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The fleet effect:

The economic benefits ofadopting a fleet approachto nuclear new build inthe UK

November 2012

The fleet effect:

The economic benefits of adopting a fleet approach to nuclear new build in the UK PwC Contents

Contents

1. Introduction 4

2. Executive summary 5

3. The energy challenge 7

4. Approach and methodology 12

5. Enhanced certainty 16

6. Reduced cost of UK nuclear new build 19

7. Enhanced local content of UK nuclear new build 21

8. Reduced cost of electricity to consumers 25

9. Longer term benefits of strengthened UK industrial base 28

10. Risks associated with a nuclear fleet and their mitigation 30

11. Conclusions 33

Appendices 34

Appendix A: Model structure, data sources and assumptions 35

Appendix B: Model results and sensitivity analysis 39

Appendix C: Summary of EMR 44

Appendix D: References 45

Appendix E: Acronyms 47

The fleet effect:

The economic benefits of adopting a fleet approach to nuclear new build in the UK PwC 2

The fleet effect:


Acknowledgements

The report was commissioned by Areva, and independently researched and written by PwC, with theparticipation of the following companies:

Nuclear supply chain companiesAreva S.A. Nuclear Engineering Services Limited

WS Atkins Plc Rolls Royce Plc

BAE Systems Plc Sheffield Forgemasters International Ltd

Balfour Beatty Plc Siemens AG

Bendalls Engineering Siempelkamp Nukleartechnik GmbH

Clyde Union Ltd Sir Robert McAlpine Ltd

Costain Group Plc SPX Balcke Duerr GmbH

Darchem Engineering Ltd Sulzer Pumps Ltd

Delta Controls Ltd Ultra Electronics Limited

Doosan Babcock Ltd Wellman Booth

Eaton Electric Ltd Wier Group Plc

Flowserve Corporation Wyman Gordon Ltd

Independent Forgings and Alloys Limited

UK nuclear stakeholdersNational Nuclear Skills AcademyDepartment of Energy and Climate Change (DECC)Department for Business, Innovations and Skills (BIS)

Third party reportsWe reviewed over 50 studies and articles on the nuclear and wider energy sector that addressed issues ofrelevance to our report including the development of national supply chains, economics of generation, policydrivers, skills requirements and the global nuclear sector. These are listed in Appendix D.

DisclaimerThis publication has been prepared for general guidance on matters of interest only, and does not constituteprofessional advice. You should not act upon the information contained in this publication without obtainingspecific professional advice. No representation or warranty (express or implied) is given as to the accuracy orcompleteness of the information contained in this publication, and, to the extent permitted by law,PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability,responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in relianceon the information contained in this publication or for any decision based on it.

© 2012 PricewaterhouseCoopers LLP. All rights reserved. In this document, ‘PwC’ refers toPricewaterhouseCoopers LLP (a limited liability partnership in the United Kingdom), which is a member firmof PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.

The fleet effect:


It is the context of major change within the electricitysector and Government focus on economic growththat characterises the landscape within whichPricewaterhouseCoopers LLP (PwC) has undertaken astudy on the benefits to UK industry of adopting afleet approach to nuclear new build.

Our report addresses whether there are advantages toadopting a fleet approach to a nuclear new buildprogramme through the use of a single technology. Itaddresses whether these advantages can bedemonstrated through increases in sustainablemanufacturing and construction jobs, investment infacilities and skills development in the nuclear supplychain, and in wider economic benefits1. We considerthe extent to which it is possible to identify theadditional benefits from a fleet approach due tolearning and sharing of best practice, optimisingstrategic stocks of components, staff utilisation andthe economics of seeking regulatory approvals. Weassess the potential for these benefits to flow throughto a lower cost of electricity for consumers andincreased export opportunities for the supply chain.

At the outset, it is important to define what we meanby a fleet approach to nuclear new build. For thepurposes of our analysis, we define a fleet approach ashaving two key characteristics: all the nuclear reactorsrely on a common reactor technology and all have acommon design of the associated Conventional Island(CI) and the Balance of Plant (BOP). For simplicity,we consider a new nuclear portfolio from a minimumof four reactors up to eight reactors (which operate asfour pairs), assumed to be built at regular intervals inthe period to 2030. Our definition of the fleet does notassume either a common commercialmodel/operating consortia structure or a commonowner/operator.

1 Throughout the report we do not refer to specific sites for nuclearnew build but assume all sites that have been nominated for newnuclear power stations could potentially be utilised up to 2030.

Our report:

provides an overview of the context underpinningour study;

summarises the approach taken to investigatingour hypothesis and the methodology adopted forour model;

outlines the benefits of a fleet approach to newnuclear build;

considers the impact of a fleet approach on the UKnuclear supply chain through enhanced certainty;

discusses the impact of how a new nuclear fleetcan reduce the cost of UK nuclear new build;

describes the fleet impact on the local content ofUK nuclear new build;

assesses the impact of a new nuclear fleet on thecost of electricity to consumers;

describes the impact of a fleet approach on the UKindustrial base;

discusses the risks associated with a nuclear fleetapproach and their mitigation;

summarises the conclusions reached; and

provides further details regarding themethodology, references and acronyms in theappendices.

1. Introduction

The fleet effect:


2.1. IntroductionPricewaterhouseCoopers LLP (PwC) has undertaken astudy to assess the potential benefits to the UKeconomy of adopting a fleet approach to nuclear newbuild. For the purposes of this report, a ‘fleet’ isdefined as two or more pairs of reactors which rely onthe same reactor technology and common design ofthe CI and BOP. We consider fleet sizes of four, sixand eight reactors and our data ranges refer to fleetsizes from four to eight reactors.

We studied the benefits of a fleet approach to newnuclear build compared to diversified reactortechnologies over the period to 2030 by looking at:

the importance of certainty for the UK’s supplychain and the impact of a fleet effect on it;

the advantages in terms of investment in the UKindustrial base and the economic benefits to theUK; and

the benefits that a fleet effect can deliver toelectricity users through reduced costs.

We examined implications for the supply chain of afleet approach, pre-requisites for investmentdecisions and impacts on companies further down thesupply chain. We interviewed 26 companies fromacross the nuclear supply chain as well as key nuclearstakeholders and used the outcomes in developing aneconomic model to quantify the benefits. Our modelconsidered direct, indirect and induced effects of afleet approach and expressed them in terms of theirimpact on both jobs and GDP. We developed a rangeof scenarios to assess the robustness of our analysis,based on the key drivers of cost, timescales, UKcontribution and certainty.

Our report does not consider the technical capabilitiesof different reactor types, but focuses on genericreactors that would be built in pairs on a single site.We assume that these generic reactors would meet therequirements of the Generic Design Assessment(GDA) process. We do not address cost differentialsbetween generic reactor types but assume that costsremain constant for a non-fleet approach so that wefocus on the incremental benefits of a fleet approach.

Current investment plans based on the acquisition ofnuclear licensed sites suggest that there could be up toeight reactors (ignoring differences in capacity acrosstechnologies) across four sites providing up to13.2GW of additional capacity by 2030. Adopting afleet approach to new nuclear build could provide theUK with three additional key benefits which wouldnot otherwise be realised through nuclear new build.

2.2. CertaintyA strong theme throughout the study is the urgentneed for much greater certainty on the make-up of theUK’s nuclear programme. Without certainty of timingand volume, companies are reluctant to invest in thefacilities, training and accreditation necessary toparticipate in new nuclear. Commitment to a fleet isseen as a key factor underpinning investmentdecisions and one of the most important levers inrevitalising and enhancing the UK’s nuclear supplychain. At present many smaller firms with thecapability to deliver in the nuclear supply chain areopting to apply their capabilities to other sectors suchas oil and gas, where the barriers to entry are lowerand the certainty of orders is greater. This leakage oftop end skills and experience, starting from arelatively low base given the period since the UK’s lastnuclear build project, is damaging the UK’s industrialbase. The impact of certainty is quantified within theeconomic model that underpins this report.

2.3. Strengthened industrialbase

The lack of recent experience of large scale newnuclear build in the UK suggests that UK basedsuppliers would provide only a limited share of theengineering and manufacturing inputs required for asingle pair of reactors since the expertise and therelationships would be largely with non-UK supplychain companies. With a fleet approach, however, thescope for increasing the UK content becomes easier toidentify and more commercially viable. In addition, ifUK content were to be used as a lever in commercialnegotiations through implementation of an industrialstrategy that imposed localisation targets, there couldbe a significant increase in the proportion of supplychain contracts awarded to UK companies.

2. Executive summary

The fleet effect:


2.4. Reduced consumer costs ofelectricity

A fleet approach to new nuclear build has thepotential to reduce significantly the cost of designingand building nuclear generation capacity. This wouldbe achieved through the economies of scale achievedby having common components and throughsignificant reductions in design and licensing effort,construction risk and contingency. The effect of sucha reduction in costs would be to reduce the costs ofelectricity to business and consumers. Consumers’disposable income would be increased directlythrough lower electricity bills. Business users wouldbenefit from lower electricity costs, which would betranslated into lower product prices, improvinginternational competitiveness.

2.5. Key findingsA fleet approach to new nuclear build could deliver upto £17 billion of additional contribution toGDP (equivalent to about 1% of UK GDP in 2011), asshown in Figure 1, based upon the following:

The overall development of a fleet of four pairs ofnew nuclear reactors in the UK could result in asignificant additional direct boost to the UKmanufacturing sector, increasing GDP byapproximately £4.6bn expressed as a presentvalue in 2012 prices. This would be equivalent toan additional 68,000 man years of employmentover the design and build period up to 2030,equating to over 4,200 extra jobs over the buildperiod.

The indirect and induced effects could lead to afurther 82,000 man years of employment or 5,200extra jobs over the same period, equivalent to anaddition to UK GDP of £6.5bn expressed as apresent value in 2012 prices as compared to theeffects from diversified reactor technologies.

The lifetime costs of nuclear electricity generationfrom a fleet of four pairs of reactors could bereduced by 10.3% compared to a non-fleetapproach. The impact of the cost reduction wouldbe manifested in two ways;

first through a reduction in the costs ofElectricity Market Reform (EMR) support toGovernment, achieved through lower strikeprices for the Contracts for Difference (CfDs)for the second , third and fourth pairs ofreactors and

secondly, through a reduction in the wholesaleelectricity price.

The reduction in costs would feed through to apotential reduction in the price of electricity chargedto domestic and industrial users of up to 2.6% by2030 and an overall lifetime cost reduction in the costof generating electricity from the new nuclear fleet of10.3%, thereby reducing the costs for business andconsumers. Consumers’ disposable income would beincreased directly through lower electricity bills.Lower costs for businesses would contribute to lowerproduct prices which would improve internationalcompetitiveness. This could be equivalent to about44,000 man years of employment in sectors of theeconomy outside electricity generation over the EMRCfD durations or 1,700 extra jobs. We estimate thiswould be equivalent to a boost to UK GDP of about£6bn expressed as a present value using 2012 prices.

The incremental benefits of a fleet effect for nuclearnew build are largest with construction of the secondpair of reactors. Ending up with two or three isolatedpairs of reactors of different technologies across theUK would not maximise the industrial benefits of theprogramme and lead to the highest costs. A strategic,programmatic approach to nuclear new build cansupport the development of a sustainable nuclearsupply chain and deliver the most cost effective sourceof low carbon base load generation of electricityavailable.

Figure 1: Benefits of a fleet effect

68,000 4,2004.6

82,0005,200

6.5

44,0001,700

6

Man years Jobs GDP (£bn)

Reducedcost ofelectricity

Indirectandinducedimpacts

Directimpacts

Ov

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CfD

pe

rio

dU

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203

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194,000 1711,100

The risks associated with a fleet approach, and theirmitigations, are addressed in Section 10. We have notconsidered the potential ongoing savings once theCfDs have expired, or the potential for furtherinvestment in new nuclear post 2030 to capitalise onthe cost benefits in preference to other technologies.Both of these areas could provide further upsides.

In addition, our conclusions on the economic impactsof a fleet approach could be applied to other low-carbon technologies.

The fleet effect:


3.1. The energy landscapeThe UK Government has set out ambitious plans tomeet its decarbonisation targets, with current policybuilt upon three key pillars:

reduction of CO2 and GHG emissions;

ensuring safe low carbon sources of energy; and

ensuring secure energy supplies within our ownborders.

Significant investments of around £250bn arerequired in energy sector infrastructure to deliver alow-carbon economy, particularly with the need toreplace a quarter of the UK’s existing power stationsby 2020 and to extend the transmission network toaccommodate a wider range of low-carbongeneration. The scale of investment required offersopportunities for the development of new skills andfacilities in the UK workforce and an expansion ofsustainable jobs in the manufacturing andconstruction sectors to meet the forecast demand inthe sector over the next 20 years. Added to this, thecurrent economic and financial pressures have led toa Government emphasis on enablers of growth tosupport employment. The low carbon agendaprovides the potential for real benefits for the UK interms of both jobs and GDP.

