navigating complexity
March 2016
2017
Shaping
the
future
Mastering
the
Transformation
of
nuclear powerJourney
What's
next for legacy
emerging companies
A comprehensive
guideand
to reinventing
nuclear players?
2 Think:Act
Shaping the future of nuclear power
3
THE BIG
63
The number of nuclear reactors currently
under construction.
Page 4
70 GW
The capacity of nuclear power contracted
since Fukushima.
Page 4
29 tCO 2eq
Lifecycle GHG emissions from nuclear power per GWH,
three times less than solar PV.
Page 6
Think:Act 3
Shaping the future of nuclear power
Nuclear power can help
meet the growing
energy demand.
CHALLENGE AHEAD
Growth is on the horizon. Global electricity demand
will jump from today's 22 thousand TWh to 34 thousand TWh by 2040, fueled by economic growth and improved electricity access in emerging countries, offsetting by far all energy savings initiatives.
Emerging countries are faced with a new challenge:
getting electrical power to the 1.3 billion people currently left behind. One could draw parallels here to the
60s and 70s when mass electrification of daily life (e.g.
ovens, refrigerators, appliances) and rising standards
of living (e.g. electric heating, HVAC) led to a substantial increase in electricity demand in OECD countries.
They tackled the issue through the rapid development
of large-scale fossil fuel power plants and the massive
roll-out of nuclear programs. Electricity output increased by over 50%, from 3.2 thousand TWh in 1971
to 4.8 thousand TWh in 1980. A
Today, however, the massive deployment of fossil
fuel solutions is no longer feasible. The global community has agreed to jointly address human-caused climate change, and new solutions must be low carbon.
While nuclear power remains a controversial option, it
is worth exploring its benefits and risks.
NUCLEAR BENEFITS
Nuclear power plants are reliable electricity generators.
Indeed, they can generate electricity continuously
throughout the day and the seasons and have load factors in excess of 80%. It also does not depend on volatile oil or gas supplies. Uranium, which is usually pur-
chased overseas, represents only around 5% of the cost
of nuclear energy. It is easy to store and is mined in
many places, with Kazakhstan, Australia and Canada
today's top suppliers.
Nuclear power has established itself as a cheap energy source, with a median cost of 83 USD/MWh in
2015 (levelized cost of energy, or LCOE, which includes
all plant-level costs: investments, fuel, emissions, operation and maintenance, dismantling, future waste
management costs, etc.). This puts nuclear power
among the lowest -cost power generation technologies
available in the market. Nuclear is also one of the technologies with the lowest contribution to pollution and
climate change. Finally, compared to other low-emissions solutions, nuclear power is a high density energy
and nuclear plants require limited land area. B
NUCLEAR RISKS
Nuclear power also presents clear drawbacks. The safety risk posed by nuclear power generation is inherent
to the technology, and cannot be fully mitigated despite safety mechanisms and measures put in place by
manufacturers and operators. Nuclear plants also produce long-lasting and highly radioactive waste that
places a burden on future generations. Additionally
worrisome is that nuclear technology may be misappropriated by rogue actors or leveraged for military
programs, leading to nuclear terrorism or proliferation. Yet another worry: Nuclear power relies on a
non-renewable fuel available in limited supply. In the
high nuclear scenario laid out by the IAEA in its World
4 Think:Act
Shaping the future of nuclear power
A
GROWTH ON THE HORIZON
Forecast of electricity demand in non-OECD countries compared to past OECD demand.
300
TWh (base 100)
250
OECD
Electricity demand
1990
2040
200
Non-OECD
Electricity demand forecast
150
1970
100
2010
50
0
Years
Source: IEA
Energy Outlook, the industry may face a shortage of
uranium supply as early as 2025. Finally, the high
CAPEX required to build a nuclear plant (at least several hundreds of millions of dollars to build the smallest
reactors and around 5 billion for a full-size reactor) are
an obstacle for many countries.
In summary, nuclear has been a controversial technology from the start and will likely continue to be
challenged by its detractors. Nonetheless, it has been
part of the global electricity landscape for over half a
century. It managed to grow more rapidly than any other means of generating electricity, going from almost
zero to 300 GW of capacity in its first three decades.
