Under Article VII of the NPT, it is specifically recognized that a group of States have a right to conclude regional treaties ‘in order to assure the absence of nuclear weapons in their respective territories’. Thus, when a NNWS is giving consideration to building its first nuclear power plant, as part of the decision process they should also consider the impact that any relevant regional treaty will have.

Today, there are a number of regional treaties dealing with nuclear- weapon-free zones, each of which obligates the Parties to conclude a com­prehensive safeguards agreement with the IAEA. Examples of regional treaties with the goal of establishing a nuclear-weapon-free zone include the Treaty for the Prohibition of Nuclear Weapons in Latin America (Tlatelolco Treaty)[14], the African Nuclear-Weapon-Free Zone Treaty (Pelindaba Treaty)[15], the Southeast Asia Nuclear-Weapon-Free Zone Treaty (Treaty of Bangkok)[16], the Central Asian Nuclear-Weapon-Free Zone

Treaty (CANWFZ or Treaty of Semipalatinsk)8 and the South Pacific Nuclear-Free Zone Treaty (Rarotonga Treaty).9

Irrespective of which option is chosen, the first step in the spent fuel man­agement is interim storage. The spent nuclear fuel element is mechanically the same as fresh fuel and can be handled as an intact fuel element. It is, however, highly radioactive and needs shielding and cooling during han­dling. The shielding is mainly for gamma and neutron radiation from the fuel. The spent fuel element is thus, after removal from the reactor vessel, handled and stored under water that can provide adequate shielding and cooling.

All water-cooled reactors store the spent nuclear fuel in deep water-filled pools. The water depth is typically 10 metres or more to ensure that the water provides adequate shielding (3-4 metres coverage) during all han­dling of the fuel. As the original intention in many cases was to reprocess the fuel, the size of the pools was designed to store a few years’ production only in these pools. In later reactors larger storage capacity has been pro­vided, in some cases corresponding to 30 years’ production or more.

As reprocessing currently is used in only a few programmes, it has been necessary to expand the storage capacity for most reactors. Different methods have been used. In some cases it has been possible to pack the fuel closer in the existing pools by introducing neutron absorbers or by taking into account the fact that the reactivity of spent fuel is lower than that of fresh fuel for which the storage racks in the pools were designed (burn-up credit). In other cases new storage facilities have been built, either at the reactor site or at a central site away from the reactor, to which the fuel can be transferred. In some cases these are also built as deep storage pools, while in other cases the fuel is stored under dry conditions in metal or concrete casks similar to transport casks, or in vaults or silos. Dry storage can be used when the heat release has diminished sufficiently after 5-10 years of storage. Although there are several wet-type storage facilities in operation, the trend at present is to use dry storage facilities for long-term storage. These have the advantage of requiring less long-term maintenance and can also more easily be expanded as the needs arise. The most obvious example of the latter is the dry storage casks, which essentially can be pur­chased as they are needed (Fig. 14.6). A typical modern storage cask can accommodate 20-40 PWR fuel elements or 50 — 100 BWR fuel elements, which means that a large reactor will require only about two to three casks

per year. The casks can be stored in simple warehouses and do not require strong buildings. There are also proposals for multipurpose casks that can be used for storage and transport and possibly even disposal. An overview of existing storage types is given in IAEA (2007c).

There is ample experience of long-term storage, up to 50 years, of spent fuel in water. So far no degradation of the fuel has been seen if the water quality is kept under control. The experience of dry storage is also good, although for a shorter period (less than 30 years). It is expected that the storage times can be extended without problems to at least 100 years, but the proof of such extension will require some further studies, in particular to ensure that the fuel can be removed after such a long period.

