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SMRS: THE ECONOMICS AND CHALLENGES, 24 APRIL 2012 1 / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / /

SMRS:

THE ECONOMICS

AND CHALLENGES 2ND ANNUAL SMALL MODULAR REACTOR

CONFERENCE, COLUMBIA, SC

24 APRIL 2012

CHRIS GADOMSKI, LEAD ANALYST, NUCLEAR

SMRS: THE ECONOMICS AND CHALLENGES, 24 APRIL 2012 2 / / / /

ABOUT BLOOMBERG NEW ENERGY FINANCE

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MARKETS SERVICES


CONTENTS

1. The economics: Q2 2012 assessment

2. Major challenges

4. Crititical technical and commercial factors

3. Market opportunities


FOSSIL TECHNOLOGY LCOES ($/MWH)

Source: Bloomberg New Energy Finance Note: Prices are in nominal dollars

CCGT

Coal

CCGT w/CO2

Coal w/CO2

0

20

40

60

80

100

120

140

Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2009 2010 2011 2012


SOLAR TECHNOLOGY LCOES ($/MWH)


0

50

100

150

200

250

300

350

Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2009 2010 2011 2012

STEG - Parabolic Trough STEG - Parabolic Trough w/StorageSTEG - Tower & Heliostat STEG - Tower & Heliostat w/StorageSTEG - LFR PV - Thin FilmPV - c-Si PV - c-Si Tracking


WIND TECHNOLOGY LCOES ($/MWH)


Wind - Onshore

Wind - Offshore

0

50

100

150

200

250

Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2009 2010 2011 2012


LEVELISED COST OF ELECTRICITY, Q1 2012 ($/MWH)

Source: Bloomberg New Energy Finance

Note: Carbon forecasts from the Bloomberg New Energy Finance European Carbon Model with an

average price to 2020 of $33/mtCO2. Coal and natural gas prices from the US Department of Energy EIA

Annual Energy Outlook 2011 and internal forecasts. Percentage change represents change from Q4 2011.

0 100 200 300 400 500

Natural Gas CCGT

Coal Fired

Nuclear

Landfill Gas

Geothermal - Flash Plant

Large Hydro

Small Hydro

Wind - Onshore

Geothermal - Binary Plant

Municipal Solid Waste

Biomass - Incineration

Biomass - Anaerobic Digestion

PV - c-Si Tracking

Biomass - Gasification

PV - Thin Film

PV - c-Si

STEG - Tower & Heliostat w/storage

Wind - Offshore

STEG - Tower & Heliostat

STEG - Parabolic Trough + Storage

STEG - LFR

STEG - Parabolic Trough

Marine - Tidal

Marine - Wave

LCOE BNEF 2011 EU-ETS EUA Forecast Q1 2012 Central Scenario Q4 2011 Central Scenario

-12%

+5%

-

+4%

-

-

-

+7%

799 -

740 -

+5%

+5%

+6%

+1%

-

+6%

-13%

-

-8%

-

-

+3%

-

-

NOAK

SMR


CONTENTS


2. Major challenges

4. Crititical technical and commercial factors



2. MAJOR CHALLENGES FACING NUCLEAR

Cheap and abundant ‘clean’ natural gas

Demand erosion

Fukushima backlash

Renewable investment

1.

2.

3.

4.


0

2

4

6

8

10

12

14

162

00

2

20

04

20

06

20

08

20

10

20

12

20

14

20

16

20

18

20

20

Historical

BNEF forecast

HISTORICAL AND PROJECTED GAS PRICE FORECASTS,

2002-20 ($/MMBTU)



NO MATERIAL UPSIDE TO PRICES IN THE SHORT TERM…

Working gas in underground storage (Bcf)

Source: Bloomberg New Energy Finance, EIA

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52

2007-10 range 2011 2012 actual

2012 estimate 2013 estimate

Physical storage limit


ANNUAL AVERAGE WHOLESALE PRICE FORECASTS BY

REGION, 2012-20


Wholesale price ($/MWh) Gas price ($/MMBtu)

0

1

2

3

4

5

6

7

8

0

10

20

30

40

50

60

70

80

2012 2013 2014 2015 2016 2017 2018 2019 2020

PJM

NY

MISO

CA

SPP

TX

Gas

Note: Gas price is our base case forecast of Henry Hub.