Today, 30 countries are operating 444 nuclear reactors
to generate electricity, 63 new nuclear plants are under
construction in 15 countries, and 70 GW of capacity
have been contracted since Fukushima. Altogether, the
value proposition of nuclear power still holds today:
providing cheap, reliable, carbon-free electricity in
large quantities with a risk profile lowered by strong
safety precautions.
THE NEW STATUS QUO
Two recent developments have changed the nuclear
status quo in significant ways: the Fukushima disaster
and the COP 21 Agreement. The events at Fukushima
have made obvious to the public that the rate of incidents at nuclear power plants is higher than what nuclear proponents expected. It questions the future of
nuclear energy on the global scale. The nuclear industry is facing this by reevaluating risks, upgrading safety
in existing plants, enhancing industry governance, and
calling for further innovation. It will certainly take
time and security breakthroughs to fully restore public
confidence. On the other hand, widespread recognition of human-driven global warming has spurred
greater focus on CO2 emissions reduction, favoring nuclear technology while also supporting growth of renewable solutions.
Think:Act 5
Shaping the future of nuclear power
B
LCOE AND SHARE IN GENERATION MIX IN EUROPE
The global community has agreed to address climate change. Massive deployment of fossil fuel solutions to meet
the energy demand is no longer a sustainable option.
Share in generation mix [%]
30%
30
110
20
25%
60
40
15%
60
NUCLEAR
Coal
Gas
40
70
40
70
Hydro
10%
Onshore wind
90
130
Biomass
5%
70
130
100
Solar photovoltaic
Offshore wind
180
Concentrated
solar power
190
300
0%
0
50
Average of competitive technologies
1 2015, Europe, including grid connection
Source: IEA; Roland Berger
100
150
200
300
LCoE [EUR/MHh 1]
6 Think:Act
Shaping the future of nuclear power
A seriously low carbon
world needs nuclear
energy.
RISING EMISSIONS
The goal to curb greenhouse gas (GHG) emissions has
united the global community. In an effort to protect us
from the consequences of global warming, 182 countries have ratified the Kyoto Protocol since 1998. The
Protocol, however, does not require emerging countries to reduce emissions, and the United States eventually decided not to ratify it. This has significantly
limited its impact. Indeed, energy-related GHG emissions were 33.5 gigatons worldwide in 2015, up 56%
from the 1990 level of 21.5 gigatons.
Continuing on the current GHG emissions trajectory is likely to result in an increase in average global
surface temperature of more than 4°C by 2050 compared to pre-industrial levels, which would force hundreds of millions out of their homes due to a rise in
sea levels. Governments worldwide have recognized
what is at stake here, and have been working together
towards a solution. Their efforts crystallized during
the 2015 COP 21 in the Paris Agreement, which aims
to limit the increase in temperatures to 2°C or less
through GHG emissions reduction. The Paris Agreement has been ratified by 113 countries worldwide,
including the biggest emitters like the United States
and China.
CLIMATE-BENIGN NUCLEAR POWER
However, following the Paris Agreement, the pledged
national reductions are insufficient to prevent a 2°C
rise. To achieve further reductions, nuclear power generation should be considered. The IEA "bridge scenario" estimates that worldwide nuclear production will
have to grow by 2.9% a year until 2030 in order to keep
the door to the 2°C goal open.
Nuclear power is one of the most climate-benign ways
of producing electricity. The lifecycle GHG emissions
of nuclear power plants are among the lowest:
29 tCO2eq/GWh, on par with wind or hydro, 3 times lower than solar photovoltaic (PV), and considerably lower
than fossil-fueled electricity generation. Recognizing
this, the United States, China and India have already
pledged to use nuclear power to meet their emissions
reduction goals. C
COMPETING WITH RENEWABLES ON COSTS
Wind and solar PV technologies have matured enough
to challenge nuclear power as cheap sources of low-carbon electricity. Nuclear power costs are going up due to
more complex generation III reactors and the CAPEX
required to upgrade existing plants post Fukushima or
extend their operating life. Meanwhile, costs for renewable energies are on a downward trend, led by standardization and growing competition in these industries. Since 2009, solar module costs have fallen 90%
and onshore wind LCOE has fallen 50%. Every year, a
new record is set: a 24.2 USD/MWh solar PV project in
Abu Dhabi was submitted in September 2016, a 30
USD/MWh onshore wind farm in Morocco was awarded in March 2016 for commissioning in 2018.