The main difference between wet storage and dry storage is the need for continuous cooling and chemical clean-up of the pool water to ensure a low fuel temperature and avoid long-term corrosion of the fuel or the spent fuel pools. Wet storage thus normally requires more staff for operation. Dry storage represents a much higher fuel and fuel cladding temperature, but a more benign environment, normally helium or argon gas. It is, however, important to have a follow-up programme of the fuel to ensure that the fuel can still be removed from the dry storage when the fuel is transferred to the next step. Most storage facilities are built above ground, but like the Swedish CLAB facility they could be built in a rock cavern to provide a better physical protection over long time periods (Fig. 14.7).

Plant construction completion on time and on budget is by far the largest financial risk faced by investors in nuclear power. With a financial exposure of several billion dollars per plant, even small cost overruns or slippages in completion can adversely affect a utility’s equity value. The negative exam­ples of the cost overruns of an estimated 75% and completion delay of three to four years as experienced by the Olkiluoto project in Finland (NW, 2010a; KPMG, 2010) and the 50% over budget and two years behind schedule of the Flamanville-3 plant in France (NW, 2010b) led many financial analysts to conclude that the ‘economics of nuclear say no’ to new nuclear build (CITI, 2009; Moody’s, 2009). Clearly, such cost overruns can only be shoul­dered by the largest utilities such as TVO or EDF. Both entities are special in their ownership structures, which differ greatly from other utilities around the world and have helped avoid otherwise likely economic and financial

troubles. TVO, though a privately held company, sells its electricity exclu­sively to the owners at cost, which eliminates some uncertainties such as demand and market risks and also allows passing through unexpected higher generating costs. EDF is largely government owned (84.5%) and thus better bolstered for events like Flamanville than privately held utilities operating in competitive markets.

The track records of Olkiluoto and Flamanville are worrisome indeed, but one has to put them into the perspective of a FOAK situation and the lessons learned for future projects. Many potential nuclear power undertak­ings in Europe and North America are likely to encounter some kind of FOAK flavour simply because of lack of recent construction experience. This and the fact that, historically, many nuclear-building utilities suffered downgrades in their credit ratings during the construction phase (Moody’s, 2009), reflecting the risk profile of nuclear power investments, are argu­ments used by finance institutions in their pessimistic outlook on new nuclear build.

One suggested hedge for containing construction cost overruns is phased financing. This approach, already implemented in China and proposed for new plants in the US, involves financing a project in tranches, starting with construction. The cost of capital for each phase will reflect the risks only of that phase, so that the high costs of construction risks are not carried over throughout the project. During construction, the main risk is completion on time and within budget. As construction proceeds and completion risks diminish, the cost of capital can also fall. Once completed, investor risks are essentially reduced to operational and market risks (revenue stream). Different financing phases may also have different capital structures: for example, shareholders would generally be at risk for the construction phase, but non-recourse financing might be introduced with the onset of commer­cial operations. Phased financing is deemed to be especially effective with a phased asset transfer and, where applicable, a phased sell-out of govern­ment interests. Phased financing may thus facilitate government participa­tion in a private sector project, since a government could choose to finance or guarantee only a part of the project and then privatize its share of the plant. The concept of phasing may also help to manage supply bottlenecks and the need for trained personnel, regulators and other project inputs.

The same concept of phasing applies on a broader scale to the start of a nuclear programme. The first unit will carry a higher risk of successful com­pletion — and higher costs — than subsequent units. However, once a few units are built and operating successfully, the financing model can change, with revenue from operating units being used to finance new build.

But it can confidently be expected that, with regained knowledge and build experience, construction schedules will be met and cost overruns minimized as demonstrated elsewhere: neither the limited European construction experience nor the nuclear power history of North America is representative globally. There are numerous nuclear power plants in Asia that have been completed on time and on budget. One can only move down the learning curve with repeated plant construction over short time inter­vals. Construction times of just 48 months or four years have been demon­strated in the Republic of Korea, Japan and China — these three countries alone account for more than 70% of all nuclear power construction activity since 1990.

However, in most industrialized countries new construction of power­generating plants has generally been limited and has lacked technological diversity. In the last decade, the majority of new generating plant con­structed in non-Asian OECD countries has been either gas (especially combined cycle gas turbines) or new renewables, especially onshore wind (NEA and IEA, 2010). So new coal power plants, especially if equipped with CCS, share the issue of construction cost uncertainty with nuclear power.