NOAK SMR


-100

-80

-60

-40

-20

0

20

40

60

80

100

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Supply

Demand

US SUPPLY AND DEMAND, 2010-20 (BCFD)

Source: Bloomberg New Energy Finance, EIA, AL OGB, AOGC (AR), COGCC (CO), LA DNR, NM OCD, OCC (OK),

PA DEP, TRRC (TX), UT DNR, VA DMME, WOGCC (WY), WV DEP

-100

-80

-60

-40

-20

0

20

40

60

80

100

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Other

Eagle Ford

Marcellus

Woodford

Fayetteville

Barnett

Haynesville

CBM

Gulf of Mexico

Conventional (gas)

Conventional (associated)

Power

Industrial

Residential & commercial

Other

LNG exports

Net imports

Supply

Demand

Net imports

-100

-80

-60

-40

-20

0

20

40

60

80

100

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Other

Eagle Ford

Marcellus

Woodford

Fayetteville

Barnett

Haynesville

CBM

Gulf of Mexico

Conventional (gas)


Power

Industrial


Other

LNG exports

Net imports

Supply

Demand

Net imports

-100

-80

-60

-40

-20

0

20

40

60

80

100

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Other

Eagle Ford

Marcellus

Woodford

Fayetteville

Barnett

Haynesville

CBM

Gulf of Mexico

Conventional (gas)


Power

Industrial


Other

LNG exports

Net imports

Supply

Demand

Net imports

Sources of supply

Sources of demand

Balance -100

-80

-60

-40

-20

0

20

40

60

80

100

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Other

Eagle Ford

Marcellus

Woodford

Fayetteville

Barnett

Haynesville

CBM

Gulf of Mexico

Conventional (gas)


Power

Industrial


Other

LNG exports

Net exports

Supply

Demand

Net imports


JAPAN NUCLEAR CAPACITY: 2010 AND PROJECTED GROWTH

VS. NO NEW BUILDS, ASSUMING 40-YEAR OPERATING LIFE (GW)

Source: Bloomberg New Energy Finance, METI

49

6468

36

22

0

10

20

30

40

50

60

70

80

1970 1980 1990 2000 2010 2020 2030

2001-2010

1991-2000

1981-1990

1971-1980

1966-1970


GERMAN NUCLEAR CAPACITY, 2010-23 (GW)

Source: Bloomberg New Energy FInance

0

5

10

15

20

25

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Biblis A, Biblis B, Brunsbuttel,

Isar 1, Krummel,

Necharwestheim 1, Philippsburg

and Unterweser in 2011

Grafenrheinfeld

by end of 2015 Gundremmingen-B

by end of 2017 Philippsburg-2

by end of 2019

Grohnde, Gundremmingen C

and Brokdorf by end of 2021

Isar 2, Emsland

and

Neckarwestheim 2

by end of 2022


FRENCH PEAK DEMAND-SUPPLY OUTLOOK TO 2025

WITH NO LIFE EXTENSIONS (GW)

Source: RTE, Bloomberg New Energy Finance

0

20

40

60

80

100

2011 2014 2017 2020 2023

Nuclear life extension

Peak imports

Baseload imports

Oil + OCGTs

CCGT

Coal

Cogen + Other RE

Wind

Hydro

Nuclear

Peak exports

Winter reference peak

Baseload exports

Baseload demand


REPLACING NUCLEAR GENERATION ELECTRICITY DEMAND AND GENERATION (TWH/YR)


