renewable energies, the academic world, research and nuclear operators up to speed. especially when the Return on development, and financial Investment is quick. This said, one institutions have defocused from this Among the relatively young nuclear should always bear in mind that at the industry. The safety shocks tainted the operators, CGNPG in China and end of the day, it is the end customers nuclear energy industry with a bad KHNP in South Korea also have who pay for these additional costs. but undeserved reputation. Today nuclear exportation ambitions. This is not a sustainable business many financial institutions are model. Governments change and new reluctant to consider investment in Supply chain capacity ones may have other priorities on this field. Also, students are not The nuclear reactor vendors fund allocation. For nuclear energy, interested in graduating as nuclear worldwide have to grow their which has an exceptionally long engineers. production capacities. They comprise project lifetime and very large very heavy industry manufacturers investment needs, it is too risky to To sustain this recent nuclear with very strict quality control rely on such unpredictable public renaissance, different stakeholders procedures to follow. Their products, subsidy schemes. Actually, the need to ramp up capabilities both in nuclear vessel or steam generators, are majority of the present nuclear their own territory as well as expand gigantic steel structures measuring reactors in developed countries were into new countries. The same more than 15 meters high with walls built without public subsidies. They challenge exists in the industry of oil that are more than 15 centimeters have successful experience in and gas exploration. However, the thick, but the slightest variation in the absorbing all the costs into the particularly stringent conditions of the steel formula or a lack of quality electricity price, including provisions nuclear energy industry make it even control in welding can generate safety for future treatment of used fuels and more difficult to safely re-grow the issues. It is clear that it will take time wastes, as well as the costs for future whole value chain in a short notice. for these vendors to ramp up their plant decommissioning. This model is production capacity again. Though sound and sustainable. It should be International Collaboration vendors usually have a few years of widely adopted. There is obviously a need for large lead time from order to delivery, they and knowledgeable operators who are need to start preparations now Competition from deregulated able to take the financial, construction because there could soon be a busy market and operational risks to implement a growth period in the industry. In some parts of the world, the safety culture, and to improve utilities market is being deregulated. operations through exchange with Nuclear operators have to take a their peers. These operators are market related risk in this new

18 Energy, Utilities and Chemicals the way we see it

Most vendors are already taking I Establish a map of critical We believe that uranium supply is not positive steps: competencies a real issue. After the cold war and in

I In July 2008, Areva and Arcelor I Decide what should be provided at the context of the disarmament Mittal signed a Memorandum of national or local level and what treaties framework, the US and Russia Understanding to increase Le could be imported have agreed to transform military stockpiles into civilian use—the so Creusot’s forging capacity. According I Identify the gaps to Areva, Creusot Forge can make called “Weapons to Plough” program. I Create the right incentives to bridge 80% of a nuclear power plant's This agreement was implemented those gaps. components with its current both by diluting highly enriched capabilities, and with the new uranium and by recycling plutonium This should be a very rewarding investment, this figure would reach through MOX fuels, thus recovering exercise. The UK government has 100%. uranium and reducing fresh needs. declared: “A new fleet of reactors I In August 2008, Westinghouse would potentially create up to This program, combined with the low Electric has decided to form a joint 100,000 jobs and represent about £20 period of nuclear plants construction, venture with Shaw Group to make billion worth of business for UK created excessive stocks at various and assemble structural and companies.” stages of the fuel cycle, thus pushing equipment modules for uranium price down. Many mines Westinghouse’s AP1000 nuclear Uranium Supply were mothballed and few new ones plants. There is a widespread view that were opened. Now, as these military I Britain’s Sheffield Forgemasters is uranium supply is a threat to nuclear converted stockpiles are coming to an extending its capacity to be able to revival. This fear pushed uranium end, together with announcements of provide some key components for price up in early 2007, but it has new nuclear builds, they have pushed the AP1000 reactor. since dropped again. the price of uranium up again. I These vendors have also started to reengineer their logistics in order to deliver these big pieces of equipment all over the world. Figure 16: Uranium Price Evolution Certain countries, for example China, request these vendors to set up local joint ventures to manufacture specific 16 0 pieces of equipment, or to provide engineering capacities as well as 14 0 transferring their technological 12 0 knowledge. These partnerships can 10 0 bring together the deep know-hows ) b l / $ (

from the “old” nuclear countries and

m 80 u i

the abundant industrial and human n a r resources from the “new” nuclear U 60 countries. If well managed, it should help pull together enough resources 40 for a successful worldwide vendor capability ramp up. It needs to be 20 pointed out that the extent of 0 knowledge transfer, acceptable for 7 7 7 7 7 7 7 7 7 7 7 7 8 8 8 8 8 8 8 8 8 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 /0 1 2 3 4 5 6 7 8 9 0 1 2 1 2 3 4 5 6 7 8 9 both parties, remains an unanswered 0 0 0 0 0 0 0 0 0 1 1 1 0 0 0 0 0 0 0 0 0 question.