15.4.2 Market rates

Irrespective of the actual market structure — liberalized or regulated — the cash flow and profitability of a utility depend on its operating efficiency and the price at which it can sell its electricity in the marketplace. The high fixed costs and low operating costs of new nuclear power plants require higher revenue per kWh to break even than most competing alternatives. It is questionable if private sector entities involved in nuclear power projects are willing to take on the price risk. In regulated markets of developing countries, social considerations of delivering affordable electricity to the poor are often enforced upon utilities to sell electricity below costs. Their economic survival then hinges upon government subsidies. In either situa­tion, the price risk serves as a barrier for private sector finance of new nuclear build.

Market risks can be mitigated with long-term power purchase agree­ments with large-scale electricity customers such as electricity-intensive industries and larger communities. It has been argued that with long-term power purchase agreements in place, lending institutions would be satisfied with an expected rate of return of 5% to 10%. The same plant operating in a merchant market with no underpinning contracts would be confronted with rates of 10-12% (Bulleid, 2005) with direct implications for WACC and IDC.

Generally, once operating and with plant completion risks eliminated, the economics of nuclear power plants are viewed favourably by ratings agen­cies and investors alike. The longer-term outlook is even better, when plants are more and more amortized and the capital portion of operating costs approaches zero.

Environmental policy is another uncertain element influencing the market price of electricity. Nuclear power has a small greenhouse gas (GHG) footprint per kWh, thus its competitiveness (along with other low GHG-emitting technologies) would benefit from policies targeted at miti­gating climate change. Electricity demand prospects themselves are a source of uncertainty. The emergence and market penetration of smart grids, including real-time pricing, may flatten the load profile — a positive aspect for the baseload technology nuclear power — but also better integrate inter­mittently available renewables, thus improving their competitiveness against nuclear power. Efficiency improvements at the level of electricity use spurred by government policy could substantially dampen future demand growth while a large-scale advent of electric vehicles might even result in accelerated growth.

15.4.3 Operational

Operational risks relate primarily to operational unreliability due to unplanned outage. High fixed costs combined with unit sizes often counted in multiples of fossil and renewable plant capacities make the unavailability of a nuclear generating station a costly affair. In addition to lost revenues, utilities that sold their electricity under long-term power purchase agree­ments may be forced to provide high-cost replacement power from other generators. Operational risks are generally less an issue for utilities with a sufficiently large portfolio of generating capacities.

Plant operating safety is a non-negotiable prerequisite for a profitable nuclear power plant. A plant that is found to be not in compliance with operating safety regulations will be shutdown by the national regulatory authority and a shutdown plant does not earn revenues. Moreover, regula­tory oversight and, if necessary, intervention also protects the utility’s revenue generating asset from potential serious damage and long-term unavailability. An operational risk exists, however, if regulatory interven­tion is politically motivated and not exclusively safety related.

15.4.4 Waste and decommissioning

Private sector investors shy away from unknown or unknowable liabilities. Spent fuel and nuclear waste management, as well as plant decommission­ing at the end of a service life of 60 or more years, are factors with no practi­cal or commercial evidence (except for decommissioning) regarding their eventual costs. It is also unknown under what kind of regulatory environ­ment waste management and decommissioning will take place, e. g., to what level will plant sites have to be decommissioned beyond plant demolition, decontamination and debris removal. In order to cope with long-term liabilities, most jurisdictions assess a levy on nuclear power plant operators for every kWh produced to be paid into an escrow fund (or equivalent) to be used for waste management and decommissioning. Whether or not the escrow funds accumulate funds sufficiently large to cover all post-closure cost remains to be seen but their existence limits the risk exposure of investors.