And this is only the technological side of it. Competition is further accelerated by a global shift of the merit order curve to the right. Renewables have a near-zero
marginal cost and often benefit from favorable legislation on priority dispatch, meaning that they are called
Think:Act 7
Shaping the future of nuclear power
C
NUCLEAR PLANTS ARE ONE OF THE MOST CLIMATE-BENIGN WAYS TO GENERATE ELECTRICITY
Lifecycle greenhouse gas emissions [tCO2eq/GWh]
1,400
1,200
1,000
1,054
888
800
733
600
499
400
200
85
0
Lignite
Coal
Average emissions intensity
Oil
Natural Gas
Solar PV
45
Biomass
29
Nuclear
26
Hydroelectric
26
Wind
Range between studies
Source: IPCC (2014) via NEA
first in the merit order. As a result, baseload plants get
a lower load factor, which increases their LCOE as the
fixed costs are split on a smaller number of MWh.
This vicious cycle is already at work in Europe for
gas-fired plants, and will ultimately also impact nuclear
power. As a result, nuclear power is expected to become
more expensive than both wind and PV before 2030.
AND THE WINNER IS...
Does this mean that renewables will win it all? Not quite.
A high penetration of renewables comes with a hidden
cost: balancing the network. Solar photovoltaic and
wind power solutions produce electricity on an intermittent basis because they rely on energy sources that
are variable in nature: sun or wind. At a low share of
renewables in the energy mix (up to 5% to 10%), the
intermittency of power generation can be absorbed by
the system through existing backup solutions.
However, at a higher share in the energy mix (20%
to 40%), renewables require a combination of natural
balancing, a reinforced grid, energy storage solutions,
backup installations, and some form of demand management. This adds costs, called system costs, ranging
from 24 to 47 USD/MWh according to the NEA. In 2015,
OECD countries already had 8% of their electricity
coming from non-hydro renewable sources, and this
share is growing. Additional renewable system costs
and the ability of nuclear plants to track load when operating up to 25% (older design) or 50% (newer design)
below rated capacity support nuclear power as a solution in the long run.
8 Think:Act
Shaping the future of nuclear power
Nuclear can thrive in
at least four market
segments.
A SEGMENTED MARKET
When it comes to energy, each country has its specificities related to geography and history. Utilities and governments consider at least six criteria when deciding to
invest in a nuclear power plant: anticipated electricity
demand growth, existing generation assets, ability to
balance the production of a large power plant, availability of natural energy resources (e.g. fossil fuels in Saudi
Arabia and Russia, wind in Denmark), existing infrastructures (e.g. gas pipeline across Europe, grid interconnections) and political stability. This has resulted in
a segmented energy market, and nuclear can thrive in
at least four niches each having its own dynamics.
1. LEGACY
Major legacy nuclear players with further nuclear ambitions like Russia, France or the United States will extend the useful life of the existing plants and invest in
limited capacity additions. They will use their national
installed base for experimentation and preservation of
their industrial leadership. At the opposite side of the
spectrum, legacy players opting out of nuclear power
like Germany or Switzerland will need to decommission existing plants, an industrial capability which has
yet to be developed at a global scale.
2. FAST CAPACITY
High growth, high population countries such as China, India and South Korea need to quickly add generation capacity to keep up with increasing demand from
a booming population and a thriving economy. These
countries will need to build new nuclear capacities
and will invest high CAPEX to meet their nation's energy demand. However, key considerations for these
powerful economies are the development of their
home industries and the preservation of their independence from foreign expertise and interference. For
these reasons, they will work to ensure sustainable
technology transfer to their local industries and will
favor arrangements like extensive partnerships and
knowledge sharing.
3. DIVERSIFICATION
Emerging countries such as Turkey, Saudi Arabia, Indonesia, Egypt, Vietnam and Iran are also high-growth
countries that require fast baseload growth and diversified energy sources. But these countries do not see high
enough demand to smoothly integrate large reactors
into the grid. Consequently, they will invest in smaller
and more modular nuclear reactors alongside other
power generation technologies. They will most likely
import nuclear technology and outsource plant services rather than invest in large-scale local industry development. These countries thus form a long-term opportunity for legacy nuclear industries.