Since privatisation in the 1990s, investment in newelectricity generation has been undertaken by privatecompanies, based on their assessment of market risksand returns. As the low carbon focus has intensified,concerns about the risk/return balance for electricitygeneration assets with high capital costs andsignificant construction risks has increased, resultingin a reluctance for companies to invest without somerevenue certainty. Whilst the current coalitiongovernment has stated that the UK’s future supply of

2 DECC ‘Planning our electric future: a white paper for secure,affordable and low carbon electricity (cm8009)’, July 2011.

nuclear energy will be determined by marketmechanisms, the Government’s EMR package willdeliver some incentives. The EMR proposals3 seek tofacilitate investment in low carbon electricitygeneration through the agreement of CfDs. These willguarantee a price for electricity over an initial periodof time thus creating stable financial incentives forinvestment in all forms of low carbon electricitygeneration, including nuclear.

Our report looks at whether the benefits ofmoving from first of a kind (FOAK) in the UKto nth of a kind (NOAK) for nuclear plant differdepending on whether a fleet of the samereactor technology or diversified reactortechnologies are adopted. We seek to identifythe extent to which benefits accrue to UKnuclear supply chain companies and theoverall benefit to UK consumers.

Current uncertainties around the details of the EMRmechanisms have led to delays in the sanctioning ofnew projects and nuclear plant are no exception.Uncertainty feeds through to the supply chain and theUK manufacturing sector is feeling the impact. Itrecognises that there are opportunities to participatein new nuclear build but is seeking signals that thereis a tangible pipeline of projects to justify investmentsin facilities and training. There remains anunderstandable concern based on the history ofnuclear electricity generation in the UK that the newnuclear programme could result in the developmentof only a single station. Our report seeks to identifythe signals that would provide comfort to differentsections of the UK supply chain, the timescales inwhich they would be required and the resulting scaleof investments that would arise.

The Government’s economic policy objective is toachieve strong, sustainable and balanced growth. As

3 DECC ‘Draft Energy Bill CM 8362’ May 2012.

3. The energy challenge

Over £250bn2 investment required in energy infrastructure.

Centred on ensuring safe low carbon and secure supply of energy.

Nuclear key to the energy mix for UK.

Uncertainties surrounding EMR have led to delays in nuclear build.

The fleet effect:


part of the Growth Review launched in November20104, it aims to make the UK an attractive place tostart or grow a business, to encourage investment andto create a flexible, appropriately skilled workforce asreferenced in the Industrial Strategy in September20115. The investment requirements in the electricityindustry means that electricity generation is a keysector for achieving such growth.

There is a wide range of nuclear sector expertise in theUK currently, but much of it is focused on other partsof the nuclear value chain (outside of new nuclearbuild), including existing nuclear generation,decommissioning and defence. Those companies thathave experience in supplying parts and services fornew nuclear in other countries have already madeinvestments in quality assurance, qualificationrequirements and skills training. They see the UKnuclear new build programme as a major opportunity.

Our report seeks to identify the signals that wouldencourage overseas companies to invest in the UK, thelessons learnt from those UK companies with newnuclear build experience and the support andincentives that the UK supply chain is seeking toexpand its capabilities and skill base in a timelymanner to benefit from new nuclear buildopportunities.

The success of the nuclear new build programme inthe UK will be dependent, in part, on its ability todemonstrate a broader range of economic benefitsthan a contribution to low carbon electricitygeneration and security of supply. The nuclearindustry, has, and always will, present a nuclearhurdle to potential suppliers and investors in terms ofinvestment in capability and resources.

Over time the barriers to entry can be reduced as thelevel of experience of developing nuclear new build inthe UK improves, which should lead to increasedinward investment and the realisation of greatereconomies of scale and scope for companies withinthe supply chain. Increased scope and volume ofservices should in turn lead to increases in theperformance of regional economies, both throughindirect and induced benefits.

4 The path to strong, sustainable and balanced growth, BIS,November 2010

5 BIS ‘Industrial Strategy: UK Sector Analysis’, 2012

3.2. Future energy needsOver the next decade, a quarter of the UK’s electricitygenerating capacity is expected to close, with all butone of the existing nuclear plants scheduled to reachthe end of their operating life by 2025. The challenge ofreplacing this infrastructure is increased further by theneed to reduce CO2 emissions, implement safe lowcarbon sources of energy and maintain secure energysupplies within our own borders. This is set against thepotential doubling of demand for energy as thetransport and heating sectors become increasinglydependent on electricity.

Compliance with the EU Large Combustion Plant andIndustrial Emissions Directives means that themajority of the new plant to be developed over theperiod to 2030 will be nuclear or wind, with newer lowcarbon technologies gradually increasing in importanceas their technology challenges are overcome (and theircosts fall). The role of combined cycle gas turbines(CCGTs), the new electricity generation of choice todate, will increasingly move to that of fast responseplant to balance input from wind and otherintermittent generation. Investing in diversifiedsources of energy is key to preserving and enhancingthe UK’s security of supply, but must comply with theGovernment’s low carbon commitments andaffordability objectives.

Within this policy context, new nuclear plant isassumed to be the primary low carbon baseload plant,playing a crucial role in the UK’s ability to maintain itssecurity of supply. Current investment plansbased on the acquisition of nuclear licensedsites suggest that there could be up to eightreactors (ignoring differences in capacityacross technologies) across four sites providingup to some 13.2GW of additional capacity by2030 (as shown in Figure 2).We assume that anynuclear development on the fifth acquired site or thethree additional nominated sites would not commenceuntil after 2030 and so have not included any potentialbenefits within our analysis.

National Grid currently projects peak electricitydemand to rise from around 57GW in 2020 to around60GW by 2030 at a relatively stable rate under its‘Gone Green’ scenario6. The contribution of nuclearelectricity generation to meeting this demand falls to alow of around 7% in 2020 under DECCs centralscenario and as new nuclear electricity generation iscommissioned rises to around 23% by 2030 ascompared with around 18% today as shown in Figure 3.

6 National Grid ‘UK future energy scenarios’ November 2011.

The fleet effect:


Figure 2: Expected nuclear electricity generation capacity (2012 – 2030)7

Figure 3 : Expected nuclear power generation (2012 – 2030)8

7 Source: 2011 ‘national electricity transmission system seven year statement’ national grid; PwC analysis.8 Source: DECC ‘total electricity generation by source’ (spreadsheet) November 2011.

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Existing nuclear capacity New nuclear capacity

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Nuclear output Total output Percentage nuclear

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The fleet effect:


The contribution of new nuclear power to the UK’ssecurity of supply underpins the importance of timelyinvestment decisions, both for developers and thesupply chain. The earliest timescale for the commercialoperation of new nuclear is assumed to be 2018 underDECC’s 2011 indicative timeline9, but manycommentators assume commercial operationdates of around 2020.

The uncertainty over timing of investment decisions bydevelopers feeds through into uncertainty for thesupply chain and uncertainty over commercialoperation dates. New nuclear is assumed to provide anincreasing contribution to meeting demand throughoutthe 2020’s which means that a continuous programmeof new build is required, with a correspondingrequirement for resources to design and construct theplant.

3.3. The UK supply chainThe last nuclear plant developed in the UK wasSizewell B, which was commissioned in 1995 and isdue to operate until 2035. Since then, UK nuclearskills have been concentrated in supportingoperations and maintenance of the Magnox andBritish Energy (now EDF) nuclear fleet, waste anddecommissioning at Sellafield and other sites and themilitary nuclear sector.

The challenges faced due to an ageing workforce, aneed to encourage graduates and craftsmen to enterthe nuclear industry, and the realisation that the skillsto support a new nuclear build programme in the UKwere insufficient and have led to a range ofGovernment, regional and company-led initiatives.However, the nuclear sector faces competition forskilled engineering and construction resources fromother infrastructure projects and safety critical sectorsincluding oil & gas and aerospace, highlighting theneed to expand both the number of workers and thetraining facilities to support skills transfer.

Cogent’s 2009 report states that the civil nuclearindustry in the UK currently providesemployment for 44,000 people10 as shown inFigure 4. Of these, around 24,000 are employeddirectly by nuclear operators across electricitygeneration, decommissioning and fuel processing andthe remaining 20,000 in the nuclear supply chain.

9 DECC ‘indicative timeline for new nuclear’ October 2011.10 Cogent ‘Power People, the Civil Nuclear Workforce 2009-2025%

September 2009.

NAMTEC’s 2009 report notes that the civil nuclearsector contributes around £3.3bn to UK GDP11.

Figure 4: 2009 employment within the UKcivilian nuclear sector

The nuclear supply chain covers two categories ofcompanies – those that supply goods and services thatare central to the nuclear reactor and those thatsupply non-nuclear specific goods and services. Therequirements on the first category are higher thanthose in the second, where the nuclear emphasis ismore about quality control and documentation. Wehave spoken with companies in both categories indeveloping our analysis, recognising that the potentialfor increased UK input varies between the two.

In addition to the number of skilled people required,the nuclear sector has specific safety and qualityassurance standards that impose an additional barrierto entry. There is a time lag and associated cost for acompany to train people to the required standardsthat must be recouped through future sales. Theclassification of SQEP (suitably qualified andexperienced personnel) is not standardised, which hasled to a need for supply chain companies to undergospecific accreditation programmes for technologyproviders or Tier 1 suppliers (such as reactor vendorsor integrators). This is adding to costs and potentiallyreducing the attractiveness of the sector as anexpansion focus.

There are initiatives already in place to support skillsenhancement, such as the Nuclear Passport, theNuclear Advanced Manufacturing Research Centre(NAMRC) and Fit for Nuclear, which are seen as awelcome addition by many supply chain companies,providing clarity on requirements and giving supportand guidance on qualification requirements. Thequestion is the extent to which the supply

11 NAMTEC ‘The Supply Chain for a UK Nuclear New BuildProgramme’, updated February 2009.

7,500

4,500

12,000

20,000

Direct jobs in the nuclear industry

Direct supply chain

Decommissioning

Fuel processing

Generation

The fleet effect:


chain is prepared to participate in suchschemes without certainty on the timing andthe future of the new nuclear programme andthe risk that their own role might be limited tosupport on a single plant.

Some UK companies have entered into joint ventures(JVs) with companies already in the new nuclearsupply chain such as Atkins’ JV with Assystem knownas n.triple.a which aims to provide globalopportunities but also to support activities in the twocompanies’ home markets.

Where UK companies are a subsidiary of aninternational company with an established trackrecord in new nuclear supply chains (e.g. ClydeUnion, Doosan Babcock) they have more ready accessto skilled resources, established contacts andprocesses for accreditation. Other categories withinthe supply chain are those with relevant nuclearexperience but who have not yet participated innuclear new build and those who operate in safetycritical industries but without nuclear experience.Both of these could, if appropriate incentives andsupport were to be made available, seize thisopportunity to support the growth of the UK nuclearnew build sector.

The challenge for all UK companies to capture theopportunities from a new nuclear build programme inthe UK is to determine the addressable part of themarket, the investments required in qualification andaccreditation (and their associated timescales) andthe costs of bidding for and delivering the work. Theythen need to develop business cases to invest andsecure acceptable volumes of work over predictabletimescales. We discussed with our interviewees thesignals that would encourage them to commit to suchinvestment programmes, and the impact ofdifferences between a fleet and a non-fleet approach.

The fleet effect:


Comprehensive literature review of material relating to nuclear reactor construction.

Developed a set of hypotheses about the expected impacts of a fleet approach.

Undertook a series of interviews with companies in, or potentially part of, the nuclear supplychain.

Created an economic model to assess the potential impact on GDP and jobs from a fleetapproach to nuclear new build.

Model designed to estimate the direct, indirect and induced benefits of a fleet approach.

4.1. IntroductionIn this section, we describe how we have assessed theexpected benefits of a fleet approach to nuclear newbuild as compared with a non-fleet approach. We alsoprovide a brief overview of the methodology we haveused to estimate the expected benefits of a fleetapproach: further details of the model can be found inAppendix A.

We consider a new nuclear portfolio of up toeight reactors (which operate as four pairs).The interval between reactor builds is asshown in Figure 5, over a 16 year period. Thisassumption is derived from expected constructionintervals between the first and second reactors on asingle site, a rhythm of site development activity thatwould support continuity of employment, and theentry into commercial operation of sufficient nuclearcapacity to meet forecast contributions to security ofsupply by 2030. As already stated in Chapter 1, wehave not considered site specific new build.

Figure 5: Illustration of a fleet approach tonuclear new build

4.2. Approach to assessmentOur approach to assessing the economic benefits ofadopting a fleet approach to nuclear new build in theUK has been based on four key elements:

We reviewed earlier third party reports whichanalysed diverse aspects of the potential impact ofa nuclear new build programme within the UK aswell as the lessons from international experienceof the construction and operation of nuclear plant.These reports cover the nuclear supply chain, skillsrequirements, drivers of risk, reward andinvestment decisions and the downstream andupstream impact of nuclear generation. A list ofthe key reports reviewed can be found at AppendixD.

Based on our review of existing reports and ourknowledge of the UK nuclear sector, we developedan initial set of hypotheses about the expectedimpacts of a fleet approach to the delivery of newnuclear power compared to a non-fleet approach.These hypotheses effectively provided a frameworkfor the model we developed to assess the expectedbenefits of a fleet approach to a nuclear new buildprogramme.