478520 542

584 584

+59 -17 -158

+34

+192 -27

64

64

2011 Electricity demand

Expected demand growth

Additional EEmeasures

2025 Electricity demand

2011 Electricity generation

Nuclear capacity shutdown

Increased nuclear load

factor

New renewable energy

generation

Available surplus

generation

2025 Electricity generation

DEMAND GENERATION

Implementationneeded

Planned / Projected

Export - Imports+ Pumped storage

consumption

Domesticconsumption


GLOBAL NEW INVESTMENT IN CLEAN ENERGY BY

SECTOR ($BN)


Note: Includes corporate and government R&D, and small distributed capacity. Adjusted

for re-invested equity. Does not include proceeds from acquisition transactions

13.8 16.3 20.237.8

57.4 58.1

100.2

136.6

13.423.5

32.2

50.9

67.673.8

90.1

74.9

9.6

15.5

37.4

36.1

32.3 21.7

21.8

19.8

12.0

11.1

12.8

15.6

16.6 18.6

23.2

19.2

$54bn

$75bn

$113bn

$153bn

$187bn $189bn

$247bn$260bn

4.8

8.1

10.4

12.4

13.2 16.5

11.7

9.6

2004 2005 2006 2007 2008 2009 2010 2011

Other

Energy smart technologies

Bioenergy

Wind

Solar

Internal Note: Includes all add-ons (Corp R&D, Gov R&D, SDC and adjustment for re-inv equity)


FORECAST LARGE PV PROJECT CAPITAL COST, 2010–20 ($/W)


Note: Based on historical experience curves for crystalline silicon modules and other

components, and the prices in the mature German market. 2010 dollars. Assumes Bloomberg

New Energy Finance short-term build forecasts to 2013, 20% new build growth after that.

$3.02

$2.63

$2.32

$2.11$1.98

$1.87$1.77

$1.68$1.6 $1.52 $1.45

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Module Inverter Balance of plant Engineering, procurement & construction other


0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

800 1000 1200 1400 1600 1800 2000

kWh/kW/year

More sun

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

800 1000 1200 1400 1600 1800 2000

kWh/kW/year

More sun

RESIDENTIAL ELECTRICITY PRICE 2012, INSOLATION,

RESIDENTIAL PV LCOE 2015

$/kWh

Note: LCOE based on 6% weighted average cost of capital, 0.7%/year module degradation, 1%

capex as O&M annually. $2.34/W capex assumed for 2015

Spain

Germany

Italy

Denmark

France

Israel

United Kingdom

Russia

Turkey

Saudi Arabia

Canada

Mexico

Argentina

California

Texas

Hawaii

New Jersey

Brazil

North China

South

China

North India

South India

Japan

South Korea

Indonesia

Australia

0.00

0.40

EMEA ASOC AMER25GWPotential

residentialPV market

Source: Eurostat, grid operators, Bloomberg New Energy

Finance


BALTIMORE GAS AND ELECTRIC PROJECTED PEAK DEMAND REQUIREMENTS, 2009-23 (MW)

(Demand-side

management)

But what about

electric cars?

Source: BGE via Maryland DSM study

0%


CONTENTS


2. Major commercial challenges

4. Critical technical and commercial factors



3. MARKET OPPORTUNITIES

Fossil fuel generation replacement, eg. US & UK

Process heat for biofuels

Power and desalination, MENA

Oil sands, Alberta

1.

2.

3.

4.


UK GENERATION CAPACITY, 2012-30 (GW)


0

20

40

60

80

100

120

140

160

2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

Biomass & waste

CCGT

CCGT w/CCS

Coal

Coal w/CCS

Hydro

Marine

Nuclear

Oil & OCGT

Solar

Wind offshore

Wind onshore


UK PLANNED RETIREMENTS CAPACITY (GW)


0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

2012 2013 2014 2015 2016

CCGT

Coal

Nuclear

Oil


MENA TECHNOLOGY AND POLICY DRIVERS

Rapidly growing energy demand – at least 5% CAGR 2010-20

Contracts signed for large reactors

Economics – lost opportunity cost for a barrel of oil

Water – 79% of installed global desal capacity in 2020

1.

2.