Aside from these big vendors, there is a need to reinvigorate or to create an industrial network of nuclear components and services providers. It applies to new nuclear countries as well as existing ones that are launching new programs. Each of these countries need to:

How to Sustain the Nuclear Renaissance 19 There is no real threat linked to Figure 17: How to bridge the talent gap in the nuclear industry by 2017? uranium supply. According to the latest edition of the world reference 17 on uranium, the so-called “Red Book ,” 100% the known to exist uranium is enough 30% Reduction in Level of Effort 90% to fuel the world's fleet of nuclear - Radical Process Re-engineering - Next Generation Technology reactors at current consumption rates 80% Process Re-engineering for at least a century. Moreover, plutonium and used uranium 70%

recycling enables a 30% decrease in p a 60% Technology Millennials G

needs. Finally, new fourth generation 7 1 0 2

reactors should use less uranium for n 50% o i t u l the same electricity output. o S

o 40% t

t r o f f E This said, we could witness some f 30% o

l e uranium supply bottlenecks linked to v e L 20% delays in opening new mines or Outsourcing increasing mine productions. This risk Staff Augmentation, Traditional 10% would be mitigated by the long lead Hires & Innovative HR time involved in the construction of 0% reactors. It gives enough time for 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 mining companies to get organized and for the operators to buffer the ups and downs with their reserve stockpiles. Decommissioning Authority. The UK These topics are discussed in detail in Competent human resources National Skills Academy for Nuclear is the Capgemini Point of View Aging workforce is a major issue. a good example of national “Preparing for the nuclear power Safety Authorities, vendors and coordination to solve human resource renaissance” 18 . operators all need to massively recruit shortages. It was established in early personnel to replace the retiring baby 2008 at the request of nuclear Re-launch nuclear related research boomers and meet growing demand. employers to address the key skills and development programs This squeeze is exacerbated by a few shortage and training challenges. It In the past few decades, nuclear factors: works on coordinating and qualifying knowledge, technologies and safety I Staff layoffs done in the past 10 industry needs with academic tools have been improved by years to control cost institutions and communicating academic and research work. There are of course still issues pending, I Students’ lack of interest in towards future students. Other engineering countries could benefit from this notably those related to safe and long experience. term disposal of nuclear radioactive I Decline of nuclear engineering wastes that need to be tackled. courses in higher education. To overcome the human resources gap, nuclear energy operators need to The French Atomic Energy In a report published in May 2008, take a holistic view. As shown in Commission has never discontinued US Nuclear Regulatory Commission figure 17, they need not only to its excellent research work. Great estimated that about 35 percent of launch specific training and achievements have been made around those working at U.S. nuclear utilities recruitment programs and retain nuclear waste transmutation and 4th will be eligible for retirement in the senior “grey hair” specialists, but also: generation reactors that would use next 5 to 10 years and that 90,000 less uranium and generate less waste. new workers will be needed by 2011. I Use new Knowledge Management tools, In many existing nuclear countries, In the UK, the government is also research and development funding I Streamline their internal processes, taking measures to meet the expected needs to be increased. Some measures high levels of demand for trained staff I Outsource non-core activities and have been announced: in the industry, by working together I Modify the working environment to with the National Skills Academy for retain the new generations of I In July 2008, the UK confirmed that Nuclear and the Nuclear employees. it will establish a National Nuclear

17 The Red Book, officially titled, “Uranium 2007: Resources, Production and Demand.” It is jointly prepared by the OECD’s Nuclear Energy Agency (NEA) and the International Atomic Energy Agency (IAEA) 18 http://www.capgemini.com/resources/thought_leadership/preparing_for_the_nuclear_power_renaissance