4. Approach and methodology

Reactor 1

Reactor 2

Reactor 3

Reactor 4

Reactor 5

Reactor 6

Reactor 7

Reactor 8

2029 20302024 2025 2026 2027 20282019 2020 2021 2022 20232013 2014 2015 2016 2017 2018

The fleet effect:


We then undertook a series of 26interviews with a sample of organisations12

which are either in existing nuclear supply chainsor might potentially be part of the UK nuclearsupply chain. Our interviewees includedcompanies from across different parts of thenuclear supply chain, large and small companies,those with existing nuclear new build experienceand those without, UK based companies and thosethat are subsidiaries of international companies.We asked the companies a series of questionsdesigned to elicit qualitative and quantitativeinformation about:

the opportunities presented by nuclear newbuild in the UK;

the implications on their specific business of afleet approach to nuclear new build in the UK;

how commitment to a fleet approach to nuclearnew build would affect their investmentdecisions; and

the impact on their own supply chains of a fleetapproach in the UK.

In addition, we discussed a similar range of topicswith key stakeholders , namely the Department forBusiness, Innovation and Skills (BIS), the Departmentof Energy and Climate Change (DECC) and theNational Nuclear Skills Academy.

Using results from the preceding elements, wedeveloped an economic model to assess thepotential impact on GDP and jobs from afleet approach to nuclear build compared to anon-fleet approach for the UK. The model wasdesigned to estimate the direct, indirect andinduced benefits of a fleet approach, where:

direct benefits are the employment and GrossValue Added (GVA13) generated by expenditureon suppliers of the nuclear island, civil works,conventional island and balance of plant;

indirect benefits are the employment and GVAgenerated by greater supply chain spending as aresult of the first round of expenditure; and

induced benefits are the employment and GVAgenerated by greater employee wages, whichresults from the increased revenue of suppliersand their supply chains.

12 See acknowledgements for list of companies and stakeholdersinterviewed.

13 GVA is the difference between revenue and intermediateconsumption, and a contributor to GDP.

4.3. MethodologyA critical part of our approach was the developmentand application of an economic model with which toassess the expected incremental benefits of a fleetapproach to nuclear new build. This involved threekey steps:

development of a series of logic chains whichdescribe how the expected incremental impacts ofa fleet approach to nuclear new build are expectedto arise, including the articulation of what isassumed to happen in the absence of a fleetapproach (the counterfactual or non-fleetapproach);

identification and collection of the data needed topopulate the economic model and determinationof the additional assumptions required; and

construction, testing and running of the economicmodel, including sensitivity testing to understandthe significance of the key assumptions anduncertainties.

An explanation of the steps can be found below.

4.3.1. Development of logic chainsfor benefit categorisation

Our logic chains assumed that a fleet approach tonuclear new build has the potential to deliverincremental economic benefits for the UK throughfour key mechanisms by:

reducing the cost of designing, building andoperating (including decommissioning) up to fournuclear plant comprising eight reactors of thesame technology and design;

increasing the share of UK content in the UK’snuclear new build programme;

reducing the average cost of electricity toconsumers in the UK; and

developing UK capability so it can be exploited inthe longer term in the nuclear supply chain, bothwithin the UK and globally. This capability couldthen be additionally deployed in other sectors withhigh quality and safety requirements.

Figure 6 shows schematically the key expectedbenefits of a fleet approach in chronological orderbased upon when they would be expected to arise.

The fleet effect:


Figure 6: Expected benefits of a fleet approach

An integral part of assessing the potential incrementalbenefits of a fleet approach was to define thecounterfactual – an alternative view of what wouldhappen without a fleet approach. Our counterfactualassumed that the same volume of additional nuclearcapacity would be provided in the UK as part of thenuclear new build programme but reactor technologywere not common and the design of the CI and BOPwere not the same. Otherwise, under thecounterfactual, we assumed that the features of eachplant were the same.

We combined the underlying logic model with theavailable data to construct, run and test our economicmodel to estimate the scale of the potential benefits ofa fleet approach to new nuclear build. Details of themodel structure can be found in Appendix A.

4.3.2. Data sources and assumptionsEach of the logic chains required different data and,where reliable data were not available, assumptionswere made in order to estimate the scale of thepotential benefit. The key data sources andassumptions used for each element of our model aredescribed in Appendix A and summarised in Table 1below.

Table 1: Key data sources and assumptions

Category of assumptions Sources

Expenditure groupings withinthe design and build phase of anuclear reactor

Supply chain interviews,third party reports,PwC analysis

Timescales Supply chain interviews

Economic assumptions PwC assumptions,Government statistics

Financial assumptions PwC assumptions

Electricity pricing assumptions(cost for consumers)

DECC, National Grid, thirdparty reports

Our analysis of reductions in electricity prices startsfrom assumptions on the CfD strike price achieved foreach pair of nuclear reactors. These are sourced frompublicly available sources and do not represent PwC’sview on appropriate or achievable strike prices fornuclear plant. Any cost savings are assumed to applyto CfDs for subsequent pairs of reactors – i.e. thesecond, third and fourth pairs only.

4.3.3. Sensitivity analysisWe undertook a range of sensitivity analyses on thefollowing parameters:

reduction in the design and build cost of a reactor;

increase in the proportion of design and buildcontent achieved by UK companies; and

reductions in the cost of electricity.

Through these, we aimed to assess the robustness ofour hypotheses. Details are found in Appendix B.

Our sensitivity assessment associated with thecost of electricity for consumers uses a rangeof CfD strike prices from £75/MWh to£135/MWh (2012 prices) taken from publicsources. The lower end of the range is a round figurebased on the £74.10/MWh proposed by PB Power intheir 2011 report for DECC14. The upper range is around figure that is lower than the £140/MWh quotedas an offshore wind price cap by Vincent de Rivaz,Chief Executive Officer, EDF in his August 2012interview with the Daily Telegraph15.

14 Parsons Brinckerhoff “Electricity Generation Cost Model” 201115 Daily Telegraph

‘http://www.telegraph.co.uk/finance/newsbysector/energy/9471193/EDF-Energy-puts-price-cap-on-Hinkley-Point-nuclear-plant.html’

• Greater certainty

Investmentdecisions

• Economies ofscale

• Local (UK)

Design and build

• Lower electricityprices forcustomers

Operation

• Strengthened UKindustrial base

• Increasedexports

Legacy

The fleet effect:


4.4. Overview of resultsIn Chapters 5-10 we analyse the expected potentialbenefits of a nuclear new build programme focusing,in particular, on the incremental benefits that a fleetapproach to nuclear new build could be expected tobring (compared with the alternative of a non-fleetapproach – where the volume, technology/design andtiming of the programme is not known withcertainty).

We also consider the potential risks associated witheach category of benefit, reviewing the evidence inrelation to each category of expected benefit in turnand following a broadly common structure for eachcategory:

We describe (qualitatively) the mechanismsthrough which the UK is expected to deriveeconomic benefits from a fleet approachdrawing on our interviews with key stakeholders,especially those potentially involved in the deliveryof the programme, and our review of recentrelevant studies.

We present the results of our economicmodelling of each benefit. This includes anoverview of the key steps in our analysis as well asa summary of the sensitivity of our results to thekey assumptions we made.

We summarise our assessment of the keyrisks and uncertainties associated with eachbenefit.

Table 2: Summary of expected benefits andrisks of new nuclear build

Chapter Benefit Estimated fleet benefits

5 Enhancedcertainty

Quantified through measuresbelow

6 Reduced costof design andbuild

Up to 18% reduction for a fourthpair of reactors

7 Enhancedlocal content

Up to £11bn of additional GVA andan additional 150,000 man yearsof employment

8 Reduced costof electricity

Wholesale electricity prices downby up to 2.6% by 2030, resulting inup to £6bn of additional GVA and44,000 additional man years ofemployment

9 StrengthenedUKindustrialbase

Not directly quantified

10 Key risks anduncertainties

Qualitative mitigation measuresidentified

The fleet effect:


Nuclear supply chains need enhanced certainty about the make-up of the UK’s nuclear newbuild programme.

At present only Hinkley C is seen as secure.

Commitment to a fleet provides confidence and clarity on timescales and work volumes.

A fleet approach can reduce actual and perceived risk in programme.

The over-riding feedback from our discussions withthe supply chain is the need for enhanced certaintyabout the direction, timing and scale of the UK newnuclear build programme. The level of nuclear buildskills and experience within the UK is at a relativelylow base given the period since the development ofSizewell C and the limited involvement of UKcompanies in other global nuclear new buildinitiatives. A programme of UK nuclear newbuild is not seen as a reality at present:although Hinkley Point C is seen as probable, otherreactors are viewed as no more than likely at themoment.

Figure 7: The components of certainty

Whilst it can be argued that achieving certainty istechnology agnostic, there are strong arguments thatpoint to a fleet approach enhancing certainty. A fleetbased on common technology and design can reduceboth actual and perceived risks, unlocking thepotential for supply chain investments throughimproving the risk/reward balance and enabling the

realisation of economies of scale and increased UKindustrial capability.

5.1. Certainty throughcommitment

We identified a number of themes relating tocommitment to new nuclear industrial strategies toprovide certainty to the supply chain on the role itcould play.

The lack of clarity over the structure of theprogramme, delays in the programme itself anduncertainty over the technologies to be adoptedare resulting in parts of the supply chain:

delaying investment decisions to enhance skilllevels or improve facilities;

opting to apply their capabilities to othersectors such as the wider power and utilitiesmarket, or oil and gas, where the barriers toentry are lower, investment decisions are lowerrisk and the certainty of orders is greater; and

focusing nuclear skills abroad on other newnuclear programmes such as in Asia, CentralEurope and the Middle East.

The commercial supply chain strategies for Tier 1and 2 supply chain companies reflect theuncertainty in the new build programme.Commitment would enable the firming upof commercial strategies and provide clarityfor the supply chain on steps required to supportdelivery.

Orders for four or more reactors of a singletechnology would be a ‘game changer’ formany supply chain companies weinterviewed. It would justify investments ininnovation through automation or expansion ofwork along the value chain into fabrication anddesign, improving quality and cost-effectiveness.

Commitment to

Volumes that support investment

Confidenceand

certainty

Timescales to support continuity of workload

The nuclear new build programme

results in

5. Enhanced certainty

The fleet effect:


Our interviewees told us that the reduction inconstruction risk resulting from thecertainty of a fleet programme would leadto cost and timescale reductions throughmore efficient use of capacity, reduced trainingrequirements and better implementation oflessons learned.

The supply chain recognises that accreditationrequirements for nuclear new build (‘N’ Stamp orRCC-M) are onerous and time-consuming. A fleetapproach would provide companies with agreater degree of certainty that they wouldachieve acceptable returns on theirinvestments.

Commitment to contracts for multiplereactors would enable supply chaincompanies to demonstrate secure revenuesto underpin financing support for investmentin facilities.

For supply chain companies active in a range ofindustries, commitment to multiple reactorswould allow businesses to invest to meetknown demand and take investment risksin other sectors.

Moving from memoranda of understanding to firmcontract placement depends on investors takingFinal Investment Decisions (FIDs), which in turnneed successful CfD negotiations that gives ownersa known commercial basis for their investment,based on the expected cost of building andoperating proposed plant and clarity to the supplychain.

5.2. Certainty throughcontinuity

Discussions with the supply chain identified clearmessages on the need for a sustained programme ofwork to support supply chain investment in facilities,accreditation and people:

Continuity of work is more readilyachievable with one technology providerable to coordinate the placing of orders inand across the supply chain. If intervalsbetween reactor builds are too long, the supplychain will have underutilised manpower and runsthe risk of losing specialist skills, but if intervalsare too short, manpower capacity requirementswill increase significantly, providing challenges forthe supply chain and suggesting that the balance ofrequirements might be met from the overseassupply chain. A consensus appears to be buildingaround an interval of around 18 months betweenreactor builds.

Continuity through the use of a consistentdesign and supply chain would be a majorcontributor in maximising processeffectiveness.

Confidence in the continuity of the nuclearnew build fleet programme will enable thesupply chain to invest in capability building– through additional recruitment of apprentices,development of career plans for ongoing skillstraining over time, recruitment of skilled engineersand graduate trainees – to support their ability toearn the required levels of return on theirinvestment.

Greater maturity of the design and mutualunderstanding of the costs of deliverywould reduce the risks of delay andimprove the certainty of outcome, therebyreducing overall construction risk. Thebenefits of learning from previous experience,increasing expertise and familiarity with therequired processes would result in cost andschedule savings in design, construction andcontingency requirements.

As the technology develops a track recordwith the regulator, licensing risks will bereduced.

Development of a fleet would lead to anincreased level of trust and understandingacross the supply chain from Tier 1 to Tier 4 asthe level of maturity and expertise in the nuclearnew build sector expands.

5.3. Certainty through volumeFor many companies in the supply chain, the businesscase for investment in new nuclear build is dependenton the volume of services or components requiredover time, such that investment is sustainable:

Certainty in volumes provides confidenceto smaller supply chain companies that thecosts and timescales of achieving nuclear qualityaccreditations is a worthwhile investment.

Some specialist supply chain companies are theonly, or one of a few remaining, manufacturers oftheir product in the UK. Certainty throughvolume will support their continuedoperations.

Commitment to volumes means that the additionalcosts associated with nuclear quality requirementscan be recovered over a larger number of productsor longer timescale, leading to lower unit costsand increased competitiveness of UK supplychain companies.

The fleet effect:


Commitment to multiple reactors and anassociated timing provides the supply chain withcertainty over future orders and sufficient securityand confidence to put in place the multi-yeartraining programmes required to deliver thenecessary numbers of apprentices and designengineers and to develop career progression plansto provide opportunities over the duration of thenew nuclear build programme.