15.3 Conclusions

Generally, the economic prospects of nuclear power look promising, and generating costs on a life-cycle basis are competitive against alternatives in many markets. But nuclear power is capital intensive with long amortization periods and capital requirements that amount to several billion dollars per unit — overstretching the comfort levels of many investors. Finance, there­fore, is one of the major barriers for nuclear power. In liberalized markets only very large utilities can finance a nuclear power project.

The economics of nuclear power embrace more than the life-cycle gen­erating costs and include energy supply security, reliability and price stabil­ity considerations as well as environmental policy objectives. Nuclear power is a technology with the lowest externalities — as most externalities have already been internalized. Nuclear power is an effective and efficient GHG mitigation technology. Where energy security and protection of the environ­ment are national policy objectives, a quasi-internalization of externalities may warrant some form of financial support or guarantee for private sector investment in new nuclear plants. A level playing field with clear and uniform performance criteria for all generating options reduces overall uncertainty and raises the probability that electricity market prices over the plant’s lifetime will provide an adequate return on investment.

At the minimum, unambiguous and sustained government policy support is required for nuclear power to unfold its economic potential. Such a policy in support of national nuclear power programmes as an integral part of a national energy strategy is paramount for investor and lender confidence and public acceptance of the technology.

Future international GHG reduction schemes may also recognize the mitigation potential of nuclear power and thus increase its attractiveness to investors and lenders, particularly schemes that award emission credits for environmentally benign investments abroad.[100] But even here, economic viability is inescapable; no-one is likely to invest in a financial black hole, nor to build nuclear power plants for environmental reasons, unless they are demonstrably profitable and among the most cost-efficient solutions.

The global financial community is still attributing a deterring risk/reward ratio to nuclear power. International organizations and governments alike need to join hands in enhancing the community’s ability to assess the invest­ment risks involved in nuclear power projects so that it can provide suitable finance packages for such investments, especially for countries currently without active nuclear power programmes. Newcomer countries will depend on the assistance of technology holders in launching their national nuclear programmes. Nuclear infrastructure and human resource development fol­lowed by financing are key in this regard.

The capital costs of nuclear power are expected to further improve as the number of plant orders increase and FOAK conditions decrease. The cost reduction potential for technology learning but also for design standardiza­tion is substantial.

Planning and construction times of nuclear power plants are longer than for most alternatives, excluding nuclear power from quick-fix solutions. Nuclear power is not a quick-fix solution to a country’s energy problems. But as an integral part of a long-term energy strategy, nuclear energy can contribute to a country’s sustainable energy development objectives.

The environmental radiation risks associated with nuclear power genera­tion have received a considerable amount of attention, and this is to some extent understandable given the occurrence of high-profile incidents such as Chernobyl and the damage caused by the tsunami at the Fukushima plant in Japan. The strong public opposition to nuclear power is often founded on environmental concerns associated with these rare occurrences, which overlooks the day-to-day threat posed in the construction, operation and decommissioning of plant. From water abstraction and discharges to industrial emissions and contamination to land, there are a host of different environmental impacts which will need to be tightly controlled. This is an area where the boundaries of regulation can converge, and which, in turn, requires the coordination of the activities of the authorities involved. The pervasive nature of environmental regulation in the lifecycle of a nuclear power plant (including at the design and planning stages) should not be understated, and it is therefore a subject which requires further consideration.

The BIS is the owner’s specification for the plant he intends to purchase. The main purpose of the BIS is to provide the bidders (that is, the prospec­tive vendors) with the necessary information to prepare their bids. It is through the BIS that the owner informs the bidders regarding the following:

• The scope of supply he expects to be offered

• The technical requirements in terms of plant design, procurement, con­struction, commissioning, operation and maintenance

• The manner in which he wishes the project to be implemented through­out the various execution phases

• The commercial and contractual terms and conditions he wishes to agree on with the successful bidder

• The structure, organisation and extent of technical, commercial and other information he expects to receive with the bid, to facilitate his evaluation and understanding of what is proposed by the bidder.

