Nuclear Power Plant & SystemsDavid Downing / Kenneth GreenWSP | Parsons Brinckerhoff / Sargent & LundyTUESDAY, 6 OCTOBER 2015

The Brief

• To develop whole-of-life cost estimates for the development of nuclear power generation facilities in South Australia• Generation III or later• Commercially available by 2030• Large-scale or small modular reactors• Infrastructure requirements: road; rail; water supply; electricity transmission• South Australian context

• To develop business cases• Cost and revenue streams• Levelised cost of electricity• Required commercial returns• Developmental risk assessment• Requirements for project investment

Evolutionary Generation III Designs

• Net capacities 700–1,600MWe

• General Electric-Hitachi ABWR

• KEPCO APR-1400

• AREVA EPR

• Enhanced CANDU 6 (EC6)

Advanced Generation III+ Designs

• Net capacities 1,100-1,600MWe• Westinghouse AP1000

• General Electric-Hitachi ESBWR

• Advanced CANDU (ACR-1000)

• Net capacities - 50-200MWe per reactor • NuScale

• SMART

• SMR-160

• mPower

Small Modular Reactors

The Brief - Modelling

• To develop whole-of-life cost estimates for the development of nuclear power generation facilities in South Australia• Generation III or later

• Commercially available by 2030

• Large-scale or small modular reactors

• Infrastructure requirements: road; rail; water supply; electricity transmission

• South Australian context

Economic Modelling

• Inputs• Economic assumptions

• Capital cost

• Operating costs

• Technical assumptions

• Schedules

• Outputs• Levelised cost of electricity, LCOE

• Levelised price of electricity, LPOE

• Inputs to CGE modelling by others

Economic Assumptions• Macro-economic assumptions

• Escalation = 0.95% real (AETA, 2012)• Foreign exchange rates

• AU$1.00 = US$0.73 (interim assumption)

• Economic assumptions specific to NPP• Weighted average cost of capital, WACC• Assumed NPP business model

• Revenue assumptions - wholesale electricity pricing• forecast using EY electricity market model• considers changes to mix of generation technologies• considers international and Australian climate change obligations

Weighted Average Cost of Capital• Basis of estimation

• Experience of recent energy/infrastructure financing in Australia

• Review of recent international NPP financing • Not market-tested• Long-term revenue certainty required• Governmental support required (e.g.)

• Loan guarantees• Tariff guarantees

• Real pre-tax WACC = 10.47%• Consistent with other nuclear power study real

pre-tax WACC assumptions• Imperial College study “Cost estimates for

nuclear power in the UK” - 11%• AREVA: liberalised markets would require 11%

WACC Assumptions

Long term capital structure: Debt 50% Equity 50%

Cost of equity Risk free rate (Rf) 4.9% Market risk premium (Rm-Rf) 6.0% Asset beta (ß) 0.5

Alpha factor () 3.0%

Cost of debt Risk free rate 4.9% Swap margin 0.5% Margin above swap 2.5%

Other assumptions Tax rate 30% Franking credit utilisation 0.0% Inflation rate 2.5%

Weighted average cost of capital Nominal post-tax 9.27% Nominal pre-tax 13.24% Real post-tax 6.60% Real pre-tax 10.47%

Existing NPP Capital Cost Data

• Westinghouse PWR AP1000• Representative PWR design

• Two US projects under construction• Vogtle in service June 2019 & June 2020

• VC Summer in service Sept 2019 & June 2020

• Headline cost information is available and reliable

• Total project costs are publically reported

• Contract and delay costs are reported separately

• US construction costs more indicative of Australian costs than those of other projects (China, UAE, Korea)

Existing NPP Capital Cost Data

• BWR• Comparisons of historical BWR vs. PWR capital costs show no

material differences

• PHWR• Historical CANDU experience is higher cost than US LWRs

• Reports of proposed Cernavodă EC6 cost > AP1000

• CANDU (EC6 or ACR-1000) costs estimated to be > AP1000

SMR Cost Assumptions

• SMR • No commercially available SMRs have yet been built

• SMR developers projecting LW SMR technologies ~ US$5,000/kWe • Poorly defined scopes of supply and cost dates

• Design and regulatory/licensing processes underway

• SMART estimates US$9,000-US$10,000/kWe

• UK Small Modular Reactors Feasibility Study, 2014• Estimates between US$6,400-US$8,900/kWe

• Costs need to compete with large-scale reactors

• Cost projections are expected to be slightly greater than PWR

Assumptions – NPP Capital Cost

• NPP Capital Costs• PWR/BWR – based on Vogtle/Summer costs with adjustments

• HWR – higher than PWR/BWR – historical CANDU experience

• SMRs – slightly higher to be competitive with PWR/BWR

• Sensitivity to lower and higher costs to be studied

PWR BWRLarge PHWR

SmallPHWR

Large SMR

Small SMR

Project Development

AU$m 200

US$m 150

Regulatory / Licensing

US$m 67

Construction(to be distributed across

categories)

US$/kW 5,700 6,300 6,000 6.600

US$m 6,413 8,978 7,560 4,662 2,160 1,881

Mid-Life Refit(in years 29 & 30)

US$m 0 1,450 0

Infrastructure Requirements

• Generic “brownfield” and “greenfield” locations• Brownfield

• Location supported by nearby existing infrastructure

• Short local connections

• Greenfield• No nearby existing infrastructure

• 50km connection assets to existing infrastructure

• Road, rail, water supply, electricity transmission

Infrastructure – Road & Rail• Road & rail

• Independent of capacity of nuclear power plant• Greenfield - 50km spur road/rail to NPP, connections/junctions to existing

infrastructure, refurbishment of existing infrastructure• Brownfield - 1-2km spur to NPP, connections/junctions to existing

infrastructure, Refurbishment of existing infrastructure

• Road• Two-lane highway to SA/national standards

• Rail • Single line access and 2km loop to SA/national standards

Greenfield Brownfield

Roads AU$m 42 4

Rail AU$m 112 6

Infrastructure - Water

• Large-scale plant (1,200 MW)• Cooling water

• Once-through cooling - 200,000 tonnes/hour (4,800 megalitres/day)

