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Identifying the cost drivers of nuclear projects

The Energy Technologies Institute (ETI) yesterday released a summary report from its Nuclear Cost Drivers project which identifies eight “key drivers” and 35 “credible opportunities” to reduce the cost of generating electricity using nuclear power. The study is led by Clean Tech Catalyst, Ltd (CTC), working with Lucid Strategy.

ETI – a public-private partnership between energy and engineering companies and the UK government – plans to publish the full report later this year. It hopes the report will “add to the evidence base” that will inform UK nuclear activity in the coming years in support of the soon-to-be announced nuclear sector deal.

Mike Middleton, ETI strategy manager, said: “As long as nuclear power is cost competitive within the overall energy mix, it has the potential to play a significant role in the UK’s transition to a low-carbon economy. The challenge is to realise cost reductions across a sequence of new nuclear power reactors, which can meet the expectations of government, investors and consumers.

“Unlike other low-carbon technologies such as offshore wind and carbon capture and storage, fleet deployment itself does not necessarily generate cost reduction for nuclear power plant projects. However, such cost reductions cannot be materialised without deployment of a new nuclear fleet. There is evidence of previous UK expertise in the cost-effective delivery of nuclear power projects, but this ‘know how’ must be regenerated through an integrated programme and applied to delivering a fleet of new nuclear projects.”

Kirsty Gogan, director of CTC said the study aimed to understand what drives the range in cost of delivered nuclear plants around the world.

“Our findings are clear that many transformative best practices are transferable to the UK context,” she said, adding that a “sector-wide, carefully designed programme focused on delivering high quality and lower cost construction could start the UK down the path to far more affordable nuclear energy”.

The eight cost drivers identified in the document are: vendor plant design; equipment and materials; construction execution; labour; project governance and project development; political and regulatory context; supply chain; and operations.

For example, ‘project governance and project development’ includes all factors related to developing, contracting, financing, and operating the project by the project owner. This covers topics from the interdisciplinary expertise of the owner’s team to the number of units ordered (at the same site), discretionary design changes, weighted average cost of capital (WACC), and contracting structures with the EPC and suppliers.

The characteristics of this driver are: ~7-8% WACC; few discretionary changes to design; one unit at the plant site; well-organised project structure from owner’s perspective; defined limits to the number of prime and subcontractors; and clear assignment of liability and customer exercises diligent oversight.

The UK’s Nuclear Industry Association welcomed the report.

Peter Haslam, NIA head of policy, said: “This evidence-led report shows new nuclear need not be expensive, and identifies key areas of nuclear plant design, construction and operation that could deliver significant cost reductions, through joint action by all parties.

“The NIA will work with ETI, government and industry to identify how these can be delivered and we look forward to discussing this further with them and other interested parties.”

by World Nuclear News