3.

4.


ELECTRICAL POWER GENERATED FROM OIL (GWH)

Source: World Bank Data

0

20,000

40,000

60,000

80,000

100,000

120,000

Saudi Kuwait Iraq Egypt Libya

That totals 246TWh…

55%

72% 98%

19%

55%


DESALINATION OPPORTUNITIES IN MENA

(M3/CAPITAL/YEAR)

Source: ESCWA ESCWA: Economic And Social Commission For Western Asia

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000N

ort

hA

meri

ca

Wo

rld

SE

Asia

Iraq

Syri

a

Sud

an

ES

CW

A

Leb

an

on

Om

an

Egypt

Pale

stin

e

Yem

en

Jord

an

Bah

rain

Sau

di

Ara

bia

UA

E

Qata

r

Kuw

ait

TOTAL RENEWABLE WATER RESOURCES PER CAPITA

DESALINATION OPPORTUNITIES?


ENERGY INPUT COST OF DESALINATION PER M3

Source: Data compiled by ESCWA

Note: Assumes energy accounts for 75% of water supply costs. Plants with different

capacities may use different amounts of energy. Prices are averages, representative of

average costs.

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

$0 $30 $70 $110 $150

MSFsa

MSFco

MEDsa

MEDco

RO

Energy cost per m3 of desalinated water

Opportunity cost of a barrel of oil


DESALINATED WATER PRICES USING DIFFERENT POWER

SOURCES ($/M3)

Source: IAEA, Bloomberg New Energy Finance

4.72

1.92

1.29 1.06

3.90

1.63

1.15 0.96

2.51

1.19

0.88 0.79

2.24

1.10 0.87

0.75

1.43

0.87 0.75 0.70

Oil Coal Nuclear Natural Gas

MSF MSF-RO MED MED-RO RO


ALBERTA OIL SANDS PROJECTED PRODUCTION

Source: CERI's 2011 Canadian Oil Sands Supply Costs and

Development Projects (2011-2045) study number 128.


CANADIAN OIL SANDS NATURAL GAS DEMAND (MCF/D)

DRIVING CO2 EMISSIONS (CO2 EQ. MT/YEAR)

Source: CERI's 2011 Canadian Oil Sands Supply Costs and

Development Projects (2011-2045) study number 128.

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

Nat Gas Consumption

CO2 Emission

2007 2012 2017 2022 2027 2032 2037 2042

(MMcf/d)

(CO2 eq. MT/year)

Cost of compliance

in 2022: C$3bn+

Total compliance

through 2045:

C$200bn


RENEWABLE FUELS STANDARD (RFS-2), 2012

(BN GALLONS)


0

5

10

15

20

25

30

35

40

2008 2010 2012 2014 2016 2018 2020 2022

Cellulosicbiofuel (d)

Otheradvancedbiofuel (c)

Biomass-baseddiesel (b)

Corn-basedethanol (a)

21bn gallons/year by 2022 of

new “advanced biofuels”

capacity needed


RFS-2 TECHNOLOGIES


TOTAL RENEWABLE FUELS

SUGAR

FERMENTATIONTRANSESTERIFICATION

STARCHFERMENTATION

GASIFICATION – FERMENTATION

GASIFICATION – FT SYNTHESIS

PYROLYSIS

HYDROTREATMENT

OTHER RENEWABLE FUELSADVANCED BIOFUELS

CELLULOSIC BIOFUEL OTHER ADVANCED BIOMASS-BASED

BIOBUTANOLETHANOL

ENZYMATIC HYDROLYSIS

ADVANCED BIOCHEMICALBIOBUTANOL

ACID HYDROLYSIS

ALGAE FEEDSTOCK TECHNOLOGY

ETHANOL/BIODIESEL OTHER BIODIESEL

Algae feedstock technologies

Thermochemicaltechnologies

Renewable fuel type

1-generation technologies

Biochemical

small modular reactor

technology group target


BASIC THERMOCHEMICAL BIOENERGY PROCESS


Feedstock input: biomass/municipal

waste

drying

pyrolysis

reduction

combustion

tar

CO2H2O

H2CO

CH4

FermentationFT synthesis Combustion

MethanolEthanol

SyndieselPowerSteam

SyngasThermo process


CONTENTS


2. Major challenges

4. Critical technical and commercial factors



4. CRITICAL TECHNICAL AND COMMERCIAL FACTORS

Safety, safety and safety

Government support – what kind and how much?