• Cooling tower make-up - 8,600 tonnes/hour (206 megalitres/day)

• Steam cycle make-up – 60 tonnes/hour (1.4 megalitres/day)

• Small modular reactor (300 MW)• Cooling

• Once-through cooling - 50,000 tonnes/hour (1,200 megalitres/day)

• Cooling tower make-up - 2,150 tonnes/hour (52 megalitres/day)

• Steam cycle make-up – 15 tonnes/hour (0.4 megalitres/day)

• Low-volume raw water requirements: • Service water

• Potable water

Infrastructure - Water

• Greenfield• Intake structure and pumping station

• 50km pipeline to NPP

• Brownfield• 2km spur connection to existing raw water supply infrastructure

• All water treatment plant included in cost of NPP

PWR BWR Large PHWR

SmallPHWR

Large SMR

Small SMR

Greenfield AU$m

Once-through system included in NPP capital cost

146 144

Brownfield AU$m 10 10

Electricity Transmission• Electranet information

• Network 2035 Vision• Transmission Annual Planning Report

• AEMO building block costs• 100 Per Cent Renewables Study - Electricity Transmission Cost Assumptions, 2012

• Small Modular Reactors (~300 MW total)• Greenfield – 50km 275kV line & substations• Brownfield – 275kV substation

• Large-scale reactors• Greenfield – 50km 500kV line & substations• Brownfield – 500kV substation

PWR BWR Large PHWR

SmallPHWR

Large SMR

Small SMR

Greenfield AU$m 344 344 344 265 92 92

Brownfield AU$m 167 167 167 112 22 22

Electricity Transmission – additional costs

• 500kV AC• New 800km backbone including series compensation

• Building block costs for 1600MW, 1200MW, 700MW lines & substations

• 275kV AC• Building block costs for 400MW lines & substations

• 500kV/275kV substations• Building block costs for 1600MW, 1200MW, 700MW substations

• HVDC• Building block costs for 1600MW, 1200MW, 700MW, 400MW HVDC

links including bipolar lines & converter stations

Operating Costs – Fixed O&M• Fixed O&M as $/MW net/yr

• US Nuclear Energy Institute reference data• US¢/kWhe – adjusted to S/MW/yr• Mix of onshore and offshore costs

• Insurance as $/MW net/annum• Historically 2.5%-3% of capex per annum

• Decommissioning• Funding of decommissioning reserve account as fixed O&M cost

PWR BWR Large PHWR

Small PHWR

Large SMR

Small SMR

Fixed O&MUS$m/yr 29 41 31 19 9 7

AU$m/yr 158 221 168 104 50 40

Insurance US$m/yr 19 27 23 14 6 6

Decomm’gfund target US$m 500 575 500 500 250 250

Operating Costs – Fuel & non-fuel variable• Fuel cost as $/MWh net

• US Nuclear Energy Institute reference data – enriched fuel US$7.6/MWh, 2014• HWR fuel unenriched, higher volume/fabrication costs• SMRs – enriched fuel, but lower efficiency – higher cost• Fuel has limited life - effectively fixed cost

• Spent fuel cost as $/MWh net• “Wet” storage included in NPP Fixed O&M• “Dry” storage levy to fund off-site long-term waste storage facility

• Non-fuel variable O&M as $/MWh net • Non-material in relation to capital, fixed O&M and fuel cost elements

• Infrastructure cost as $/yr• Transmission connection and use of system (TUoS)

PWR BWR Large PHWR

Small PHWR

Large SMR

Small SMR

FuelUS$/MWh 7.6 7.6 7.6 7.6 9.2 9.2

US$m/yr 69 97 73 45 27 21

Spent FuelUS$/MWh 1.5 1.5 1.5 1.5 1.5 1.5

US$m/yr 14 19 14 9 4 3

Transmission AU$m/yr 4.7 6.1 4.7 2.8 0.7 0.7

Technical assumptions

• Net Power Output• Representative examples of technologies

• PWR, BWR, Large PHWR, Small PHWR, Large SMR, Small SMR

Assumptions – Capacity Factor

• Baseload operation with allowance for forced & planned outages, refits/life extension

• Mature well-known technologies by 2030

• Baseload capacity factors - 95-96% without refueling

• Base case lifetime average capacity factor ~ 90%• Sensitivity range from 85% to 95% lifetime average

Assumptions - Schedule

• Commencement of operation in 2030

• Sensitivity to variation in pre-construction and construction durations to be studied

Modelling – Outputs

• Levelised cost of electricity, LCOE• Ratio of NPV of whole-of-life NPP costs to NPV of whole-of-life

electricity production

• Breakdown of LCOE constituents

• Levelised price of electricity, LPOE• Ratio of NPV of whole-of-life NPP electricity sales to NPV of whole-of-

life electricity production

• Determination of return on investment

• NPV costs of infrastructure building blocks

• Inputs to CGE modelling by others• Aggregated categorised real costs over life of NPP

Detailed business case• Modelling outputs to inform detailed business case

• Cost and revenue streams• Levelised cost of electricity• Sensitivity to variables including:

• Pre-construction and construction duration and costs• Decommissioning reserve requirement• Infrastructure costs• Operating costs• Fuel and spent fuel costs• Generation average capacity factors• Economic assumptions

• Assessment of IRR vs required commercial expectations• Identification of funding “gaps”

• Developmental risk assessment• Requirements for project investment