Increased volumes of standard componentswould enable minimal retooling, common qualityassurance regimes, increased innovation andboosts R&D to provide more efficient, lowercost, higher quality solutions. Onceoperational, additional volumes would be requiredto support O&M services.

The quantification of the impact of certainty isdiscussed in Chapters 6-9, through the impact onreduced costs, increased jobs and impact on GDP.

The fleet effect:


Reduction in total design and build costs of approximately 11% between first and secondpairs of reactors.

Further 4% saving between second and third pairs of reactors.

Overall saving of 18% between first and fourth pairs of reactors.

Total saving for design and build of a fleet of eight reactors of 10% against thecounterfactual.

6.1. Nature of benefitsThe construction of a fleet of nuclear reactorsgenerates cost efficiencies through a variety ofsources, which differ according to the type of supplierand their position in the value chain. Supply chaininterviews identified the economies of scalegenerated by a volume of reactors withidentical technology and design as the mostcommon driver of cost savings.

The improved certainty associated with a fleetapproach was identified as an important contributorto lower financing costs, supporting early investmentin supply chain capability. The continuity of ordersresulting from certainty was also expected to besignificant, allowing the supply chain to optimise theiruse of resources. We include the cost savings fromcertainty in the benefits discussed below.

The specific sources of cost savings identified bystakeholder interviews as the most significant:

volume discounts through bulk purchasing;

absorbing one-off fixed costs – such as thoseassociated with design, set-up, procurement andaccreditation;

learning effects, leading to new or improvedproduction techniques;

reduced financing costs; and

improved resource planning.

Our analysis has assessed the potential scale of thesecost savings (compared to a non-fleet approach) foreach key element of spend: in total, we haveconsidered around 20 separate elements of spendassociated with the design and build of new nuclear

plant, split across the nuclear island, nuclear islandcivil works, balance of plant and conventional island.

6.2. Scale of benefitsThe quantification of these savings is displayed inFigure 8, with a reduction in total design and buildcosts of approximately 11% between the first andsecond pairs of reactors. There is an incrementalsaving of approximately 4% between the second andthird pairs of reactors, which is repeated between thethird and fourth pairs of reactors. Hence, the designand build cost of the fourth pair of reactors isapproximately 18% less than that of the firstpair, under a fleet approach of building fourpairs of reactors. The total design and build costfor the eight reactors under a fleet approach results ina 10% saving against a non-fleet approach. In 2011Parsons Brinckerhoff’s study for DECC16 estimated asaving of 15% for the total capital costs of a nuclearpower station with multiple reactors, as constructionmoves from FOAK to NOAK in the UK, which iscomparable to the savings in Figure 8.

Figure 8: Expected cost savings during designand build phase with a fleet approach

16 Parsons Brinckerhoff ‘Electricity generation costs’ 2011

0%

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Reactors 1 & 2 Reactors 3 & 4 Reactors 5 & 6 Reactors 7 & 8

Pe

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Nuclear island - non civil works Nuclear island civil worksConventional island Balance of plant

6. Reduced cost of UK nuclearnew build

The fleet effect:


6.3. Sensitivity analysisTwo key sensitivities were identified for design andbuild cost savings based on the responses provided inour supply chain interviews. The first is the level ofcost savings considered achievable with a fleetapproach, where we considered the quantitativeimpacts of conservative and optimistic scenarios tocompare with our base case saving of 18%:

a conservative view on design and build costsavings led to a saving of 9% for the fourth pair ofreactors when compared with the first; and

an optimistic view on design and build cost savingsled to a saving of 28% for the fourth pair ofreactors when compared with the first.

The second is the timing of the new build programme,which we dealt with qualitatively due to the difficultyof quantifying its impact. Stakeholder interviewsrevealed that for many companies in the supply chain,the cost saving from a fleet approach was sensitive tothe phasing of reactors. A significant proportion ofsavings could be lost if the gap between theconstruction of reactors was noticeably increased ordecreased. A phasing of around 18 months appearedto suit the majority of companies.

Further details are contained in Appendix B.

The fleet effect:


Increased UK content in the nuclear supply chain could provide an additional £5bn in directGDP and an additional £6bn in indirect and induced GDP.

The UK nuclear supply chain could be boosted by up to 4,200 additional direct jobs duringdesign and build and a further 5,200 additional indirect/induced jobs.

A fleet approach strengthens the incentives for the supply chain to invest in nuclear newbuild capability (facilities, accreditation and training).

The potential volume of work will lower barriers of entry for UK nuclear new build supplychain.

A fleet approach increases the likelihood of additional inward investment from non-UKcompanies.

7.1. Nature of benefitsConstruction of a fleet of nuclear reactors as part ofthe UK nuclear new build programme is also expectedto enable increased UK industrial and manufacturingcontent in the nuclear new build programme(compared with what it might otherwise be) for tworeasons:

it would encourage more existing UK basedsuppliers to invest in developing their capability tomeet the needs of the operators; and

it could incentivise more international (non-UKbased) suppliers to invest in new or additionalcapacity in the UK (facilities and jobs) so that theycould compete more effectively to supply the UKnuclear new build programme.

Both of these effects have the potential to increase UKbased suppliers’ share of spend on the nuclear newbuild programme. This, in turn, could be expected toenhance the direct contribution of new nuclear buildto the UK economy. This can be measured asadditional GVA and as an increase in employment.

There would also be knock-on effects of any increasein UK output as the direct value added flowed throughthe economy. There would be indirect impacts on theeconomy through the spending of UK suppliers ontheir own supply chains and induced impacts on theeconomy through the spending of the suppliers’employees (and the employees in the supply chains).The indirect and induced impacts have beenestimated using GVA and employment multipliers as

defined in ONS input/output tables and PwC analysis.Combining these impacts with the direct impact givesthe total change in GDP and jobs resulting fromincreased UK content.

Delivery of a fleet of new nuclear reactors couldsignificantly strengthen the UK’s industrial base,specifically the capacity and skills to supplycomponents to new nuclear plants. This would haveincreased value at present as this capability iscurrently at risk from a lack of certainty. There couldalso be additional benefits from the creation ofnuclear know-how that could be applied across thewider UK generation sector.

While a proportion of the UK’s nuclear new buildprogramme must by definition be localised (e.g. civilworks for construction, operation and maintenance),the lack of recent UK experience in new nuclearsuggests that domestic suppliers may provide only alimited share of the design and build value. However,the certainty and volume brought about by a fleetapproach has the potential to affect the behaviour ofthe new nuclear supply chain, increasing the scope forUK content. These impacts vary across the differentcategories of expenditure in the design and buildphase and so the scale of the addressable market forcompanies in the UK nuclear supply chain differs,with each category considered separately:

For UK suppliers, the enhanced certaintyassociated with a fleet strengthens the incentivesto invest in nuclear new build capability, as areturn on their investment is more likely. This may

7. Enhanced local content of UKnuclear new build

The fleet effect:


take the form of investment in specific capitalequipment, recruitment of apprentices andnuclear-qualified staff, or training programmes tomeet nuclear standards. The capability of UKsuppliers would also improve over the fleet buildprogramme as they benefit from experience andlearning effects in delivering the same reactortechnology.

In addition, the potential volume associated with afleet of nuclear reactors lowers the barriers toentry into the UK nuclear new build supply chain.The entry barriers to the nuclear industry areparticularly high, consisting of sunk costs such asaccreditation, quality control procedures andtendering. The timescale required to achieveaccreditation coupled with uncertainty over ordervolumes, technology differences and deliverytimings made smaller companies in our interviewprogramme reluctant to commit to the costs ofinvestment. Commitment to a fleet approach andthe greater opportunity for repeat contracts wouldallow the potential for costs to be recovered over agreater number of units or timescales.

For non-UK suppliers, greater volume andcertainty of reactors with identical technologywould increase the viability of transferringmanufacturing operations into the UK, withadditional confidence being provided by a clearindustrial strategy. Our interviewees made clearthat, with a global supply chain, the business casefor investment must be strong. The increasedquantity of orders from a fleet approach wouldmake it more cost-effective to make inwardinvestment. Such investments have already beenseen in the UK offshore wind sector such asSamsung’s deal with David Brown Gear Systems17,Gamesa’s investment in an R&D facility inStrathclyde18 and Siemens’ £80m investment in awind turbine factory in Hull19.

Prime contractors are expected to employ globalsupply chains, using the optimum combination ofcost and quality criteria. The increased capabilityof the UK supply chain described above increasesthe likelihood that prime contractors would electto use UK content.

These reasons show the scope for increasing the UKindustrial and manufacturing contribution to nuclearnew build becomes more commercially viable when a

17 http://www.ft.com/cms/s/0/da0bf1b6-4c15-11e1-98dd-00144feabdc0.html#axzz28w21HjpO.

18 http://www.guardian.co.uk/environment/2012/mar/23/gamesa-offshore-windfarm.

19 http://www.bbc.co.uk/news/uk-england-humber-17993593.

fleet approach is adopted. However, without positiveaction to utilise UK capacity, there is a risk that thelevel of UK content will remain relatively small giventhe maturity of existing global supply chains andmodern logistics. The benefits of a fleet approachis likely to be maximised when supported by aclear industrial strategy that supports UKcontent, which would allow the proportion ofwork undertaken in the UK to increasesignificantly.

7.2. Scale of benefitsIn the context of utilising a fleet approach to drivedomestic content, Figure 9 demonstrates there isscope to almost double the UK’s involvement in thenuclear new build programme, when compared to thenon-fleet approach. In the absence of a fleet approachthe value of UK content is estimated to remain below50%, with over half of the available work undertakenby companies outside the UK. Our analysis of theresults of our interview programme concludes that thescope for UK content under a fleet approach increasesas the size of the fleet increases, with the greatestlocalisation potential for a fleet of eight reactorsestimated at approximately 85%20.

Figure 9: Potential for UK content evolutionwith and without a fleet

Economic benefits are generated for the UK in termsof GVA and employment, shown in Figure 10,increasing with the size of a fleet. There would be:

direct economic impacts for the nuclear supplychain as they generated greater profits, wage billsand employment;

indirect impacts when those businesses increasedtheir own supply chain spending; and

induced impacts when the employees of all ofthese businesses spent their increased wages in theeconomy.

20 See Appendix B for details.

0%

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60%

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90%

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Fleet of 2 Fleet of 4 Fleet of 6 Fleet of 8

%U

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UK content - non-f leet approach UK content - f leet approach

The fleet effect:


For a fleet of eight reactors, approximately £4.6bn ofdirect additional GVA could be generated from theincrease in UK content, with additional indirect andinduced impacts of £3.5bn and £3.0bn respectively.This total additional GVA of more than £11bntranslates into approximately 150,000 manyears of employment (or around 9,400 jobs),which consists of:

a direct impact of 68,000 man years (equivalent to4,200 jobs);

an indirect impact of 45,000 man years(equivalent to 2,800 jobs); and

an induced impact of 38,000 man years(equivalent to 2,400 jobs).

The impacts on the UK supply chain are the net resultof the:

reduction in the total value of work available to UKcompanies due to the reduced design and buildcosts of a fleet; and

increase in the total share of design and build workdue to the fleet effect encouraging inwardinvestment and increased competitiveness of UKcompanies.

Figure 10 and Figure 11 take into account the trade-offs between the two effects, and demonstrate theeconomic impacts of increased UK content assumingthat the projected cost savings in Chapter 6 areachieved.

Figure 10: Additional direct, indirect andinduced GVA generated by a fleet approach

Figure 11: Additional direct, indirect andinduced employment generated by a fleetapproach

Figure 12 below shows how the magnitude ofeconomic impact for a fleet of eight reactors variesover the lifetime of the nuclear new build programme,which has been assumed to be completed by 2030.

The fleet benefit of UK content follows the timeprofile of construction activity, reaching its peak in2022 when the design and build of six reactors isunderway simultaneously, and tailing down as theconstruction of each reactor is completed. The peakeconomic impact will arise in 2022 when we estimatethat 14,900 people will be employed to meet thedemand for UK support to the new nuclearprogramme. This will generate additional GVA of£1.6bn in 2022.

Figure 12: Additional employment and GVAimpacts over time (fleet of eight reactors)

£0

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Fleet of 4 Fleet of 6 Fleet of 8

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The fleet effect:


7.3. Sensitivity analysisThree sensitivities were quantitatively tested in oursensitivity analysis against our base case estimate of£11.1bn of additional GVA and an additional 150,000man years of employment (9,400 jobs) for a fleet ofeight reactors:

A conservative scenario on the level of costreduction possible over the design and build of afleet produces an estimate of an additional £5.8bnof GVA and an additional employment estimate of57,000 man years or 4,000 jobs.

A more optimistic scenario on the level of costreduction possible over the design and build of afleet produces an estimate of an additional £11.4bnof GVA and an additional employment estimate of153,000 man years or 10,000 jobs.

A scenario assuming output per worker ratiosbased on UK nuclear literature (representing anindustry with lower labour-intensity) does notimpact the GVA estimates but provides anadditional employment estimate of 98,000 manyears or 6,000 jobs.

A scenario assuming output per worker ratiosbased on ONS input-output tables (representinghigher labour intensity) provides a total additionalemployment estimate of 388,000 man yearsrespectively or 24,000 jobs.

A scenario assuming economic multipliers basedon UK nuclear literature representing an under-developed nuclear supply chain provides anestimate of £7.4bn of additional GVA and 162,000additional man years of employment (10,000jobs).

