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Managing Drivers of Cost in the Construction of Nuclear Plants

This article was published in the The Bridge, September 2020, National Academy of Engineering (NAE)

 

Ingersoll, E, Gogan, K and Locatelli, G  (2020) Managing Drivers of Cost in the Construction of Nuclear Plants. The Bridge, 50 (3). pp. 32-37. ISSN 0737-6278

 

The US nuclear sector needs to shift to standardized products with replicable designs delivered by consistent, experienced suppliers.

 

To make a meaningful contribution toward clean, reliable, and economical future energy systems, nuclear power plants (NPPs) must be cost and risk competitive with other low-carbon technologies within near-term time- frames. Recent new builds in the United States and western Europe have suffered from two phenomena. First, they are expensive in absolute and rela- tive terms: the cost per MW installed, along with the size of the plant, makes them among the most expensive power plants of any type. Second, they have all been delivered overbudget and late, making NPP construction a risky investment, which in turn increases the cost of borrowing money for new projects. 

 

But the experience in Asia has been very different. Many new build projects there are highly cost competitive with both fossil fuels and renewables. 

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Research helps to explain the differences. The Nuclear Cost Drivers Project commissioned by the UK Energy Technologies Institute (ETI NCD study; ETI 2018) reviewed pathways for reducing capital costs, which comprise those for base construction plus contingency, interest during construction, owner’s cost (including utility startup), commissioning (nonutility startup), and initial fuel core (adapted from GIF 2007). Through an evidence-based study of historic, contemporary, and future NPPs, the project identified a small number of factors that drive NPP costs and risks and highlighted characteristics common among low-cost NPP projects and others common to high-cost projects.

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Evidence from NPP new build programs around the world indicates that FOAK plants represent a major investment in skills and capability. Significant productivity improvements and cost effectiveness can be gained in subsequent projects with respect to the project governance, workforce, supply chain, and regulators, in general illustrating the role of experienced leadership, design standardization, and mature capability in reducing costs, delays, and risks (Mignacca and Locatelli 2020).

 

Ways to Reduce New Build Costs

Of course, cost improvements are not automatic. A review of learning rates with different technologies showed that they vary according to the technology, time of the study, location, and other factors (Rubin et al. 2015). The nuclear industry has had among the low- est learning rates. The lack of standardization in design and the project delivery chain is a key reason for this poor performance.

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Conclusion

The nuclear sector in the United States and Europe needs to shift from artisan-crafted projects to standardized repeatable products, with NPP planning based on a few replicable designs delivered by a consistent network of experienced suppliers. It is up to the nuclear sector to shift its mindset and lead this transition.

The nuclear sector must also engage with its many stakeholders to explain why nuclear products instead of projects can deliver lower costs and other wider societal benefits. This is important to create a societal "pull" in the same way that has made flying safe, convenient, and affordable today.

 

About the authors: Eric Ingersoll and Kirsty Gogan are managing partners of Lucidcatalyst. Giorgio Locatelli is a professor of project management in the School of Civil Engineering at the University of Leeds.

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