The following is the Executive Summary of a recent report. The full content can be freely downloaded at: Global Nuclear Industry
1 Executive Summary
1.1 Research Objectives
The nuclear power industry has begun to receive serious attention once again with the promise of new reactor designs and has increasingly been named among the portfolios of national governments as long-term sources of electricity. Unfortunately, this industry has a long history of over optimism in terms of both the readiness of technology and its economics. Those parties interested in determining the kinds of growth opportunities in nuclear power business sector might offer them need a realistic appraisal of what is likely to emerge in the next eight years.
This report answers several questions regarding commercial nuclear power: Is the perceived resurgence of this industry plausible and if so, how much of a market does it constitute? Are nuclear capacity addition forecasts accurate? Are cost estimates for plant construction and operation reasonable? How does the cost of electricity from these new designs compare with alternative sources of electricity?
This report also attempts to provide some context to the business of nuclear power, insight as to why it declined in the 80s and then remained dormant over much of the 90’s; what issues have been resolved since then and what barriers remain.
The objectives of the report are to equip the reader with realistic and objective insight into:
- The nature of the nuclear power “renaissance” and whether or not it is a short term or sustainable change in the industry; and
- Cost assessments and comparisons of nuclear technologies among themselves and other electricity generation sources
- A synthesis forecast of all available official information regarding new nuclear plant capacity plans and capital investment; and a
- Probabilistic forecast of new nuclear plant capacity and investments through 2030.
This report examines the global nuclear power industry and its prospects between 2014 and 2030. The report scope includes:
- Brief history of nuclear power commercial development;
- Basics of nuclear generation; descriptions of the primary technologies deployed as well as the new generations of reactor designs currently in development;
- Impact of the Fukushima-Daichi incident on the commercial industry;
- Market drivers and barriers;
- Assessment of the economics of the new generation technologies and how they compare with other generation sources; and
- Forecasts of capacity additions as well as capital investments in nuclear power from 2014-2030.
In addition to providing a business context to commercial nuclear power, this report provides:
- Insight into the relative economics of comparable sources of electricity generation;
- A discussion of the economics of the large scale NPPs now in construction and the small modular reactor (SMR) designs that are in development; and
- A more meaningful way to look at the growth projections of this industry.
Worthington Sawtelle reviewed the most recent primary forecasts for nuclear power plant construction (capacity, scheduled commercial operation, construction status, cost) produced by the World Nuclear Association, the International Atomic Energy Agency, the U.S. Energy Information Administration, the Nuclear Energy Institute and the International Energy Agency. These forecasts were further refined and supplemented by:
- Reports and presentations by the staff of all relevant government agencies and state owned entities, including those of the U.S. Nuclear Regulatory Commission, the Russian State Nuclear Organizations, the China National Nuclear Corporation and the Indian Department of Atomic Energy;
- Direct testimony in rate regulatory proceedings regarding the timing and costs of nuclear plants currently under construction in several U.S. states, and;
- Private sector company financials and plans from investor and conference presentations.
In addition, we consulted secondary sources for the report, including industry journals and publications, product literature, white papers and technical journals, and financial reports for industry suppliers.
All Key Participants cited in the report were given the opportunity to be interviewed or provide input and most complied.
The base year for analysis and projection is 2014. With 2014 as a baseline, we developed market projections for 2014 to 2020 and then to 2030. These projections begin with a database that synthesizes the above sources. We then combined its unique understanding of the key market drivers, and their impact from a historical and analytical perspective, with scenario and probability based forecasting techniques to capture the uncertainties in the forecast. Each of the market forecast sections in this report give detailed descriptions of the analytical methodologies used. All dollar projections presented in this report are in 2013 constant dollars unless otherwise cited.
Commercial nuclear power generation has had an unsettled role among the world’s choices for electricity generation. There have been periods when it was hailed as the single best option for long term, large-scale economical electricity generation. There have also been periods where, at least in certain countries, nuclear power generation was regarded as anathema. Indeed, during the 80’s and 90’s, very few nuclear power plants (NPPs) were constructed. Beginning in the early 2000’s nuclear power seemed to be making a comeback with the promise of safe, environmentally sound and economic power generation delivered by a new generation of reactor designs. A few environmental groups even accepted it as having a place among low carbon energy source portfolios.