4. FOLLOWERS
Finally, smaller nuclear legacy countries with serious
ambitions such as Mexico, Argentina, South Africa,
Brazil, Hungary and Romania will also require small
modular reactors (SMR) and rely on the international
nuclear industry to reach their goals.
Think:Act 9
Shaping the future of nuclear power
DIVERSITY
The global map of nuclear capacity additions will shift
from west to east and will become more open and
diverse. D
From a technological standpoint, the future of nuclear power will be diverse as technologies like SMR
and new designs (e.g. fast neutron, molten-salt reactors, thorium) are developed to target these niches.
The 2030 nuclear landscape will look quite different from the giant reactors built by the nuclear legacy
industry over the past 20 years. The private sector will
play a larger role, as well, as can already be seen with
the emergence of nuclear start-ups with strong financial backing, such as Transatomic and TerraPower,
which are leading molten-salt technology development in the United States. E
10 Think:Act
Shaping the future of nuclear power
D
THE GLOBAL MAP OF NUCLEAR
CAPACITY ADDITIONS
United States
Sweden
Canada
Belgium
United Kingdom
France
Spain
Mexico
Brazil
2000-2030 1
Legacy
Semi-mature
Emerging
Semi-mature
Emerging
1970-1999 1
Legacy
Source: Roland Berger
1 Selected top 27 countries with more than 5 GW in capacity additions over 1970-2030
Think:Act 11
Shaping the future of nuclear power
The global map of nuclear capacity additions will shift from
west to east and will become more open and diverse.
Russian Federation
Finland
China - Mainland
Germany
Japan
Ukraine
South Korea
Romania
Turkey
Iran
Pakistan
Slovakia
China - Taiwan
India
Saudi Arabia
United Arab
Emirates
Indonesia
South Africa
12 Think:Act
Shaping the future of nuclear power
E
THE FUTURE OF NUCLEAR POWER
NUCLEAR START-UPS
Source: Roland Berger
CURRENT DEVELOPMENT STAGE
OF GENERATION IV NUCLEAR TECHNOLOGIES
VHTR
CHINA
UNITED STATES
FRANCE
GERMANY
JAPAN
RUSSIAN FEDERATION
SOUTH KOREA
Development
Prototype
Source: World Nuclear Association; Roland Berger
SFR
SCWR
GFR
LFR
MSR
Think:Act 13
Shaping the future of nuclear power
Nuclear players
need to adapt.
Historically, the nuclear industry developed exclusively
in OECD countries out of fear of nuclear proliferation
in smaller emerging countries. Over the past few decades, some of the BRICS and upcoming emerging
countries started building nuclear capacity in order to
meet their growing electricity demand, with China
leading the group. As new plants are set to be built over
the next decades, the current offering focused on large,
expensive and fuel-hungry reactors seems ill-adapted
to evolving requirements. What opportunities are
available to industry leaders and ambitious outsiders
to make the most out of the changing market?
RUSSIA
Russia has been at the forefront of nuclear power development for 70 years, with 35 reactors now installed.
These reactors amount to 26.2 GW of capacity and generate over 18% of the country's electric power. Eight
additional reactors are also under construction.
The Russian nuclear industry is structured around
three main businesses: Zippe, a gas centrifuge technology to enrich uranium, considered very efficient and
well-proven globally; the WWER pressurized water reactor; and a sizeable diversification into civil products,
from nuclear medicine to particle accelerators, composites and high-temperature superconductors.
Rosatom, Russia's nuclear monopoly, has achieved
impressive results over the past 10 years. The business
has gained truly global presence, a presence which
continues to grow today. It has a backlog of 36 reactors
to be built, worth in excess of USD 110 bn, with the
ambition to grow to 80 reactors worth more than USD
240 bn by 2030. Russia also has a strong foothold in
upstream , where it has global market shares of ~35%
for uranium enrichment and ~15% for fuel fabrication,
with the ambition to further expand in 10-15 years to
45% and 25% respectively by not only servicing the
owners of Russian-designed power plants but also
gradually conquering other developed markets with
square-shaped fuel assembly.
Rosatom has also demonstrated the strong reliability of its nuclear assets, with an 86% utilization rate for
plants in operation and no events of rank 2 or above on
the INES scale. The company harvests remarkable results in applied innovations, including the world's first
generation III+ reactor put online in 2015 (unit VI at
Novovoronezh) and the first MOX fuel assemblies put
in operation in 2016 at the Beloyarskaya 800 MWe fast
neutron reactor.