When organising, structuring and drafting the BIS documents, an impor­tant aspect to keep in mind is that they will serve as the basis from which will be developed the documents that will later constitute the contract between the owner and the successful bidder. Therefore, when preparing the BIS, one should always look ahead to how the contract documents will be organised and structured.

The BIS structure and contents very much depend on the contractual approach selected and the scope of supply requested by the owner. However, no matter which contractual model and scope of supply are chosen by the owner, and notwithstanding the bidding process the owner intends to follow (e. g. competitive bidding or direct negotiations with a single bidder), it is essential to prepare BIS documents that are specifically targeted at the particular circumstances of the project, describing the owner’s requirements and conditions for plant delivery, providing the bidder with the information he requires to prepare his bid, and outlining to the bidder the information expected from him in the bid for a fuller understanding of what is being offered and for easier bid evaluation. There are many ways to structure the information to be included in the BIS, and any reasonable one is acceptable, as long as the information is complete.

Following is an example of how the BIS may be structured for a plant that the owner has decided to purchase complete (i. e. including nuclear island, turbine island and balance of plant) under a turnkey contract approach (i. e. including engineering and design, equipment supply, con­struction and commissioning). The BIS contents are organised into a number of separate documents, each dedicated to a specific topic, as can be seen

The following sections present an overview of each of the above-indicated BIS documents. This tentative BIS table of contents, built around a com­plete plant under turnkey contract, may also be used as a guide in drafting up the BIS documents when the plant is to be purchased by large split packages (e. g. nuclear island separate from the turbine island), each of which could be contracted on a turnkey basis, or even for a multi-package or ‘by components’ approach under direct management of the owner. The BIS structure could be basically the same, but the contents of each docu­ment would have to be tailored according to the specific scope of supply and contractual approach selected by the owner.

A large variety of examples of licensing methodologies can be found in updates published by the Nuclear Energy Agency (NEA) on analytical studies of nuclear legislation in Member States (NEA, 2004). Likewise, Chapter 2 of the IAEA Handbook of Nuclear Law (Stoiber et al., 2010) recognizes the large variety of regulatory organizations. The Handbook also includes recommendations on the establishment of such bodies. For illustra­tion, three very different and relevant examples are discussed in the Appendix in Section 20.10.

The basis for safe operation is a sound design, and plant and equipment installed and operated in accordance with the design basis, all of which is subject to independent regulation.

Nuclear power plants are operated and maintained by many people on a 24-hour 365-days a year basis, so the licensee and the regulatory bodies need to establish arrangements that provide assurance that the design integ­rity and limits and conditions of operation are maintained at all times. Key among these requirements are:

• Rules and regulations concerning the training, qualification and licens­ing of personnel that ensure that only suitably qualified and experienced personnel perform the tasks assigned to them

• Technical specifications that specify the limits and conditions of plant operations and direct the operator action in normal operation and in the event of plant abnormalities

• Plant and equipment maintenance and testing schedules that ensure the plant can fulfil its design safety and performance requirements.

In addition to rules, regulations, training and experience it is vitally important that personnel conduct their work in a manner that is conducive to safe operation. In this respect it is important that the leadership of the organisation fosters a culture in which nuclear safety is accorded the sig­nificance it merits and that people act conservatively when making nuclear safety-related decisions.

Site preparation will require craftsmen and labourers, as well as profession­als and managers, who have previously performed similar duties. Most of the staff during plant construction (about 85%) will be technicians and craftsmen. In the nuclear power industry, the requirements for unskilled labour are very low (of the order of 10%) although in some countries their proportion may be considerably higher, mainly owing to local labour prac­tices and employment policies. The construction, erection and installation of plant buildings will require one or more qualified civil engineering and construction firms with skilled and experienced workers.

For the manufacture of equipment and components there will be needed mechanical and electrical technicians, foremen and craftsmen, labour and administration.

To coordinate, manage and expedite component installation requires an experienced team. For equipment, component and systems erection and installation most of the required workforce will be technicians and crafts­men. Many of the welders must be qualified for specialized cover-gas equip­ment. At least 30% of the mechanical technicians and 10% of the electricians should have knowledge and familiarity with relevant codes, standards and criteria.

