Nuclear Fleet Strategies

Edward Kee
5 Nov 2008

Sponsored by Nuclear Engineering International

Crowne Plaza – London Docklands
Western Gateway
Royal Victoria Dock
London E16 1AL
Conference manager: Linda Dunkley, Progressive Media Markets Ltd
+44(0) 208 269 7812
ldunkley@progressivemediagroup.com

[Photo: Doel nuclear power plant in Belgium]

1
 These slides do not provide a complete record of the
presentation and discussion.
The views expressed in this presentation are mine;
these views may not be the same as those held by
CRA’s clients or by others at CRA.

2 Nuclear Fleet Strategies

I am subject to several Non-Disclosure Agreements (NDAs) with clients.

The material in these slides is in full compliance with those NDAs.
The oral discussion of these slides must also comply with those NDAs, so that I
may not be able to answer all your questions.

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Introduction

• Nuclear fleet strategy was (is) successful in France

• But, world has changed since French fleet was built
• Is the nuclear fleet concept relevant (or even possible) today?
• Yes - a 21st Century virtual nuclear fleet approach is evolving

3 Nuclear Fleet Strategies

3
Agenda

• Eskom’s nuclear fleet aspirations

• Nuclear fleet concept
– Review of the French nuclear fleet
– Fleet benefits
• Feasibility of the French nuclear fleet approach today
• Virtual fleets

4 Nuclear Fleet Strategies

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 Eskom’s nuclear fleet aspirations

• Large capacity build

– 40,000 MW of new capacity
planned by 2025
– 20,000 MW in new nuclear fleet
• Nuclear fleet strategy
– 10 EPR units or 15 AP1000 units,
plus PBMR units in later years
• Eskom faces several issues
– Large CapEx investment, even with single nuclear plant
– Nuclear fleet purchase requires large financial commitment
– Rating agency action in August reduced funding ability
• Examined costs, benefits, and approaches to nuclear fleets

5 Nuclear Fleet Strategies

In 2008, I provided advice and consulting assistance to Eskom on their nuclear

procurement and investment process.
The public strategy of Eskom is to build a new nuclear fleet, starting with the
Nuclear 1 power station.
The size of the Eskom nuclear fleet suggested that lessons might be available
from the French nuclear fleet experience.
We provided a review of the nuclear fleet approach in France and other
countries; an analysis of the nuclear fleet benefits; and a review of the linkage
between nuclear fleet benefits and nuclear fleet procurement.

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 Nuclear fleet concept

Multiple
No fleet Multiple identical units
units

Single nuclear Smaller fleet Single owner

unit/plant operators Sequential Bulk
Common
owner build purchase
Nuclear fleets, simulators, special
Some multi- composed of tools, training
company efforts to multiple reactor Co-ordination of Multiple Single procurement
gain fleet benefits types (BWR and upgrades, procurements and vendor
through cooperation PWR and other), maintenance,
reactor designs, Potentially Coordinated
US nuclear constructors, and Fungible operators, coordinated construction,
management vintages maintenance construction mobilization
companies a more teams, outage benefits
formal approach to A mix of units built teams Learning curve
multi-company by owner and benefits may not be Learning curve
efforts acquired Operational captured by owner benefits captured
improvement
Some ability to Benefits from single through learning Financial flexibility, Large order means
share learning overhead, across fleet vendor competition, upstream
through industry purchasing, more options for infrastructure
groups engineering, and buyer
Large financial
management
commitment, less
flexibility

6 Nuclear Fleet Strategies

This picture provides a simplified version of the framework for examining

different approaches to nuclear fleets.
A key insight is that there are significant nuclear fleet benefits that do not directly
depend on the procurement approach.

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 Nuclear Fleet Concept

French nuclear fleet build-out (MWe)

8,000 80,000

7,000 1958 - Framatome 70,000

founded; obtains
Westinghouse 1976 - Ten 900
6,000 PWR license MWe units and 60,000
twenty 1,300 MWe
units ordered
5,000 Four 1,500 MWe 50,000
N4 units

4,000 1974 - OPEC oil 40,000

crisis; Sixteen 900
MWe units ordered
3,000 30,000
1968 - Seven 900
2,000 MWe units 20,000
ordered

1,000 10,000

0 0
19 8
60

19 2
64

19 6
68

19 0
72

19 4
76

19 8
80

19 2
19 4
86

19 8
19 0
92

19 4
19 6
98

20 0
02
5

8
8

8
9

9
9

0
19

19

19

19

19

19

19

19

19

20
Annual Cumulative
Source: CRA analysis

7 Nuclear Fleet Strategies

This is the capacity (in MWe) of new LWR nuclear plants that were placed into
commercial operation in France from 1958 to 2002.
It is focused on conventional LWR technology (for France, this is PWRs), so that
the early gas-cooled reactor prototypes, the fast breeder reactors, and
retirements are not included.