Over the years, the country has managed to become
a "one-stop shop", with full coverage of the nuclear value chain, nearly 100% self-sufficiency in critical technologies and equipment, and what is probably the
most important differentiating factor these days: a
track record for delivering projects on time and within
budget, largely facilitated by the innovative digital information model of nuclear power plants jointly developed with Toshiba. In a single document, this 6D model groups information on a three-dimensional design,
procurement and delivery of materials and components (4D), activity progress planning (5D), and human, material and technological resources (6D).
However, challenges are also abundant. State financing is expected to become more difficult against
the yearly budget deficit of 4% of GDP in Russia. Paybacks from "build, own and operate" contracts (e.g. in
Turkey or Jordan) might be affected by political and
macroeconomic risks. Rosatom will also need to address its competence gaps in some of the back-end nuclear segments (e.g. silicon carbide casks for spent nuclear fuel, mobile on-site nuclear waste treatment
units, graphite decontamination).
14 Think:Act
Shaping the future of nuclear power
Finally, Russia needs to accelerate its programs for
small and medium-sized reactors to catch up with the
recent advancements in other countries. Russian designs, except those for marine and submarine reactors,
are either active but at the feasibility study stage (e.g.
floating plants based on the VBER-300 reactor unit) or
at the detailed engineering phase but put on hold (e.g.
lead-bismuth cooled SVBR-100 with desalination and
industrial heat applications).
All challenges faced by
Russia have a common
characteristic – they can be
tackled if foreign partners
get involved in order to
achieve common goals.
CHINA
Tremendous roll-out
Since the 1990s, China has undergone one of the most
tremendous nuclear power roll-outs in the world. It is
the country with the fourth largest installed power capacity – with 29 GW in operation and another 25 GW
under construction. After a setback in government approval of nuclear projects following the Fukushima incident in 2011, the development of nuclear power
plants has resumed and China is on track to achieve its
13th Five-Year Plan target. As a latecomer to nuclear
power generation, China has been able to leverage the
knowledge and technology developed by incumbents
and, with its export ambitions, is now posing a threat
to large foreign players.
The development of nuclear technology in China
was not implemented in a turnkey fashion by OECD
experts locking in construction, operations and supply
chain for themselves, but rather the Chinese government incentivized extensive technology-sharing agreements in order to foster the development of a strong
domestic industry. The strategy of the three Chinese
nuclear companies CNNC, CGN and SPIC has been the
repetition of a similar pattern across reactor technolo-
gies. First, the Chinese company buys a foreign technology. Then it obtains a deal where it contracts knowledge transfer in addition to buying the technology.
Third, it co-develops an improved model of the technology with the incumbent player and retains intellectual rights on it.
This process is accompanied by a gradual transfer of
the supply chain for construction and operations from
the home country of the incumbent towards China, with
an accompanying increase in local presence in this supply chain. Indeed, for the CPR-1000 technology developed from the Framatome/Areva M310, the World Nuclear Association estimates that the first plant at Daya
Bay was ~1% local, while the latest Ningde reactor built
in 2015 is ~85% local. Relying on this technology transfer model, China has grown into a nuclear power which
is autonomous in R&D, design, engineering, construction and operation of 2nd and 3rd generation reactors.
Domestic capability
Chinese nuclear companies have placed particular focus on building domestic capabilities for heavy components such as the manufacturing of reactor vessels, for
which several foundries now exist in China. Through
cooperation with Areva, China has also been able to develop its own domestic fuel cycle. Chinese capabilities
cover uranium mining to enrichment and fuel fabrication, although current capacity does not cover all domestic needs. Additional capacity is planned, as well as
capability build-up for fuel recycling and reprocessing.
The ambition is to grow beyond a successful independent domestic developer and operator of nuclear power
plants to supporting economic development and the
fight against coal pollution. It is also determined to
conquer the international market through the intellectual property and experience it has accumulated, not
unlike France in the 80s.
