SMR Financing and Economics. The Nuclear Option: Is Small Scale Nuclear Energy an Option for Alaska?

Transcription

1 SMR Financing and Economics The Nuclear Option: Is Small Scale Nuclear Energy an Option for Alaska? Craig Welling Office of Nuclear Energy U.S. Department of Energy December 2010

2 Uncertainties in Nuclear Power Economics Calculating financial costs for new nuclear power plants involves various uncertainties and risks: Construction cost uncertainties, including uncertainties associated with overnight costs, construction duration, labor productivity and total financing costs Operating cost risks, including risks associated with fuel cost, operating and maintenance cost, and plant capacity factor Electricity price uncertainty, for example, with carbon pricing and demand growth projections (i.e., slower than expected economic recovery) Modular construction may reduce risks associated with construction costs 2

3 Modular Construction Components can delivered to the site as modules that can be assembled on site with less construction impacted by site related factors. SMRs can be constructed incrementally Incremental builds allow for revenue generation from early units to assist in financing follow-on units 3

4 Estimated Overnight Capital Costs Total Overnight $/kw (2010 Dollars) EPRI (2009) DOE ( 2009) EIA ( 2010) Large Reactor estimated costs 4,063 4,544 5,284 SMR generic estimated costs Generic estimate (2010) example Total Reactor Costs $ (2010 Dollars) NuScale (45MW) B&W (125MW) Single Reactor $225 M $625 M Two Reactor Cluster $450 M $1,250 M Four Reactor Cluster $900 M $2,500 M These calculations are general estimates and do not reflect savings for multiple reactors nor do they reflect specific vendor statements. A six pack for NuScale and a four pack for B&W would be probable sweet spots. 4

5 Financing Arrangements Potential business models: - Traditional State Model: Return on investment is guaranteed by state electricity regulator; e.g., United States ( 60s 70s) - Loan Guarantee Model: Return on investment is backed by Government loan guarantee; Vogle Economic Model: Return on investment mostly backed by long-term Power-Purchase Agreements (PPAs) with industrial and public customers; - Hybrid Model: Return on investment partially backed by long-term PPAs with industrial and public customers and the majority sold at competitive prices to a variety of customers; e.g., Canada (Bruce Power) and United States (South Texas 3-4) 5

6 Financing Arrangements (cont d) While government financial support is desirable its limited availability has led to other options, including: - Corporate self financing - Establishment of corporate partners - Bond issuance Possible roles of government are to: - Act as a loan guarantor - Provide tax incentives - Provide a clear licensing scheme to reduce unexpected regulatory cost overruns 6

7 Financial Factors Factors in evaluating investor risk: - Existence of a qualified reactor selection process - Availability of loan guarantees - Quality of the organization of the endeavor - Existence of an environmentally sound approach - The economic environment Credit risk peaks during construction due to: - Cost overruns and delays - High costs relative to market capitalization of owners Principle rating metrics include: - Adequacy of cash flow relative to debt and interest - Capital adequacy and liquidity - Assurance and timelines of cost recovery Other - Only recent use of the NRC COLA process 7

8 Potential Risk Mitigation Measures Financial institutions are more willing to extend credit to borrowers who have given consideration to: Alternatives Better distribution of risk Project flexibility (particularly in the event of regulatory delay) Fuel management Small modular reactors (SMR) could improve project flexibility and accelerate revenue flows While SMR have higher economies of scale, advantages in unit timing, build schedule, simplified plant design, mass production efficiencies and multiple-unit siting could render their overnight cost competitive with larger reactors 8

9 Illustrative Example of a potential delay in a Large Units 9

10 Economy of Scale Economic Factors that Contribute to Offsetting the Economy of Scale for a 4-Unit SMR Plant Compared to a Single Large Reactor Plant 10

11 Natural Gas and Nuclear The cost of natural gas appears to be a driver in decisions regarding acquisition of generation capability Natural gas costs will be affected if there is a carbon tax, which is uncertain Natural gas prices are subject to more volatility than operating costs associated with nuclear energy Operating Costs for Nuclear Energy include Plant amortized cost Uranium fuel costs Staffing costs Maintenance costs 11

12 Uncertainty in Natural Gas Prices $20 $18 $16 $14 $12 $10 $8 Henry Hub Spot Prices $/M BTU 2011$ Spike I 12/'00 Spike II 8/'03 Spike III+ 9-12/'05 Spike IV 6/'08 $6 $4 $2 $

13 Nuclear Power Human Resource Tool The NPHR tool projects workforce requirements for a nuclear power program The model is based on a model of a nuclear power program and integrates multiple data sets on workforce composition and structure NPHR has been configured for Existing programs New programs Global nuclear power growth 13

14 Human Resource Modeling Tool - Scope For new programs, the model reflects three phases of program development Prior to a decision to pursue nuclear a nuclear program Prior to a Bid Operation The model includes staffing for NEPIO (Nuclear Energy Program Implementing Organization) Construction Regulatory Operations The model includes educational pipelines for Professional (Engineers) Technicians Skilled labor Not currently included are staffing for fuel services and plant decommissioning 14