Core components erection is of a special nature and requires precision tolerances and aligning to close accuracies. Qualification of procedures by mock-ups and qualification of personnel are important. This stage of the construction provides the best possible opportunity to complement the

training of the future plant maintenance personnel, who should actively participate in the erection and installation effort and would thus gain further experience. In addition, the contractors and subcontractors and their skilled personnel would provide a very valuable manpower source for future plant maintenance and, in particular, for major overhauls, repairs or modifications.

During commissioning the specific human resource requirements accord­ing to the IAEA (2007b) include:

• A fully staffed nuclear power plant operation, maintenance and techni­cal support organization

• A fully staffed regulatory body with specific expertise in operating plant oversight

• Succession and personnel development planning to sustain the compe­tence of all areas of the national nuclear programme

• Enhanced educational opportunities for nuclear science and technology

• Enhanced training programmes for the development of operators and technicians.

Major support during commissioning is to be provided by engineers and technicians from the equipment manufacturers. In addition, the plant oper­ation and maintenance personnel participate actively in the commissioning of the plant; such participation is in fact considered to be the last essential part of their training. It is necessary to emphasize that during commission­ing the responsibility will be transferred from the construction team to the operating organization.

Most of the construction activities for a NPP such as excavation, civil con­struction, laying of piping, cables and instrument tubing, installation of electrical, air conditioning and ventilation equipment, erection of equip­ment like pumps, compressors, valves, diesel generators, transformers, switchgear and the turbine generator and its associated equipment are similar to those performed in conventional industries. It should therefore be possible to identify local agencies to carry out these jobs. However, it needs to be noted that the nuclear industry is characterized by stringent quality standards and hence the contracting agencies selected should be capable of performing construction work that meets these standards. The bidding companies should be prequalified and shortlisted based on their work experience, quality of work performed earlier, availability of qualified staff in requisite numbers, and capability to mobilize the required construc­tion machinery and manpower to complete the work according to the schedule. The successful bidders may then be selected from the organiza­tions so shortlisted. There is the modern practice of awarding mega­contracts comprising several packages to a single construction contractor.

This is towards completing the construction work in the minimum possible time and to minimize paperwork. It would be ideal if agencies for awarding mega-contracts can be identified in the local market. If this is not possible, participation of local sub-contractors under the mega-contract should be ensured to the maximum extent possible. This will not only reduce the cost of construction but also groom the local contractors to take up future NPP construction work in the country. While national participation in construc­tion to the maximum extent possible is highly desirable, there are certain specialized jobs such as the erection of the reactor vessel, primary coolant system piping and reactor control and protection system components that may have to be necessarily performed by experienced vendor personnel. Participation of utility personnel and local contractors in such jobs should be encouraged to the extent possible such that they can utilize this experi­ence subsequently in commissioning and O&M of the NPP and in similar construction activities of future NPPs.

The risks and detriments involved in nuclear power development come from three major characteristics of nuclear energy: it is energy intensive, it generates radioactive material and it generates strategic material. To avoid damaging accidents, the chain reaction, the transfer of heat and the confine­ment of radioactivity have to be kept under strict control by nuclear safety measures. To protect the health and safety of workers, the general public and the environment, radioactive materials have to be confined for lengths of time well beyond when they were first produced, requiring the establish­ment of a radioactive waste management system and a final repository strategy. The production of strategic materials creates the risk of nuclear weapons proliferation, which needs to be controlled by tough security mea­sures. As a large industrial installation, nuclear power plants also create non-radiological detriments: there is an increase in light and heavy traffic, noise, pollution, aesthetic impacts and heat releases. To a greater or lesser degree, some of these aspects may affect the whole world, the country where the nuclear power is developed, and/or the region where nuclear power plants are operated.

242 Infrastructure and methodologies for justification of NPPs