A scenario assuming economic multipliers basedon the 2011 PwC study of the nuclear industry inFrance21 representing a well-developed nuclearsupply chain provides an estimate of £13.2bn ofadditional GVA and 209,000 additional man yearsof employment (13,000 jobs).

Full details and figures on our sensitivity analysis areto be found in Appendix B.

21 PricewaterhouseCoopers ‘The Socio-Economic Impact of theNuclear Power Industry in France’ 2011.

The fleet effect:


8.1. Nature of benefitsOur research and analysis indicates that a fleetapproach to nuclear new build has the potential toreduce significantly the cost of designing and buildingnuclear generation capacity. This would be achievedthrough the economies of scale achieved by havingcommon components and through significantreductions in design effort, construction risk andcontingency, as described in Chapter 6.

Any reduction in the expected cost ofdeveloping, operating and decommissioning afleet of nuclear reactors could be anticipatedto feed through to lower electricity prices,through a reduction in the wholesale price ofelectricity and/or a reduction in the EMRsupport costs23. These lower prices would benefitdomestic and non-domestic customers, includingenergy intensive businesses:

Domestic customers would benefit from reducedelectricity costs leading to greater disposableincome, which would benefit the UK economythrough increased spending. This benefit can beestimated through increased GDP.

Commercial and industrial consumers would gainfrom lower electricity costs and hence improvedcompetitiveness leading to increased productivity.This benefit can also be estimated throughincreased GDP.

22 Lifetime costs take account of costs incurred over the operationaland decommissioning period, recovered over the duration of theEMR CfD.

23 EMR support costs is the term used by DECC in its document“Estimation of households’ demand for gas and electricity” torepresent the costs associated with CfDs under the EMR.

Companies active in export markets would alsopotentially benefit from an increase ininternational competitiveness, leading to increasedsales and increased GDP.

8.2. Scale of benefitsOverall, we estimate that the lifetime costs ofnuclear electricity generation from a fleet ofeight reactors could be reduced by 10.3%through improvements in planning, regulation,efficiency and regulatory approvals.

Our analysis suggests that the reduction incosts would feed through to a potentialreduction in the price of electricity charged todomestic, commercial and industrial users ofup to 2.6% by 2030.

Consumers’ disposable income would be increaseddirectly through lower electricity bills.

Commercial and industrial users would benefitfrom lower costs of businesses, which wouldtranslate into lower product prices, improvinginternational competitiveness. This could lead toincreased exports, reduced imports and higherlevels of investment.

Taken together, these effects are estimated to increaseUK GDP by about £700m (undiscounted) in 2030,when all the new nuclear capacity is assumed to beoperating. This is equivalent to about 2,400additional man years of employment in sectors of theeconomy outside electricity generation. We estimatethat this is equivalent to an additional boost toUK GDP of about £6bn expressed as a presentvalue using 2012 prices.

The reduced costs of delivering nuclear power due toa fleet approach are estimated to reduce the consumerprice of electricity by up to 2.6% at the peak of itsimpact around 2030, for a fleet of eight reactors as

8. Reduced cost of electricityto consumers

Analysis concludes that the lifetime costs22 of nuclear electricity generation from a fleet couldbe reduced by 10.3% for a fleet of eight reactors.

Domestic customers will benefit as well as commercial and industrial users, potentiallyleading to reduction in electricity prices of 2.6% in 2030.

Benefits equivalent to £6bn GDP boost and 44,000 man years of employment or 1,700 jobs.

The fleet effect:


shown in Figure 13. We limited our analysis toaddressing the benefits to be gained during the initialCfD period for each reactor, so our charts show adiminishing impact over time. In practice, we wouldexpect that there would be price benefits in the post-CfD period and additional benefits from thedevelopment of further nuclear plants post-2030.

Figure 13: Reduction in electricity prices byfleet size in base case scenario, 2020-2055

We assessed the sensitivity of the electricity priceimpact through developing scenarios that consideredalternative CfD strike prices, pass-through of costsavings, operational savings and the duration of CfDs.These are described in Table A4 in Appendix A andrepresent:

illustrative scenarios designed to illustrate lowerand higher impacts;

a lower scenario based on a £75/MWh CfD strikeprice, risk allocation agreements that limit thepass-through of design and build cost savings, nooperational savings (perhaps due to indexationoffsetting efficiency savings) and a 15 year CfD;

an upper scenario based on a £135/MWh CfDstrike price, full pass-through of design and buildcost savings and operational cost savings and a 25year CfD; and

a base case scenario based on £105/MWh CfD (thearithmetical average), risk allocation agreementsthat limit the pass-through of design and buildcost savings, operational savings and a 20 yearCfD.

The reductions in electricity price over the threescenarios are shown for a fleet of eight reactors inFigure 14.

Figure 14: Reduction in electricity prices byscenario for a fleet of eight reactors, 2020-2055

The fall in electricity prices due to a fleet of nuclearreactors feeds through to increased GDP andemployment through the mechanism described inAppendix A.

In our base case scenario, the fall in energy pricesbased on a fleet of four reactors translates into anincrease in £1.7bn of GDP and 12,000 additionalman years of employment or 500 jobs.

The economic impacts accumulate for additionalpairs of reactors as the cost savings build up,leading to increases of £5.9bn in GDP and 44,000man years of employment or 1,700 jobs for a fleetof eight reactors in our base case scenario.

Under our lower scenario, the economic impact fora fleet of eight reactors is estimated to provide anadditional £1.8bn of GDP and 12,000 man years ofadditional employment or 500 jobs.

Under our upper scenario the economic impact fora fleet of eight reactors is estimated to provide anadditional £10.9bn of GDP and 86,000 man yearsof employment or 3,300 jobs.

The sensitivities are shown in Figure 15 and Figure 16and described more fully in Appendix B.

Figure 15: Impact on GDP from reduced costof electricity

0.0%

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The fleet effect:


Figure 16: Impact on employment fromreduced cost of electricity

The time profile of economic impacts has beenconstrained to the period covered by the EMR CfDs solargely follows that of the fall in electricity prices inFigure 13. In our base case scenario, the impact onGDP and employment spans 26 years from 2023 until2049, with an average 1,700 additional jobs as shownin Figure 17.

Figure 17: Employment impact of reducedcost of electricity over time

8.3. Sensitivity analysisThree additional sensitivities are quantitatively testedagainst our base case assumptions for a fleet of eightreactors with respect to the impact on the cost ofelectricity. Compared to our base case results for afleet of eight reactors - an additional £6bn of GDP and44,000 additional man years of employment or 1,700jobs:

Conservative views on the level of cost reductionachievable produce additional GDP contributionsof £3bn, and an additional 26,000 man years ofemployment or 1,000 additional jobs.

optimistic views on the level of cost reductionachievable produce additional GDP contributionsof £8bn and an additional 59,000 man years ofemployment or 2,300 jobs.

In a scenario where total electricity generationproduced after 2030 continues to increaseaccording to the rate of increase forecast for the

latter half of the 2020’s24, the impact of a newnuclear fleet on electricity prices would lead to inan increase in GDP of £5.6bn and an additional41,000 man years of employment or 1,600 jobs.

In a scenario where wholesale electricity pricesremain constant after 2030, the impact of a newnuclear fleet on electricity prices would result in anincrease in GDP of£6.4bn and an additional49,000 man years of employment or 1,900additional jobs.

Further details are contained in Appendix B.

24 DECC “Fossil fuel wholesale and retail prices: Annex F” 2011

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The fleet effect:


Further increased opportunities for UK firms in ongoing support for nuclear operations.

Globally 160 reactors on order or planned with another 320 proposed by 2030 increasingoverseas opportunities.

Potential for significant increase in annual nuclear exports.

9.1. Nature of benefitsWe have demonstrated the potential for a fleetapproach to nuclear new build to enhance the skills,technical know-how and capacity of the UK supplychain. In addition, a fleet approach could allow theUK economy to realise additional benefits:

Within the nuclear industry, benefits wouldaccrue through the potential to export moreproducts and services in the global market, whichis predicted to grow significantly over the period to2030.

There may be further benefits within the UKnuclear sector if UK based firms became moreinvolved in the operation, maintenance anddecommissioning activities for the existingfleet of power stations and enduring roles as newreactors enter their operational phase.

There may also be benefits for companies in thenuclear sector through the application of theirenhanced capability to other industries. Forexample, if UK nuclear new build supply chaincompanies also provide non-nuclear products,improvements in skill levels, technology andfacilities are also likely to increase the productivityof their non-nuclear production. We would expectthe benefits to flow down through the supply chainas the experience of Tier 1 and Tier 2 suppliers ispassed on to Tier 3 and 4 suppliers.

The economic impacts of these potential benefits canalso be estimated in terms of increased GDP andemployment, although these are general in nature.

The World Nuclear Association’s October 2012forecast25 indicates that there are 160 reactors onorder or planned with a capacity of some 177GWe26

and a further 323 proposed across 48 countriesworldwide with expected commercial operation by2030, within which 19 are non-nuclear countriescontemplating nuclear development.

The level of experience of each country’smanufacturing sector of operating in safety criticalenvironments varies significantly, as does thematurity and capability of their regulatory sectors.This suggests that there are significant opportunitiesfor companies in the UK nuclear supply chain tocapture a share of this market, both from amanufacturing and a nuclear regulation perspective.The requirement for nuclear supply chain support inexport markets will be based on the contractingstrategy of the technology provider and associatedconsortium, highlighting the importance for UKcompanies to invest in the development of strongrelationships.

25 http://www.world-nuclear.org/info/reactors.html.26 http://www.world-nuclear.org/info/inf17.html.

9. Longer term benefits ofstrengthened UK industrialbase

The fleet effect:


9.2. Scale of benefitsThe development of a strong, competitiveindustrial base in the UK is a prerequisite forgaining future export orders, as is a track recordof delivery that underpins strong relationships withglobal technology providers, their potentialconsortium partners and major international Tier 1players. The certainty and rhythm associated with afleet approach provides the opportunity for UK firmsto develop in this way. The potential prise can beestimated by considering the addressable market,recognising that national governments may havelocalisation requirements that limit the size of theaddressable market and competition will be amongthe global supply chain. An indication of the scale ofthe addressable market and potential for the UKsupply chain is provided by:

Rolls Royce27 analysis that the global civil nuclearmarket is currently worth £30bn per annum andthat it is expected to rise to around £50bn perannum in 15 years, with over 70% relating tobuilding and support of new nuclear facilities; and

IPRR28 analysis that, given the current growthrates for global nuclear power predicted by theIAEA and the UK’s current market share, there isthe potential for the UK nuclear supply chain toincrease the value of exports from £700m tobetween £1.1bn and £1.6bn by 2030.

Adding a fleet effect to the current forecasts wouldenhance the potential market share for UK firmsoffering further growth over and above the 140%figure suggested above.

27 http://www.rolls-royce.com/middle_east/en/markets_products/nuclear.jsp.

28 IPPR Trading Ltd “Benefits from Infrastructure Investment: Acase study in Nuclear Energy” 2012.

The fleet effect:


Risks could be mitigated most effectively through the development of a fleet approach to newnuclear.

We reviewed the risks associated with a fleet approachand the actions available to mitigate such risks.

We identified three such risks that are directlyapplicable to a fleet approach, each of which couldimpact the build programme and hence the overallcost and commercial operation date of individualreactors. This in turn has an impact on thecontribution of nuclear power to the consumerelectricity cost, ongoing nuclear operations, the costof electricity to consumers and the subsequent level ofEMR support required.

10.1. Fleet failure risk10.1.1. During constructionA systematic design issue identified during afleet construction programme could result indelays to all reactors, both those at varying stagesof construction and those still in the planning stage.The extent of any delay would depend on theperceived severity of the risk and the time required todevelop solutions and obtain approval to proceedfrom regulatory and design authority bodies.

The implications for the supply chain could be:

an unexpected hiatus in workload of uncertainduration, leading to the need to find, andconclude, other contracts on which to deploynuclear-qualified staff;

a risk to cash flows and financial metrics for aperiod of time;

a knock-on impact on local economies servedby the supply chain; and

potential redesigns of sub-components.

The implications for consumers would be seenthrough a delay in electricity prices reflecting theimpact of a fleet approach to nuclear, but the scaleof the impact is complex to predict as it would

depend on commodity price levels, the make-up ofthe UK generation portfolio during the period ofthe delay and any adjustments to the planned fleetbuild programme following the resolution of thefailure.

We believe the robustness of the GDA andreactor design authority in the UK is amitigation for this risk. It not only requiressignificant details from reactor manufacturers to gaininitial approval but is also intended to provideongoing protection through taking account of lessonslearnt and requiring modifications.

10.1.2. During operationA failure with safety or operationalsignificance in a single operating reactorcould result in the whole fleet being shut downfor a period of time whilst the issue is mitigated, ashas been seen in the past, both in the UK andoverseas. The duration of the closure and the numberof reactors impacted would depend on a number offactors. These include the perceived severity of therisk, the investigation required to establish the causeof the failure and to develop a solution, the phasing ofthe remedial installation programme and achievingthe regulatory approvals to recommence operations:

The implications for the supply chain would be lessthan during construction as the main impactwould be on those companies providing O&Msupport. Potentially, some companies mightbenefit from additional investigative work orredesign/manufacturing work as the fault isresolved.