20 Energy, Utilities and Chemicals the way we see it

Laboratory that would play a vital are still vivid. In this context, it is Finally, the nuclear industry is very role in cleaning up the country’s remarkable that Japan has developed a technical, so it is difficult for the wide nuclear waste legacy, and also successful civilian nuclear program. public to understand its activities in contributing to the new nuclear details. In the past, nuclear build. Radioactivity can have long term stakeholders, instead of addressing the

I In North America, there are also effects on human health. The fact that people’s real concerns related to some actions taken; for example, the it is invisible further enhances people’s health, security and environment FY 2009 energy research and sense of danger. The Chernobyl protection, tended to give out very development budget requested by disaster very negatively affected the technical type of information. In the US president includes $1.4 public opinions in Europe. The 1993, to improve communication billion to promote the expansion of infamous radioactive cloud messages and channels, the European safe, emissions-free nuclear power. demonstrated that nuclear damage Nuclear Society created an association can spread far and wide through the called Woman In Nuclear (WIN). This Nuclear research institutions also need atmosphere and water. Though, at the organization has the mission to to be created in new nuclear countries end of the day, the actual damage encourage women, who usually have in order to support the industry and from the Chernobyl accident is much better sensibility on human related attract young talent. less than media and some national issues, to communicate with the authorities initially announced, the public and politicians. Today, it is a Public opinion acceptance psychological impact is huge and long worldwide organization gathering All projects to construct big industrial lasting. 2,500 members from 68 countries. facilities need to convince the general public and overcome the usual “not in Nuclear energy is a young industry. Due to the lack of effective my backyard” type of local Due to lack of knowledge, mistakes communication and mutual opposition. However, this issue is were made in the past on handling understanding with the nuclear particularly sensitive in the case of radioactive wastes. Many countries, energy industry, non-governmental nuclear plants. There are a few including Russia, the US, the UK and organizations such as Greenpeace reasons for it. France, have undertaken large clean started a media war against nuclear up programs on their old nuclear activities. Slightest incidents were In the public’s mind, civilian nuclear sites. For example, the US amplified. Distorted information activities are still linked with military Department of Energy has a large caused undue fears on nuclear nuclear activities. Memories of the multi-billion dollar program to clean industry’s threat to public health and Hiroshima and Nagasaki bombings up the Hanford site and other former environment. These media campaigns military sites. had a real impact on public opinions. Truth and facts were often lost in the flood of distorted attacks. It is Figure 18: April 08 US Opinion survey interesting to note that one of Greenpeace’ founders, Patrick Moore, changed his opinion. He declared: 100 Support for new NPP “Nuclear energy is the only large- Nuclear energy important 80 scale, cost-effective energy source that O.K. to add new NPP onexisting site can reduce these emissions while 60 continuing to satisfy a growing Build more NPP demand for power. And these days it 40 NPP safe & secure can do so safely.”

20 It is telling that public opinions are usually much more acceptant towards 0 nuclear energy in countries that are US April 08 survey results resource poor, such as France, Japan, South Korea, China and India. In many other countries, it is the combined force of climate change issues and energy supply-demand gap that tipped support in favor of nuclear energy. Equally, if not more importantly, it is also the safe operations record of nuclear facilities and better communication efforts, in