In this decade, most countries are planning for a future where sources of electricity are environmentally benign, but sufficiently robust and economic to fuel strong economic growth. Developing nations view energy and electricity as a potential constraint on their economic growth; their available energy needs to stay ahead of their economy’s leaps and bounds. Nuclear power is a strong consideration in these countries but less so in developed nations where capital is limited and energy demand is flat. In 2011 it accounted for about 12.3% of electricity supply worldwide; in 2012 about 13.5%.
Much of the enthusiasm for nuclear comes from the promises of several new reactor designs including advanced pressurized water and boiling water reactors (PWR and BWR), as well as gas cooled reactors and fast neutron reactors (GCR and FNR). These new designs have passive safety measures that allow for safe shutdown without operator intervention. In addition, another group of small modular reactors (SMR) are in development that are scalable to meet specific energy demands of several hundred megawatts (MW).
Many of the same issues that plagued nuclear power in the past remain unresolved: cost; waste management; decommissioning expense and perceived risk. The Fukushima-Daichi incident in Japan in 2011 heightened awareness to these issues and caused reductions in many nuclear power construction plans.
Assessing business opportunities in nuclear power is no simple task because of its hybrid nature. Governments developed the technology as an adjunct to nuclear weapons and nuclear submarine programs. Construction and operation of NPPs remains a government role in most countries. In fact, it is fair to say that nuclear power fits best in the context of large centrally planned economies where substantial financial resources are available and where the government bears the economic and technological risk. Nuclear power is nonetheless a commercial venture in some free market economies with varying degrees of autonomy from government control with a very large network of fully commercial suppliers for components. Governments and the supplier sector, both of whom need to market the viability of the technology and influence public opinion for continued support, heavily influence most forecasts of nuclear power growth. Some governments chose to be rather opaque regarding details, especially regarding costs and the extent to which reported costs are subsidized. These circumstances have resulted in consistently overstated forecasts and overly optimistic anticipated costs, traditions that continue today.
We believe a reasonable approach to assessing this industry incorporates a probabilistic forecast of new capacity and investment.
Figure 1 and Figure 2 present our forecast of cumulative new global nuclear capacity and the corresponding investment required. The figures indicate that the likely range of either metric are significantly less than that of the World Nuclear Association (WNA), but within the (rather broad) range of the International Energy Agency (IEA) forecast.
Figure 1 Probable Range of Cumulative Capacity Additions 2014 – 2020, MW
Source: Worthington Sawtelle LLC
Figure 2 Probable Range of Cumulative Capacity Additions 2014 – 2030, MW
Source: Worthington Sawtelle LLC
Figure 3 and Figure 4 present these capacity addition forecasts in terms of the necessary investment required (on an overnight cost of capital basis. $2013). Note the disparity between the probable range of investment and the amount that would be required if all announced plans were realized.
Figure 3 Probable Range of Overnight Capital Expenditures 2014 – 2020, $ Billions
Source: Worthington Sawtelle LLC
Figure 4 Probable Range of Overnight Capital Expenditures, 2014 – 2030, $ Billions
Source: Worthington Sawtelle LLC
Worthington Sawtelle LLC believes these probabalistic forecast are likely to be far more accurate than the announced plans of the various industries.
Worthington Sawtelle LLC has assessed all of these factors and concludes:
- International agencies have adopted a “high/low” forecasting basis that is so broad as to be meaningless; nuclear industry associations project capital additions about double what this probabilistic based forecast suggests.
- Likewise, the “as announced” forecasts likely overstate cumulative nuclear investments between 2014 and 2030 by about $300 billion but understate costs on a per unit basis
- A “nuclear renaissance” of sorts is happening, although not in the West, but in China, Russia, Korea and India.
- The cost of electricity from new generation large NPPs is likely to be less expensive than smaller scale SMRs;
- The state of development in SMRs is such that they do not factor in a forecast of new capacity through 2020; and,
- Growth in decommissioning services will build with capital expenditures for decommissioning potentially rivaling or even surpassing new builds.