Regulatory uncertainty

Time to market, competitive, less risk

1.

2.

3.

4.


2006

TOP 10 GLOBAL PV CELL MANUFACTURERS 2006, 2010

(RANK ORDER BY CAPACITY)

2010

Company Country Capacity (MW)

1. JA Solar China 1,900

2. Suntech China 1,620

3. First Solar (TF) US 1,502

4. Yingli China 1,100

5. Trina Solar China 1,000

6. Q-Cells Germany 1,000

7. Canadian Solar China 800

8. Motech Taiwan 600

9. Gintech Taiwan 600

10. JinkoSolar China 600

Note: ‘Capacity’ counted as either crystalline silicon cell or thin film module.

TF is thin film

Company Country Capacity (MW)

1. Sharp Japan 500

2. Q-Cells Germany 420

3. Suntech China 270

4. Motech Taiwan 240

5. Solarworld Germany 200

6. China Sunergy China 180

7. Kyocera Japan 180

8. Isofoton Spain 130

9. Schott Germany 121

10. Sanyo Electric Japan 115

Source: Bloomberg New Energy Finance, company

announcements

+46% per year

Europe US China Other Asia


0

50

100

150

200

250

300

350

400

20

20

20

21

20

22

20

23

20

24

20

25

20

26

20

27

20

28

20

29

20

30

20

31

20

32

20

33

20

34

20

35

20

36

20

37

20

38

20

39

20

40

Agency Low

Agency High

Consultant Low

Consultant High

Industry Low

Industry Moderate

BNEF ASSESSMENT– CAUTIOUS BUT PROMISING

• Models differ

widely

• Markets

developing quickly

• Technology

following slowly

• Market

assumptions

change rapidly

• Is it a $500bn

market…or more?

Sources: Various industry sources interpreted by Bloomberg New Energy Finance

Units installed


ON THE RECORD – POST FUKUSHIMA

“We’re seeing a knee-jerk reaction saying ‘get rid

of nuclear,’ but that is not going to happen in the long

run. There is no other good solution if you want to

decarbonize the energy sector. As far as small

reactors go, these events in Japan will strengthen

their hand as opposed to weakening it.”

Chris Gadomski

Bloomberg Markets

May 2011


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The information contained in this publication is derived from carefully selected public sources we believe are

reasonable. We do not guarantee its accuracy or completeness and nothing in this document shall be

construed to be a representation of such a guarantee. Any opinions expressed reflect the current judgment of

the author of the relevant article or features, and does not necessarily reflect the opinion of Bloomberg New

Energy Finance. The opinions presented are subject to change without notice. Bloomberg New Energy

Finance accepts no responsibility for any liability arising from use of this document or its contents. Bloomberg

New Energy Finance does not consider itself to undertake Regulated Activities as defined in Section 22 of the

Financial Services and Markets Act 2000 and is not registered with the Financial Services Authority of the UK.

/ / / / / / / / / / / / / / / / / / / / / / / / / / / /

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MARKETS Renewable Energy

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Energy Smart Technologies

Renewable Energy Certificates

Carbon Capture & Storage

Power

Water

Nuclear

SERVICES Insight: research, analysis & forecasting

Industry Intelligence: data & analytics

News & Briefing: daily, weekly & monthly

Applied Research: custom research & data mining

Knowledge Services: Summit, Leadership Forums, Executive Briefings &

workshops

SMRS: THE ECONOMICS

AND CHALLENGES

CHRIS GADOMSKI, [email protected]

TWITTER @BNEFNUC

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