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 Nuclear Fleet Concept

French nuclear fleet strategy

• OPEC oil crisis was primary motivation for French government
– EdF nuclear fleet strategy was the French national nuclear strategy
– Resources of French government were committed to nuclear
– French government influenced other sectors of the economy
– French government controlled the electricity industry
• France made a national investment in nuclear value chain - supported by
bulk reactor purchases
– Uranium mining, milling and processing
– Uranium enrichment; starting with diffusion and moving to centrifuge
– Fuel design and fabrication
– Forging facilities for reactor pressure vessels and other forged components
– Various components, systems and engineering for nuclear plants
– Spent fuel reprocessing and MOX fuel fabrication
• The French nuclear supply chain is now largely consolidated into Areva

8 Nuclear Fleet Strategies

The French nuclear fleet was the result of a coordinated national government
effort as France sought to end its dependence on imported energy after the
OPEC oil shocks in the 1970s.
EdF, the government-owned electric utility, made large single-design fleet
purchases from government-owned nuclear vendors and constructors.
A non-national utility, a commercial company, or even a smaller country might
not be able to do this.
This approach was so successful that the French national nuclear team also
exported nuclear plants (e.g., Eskom in South Africa, Daya Bay in China, and
Belgium). These export units expanded the French nuclear fleet, even though
the actual units were owned by others and located outside France.
The nuclear industry of France today is the result of earlier national investment
in the nuclear industry, both in the nuclear power plant fleet and in the
commercial and physical infrastructure and supply chain needed to build the
nuclear fleet.
Today, the French nuclear industry (through Areva) is seeking to gain additional
fleet benefits by offering their own standard PWR design (the EPR, supported
by the French nuclear industry supply chain) to other countries.

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 Nuclear Fleet Concept

Nuclear fleet benefits

Organization Multiple Learning Industry

Volume Mobilize
& Identical Curve &
Orders Teams
Management Units Effects Employment
A single • Training Learning from: Volume orders Sequencing of French nuclear
organization may allow construction is industrial
• Simulator • People
with a unified upstream key development is
involved in
approach and • Operators and component model
construction Teams move
economies of management suppliers to
and operation from one Investment in
scale to invest in longer
• Refueling of multiple units project to the new production
accomplish: production lines
outage skills & next without facilities
• Modification of due to bulk
• Training equipment interruption
the design or procurement Over time, such
(also may allow
• Purchasing • New the construction local suppliers
Volume orders simultaneous
procedures & approach and should be able
• Management may bring work on
equipment schedule to use their
discounts from multiple units)
• Engineering modifications experience (and
• Documenting NPP vendors
Teams could their own
• Regulatory • Shared spare and sharing that reflect
work on similar learning curve
affairs parts, special lessons learned expected
tasks for many benefits) to
tools, and learning curve
• Vendors build units, allowing become
strategic spares benefits and
in learning for significant competitive
upstream
later bids commitment to suppliers in the
component
hiring & training export market
savings

9 Nuclear Fleet Strategies

This chart shows some of the benefits of a nuclear fleet.

Many of these nuclear fleet benefits are available without the full French national
fleet approach.
One example are the US nuclear fleet operators. These companies have built
or acquired nuclear fleets with units of differing designs and vintages, yet have
achieved many nuclear fleet benefits by adopting Organization and
Management approaches.

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 Is the French approach feasible today?

• Role of Government
– French fleet based on Government sponsorship, investment, and control
– Only China and Russia have a nuclear fleet strategy today
– Smaller fleets in Japan and Korea have strong government involvement
• Few utilities could commit to nuclear bulk purchase today
– High cost and high perceived risk
– Few new nuclear plans involve bulk purchases
• Bulk reactor procurement has risks
– Little buyer bargaining power after initial decisions
– May be little competition for on-going costs (e.g., outage services)
• Hard to predict the winning world standard reactor design

10 Nuclear Fleet Strategies

France built a successful fleet based on its own internal purchases.

Today, only Russia and China are adopting the French nuclear fleet approach.
Both countries have strong government control of the entire economy, similar to
France in the 1970s and 1980s.
Russia is more active in the export market, with China more focused on the
internal fleet build and localization of imported reactor designs.
Today, few countries with market economies could undertake the French
nuclear fleet approach and it would be even more difficult for private utilities to
take this approach.
The French were also “lucky” in their choice of PWR technology. France had
completed several smaller PWR plants and decided to scale up this design for
its fleet. The PWR design has proven to be a good one, even if it is not the best
reactor design in theory.
In the world of real reactors, experience and learning mean a lot.
While there may be some new reactor designs that promise to be better than the
PWR design, these new designs remain theoretical and do not have the many
decades of experience across hundreds of actual units that has refined the
world PWR nuclear fleet.