Exports
To reach international markets, China is relying on the
two large generation III pressurized water reactor designs for which it owns full intellectual rights and will
be capable of delivering turnkey solutions. The HPR1000 (a.k.a. Hualong One) is a design co-developed by
CNNC and CGN based on transferred French M310
technology, and the CAP1400 is a reactor based on the
AP1000 co-developed by SPIC and Westinghouse. The
strategy is to supply both reactors to the international
Think:Act 15
Shaping the future of nuclear power
market while China also invests in developing generation IV reactors, including several SMR models, fast-neutron technology and high-temperature gas-cooled reactors that will likely be commercialized after 2030.
China relies on its formidable economic power,
since financing is the first foot in the door of a country's nuclear development. The preferred Chinese export strategy is to first jointly finance, build and operate a foreign-design reactor in an international country
and to include agreements to reproduce this set-up
with the construction of a Chinese-built reactor as a
second step. Indeed, the contract between CGN and
EDF for Hinkley Point with an option for a Hualong
One at Bradwell follow this logic. This leverages Chinese financial resources and construction experience
while building trust with the international counterpart. CGN and CNNC have entered into a similar
agreement in Argentina and have also reached an
agreement for a foreign technology plant in Romania.
As the Chinese industry matures, the first step to leverage a foreign technology will likely be skipped, as indicated by the 2015 memorandums of understanding in
Kenya and Egypt by CGN and CNNC respectively: to
support the countries in developing their nuclear
strategies with the Hualong One design under consideration.
The export of Chinese nuclear technology is part of
the One Belt, One Road strategy promoted by Xi Jinping that focuses on traditional eastern European and
continental Asia allies as well as Southern Asia and
East African partners. In that respect, the Chinese export strategy is most mature in Pakistan, where it has
already financed and built two smaller reactors (300
MW) currently in operation at the Chashma nuclear
power plant. CNNC is also financing and building two
additional smaller reactors in Chashma and two larger
PWR reactors in Karachi based on Hualong One technology. The ongoing cooperation with Pakistan is followed closely by international stakeholders as an experiment of the Chinese ability to safely export its
technology to a foreign country.
International challenges
As China progresses in the implementation of its domestic and international strategy, it will face several
challenges. It will have to maintain discipline in order
to guarantee consistent high quality and safe construction at numerous plant sites. Specifically for foreign
projects, China will have to convince international authorities that it will contribute to the fight against nuclear proliferation by protecting technological secrets.
China will not only have to maintain discipline and
report to regulatory bodies to be successful. It will also
likely face a competitive response from nuclear incumbents. China poses a serious threat to existing international nuclear players as it has demonstrated its ability
to execute and operate nuclear projects domestically,
effectively adopt technology, and as it is already starting to gain market share in foreign countries – even
legacy ones like the United Kingdom. China has built
plants more quickly and cheaply than incumbent players, with considerable localization, and is therefore
very dangerous as it becomes independent from Western technology and the supply chain.
Competition on execution and safety
So how should incumbent players respond to China?
One option is to stop sharing technology in order to
hinder Chinese development. However, China is past
the tipping point in terms of technology and now has
its own resources to undertake R&D work. The second
option is to play on equal footing with the Chinese, i.e.
design offers which are just as attractive. The key success factors for an attractive nuclear offer include safety, execution and price. However, international companies cannot wield financing means to the like of what
the Chinese government is offering to support their
export efforts. Indeed, on recent projects awarded in
the UK, Argentina, Pakistan and Romania, China has
been able to offer several billions of dollars' worth of
concessional loans.
The playing field is thus on
execution and safety, where
incumbent players can come
together to develop projects
where they bring the best of
what they do to deliver fast
and secure plants.
16 Think:Act
Shaping the future of nuclear power
USA
The United States of America is the world's largest producer of nuclear electricity, with an installed capacity
of 100 GW and 100 reactors spread over 30 states. The
two main technologies used are pressurized water reactors (65 units with a combined capacity of 65 GW) and
boiling water reactors (35 units with a combined capacity of 35 GW). Nuclear power accounts for close to 20%
of the electricity produced in the US and over 63% of
the carbon-free electricity.
Over the past few years,
nuclear power plants have
seen growing market
pressure. Electricity prices
dropped because of cheap
thermal electricity produced
from abundant shale gas.
On top of that, load factors decreased because renewables capacities were added everywhere, with low marginal cost and grid priority, moving the entire supply
curve to the right. As a result, investing in nuclear power has become riskier.