The implications for consumers would be seenthrough changes in the cost of electricity althoughthe impact would depend on the proportion ofelectricity being provided by new nucleargeneration, the relative prices of other fuels,

10.Risks associated with anuclear fleet and theirmitigation

The fleet effect:


demand levels, the duration of the shutdown, thecost of Government support under the EMR, theability for electricity suppliers to change tariffs toreflect changes in the wholesale cost of electricityand the ability of industrial and commercialconsumers to pass through price increases in theirown product prices.

Fleet failures are often related to the length ofoperation and solutions can be implemented throughan aggressive, but planned, update programme. Therobust reactor design authority also providesmitigation during operations. Its intent is toenable practical lessons to be learnt and operationaldata to be used to predict remedies for failures and tominimise the duration of the shutdown and impact onthe economy. For any reactor design that hasbeen implemented in other countries, the UKnew nuclear fleet will not be FOAK technologyand can take advantage of fleet learning that has beenidentified elsewhere, thereby benefiting from theeconomies of implementing a standardised and testedsolution.

10.2. Risk of insufficientfinancial capacity in thenuclear supply chain

There is a risk that there is insufficient financialcapacity in the nuclear supply chain to meetcontractual obligations for multiple builds.

The certainty associated with a fleet approach reducesthe risk that key companies within the UK supplychain might decide to focus on other sectors ratherthan nuclear, since volume and rhythm certaintyoffsets the cost of participation and initial investmentrequirements. Assuming that the supply chain wishesto make these investments, the resultant risk is thatcompanies are unable to acquire financing to supportthe necessary investment in facilities or recruitmentto deliver the scope of nuclear new build contracts inthe proposed timescales.

The certainty of contracts for a fleet and theassociated volumes and clarity overconstruction rhythm would be expected toprovide mitigation and comfort to financiersthat the supply chain would meet its financialcommitments. The sequencing of reactorbuilds would provide additional comfort overcontinuity of revenues and so be expected toreduce the risk premium associated with investmentloans.

Other risk mitigants that could be implementedinclude regional development loans and innovative

approaches to contracting to reduce working capitalrequirements for smaller companies in the supplychain. Other mitigants include strategic alliancesbetween larger and smaller companies in the supplychain that enable the alliance to benefit from astronger overall balance sheet in bidding for andimplementing nuclear new build projects.

10.3. Regulatory capacity andcomplexity impact thebuild programme

Although regulatory risk is common to many largebuild programmes, particularly in sectors withstringent safety and quality requirements, there areadditional risks specific to the nuclear new buildprogramme. We have identified three such risksimpacting the supply chain:

The UK has limited availability of scarce resourcessuch as site inspectors and other regulatory andlicensing specialists, which could lead to delays inapprovals and hence commissioning dates.

EU or UK requirements to amend environmentalor safety standards would require additionalskilled regulatory resources to implement andmonitor the change process, which could haveimplications for construction planning andcommissioning timescales.

Nuclear new build consortia and their approach tocontracting raises risks associated with licensingcomplexity, with implications for constructiontimescales.

Although these risks appear diverse, there arecommon mitigants:

Confirmation of a fleet approach supportsinvestment in skills development andrecruitment, particularly in the areas of processcontrols, compliance and quality control. Thisleads to more automation of processes andsystems and the introduction of lean processes tosimplify operations. The upskilling of widermanufacturing staff and internal QA professionalsshould lead to improved operational quality with acommensurate reduction in the time and scopedemands on external inspectors and regulators.

A fleet approach leads to a greater depth ofregulatory interface.

A fleet approach supports the setting up ofcommon contracting interfaces for each reactor,reducing the level of controllable risks, whilstrecognising that site specific risks (common to any

The fleet effect:


large construction project) remain to be mitigatedon a case by case basis.

10.4. Risk that non-UK suppliersbenefit from a fleetapproach at the expense ofthe UK supply chain

The industry recognises that the UK supply chaindoes not currently have sufficient resources orexperience to take a lead role in new nuclear build.Many companies have made, or are planning to make,investments to gain the relevant experience, such aspartnering with overseas firms with new nuclearexperience, increasing the scale of production,expanding the range of products offered or seekingquality approvals. The risk is that Tier 2 companies orlower do not increase their scope of work forsubsequent reactors in a fleet, thereby reducing thereturn on their investments and the contributiontowards GDP.

Our interviews with the supply chain suggestthe key mitigant is dependent on investors’contracting strategies for the fleet. A contractingstrategy that supports localisation would encouragemore UK supply chain companies to invest foraccreditation to participate in the new buildprogramme and encourage the investments needed toincrease scope and role as the programme progresses.Companies would also be encouraged to demonstratetheir ability to compete with their non-UKcompetitors and provide cost-effective solutions toinvestors and Tier 1 suppliers.

10.5. Summary of fleet risksThe complexity associated with the development andoperation of a nuclear power plant means that site-specific risks will always remain. We contend that therisks can be mitigated most effectively through thedevelopment of a fleet approach to new nuclear, suchthat maximum comfort can be taken from the robustdesign regulatory authority, learning from previousexperience and the increased level of specialists withnuclear expertise operating in the sector as shown inFigure 18.

Figure 18: Mitigants of fleet failure risk

Fleetfailure risk

NOAKtechnology

Benefit ofreactor operational

experience

Benefit ofreactor

constructionexperience

Localisationstrategy to

enhance skills

Robust designauthority

Commoncontractinginterfaces

More nuclearspecialists

The fleet effect:


Our conclusions on the benefits to the UK economy ofa fleet approach to new nuclear build in terms ofadditional contribution to GDP and additional jobsare that a fleet approach to new nuclear:

Enhances certainty for the nuclear supplychain:

much of the UK nuclear supply chain needscertainty to justify investments in facilities,training and development, skills enhancement,job expansion or accreditation activities; and

the non-UK nuclear supply chain needscertainty to justify inward investment in the UKand/or partnering with UK firms.

Supports the delivery of certainty throughenabling:

clarity over policies associated with newnuclear development, timescales andcontracting processes;

continuity of business through a clear rhythmof nuclear reactor builds allowing effective useof resources;

volume of orders through investments inrelationships, facilities and training; and

reduction in actual and perceived risksassociated with a fleet.

This could result in the UK content of nuclear newbuild increasing to up to 85%.

Provides the potential for an additional150,000 man years of UK employment(over 9,000 jobs) over the period to 2030:

68,000 man years of additional directemployment (over 4,000 jobs);

45,000 man years of additional indirectemployment (nearly 3,000 jobs); and

38,000 man years of additional inducedemployment (over 2,000 jobs).

In addition, a further 44,000 man years ofemployment (1,700 jobs) from reduced electricitycosts could arise over the period to 2050 covered byCfDs.

Could provide £11bn of additional GDPvalue for the UK in 2012 NPV terms overthe design and build period to 2030:

£4.6bn in additional direct benefits; £3.5bn in additional indirect benefits; and

£3.0bn in additional induced benefits.

In addition, a further £6bn of GDP value could arisefrom the impact of reduced electricity costs over theperiod to 2050 covered by CfDs.

Provides opportunities for significant costsavings in the period to 2030:

cost reductions could lead to savings of up to18% between the first and fourth pairs ofreactors;

cost reductions could reduce the cost of thetotal fleet build programme by up to 10%;

the cost of electricity could be reduced by up to2.6% in 2030 through reductions in theLevelised Cost of Electricity (LCOE) for newnuclear, leading to reductions in the cost ofEMR support for Government; and

the overall cost of new nuclear electricity overthe fleet CfD period could be reduced by 10.3%.

There could be further cost savings through thedevelopment of additional nuclear plant post-2030(in preference to other technologies) and fromreductions in the cost of electricity after the CfDperiods.

Provides the potential for enhancedindustrial benefits over the long term:

opportunity to increase nuclear-related exportsby significantly more than 140% by 2030; and

enables the UK supply chain to apply itslearning to other safety-intensive, highlyregulated industry sectors such as otherrenewable generation, oil and gas or chemicals.

11. Conclusions

The fleet effect:


Appendices

The fleet effect:


A. 1. IntroductionThis appendix provides additional details on theapproach we took to developing and structuring oureconomic model, identifying data sources andcollecting data and the broader economicassumptions made to develop appropriate scenariosfor analysis.

A. 2. Reducing design, build andoperating costs of nuclear plant

A.2.1. Model structure

The first stage in our assessment of the change indesign and build costs from a fleet approach involveda bottom-up analysis of the expected cost of the firstpair of nuclear reactors. Their costs were brokendown into approximately 20 categories of expendituregrouped under four main headings:

nuclear island (excluding civil works);

nuclear island civil works;

conventional island; and

balance of plant.

We estimated the cost saving from a fleet approachfor each category of expenditure based on evidencecollected from our programme of interviews withsupply chain industry experts. We checked forconsistency with publicly available informationwherever possible. The expected percentage costsaving for each category of expenditure wasmultiplied by the corresponding baseline costestimate to determine the total cost saving bycategory. To obtain present value estimates of theexpected cost savings, we applied discount rates basedon the phasing of reactors.

A.2.2. Data sources and assumptions

Our key assumptions for the modelling approachabove are as follows:

Each reactor takes seven years to build from startto finish (i.e. from FID to start of commercialoperation), with two years of studies and five yearsof construction.

The operational phase of each reactor lasts for 60years, and the decommissioning phase lasts for 20years.

Construction of each subsequent plant commences18 months after the start of the construction of thesecond reactor of the previous plant. For the firstplant, construction of the second reactor willcommence 18 months after the start ofconstruction of the first reactor, and for later plantthis gap reduces to 12 months. This is to provide asteady rhythm of construction for a programme ofnuclear plant, which recognises industry norms forreactors on a single site and typical phasing tosupport continuity.

The construction programme commences at thebeginning of 2013 and will be completed in 2029.

A. 3. Increasing UK content in theUK new nuclear build programme


Our assessment of the proportion of the UK newnuclear build programme which could potentially besourced from UK based suppliers with a fleetapproach is based on evidence collected during ourprogramme of interviews with the supply chain andindustry experts. It reflects views about supply chaincapability rather than a definite commitment on thepart of those funding and delivering the nuclearprogramme to buy from UK based companies. Usingthis information, we estimate the likely value of thepurchases from the UK based supply chain for eachcategory of expenditure.

We estimated the value added directly associated withthis spend by multiplying it by the appropriate ratio ofvalue added to output (turnover) derived from officialstatistics29. The relevant ratio was obtained bymatching each category of spend to industry sectorsdefined within the UK Standard IndustrialClassification. We estimated direct employment usinga ratio of output per man-year of employment,obtained from the financial accounts of a

29 Input-Output Analytical Tables, ONS.

Appendix A: Model structure,data sources and assumptions

The fleet effect:


representative sample of businesses in the nuclearnew build supply chain.

We used standard Type 1 and Type 2 multipliersderived from UK input-output tables30 to estimate theindirect and induced impacts of the UK contentexpressed both as GVA and man years ofemployment. This gave an estimate of theemployment and GVA generated in the UK economyas a result of supply chain expenditure and employeespending. The direct, indirect and induced impacts foreach spend category were summed to estimate thetotal economic impact of the UK content associatedwith a fleet approach to the new nuclear buildprogramme, in terms of GVA and employment. Weapplied a discount rate to the GVA figure to obtain anet present value estimate.

Our assessment of the potential UK content of a newnuclear build programme without a fleet approachuses exactly the same steps starting from the expectedspend on the new nuclear programme without a fleetapproach (i.e. using the counterfactual).

By taking the difference between the with and withoutfleet estimates of GVA and man years of employmentwe determined the incremental effect of the fleetapproach.


Table A3 below lists the assumptions used in ourmodelling of UK content and their source:

Table A3: Data sources used in UK contentestimations

Assumption Data source

Economicmultipliers

ONS input-output tables31

Output perworker ratio

Financial data from a sample of nuclear newbuild businesses

Discount rate HM Treasury discount rates32

30 Input-Output Analytical Tables, ONS.31 Input-Output Analytical Tables, ONS.32 The Green Book – Appraisal and Evaluation in Central

Government, HM Treasury, July 2011

A. 4. Reduced costs of electricity forconsumers


We estimated the impact on overall electricity pricesto consumers using the expected lifetime cost savingsof a fleet approach to nuclear new build where thelifetime includes operations and decommissioning.We estimated the expected cost savings during thedesign and build phase as described in Appendix A.2,while for the expected cost savings during theoperations, maintenance and decommissioningphases we used published estimates by ParsonsBrinckerhoff33. After accounting for the proportion oflifetime cost savings expected to be passed throughthe value chain to consumers, we estimated theimpact on consumer electricity prices on an annualbasis, using the assumption that all cost savingswould be recovered over the duration of the CfD.

We estimated the impact on consumer electricityprices through two channels; a reduction in the CfDstrike prices for each nuclear plant after the first (i.e. afleet effect has no impact on the CfD strike price forHinkley Point) and a reduction in the wholesaleelectricity price. We multiplied the percentage lifetimecost saving passed through by the counterfactualstrike price (i.e., the assumed strike price in theabsence of a fleet approach) to obtain the reduction instrike price for each CfD. For the reduction inwholesale electricity prices, we calculated the resourcecost saving per MWh of total electricity production.The two sources of price reductions were added tofind the total reduction in consumer electricity prices.