How to Sustain the Nuclear Renaissance 21 the past two decades or so, that have politicians, including French and favorably influenced general public British, are to build new plants on opinion on nuclear energy. existing sites. For this reason, local nuclear operators with available Even in countries with nuclear spaces on their existing sites became moratorium, such as Sweden, or with attractive acquisition targets. The reactor phase out decisions, such as most recent case is EDF’s take-over of Germany, public opinions are evolving British Energy at £12.4 billion. It will positively. An opinion poll conducted give EDF almost all the UK’s nuclear in July 2008 indicates that 40 percent power stations and control over most of Swedes favor continued use of the of the best sites for building more, country’s existing reactor units and giving it a dominant position for the new nuclear build if necessary. That planned revival of the UK’s nuclear compares to 33 percent in November industry. 2007 and 31 percent in May 2007. In Germany, things are also changing. In Even if public opinion is getting more January 2006, a Deutsche Bank study favorable to nuclear energy, there is argues that extending the lifetime of still a long way to go before the public all German nuclear power plants to can be truly assured about nuclear 60 years would mean adding 19,000 energy. There should be no more megawatts capacity that would nuclear accidents. Governments and otherwise have to be replaced. nuclear operators should continue to According to a recent survey clean up old nuclear sites. conducted by the German Atomic Communication skills still need Forum and published in August 2008, improvement. There is an obligation more than half of the German to provide the public with all possible population and 80% of its businesses relevant information, in an easy to are in favor of extending plants’ understand way, and in a timely operating lifetimes beyond their manner. current phase-out dates. The outcome of the 2009 general elections will be The stakes are very high here. Only crucial for the future of nuclear power with public opinion acceptance will in Germany. the nuclear energy industry have occasions to materialize and Local public opinion: The NIMBY demonstrate its enormous potential. If (not in my back yard) syndrome exists the public is not convinced, national mostly for new nuclear plants. Local and local opposition could deteriorate population demonstrations resulted in the economics of nuclear energy by construction delays and sometimes creating big project overruns. At the even cause projects to be dropped extreme, it could kill the nuclear completely, as the Plogoff project in energy programs all together, therefore France. However, the population depriving some countries of a living in areas near existing well- schedulable, financially competitive operated plants is generally in favor of and CO 2 free energy source. nuclear. They have positive experiences, enjoying the creation of jobs, small businesses and tax related financial benefits. This is why decisions adopted by many

22 Energy, Utilities and Chemicals the way we see it

Conclusions

This overview shows that there is a The industry should draw on the real revival of the nuclear energy lessons of the past. Nuclear energy is industry. It is triggered by the a complex industry with lots of following trends: inherited risks. There are clear

I Population and economic growth is prerequisites that need to be in place creating high pressure on energy before this worldwide nuclear supply renaissance can sustain and can turn into a success. We need: I Energy security of supply is becoming of strategic importance I Effective Nuclear Non-Proliferation control I Huge investments, of the right kind, are needed to solve the energy crisis I Stringent Safety Management

I I Climate change has become a major Mastering exceptionally long project concern. lifetimes and big investments I Ensuring nuclear energy’s financial In order to sustain this wave of competitiveness

nuclear renaissance, each country’s I Smooth industrial ramp up governments, local authorities, I Public opinion acceptance. financial institutions and mainly the whole value chain of the nuclear With these prerequisites in mind, energy industry have to get organized operators, vendors and financial quickly. This is true in countries with parties can better apprehend the existing nuclear programs as well as in multidimensional challenges they face new nuclear countries. At the same and make necessary preparations at time, an international collaboration is very early stages. With objective needed. All nuclear energy assessments and proactive actions development efforts need to be from all the stakeholders, we have planned and coordinated with a reason to believe that this time, global perspective. Fragility in one or nuclear energy will be able to deliver two countries, for example safety its huge potential. accidents or breach of nuclear non- proliferation, could bring devastating Our planet needs nuclear chain reactions to the entire industry energy. Success is therefore across the world. This means even if an obligation. competition exists in the nuclear energy sector, there is a need for solidarity.

How to Sustain the Nuclear Renaissance 23 About Capgemini

Capgemini, one of the With 1.15 billion euros revenue in 2007 world’s foremost providers and 10,000+ dedicated consultants of consulting, technology and engaged in Energy, Utilities and outsourcing services, enables its clients to Chemicals projects across Europe, North transform and perform through America and Asia Pacific, Capgemini's technologies. Capgemini provides its Energy, Utilities & Chemicals Global clients with insights and capabilities that Sector serves the business consulting and boost their freedom to achieve superior information technology needs of many of results through a unique way of working the world’s largest players of this —the Collaborative Business Experience industry. —and through a global delivery model called Rightshore ®, which aims to offer More information about our services, the right resources in the right location at offices and research is available at competitive cost. Present in 36 countries, www.capgemini.com/energy Capgemini reported 2007 global revenues of EUR 8.7 billion and employs over 86,000 people worldwide.

This point of view has benefited greatly from suggestions and comments from Hervé Griffon, Capgemini Energy, Utilities and Chemicals Global Sector Deputy Leader, and Philippe Coquet, Capgemini Global Sector Utilities Strategy Lab Research Lead.

Contacts Colette Lewiner [email protected]

Alva Qian [email protected]

Copyright © 2008 Capgemini. All rights reserved. www.capgemini.com/energy