A turning point
The US nuclear industry is at turning point. Almost all
American nuclear reactors were built between 1967
and 1990. The Nuclear Regulatory Commission (NRC)
has extended the operating licenses of 87 nuclear reactors, provided that significant safety works are conducted. Nonetheless, many large players have announced the shutdown of their units, uncomfortable
with upgrading investments which could turn unprofitable given the current state of energy markets.
A much needed stimulus
In recent years, three regulatory initiatives provided a
much-needed stimulus for investment in nuclear power: improvements in the design certification process, a
provision for early site permits (ESPs), and the combined construction and operating license (COL) process. All have some costs shared by the Department of
Energy (DOE). Today, four units (4,468 MW), all Westinghouse AP1000, are under construction. All in all,
however, the country will lose around 11 GW of generation capacity by 2020, according to the US Energy Information Administration.
The associated US industry reflects the state of the
nuclear market. Westinghouse Electric Company, which
has built approximately one-half of the world's operating nuclear plants, was acquired by Toshiba in 2006. In
December 2016, Toshiba said it expected to write down
its investment in Westinghouse by "several billion",
adding that it was possible that its investment in Westinghouse could ultimately have a negative worth due to
cost overruns at the US nuclear reactors it was building.
GE Hitachi Nuclear Energy, a provider of nuclear reactors and services, was established in June 2007 as a joint
venture between General Electric and Hitachi. It has a
strong focus on innovation, leveraging Hitachi’s experience in advanced modular construction.
Meanwhile, the DOE has been funding research
and partnerships with the private sector to design the
next nuclear reactor. Examples of successful cooperation are the Next Generation Nuclear Plant (NGNP) Industry Alliance, or TerraPower. With Donald Trump's
election, chances are that more actions will be taken to
reinforce these partnerships and US competitiveness
in that sector.
While the US nuclear
industry has been hit by
renewable development and
low gas prices, public and
private investments offer
new opportunities for
US players.
Think:Act 17
Shaping the future of nuclear power
FRANCE
With Areva, EDF and the CEA, France has one of the
world's largest nuclear industries. The government
heavily invested in the technology in the 1960s and
through the 1990s to ensure the country's energy
self-sufficiency. With 58 nuclear plants, the share of
nuclear power in the French electricity mix is the highest in the world, standing at 76% in 2015. Although
the French industry has developed extensive knowledge of construction and operations thanks to its installed base, the ongoing construction of European
Pressurized Reactors (EPR) in France and Finland
highlight the struggles of the French nuclear industry
in a changing global context. Not only does the French
industry experience difficulties in the construction of
ever larger and more complex reactors but the focus
on this single product (large, ultra-redundant reactors) is also ill-adapted to a market looking for smaller,
more flexible nuclear solutions. Over the next 15 years,
the French nuclear fleet will reach the end of its
planned lifetime, and the French government faces a
critical choice between supporting the national industry's short-term survival or setting the industry up for
long-term success.
A dilema for government
The government may choose to prolong the life of
most of its nuclear base by revamping and upgrading
the reactors to heightened safety norms. This is the
consensus in France at the moment, with the government planning to invest EUR 50 bn in this "Grand
Carénage". The initiative would avoid expensive decommissioning and dismantling of the plants in the
short term and maintain cheap electricity. However,
this is only a temporary solution, lifetimes can only
be extended by 10 to 20 years, and it does not challenge the French industry to develop experience in
new construction that could be used in other market
segments.
Alternatively, France may close some of its nuclear
plants as they reach the end of their planned lifetimes.
This will trigger demand for decommissioning and
new construction of baseload capacity. New EPRs nuclear reactors could serve this purpose, but that would
not help the French industry extend its offering. Smaller, more flexible reactors would help France export its
unique experience and expertise in the nuclear industry to emerging countries.
Even better would be for France to invest in developing
a set of complementary generation IV reactors. In fact,
it has already started doing so by building ASTRID, the
prototype of a fast-neutron reactor. It would lead to
opportunities worldwide, but take 10 years or so to implement if French players attempt to tackle this formidable adventure on their own.
Instead, France could choose to focus its expertise
on high value-added lifecycle steps where it has an established leadership. It would accept strategic partners on other steps to accelerate its development,
transitioning from an integrated industry to a service
provider and a components manufacture targeting the
international market.
