The principal components of OC are engineering-procurement- construction (EPC) costs, owner’s costs and contingency costs. EPC repre­sent the bare costs of plant construction comprising direct (equipment, material, labour) and indirect (engineering/construction services) compo­nents. Under an EPC contract, the contractor — usually the vendor — is responsible for the engineering design, including adaptation to match site and other location-specific conditions, production or procurement of the necessary plant components as well as materials, and plant construction. Given the complexity of a nuclear power plant and its financial dimensions (economic risks), the contractor usually subcontracts parts of the work or shares parts with the plant owner or both. In essence, subcontracting and owner involvement are a measure of risk management (plant completion risk).

Owner’s costs are additional investment expenditures borne by the plant owner and usually relate to costs associated with property (land) acquisi­tion, site selection and preparation, bid evaluation, cooling infrastructure, administration and associated buildings, site works, project management, permits, legal services, licences, local taxes, staff and operator training, and possibly also expenditures for connecting the plant to the grid, i. e., switch­yards and transmission infrastructure.

Contingencies are provisions for any unforeseen or unplanned expendi­tures associated with the project. They are generally estimated as a specified percentage of EPC but also depend on the type of contract arrangement (turnkey contract or several contracts managed by the plant owner or cost — plus contracts).

The absolute and relative values of these OC components depend on location and plant design and therefore can vary considerably even within a country and for plants of similar design and size. The major factors in variability across countries include domestic labour and material costs, site-specific conditions and readily available infrastructures, finance arrangements and interest rates, institutional and regulatory framework, standardization and multiple-plant versus single-plant construction (econo­mies of scale). They are also a function of the localization rate, i. e. the ratio between imported and locally manufactured or procured components and participation in the civil works. The availability of nuclear-specific skilled tradespeople and engineering capability is another factor affecting OCs. Site- and geography-specific conditions may add costs to an otherwise standard design, such as additional design and engineering costs for meas­ures to protect a plant in an earthquake-prone location.

Unit size and plant design are other factors that explain OC cost differ­ences. Typically, smaller plants have higher specific investment costs (i. e. dollars per kW(e)) than larger plants, since certain cost components are relatively independent of size. For example, Westinghouse’s AP-1000 design is 80% more powerful than its AP-600 design, but the AP-1000’s overnight costs are only 15% to 18% higher than the AP-600’s (RWE Nukem, 2002).

Regulatory intervention can add to overnight costs, especially if it requires design modifications once the project is well underway. The exact impact of regulatory changes on cost is elusive because the regulatory process varies across regions. A number of studies have tried to quantify the impact of regulation on nuclear power investment costs but have not generated broadly applicable quantitative results beyond the straightforward reality that construction delays increase investment costs (Mooz, 1979; Paik and Schriver, 1979; Komanoff, 1981; Zimmerman, 1982; Cantor and Hewlett, 1988; McCabe, 1996; Canterbery et al., 1996).

For new designs, or for construction in new environments, OC may include first-of-a-kind (FOAK) costs. FOAK costs include a particularly high share of contingency costs to cover unforeseen events given the lack of experience with the design, the environment or the country. They can add as much as 35% to OC (UoC, 2004). Costs are lower for subsequent units, but some (decreasing) additional costs will persist until experience has been accumulated on several (about five to eight) essentially identical designs. For example, Progress Energy recently announced overnight costs of $3376/kW(e) for a second AP-1000 at its Levy County site, substantially lower than the first unit’s $5144/kW(e). And the Russian Federation’s Kaliningrad-2 cost $1667/kW(e), half the cost of Kaliningrad-1. In these examples the cost reductions also reflect the facts that some site preparation costs incurred for the first unit are not reincurred for the second unit and the vendors’ allocations of costs among the two units are to some extent arbitrary.

The specific components of FOAK costs are uncertain and prone to escalation. For example, the OC cost estimate for Olkiluto-3, a FOAK third- generation European Pressurized Reactor (EPR), has reportedly risen from €3.0 billion to €5.3 billion due to construction delays caused by FOAK — related quality issues, design revisions and approvals, and logistic challenges not experienced for a long time (NW, 2010a; KPMG, 2010).

International comparisons of investment costs are also often obscured by the unavailability of information about the exchange rates[93] that are used and, if escalation costs are included, about the components that are affected and the escalation rates assumed. Finally, OC may include the initial core load of nuclear fuel.

The percentage of each OC cost component varies according to several studies that include both data for plants that have been built and estimates for future plants (Kozlov, 2004; UoC, 2004; Scoggs, 2007). For example, EPC ranges from 73% to 97%, owner’s cost between 2% and 15% and contin­gencies between 1% and 13% of total OC. The different percentages reflect various cost-shaping factors such as plant design, whether it is built on an existing or greenfield site, economies of scale (in terms of both unit size and the number of units previously built), contractual arrangements and the cost of labour. For example, low owner’s costs may indicate a project built on an existing site or a local government subsidy for site development and preparation. Low contingency costs might indicate a turnkey contract,[94] while high contingency costs might indicate a cost-plus EPC contract.