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 Global reactor design race

AP1000 4 12 2
VVER 2 6 10
EPR 2 2 4 3
ABWR 4 3 2 &

ESBWR 6
APR1400 2 2
USAPWR 2
0 5 10 15 20
In operation Under construction Under contract
COL filed (US) Design selected
Source: CRA analysis; Updated 15 October 2008

11 Nuclear Fleet Strategies

This chart shows global Generation III reactor plant development.

There are several insights from this chart:
1. There are only a few new reactor plants in construction today, despite the
“nuclear renaissance”
2. The relatively large number of competing designs seems to contradict the
new industry “standard designs” approach – how many reactor designs is too
many?
3. A lot of the new units on this chart are in the US, where no utility has
financially committed to invest until an NRC license is issued (expected in
about 2012); it is possible that some of these new US nuclear units will not
be built.

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 Very different ranking without US units

VVER 2 6 10
NB: Given the recent separate competitive offerings
ABWR 4 3 by GE/Hitachi and Toshiba/NRG, the existing units
might be divided into two groups

AP1000 4

EPR 2 2

APR1400 2 2

0 5 10 15 20

In operation Under construction EPC contract Design selected

Source: CRA analysis

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Outside the US, there are 6 Generation III units built and operating and 17 under
construction.
The two designs that are leading, the Russian VVER and the ABWR could be
broken down into several categories by design detail and by vendor.
The Russians offer several versions of the advanced VVER, the AES-91,
AES-92 and AES-2006.
The AWBR was built by several companies in Japan and there are two
different versions offered in the market today (the GE-Hitachi version and
the Toshiba version). Also, the 3 ABWR units under construction include
the 2 Lungmen units in Taiwan that were started in 1997.
Bottom line: Reactor buyers should think very carefully about the design and
vendor that they select. The global fleet benefits might be significant if a popular
design is selected, but there are no clear winners yet.

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 Virtual global nuclear fleets

• Multiple identical nuclear units, but different owners

• Nuclear fleet benefits through:
– Global vendor arrangements
– Formal, member-only, users groups who share learning and
investment in studies and special equipment
– Vendors bring learning in early units to bids for later units
– Public information about issues and problems
• Owners of units gain benefits by sharing:
– Construction and design issues for new units
– Safety, procedures, and equipment issues for operating units
– Special tools, strategic spares, other items
– Purchasing of services or other items

13 Nuclear Fleet Strategies

The move to a global standard design approach is an attempt to capture some

of the nuclear fleet benefits that were created in the French nuclear fleet build
(e.g., large orders, long production lines for component manufacturing, etc).
Unlike the French nuclear fleet approach, the market today consists of multiple
buyers in multiple countries.
Owners and vendors seek to gain some of the benefits that a single large fleet
purchase would bring – these benefits will come from a combination of the
design selected, the timing and location of a new plant, and the negotiated
contracts associated with the purchase.
The virtual global nuclear fleet approach will not be easy.
Different electrical frequency standards mean that each design will have
a 50 Hz and a 60 Hz variant (this means different turbines, generators,
pumps, electronics, and even reactor safety systems).
Some countries use metric measurement and some do not. A standard
design must either have a metric and a non-metric variant or a single
design with converted measurements (i.e., if metric was the original
design standard, the non-metric measurements will be in fractions).

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 Virtual global nuclear fleets - issues

• How will early adopters/buyers of new designs get benefits

from learning that will accrue to later buyers?
• Which designs/vendors will win & stay in the game?
• How many world units are needed to get fleet benefits?
• Will formal owner/user groups (e.g., APOG in US) raise
competition issues?
• Fleet benefits and competition in conflict
– Fewer designs/vendors – larger world fleets and more fleet benefits
– More design/vendor competition – more competitive prices
– Vendor business models may or may not support virtual fleets

14 Nuclear Fleet Strategies

The global virtual nuclear fleet concept is not well developed yet.
Reactor buyers may not fully realize their own options with respect to a larger
fleet where decisions by other buyers are important. Vendor actions are being
driven, in part, by attempts to gain nuclear fleet benefits for themselves.
Clearer thinking about the virtual global nuclear fleet concept can lead to a
stronger industry and more gains for all participants.
Each buyer of a new nuclear power plant must select a reactor design; this
reactor design selection means that the buyer is a part of a virtual global nuclear
fleet.
The buyer must look beyond its own requirements and examine the benefits and
costs associated with membership in the global nuclear fleet (big or small) that
is associated with each reactor design.

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 Edward Kee
Vice President
CRA International
1201 F Street, NW
Washington, DC 20004
(202) 662-3953
ekee@crai.com

15 Nuclear Fleet Strategies

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