To be successful, France
must engage in a strategic
review of its capabilities in
the industry, identify future
allies and clearly choose one
of the three strategies
presented above.
18 Think:Act
Shaping the future of nuclear power
Among the many
evolutions that will
occur over the next
decades, three are at
the forefront.
NUCLEAR IS ON
Nuclear power will keep growing over the next decades.
Despite criticism and growing competition from renewable sources, nuclear power remains a relevant option to quickly deploy large capacities, offset renewables with predictable baseload generation, and
severely reduce greenhouse gas emissions.
NEW PLAYERS WILL SEIZE GROWTH
New players will either have a full offer and the ability
to commit on schedule, cost, and quality (like Russia,
the largest nuclear exporter today) or a strong internal
market (like China). This is a clear shift from west
(France, US, Germany, Japan, etc.) to east (China, India,
Russia, etc.), which calls for a reaction from legacy players. To maintain their position, they must innovate,
partner with the new leaders, or position themselves as
tier one or two suppliers to global nuclear providers.
THE PRIVATE SECTOR IS AT THE HEART
OF NUCLEAR INNOVATION
Governments remain involved in nuclear development
for safety reasons, but we may very well see disruptions
coming from private pure players in SMR, 4th generation or fast neutron technology.
LEGACY PLAYERS NEED TO ADAPT
In the nuclear future, legacy players must define a clear
and flexible strategy around national policy, export
strategy or innovation to retain market share. France
should build a national consensus around a long-term
policy that engages all major stakeholders in a large
nuclear symposium ("Grenelle du Nucléaire"). Russia
should define a strategy to defend its export leadership
against rising China and India. And the US should favor its industry and privately-funded R&D to disrupt
the market.
Think:Act 19
Shaping the future of nuclear power
ABOUT US
Roland Berger, founded in 1967, is the only leading global consultancy of
German heritage and European origin. With 2,400 employees working from
34 countries, we have successful operations in all major international markets.
Our 50 offices are located in the key global business hubs. The consultancy
is an independent partnership owned exclusively by 220 Partners.
Navigating Complexity
For the past 50 years, Roland Berger has helped its clients manage change.
Looking at the coming 50 years, we are committed to supporting our clients
conquer the next frontier. To us, this means facilitating navigating the
complexities that define our times by providing clients with the responsive
strategies essential to success that lasts.
FURTHER READING
LINKS & LIKES
ORDER AND DOWNLOAD
www.rolandberger.com
STAY TUNED
www.twitter.com/
RolandBerger
LIKE AND SHARE
www.facebook.com/
RolandBergerGmbH
OPPORTUNITIES IN THE NUCLEAR
POWER EQUIPMENT INDUSTRY
Nuclear energy, along with renewables,
is widely considered one of the relatively
clean energy sources, destined to play
an increasing role in the global energy
mix. Despite being largely conservative,
e.g. when it comes to safety, it is now on
the verge of a set of technological
breakthroughs as well as significant
changes to conventional business
models.
RENEWABLES AS A PROSPECTIVE
CORNERSTONE OF THE FUTURE
ENERGY MIX
Renewables, along with nuclear power,
are environmentally-friendly and
carbon-free energy sources widely
considered destined to play an
increasing role in the global energy mix.
Progressively maturing and become
more competitive, renewable power is
now on the verge of a set of
technological breakthroughs as well as
significant changes to conventional
business models.
Publisher
ROLAND BERGER
62-64, Rue de Lisbonne
75008 Paris
France
+33 1 53670-320
www.rolandberger.com
WE WELCOME YOUR QUESTIONS, COMMENTS
AND SUGGESTIONS
DENIS DEPOUX
Partner
+33 1 53670-903
[email protected]
Press contact
DELPHINE MISSUD
+33 1 70394-115
[email protected]
ERIC CONFAIS
Partner
+33 1 536 70-925
[email protected]
BAPTISTE MAISONNIER
Senior Project Manager
+33 1 53670-945
[email protected]
This publication has been prepared for general guidance only. The reader should not act according to any
information provided in this publication without receiving specific professional advice. Roland Berger GmbH
shall not be liable for any damages resulting from any use of the information contained in the publication.
© 2017 ROLAND BERGER GMBH. ALL RIGHTS RESERVED.
TA_17_009
DENIS BORISOV
Project Manager
+7 495 225 76-450
[email protected]