The reduction in consumer electricity prices impactsthe economy through a number of mechanisms,displayed in Figure 19 below. Firstly, householdsbenefit from increased disposable income due tolower electricity bills, which increases consumptionand therefore generates GDP and employment.Secondly, businesses also benefit from lowerelectricity bills in the form of reduced operating costs.There are two economic impacts of lower businesscosts – an increase in business competitiveness whichleads to greater exports and increased GDP andemployment, and a reduction in product prices whichfurther increases household disposable income andconsumption, and hence GDP and employment.These various economic impacts were estimatedsimultaneously using Cambridge Econometrics’ MDM

33 Electricity Generation Cost Model, Parsons Brinckerhoff, 2011.

The fleet effect:


energy-environment-economy model34, producingestimates of the change in GDP and employment fromreduced electricity prices on an annual basis.

Figure 19: Economic impacts of reduced costsof electricity for consumers

A.4.2. Data sources and assumptions

To take account of data uncertainty, we applied threesensitivities on the impact of reduced costs ofelectricity. The assumptions underpinning each ofthese scenarios are displayed in Table A4 below.

The sensitivities are for illustrative purposes only,designed to show a range of impacts from a fleet effectand do not represent PwC’s views on theappropriateness or achievability of any particularstrike price for new nuclear plant.

Our scenarios regarding the strike price use theParsons Brinckerhoff35 estimate of the FOAK levelisedcost of nuclear power as a lower bound, and a figureslightly below the strike price for offshore wind in the2012 PwC study36 as an upper bound (based onVincent de Rivaz’s interview with the Daily Telegraphin August 201237). Our base scenario uses a valueslightly above the mid-point of the range to reflect theUK FOAK status.

For the pass-through of cost savings, we allocatesavings to consumers and producers based onassumptions on risk allocation, the impact onrequired returns and risk appetite. As with the strikeprice, the values used are designed to illustrate a

34 Multisectoral Dynamic Model, Energy-Environment-Economy,Cambridge Econometrics.

35 Electricity Generation Cost Model, Parsons Brinckerhoff, 2011.36 Offshore Wind Cost Reduction Pathways Study – Finance Work

Stream, PwC.37http://www.telegraph.co.uk/finance/newsbysector/energy/94711

93/EDF-Energy-puts-price-cap-on-Hinkley-Point-nuclear-plant.html.

range of impacts and do not represent PwC’s views onthe likely level of cost savings to be passed on toconsumers or make any assumptions aboutcommercial behaviours of companies. The lowerbound assumes that consumers and producers sharethe benefit of reduced costs equally, the upper boundassumes that all of the cost savings accrue toconsumers, while our base case scenario assumes amidpoint between the two.

For operations, maintenance and decommissioningcost savings, our lower scenario assumes that there isno saving (e.g. all savings are offset by wage orcommodity inflation), our upper scenario assumesthat savings are equal to the design and build savings,while the base scenario uses the savings identified byParsons Brinckerhoff38 in their 2011 paper on thecosts of electricity generation. Over an eight reactorfleet, the upper and central scenarios produce similarsavings but differ for smaller size fleets.

We assume that the lower tenor of the CfD for nuclearplant is at the level indicated by DECC in their 2012report39 and that the upper duration is 25 years,assuming that a longer tenor will be required fornuclear than for other low-carbon generation. Thebase scenario assumes a mid-point of 20 yearsrecognising that DECC have left the tenor for nuclearand CCS plant CfDs as a detail to be finalised.

Table A4: Lower, central and upper scenariosfor reduced cost of electricity estimations

Lowerscenario

Basescenario

Upperscenario

Strike price £75/MWh £105/MWh £135/MWh

Pass-through ofcost savings

50% 75% 100%

Operations,maintenance anddecommissioningcost savings

No costsavings

(0% overbuildprogramme)

Savings inParsonsBrinckerhoffpaper


Equal to costsavings indesign andbuild phase


Duration of CfD 15 years 20 years 25 years

38 Electricity Generation Cost Model, Parsons Brinckerhoff, 2011.39 Electricity Market Reform Policy Overview, Annex B – Feed-in

Tariff with Contracts for Difference: Draft OperationalFramework, DECC, 2012.

Reduced costs ofelectricity for

consumers

Reduced productprices

Increased GDP andemployment

Reduced operatingcosts of businesses

Increased businesscompetitiveness

Increased businessexports

Increased householddisposable income

Increased consumption

The fleet effect:


The other important data used in the base case modelling of reduced electricity costs and their sources arelisted in Table A5 below:

Table A5: Data sources

Data Source

Forecast consumption of electricity by user DECC Updated Energy and Emissions Projections, Annex C, October 2011

Electricity generation, 2012 – 2030 DECC Updated Energy and Emissions Projections, Annex E, October 2011

Electricity generation, post 2030 Assumed to stay constant at the 2030 level of generation

Wholesale electricity prices, 2012 – 2030 DECC Updated Energy and Emissions Projections, Annex F, October 2011

Wholesale electricity prices, post 2030 Assumed to increase linearly at the annual rate of increase between 2025-2030

Inflation rate UK GDP deflator, National Income, Expenditure and Output, 2012, ONS

Household elasticity of demand for electricity Estimation of Households’ Demand for Gas and Electricity, Oxford Economics,December 2008

Household energy bill and usage Estimated Impact of Energy and Climate Change Policies on Bills, DECC,November 2011

Projection of UK households UK household projections, ONS housing statistics, 2010

The fleet effect:


B. 1. IntroductionThis appendix provides greater detail on the results ofour analysis, and describes the sensitivity analysisundertaken on each of the main benefit areasconsidered.

B. 2. Reduced costs of UK nuclearnew buildFigure 20 below shows the relative contribution ofeach design and build category savings to the totalsavings for design and build on the fourth pair ofreactors compared to the first pair. The NuclearIsland makes the largest contribution to total savingsat almost 50%, with the Conventional Island next atover 25%. The categories with the smallestcontributions to total savings, Nuclear Island CivilWorks and Balance of Plant, are those with thesmallest proportion of total expenditure.

Figure 20: Contribution of categories to totaldesign and build savings

Supply chain companies interviewed had differingviews on the magnitude of cost savings achievablefrom a fleet approach, dependent on the products andservices provided and the design and build categoriesthey were targeting. Our sensitivity analysisconsidered scenarios which weighted the resultsacross the categories of spend in differentproportions, to consider conservative and optimisticsavings and assess the robustness of our resultsagainst the base case scenario. The results remainconsistent with a significant level of cost savingthroughout, shown in Figure 21. The base casescenario produces a saving of 18% on the fourth pair

of reactors, while the conservative and optimisticsavings were 9% and 28% respectively.

Figure 21: Impact of conservative andoptimistic interview data on design and buildsavings

B. 3. Enhanced local content of UKnuclear new build

B.3.1. Scale of benefits

The impact of a fleet approach on UK content variesconsiderably depending on the design and buildcategory considered. Figure 22 below shows thecontribution of each of the four categories to the totalemployment generated by greater UK content, for afleet of eight reactors:

The Nuclear Island makes the largest contributionto total employment at over 90%.

The Conventional Island also makes a positivecontribution of greater than 10%.

The Balance of Plant and Nuclear Island CivilWorks make a small negative contribution to UKcontent because the increase in UK content from afleet approach is outweighed by the reduction incost. Despite capturing a greater proportion of thetotal work, the amount of work available has fallendue to learning and efficiencies.

Although this effect occurs for each category, it isamplified for Civil Works and Balance of Plantbecause the level of UK content is alreadycomparatively high in a non-fleet approach.

0%

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Appendix B: Model results andsensitivity analysis

The fleet effect:


Figure 22: Contribution of category toemployment impact

B.3.2. Sensitivity analysis

The same approach was adopted for sensitivityanalysis to assess employment generation fromenhanced UK content. For a fleet of eight reactors,this yields total employment estimates of 57,000 and153,000 man years of employment for conservativeand optimistic interview data respectively, comparedto 150,000 man years in the base case, as shown inFigure 23.

Figure 23: Impact of conservative andoptimistic interview data on totalemployment

The assumption for output per worker is a keysensitivity because it drives the conversion of GVAinto employment, and hence impacts employmentestimates significantly. In the base case, output perworker is derived from the company accounts of asample of suppliers in the nuclear supply chain,providing a total employment estimate ofapproximately 150,000 man years for a fleet of eightreactors. The two sensitivities considered are a proxyfor output per worker from figures in the 2012 IPPRreport40, and output per worker in the sector-specificONS input-output tables41. The IPPR data provideslower values than the ONS input/output tables as theUK nuclear supply chain sector is not currently asintensive as other sectors. The range gives a view onthe potential level of uplift that could be achievable.

40 Benefits from Infrastructure Investment: A Case Study inNuclear Energy, IPPR Trading Ltd, 2012.

41 Input-Output Analytical Tables, ONS.

The IPRR scenario provides an estimate of 98,000man years for a fleet of eight reactors, while the ONSinput/output tables’ scenario provides an equivalentestimate of 388,000 man years, as shown in Figure24.

Figure 24: Impact of output per worker ratioon total employment

The choice of economic multipliers is a key sensitivityfor the UK content results because it providesestimates of the indirect and induced impacts for GVAand employment. In the base case, multipliers arederived from the ONS input-output table, aftermatching the categories of expenditure to appropriateUK Standard Industrial Classification sectors. Twoalternative sources of multipliers have been tested –those stated in the literature for the UK nuclearindustry and those used in the 2011 PwC study of theFrench nuclear industry42. Again, the nuclear industryis less well established in the UK than in France andso the scenario using French data gives a picture ofwhat could be achievable with a strong, welldeveloped nuclear sector. As Figure 25 and Figure 26show, the GVA results are more sensitive to the choiceof multipliers than the employment results. For a fleetof eight reactors, total GVA varies between £7.4bnand £13.2bn depending on the choice of multipliers,while employment varies between 150,000 and209,000 man years.

Figure 25: Impact of economic multipliers ontotal GVA

42 The Socio-Economic Impact of the Nuclear Power Industry inFrance, PwC, 2011.

Nuclear Island Nuclear Island CivilWorks

Conventional Island Balance of Plant

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Proxies from literature ONS I-O tables PwC France

The fleet effect:


Figure 26: Impact of economic multipliers ontotal employment

B. 4. Reduced cost of electricity

B.4.1. Scale of benefits

Figure 27 and Figure 28 below show how theeconomic benefits of lower electricity prices aredistributed across the sectors of the economy. Thesector which experiences the greatest economicbenefit is financial and business services, receivingmore than 50% of total employment and more than30% of total GDP generated by lower electricityprices. The other sectors which are impactedsignificantly are manufacturing and construction,which benefit from over 25% of total GVA and over20% of total employment respectively.

Figure 27: Employment impacts of reducedelectricity prices by industry

Figure 28: GVA impacts of reduced electricityprices by industry

B.4.2. Sensitivity analysis on base case

The first sensitivity we considered is the level ofachievable cost savings, based on findings from ourinterview data. It has an impact on the results, butthere are still significant economic benefits fromlower cost of electricity, shown in Figure 29 below.For a fleet of eight reactors, the conservative andoptimistic approaches produce 26,000 and 59,000man years of employment respectively, compared to44,000 man years in the base case.

Figure 29: Effect of conservative andoptimistic interview data on employment

There is only a moderate impact on the results fromtaking an alternative assumption around totalelectricity generation in the long-term as shown inFigure 30. In the base case it is assumed that after2030, the latest date of forecast electricity generationfrom DECC, the level of electricity generated remainsat a constant level. A sensitivity that generationincreases linearly at the same rate of annual increaseas between 2025-30 results in slightly lower resultsfor additional GDP and employment. The reductionreaches its maximum level (a difference of £76m(undiscounted) and approximately 260 man yearsfrom the base case) in 2042. The fall in economicimpacts arises in this case because new nuclearbecomes a lower proportion of total electricitygeneration over time, and thus has a smaller impacton overall electricity prices (assuming no other costefficiencies are achieved).

Figure 30: Impact of long-term electricitygeneration on employment, 2020-2050

0

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Fleet of 4 Fleet of 6 Fleet of 8Tota

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Proxies from literature ONS I-O tables PwC France

Fin. & business serv. Construction

Other services Inform. & commun.

Government serv. Agriculture etc

Transport & storage Accom. & food serv.

Mining & quarrying Manufacturing

Distribution

Fin. & business serv. Construction

Other services Inform. & commun.

Government serv. Agriculture etc

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The fleet effect:


The impact of varying assumptions on electricityprices has a larger impact than varying the level ofgeneration capacity. In the base case, it is assumedthat after 2030, the latest date of forecast electricityprices from DECC, that prices increase linearly at thesame annual rate as between 2025 and 2030. Thiscauses an increase in GDP and employment impactswhich reaches a peak of £120m (undiscounted) and410 man years in 2042. There is an increase ineconomic impact because when prices do not riseafter 2030, the resource cost saving becomes a largerproportion of electricity prices.

Figure 31: Impact of long-term electricityprices on employment, 2020-2050

Our analysis of the economic impacts of reduced costsof electricity assumes that benefits accrue only toconsumers and producers of electricity. However,there will be a benefit to public finances throughlower EMR support costs, which results from areduction in strike price (i.e. the funds provided whenwholesale prices are less than the CfD strike price).The fall in the strike price for each pair of reactors isestimated by combining the percentage reduction inthe lifetime cost with an assumed percentage pass-through of cost savings. The difference between thestrike price and the wholesale price (i.e. the EMRsupport cost) is calculated for each year, with andwithout the cost savings, to find the total saved cost togovernment.

In the base scenario, the fleet approach generates asaved cost to government of £8.1bn for a fleet of eightreactors, while the lower and upper scenarios provideestimates of £2.0bn and £16.5bn respectively, asshown in Figure 32. Incorporating the results fromour interviews on potential cost savings for designand build have a significant impact on the magnitudeof EMR support cost savings. The conservative andoptimistic approaches produce estimates of £4.8bnand £10.7bn respectively for eight reactors, comparedto an estimate of £8.1bn for the base case, as shown inFigure 33.

Figure 32: EMR support cost savings from afleet approach

Figure 33: Impact of conservative andoptimistic interview data on EMR supportcost savings

B. 6. Reduced costs of electricity forhouseholdsIn our analysis of reduced costs of electricity, theeconomic benefits through lower energy prices forboth households and businesses are taken intoaccount. This is a complementary analysis focusingspecifically on the benefits through lower prices forhouseholds, which constitute approximately 30% oftotal energy consumption in the UK43.

To find the saving in electricity prices faced byhouseholds, we converted the reduction in lifetimecosts into an annual cost saving per MWh of output,using total fleet generation. After accounting for thepass-through of saved costs, we calculated the impacton overall electricity prices using the ratio of newnuclear electricity generation to total electricitygeneration.

We estimated the saved cost to households usingDECC data on household energy usage44 and publiclyavailable figures on the household price elasticity of

43 DECC updated energy and emissions projections Annex C,October 2011

44 Estimated impacts of energy and climate change policies onenergy prices and bills, DECC, November 2011.

0

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The fleet effect:


demand for electricity45. We estimated the effect ofthese savings on final consumption, allowing forleakage on imports, taxes and savings. Using ONSdata from input-output tables on household demandfor each sector46, we derived the direct impact on eachsector’s employment and output, and appliedmultipliers to obtain the indirect and inducedimpacts.

Figure 34: Annual household saving fromreduced electricity prices, 2020-2055

The annual saving to households from lowerelectricity prices reaches a maximum of £72m(undiscounted) as shown in Figure 34 above, for afleet of eight reactors in the base scenario. Thesesavings translate into a total increase in £1bn of NPVGDP and 14,500 man years of employment, as shownin Figure 35 below. Applying our conservative andoptimistic cost reduction sensitivities to the base casefor a fleet of eight reactors gives additionalemployment man year impacts of 8,300 and 20,100for the conservative and optimistic approachesrespectively, as compared to 14,500 for the base case,as shown in Figure 36.

Figure 35: Impact of household savings onemployment

45 Estimation of Households’ Demand for Gas and Electricity,Oxford Economics, December 2008.

46 Input-Output Analytical Tables, ONS

Figure 36: Effect of conservative andoptimistic interview data on householdsavings employment impact

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The fleet effect:


The Draft Energy Bill 201047 and its supportingdocumentation provide the latest guidance on the detailsof the Electricity Market Reform proposals, which wereinitially consulted on in December 201048. EMRcomprises a range of policy options that provides themost radical changes to the Great Britain power sectorsince privatisation and envisions four stages thatprogress from incentives to support low-carbon projectsto a longer-term vision of low-carbon generationcompeting fairly on price. The Bill, once introduced intoParliament, is expected to achieve Royal Assent in 2013to support low-carbon projects from 2014. EMRcomprises four main policy instruments:

Feed in Tariffs with Contracts forDifference (FiT CfDs or CfDs): Long termcontracts will be offered to new low carbongenerators to provide a degree of revenuecertainty. These will be structured as CfDs toincrease revenue stability, with the aim of loweringthe cost of capital and thus cost to the consumer.DECC has indicated its intention to set up amarket for CfDs from 2014 and proposes toconsult on CfD strike prices in 2013 prior topublishing a set of strike prices within its 2014-18Delivery Plan. The current proposal is for NationalGrid to administer the mechanism and be thedelivery body on behalf of the Government, withsuppliers acting as counterparties to CfDs understatutory contracts.

Carbon Price Support (CPS): The carbon pricefloor was legislated for through the Finance Act2011 and placed a levy on input fuels such as coaland natural gas. The CPS will be introduced at£4.94/tCO2 in 2013 with a target price of£30/tCO2 in 2020, and £70/tCO2 in 2030. Thisrapid increase will put pressure on the economicviability of older and less efficient thermal powerplant, but will increase returns that can be earnedby more efficient plant and low carbon plant.

Emissions Performance Standard (EPS):The EPS sets a maximum level of emissions of450gCO2/kWh for new fossil fuel power plantsuntil 2045, with exemptions for fossil fuel plantforming part of the UK’s CCS commercialisation

47 Draft Energy Bill’ Secretary of State for Energy and ClimateChange, May 2012.

48 Electricity Market Reform Consultation Document’ DECC,December 2010

programme or benefiting from European fundingfor commercial scale CCS.

Capacity Payment Mechanism (CPM): TheCPM is intended to insure against loss of securityof supply and will be implemented through acapacity auction operated by National Grid open tonew and existing generation, storage and demand-side response. It will reward capacity foravailability and contribution to security of supply,with penalties for non-availability. The timing ofthe first capacity auction is to be determined byMinisters based on advice on the security of supplyoutlook. The consultation on the full CPM designis planned for 2013.

The CfD mechanism is the most important policyinstrument from the point of view of new nuclearcapacity. There remain a number of details outstandingwhich are likely to impact the decision making processof low-carbon developers. In particular:

Further details on the institutional framework areexpected in autumn 2012. Government is to retaincontrol of policy and implementation decisions,the System Operator to provide analysis to informGovernment decisions, administer the CfD andcapacity markets and report on delivery, andOfgem to regulate the System Operator andoversee its performance. Secondary legislation isplanned in 2013-14.

The draft CfD Operational Framework is still to beconfirmed and will be implemented throughsecondary legislation and changes to codes andlicences.

The tenor for nuclear CfDs and the sources fordetermining baseload reference prices are still tobe clarified.

The legal framework and payment model outlinedin the draft Bill have been met with concerns bythe industry. Final decisions on counterparty,framework and payment model are expected inautumn 2012.

DECC has recognised that some developers’timetables will require them to achieve FID prior to2014, including EDF’s Hinkley Point C nuclearproject, and has put in place measures to enable theSecretary of State to issue investment instruments(similar to CfDs) in advance of the implementation ofCfDs for such projects through the FID enablingprocess.

Appendix C: Summary of EMR

The fleet effect:


The table below contains a list of the third party reports used as references and the source documents forspecific data used in our modelling.

Title Author Year

Planning our electric future: a white paper for secure, affordable and low carbon

electricity

DECC 2011

Draft Energy Bill CM 8362 Secretary of State for

Energy and Climate Change

2012

The path to strong, sustainable and balanced growth BIS 2010

Industrial Strategy: UK Sector Analysis BIS 2012

National Electricity Transmission System Seven Year Statement National Grid 2011

UK Future Energy Scenarios National Grid 2011

Total electricity generation by source (spreadsheet) DECC 2011

Indicative timeline for new nuclear DECC 2011

Power People, the Civil Nuclear Workforce 2009-2025 Cogent 2009

The Supply Chain for a UK Nuclear New Build Programme NAMTEC 2009

Electricity Market Reform Consultation Document DECC 2010

Input-Output Analytical Tables ONS 2005

Electricity Generation Cost Model Parsons Brinckerhoff 2011

http://www.telegraph.co.uk/finance/newsbysector/energy/9471193/EDF-Energy-

puts-price-cap-on-Hinkley-Point-nuclear-plant.html

Daily Telegraph 2012

www.ft.com/cms/s/0/da0bf1b6-4c15-11e1-98dd-

00144feabdc0.html#axzz28w21HjpO

Financial Times 2012

www.guardian.co.uk/environment/2012/mar/23/gamesa-offshore-windfarm Guardian 2012

www.bbc.co.uk/news/uk-england-humber-1799359 BBC 2012

www.world-nuclear.org/info/reactors.html World Nuclear Association 2012

www.world-nuclear.org/info/inf17.html World Nuclear Association 2012

The Green Book – Appraisal and Evaluation in Central Government, HM Treasury, 2011

Multisectoral Dynamic Model, Energy-Environment-Economy Cambridge Econometrics 2012

Updated Energy and Emissions Projections, Annex C DECC 2011

Updated Energy and Emissions Projections, Annex E DECC 2011

Updated Energy and Emissions Projections, Annex F DECC 2011

UK GDP deflator, National Income, Expenditure and Output ONS 2012

Estimation of Households’ Demand for Gas and Electricity Oxford Economics 2008

Estimated Impact of Energy and Climate Change Policies on Bills DECC 2011

UK household projections, ONS housing statistics ONS 2010

Offshore Wind Cost Reduction Pathways Study – Finance Work Stream PwC 2012

Electricity Market Reform Policy Overview, Annex B – Feed-in Tariff with Contracts

for Difference: Draft Operational Framework

DECC 2012

Benefits from Infrastructure Investment: A Case Study in Nuclear Energy IPPR Trading Ltd 2012

The Socio-Economic Impact of the Nuclear Power Industry in France PwC France 2011

Appendix D: References

The fleet effect:


The table below contains a list of the third party reports we reviewed as part of our analysis and literaturereview:

Title Author Year

Nuclear new build Unveiled Arthur D Little 2010

Next generation: skills for new build nuclear Cogent 2010

Scottish energy ready reckoner Cogent SI 2010

Northern Way nuclear supply chain development study report Dalton Nuclear Institute,Manchester Business School& NAMRC

2011

Supply chain reaction: localisation issues for nuclear new build Deloitte 2012

UK energy sector indicators 2010 DECC 2010

Onshore wind: direct and wider economic impacts DECC 2012

Socio-economic impacts of a nuclear power station on the local community EDF 2011

Putting into perspective the supply of and demand for nuclear experts by 2020 withinthe EU-27 nuclear energy sector

EHRO-N 2012

The socio-economic impacts of Dounreay decommissioning Grangeston 2012

Human Resources for Nuclear Power Expansion International AtomicEnergy Agency

2010

An assessment of the costs of the French nuclear PWR program 1970–2000 International Institute forApplied Systems Analysis

2009

Britain's Nuclear Future IoD 2012

Scottish offshore wind: creating an industry IPA Energy and WaterEconomics

2010

Contribution of nuclear power to the national economic development in Korea Korea Atomic EnergyResearch Institute

2009

Costs of low-carbon generation technologies Mott MacDonald 2011

The nuclear energy landscape in Great Britain National Audit Office 2012

Nuclear Lessons Learned Royal Academy ofEngineering

2010

The future of Nuclear Energy in the UK University of Birmingham,Birmingham PolicyCommission

2012

The implications of recent UK energy policy for the consumer: A report for theConsumers’ Association

University of Cambridge 2012

www.unep.org/yearbook/2012/pdfs/UYB 2012 Ch 3.pdf United Nations 2012

Electricity Generation Costs Parsons Brinkerhoff 2011

Indicative timeline for new nuclear DECC 2011

http://www.unep.org/yearbook/2012/pdfs/UYB


BIS Department for Business, Innovation and Skills IEA International Energy Agency

BOP Balance of Plant JV Joint Venture

CCGT Combined-cycle gas turbine LUEC Levelised Unit Electricity Cost

CfD Contract for Difference MWh Megawatt hour

CI Conventional Island NAMTEC National Metals Technology Centre

CCS

CO2

Carbon Capture and Storage

Carbon dioxide

NAMRC Nuclear Advanced Manufacturing ResearchCentre

CPM Capacity Payment Mechanism NI Nuclear Island

CPS Carbon Price Support NOAK nth of a Kind Project (where n is a number largerthan one, indicating that cost benefits can beachieved)

DECC Department of Energy and Climate Change N Stamp Nuclear component certification program fromAmerican Society of Mechanical Engineers

EDF Électricité de France O&M Operations and Maintenance

EMR Electricity Market Reform OEMs Original Equipment Manufacturers

EPC Engineering, Procurement and Construction PwC PricewaterhouseCoopers LLP

EPS Emissions Performance Standard PWR Pressurised Water Reactor

EU European Union QA Quality Assurance

FID Final Investment Decision RCC-M Règles de conception et de construction desmatériels mécaniques des îlots nucléaires PWR

FiT Feed-in Tariff SQEP Suitably Qualified and Experienced Personnel

FOAK First of a Kind Project TI Turbine Island

gCO2/kWh

grams of Carbon Dioxide per kilowatt hour Tier 1-4 Industry recognised categories of supply chaincompanies, indicating the role they play in theconstruction process

GHG Greenhouse gases TWh Terawatt hours

GDP Gross Domestic Product Type 1 Economic multiplier driving indirect impacts

GVA Gross Value Added Type 2 Economic multiplier driving indirect andinduced impacts

GW Gigawatt

Appendix E: Acronyms


Contacts

For further information, please contact

Jonty Palmer

Partner

Karen Dawson

Director

Richard Lobley

Director

Mark Ambler

Director

+44 (0) 20 7804 5074

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[email protected]

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general guidance on matters of interest only, and does not constitute professionaladvice. You should not act upon the information contained in this publication without obtaining specific professional advice.

ed) is given as to the accuracy or completeness of the information containedin this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents

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