Redrawing the map of nuclear industry

Photo Claude Jaouen & Olivier Wantz / Senior Executive Vice President, Reactors & Services Business Group, Senior Executive Vice President, Mining Business Group, Areva / June 18th, 2012

One year after Fukushima, several European countries have decided to gradually abandon nuclear energy. What are the prospects for this sector? Two executives from world's number 1 group share their views on the new directions taken by a market unlike any other. Increasing safety requirements, predictable upmarket rise of Asian constructors, the dynamism of the small reactor segment and the slow ripening of the third gen reactors: all of these factors draw a new map of this industry.

ParisTech Review – After the Fukushima disaster, Germany decided to abandon nuclear energy. Nobody can predict with certainty the future of the civil nuclear energy market: expansion, stagnation, or contraction? You are the world’s number one company in this field. At this day, what is the impact of Fukushima on your order book?

Olivier Wantz - It is very limited: approximately 400 million euros have been cancelled on a global 43 billion euros of contracts. We are not the providers of the eight reactors that will close in Germany, but of only five. Besides, even if it is true that we observed a relative slowing down, Fukushima is certainly not the only explanation. Nuclear decisions are taken very slowly, as they lead countries into structural technological choices on the very long-tem. Apart from these reasons, the world has been through two major financial crises that jeopardize financial support.

What is your prediction on the share of nuclear energy in the world market for the next 20 years?

Claude Jaouen - It would be risky to try and make a precise prediction on the long-term, taking in account all of the ongoing disturbances. In this respect, I share the analysis of Olivier Wantz: the impact the economic crisis is deeper than that of Fukushima, with a slight shift in the decisions. It’s a matter of liquidity and visibility: public investors and big electricity producers need to make long-term projections, in a stable framework.

We can however think on a 15-20 years basis. What we imagine today, together with the great world agencies that deal with these issues on a global level, such as the International Atomic Energy Agency, is that nuclear energy will have a significant share in the energy mix around 2030, with a annual growth prospect around 2.2%. This figure has been lowered after Fukushima, but it is still quite significant. It represents approximately 300 GW, the power production of over 180 EPR reactors of 1.65 GW each. Already fifty construction sites have been launched throughout the world. Asia, China, India are at the top of the list and represent an important share in the global nuclear market. Around 2030, 60% of the new reactors will be constructed in areas with fast-increasing energetic needs.

Olivier Wantz –
We have to admit that on a global scale, some countries seem to turn away from nuclear energy: Germany for instance, or Italy that has decided to move out of it. Belgium and Switzerland are still pondering nuclear future. In the rest of the world however, all other countries have extremely reasonable positions regarding nuclear energy. They’ve acknowledged the importance of the Fukushima accident, are ready to assume all the consequences and have decided to perform the most demanding stress tests. But they are determined to continue with the nuclear energy.

Because there are stubborn facts: the rising electricity demands throughout the world will not be met without a significant share of nuclear power in the energy mix. The global nuclear capability will have to rely on very safe reactors. Safety standards will be held in even greater consideration than today, when electricity producers come to make their decisions.

If safety becomes the chief element of decision making for governments and producers, will the EPR end up winning the race? In other words, would Abu Dhabi’s choice (of taking a cheaper and much less sophisticated Korean reactor over the EPR) be the same today?

Claude Jaouen - Your question brings up the issue of quality after the Fukushima accident. This is what we have already observed: today, China doesn’t think any longer about second generation reactors; it aims at third generation reactors. But the debate has just been opened and if they eventually choose to make these third gen reactors, we still don’t know whether they will use western technology (American or French) or try to develop their own technology.

In the rest of the world, the general tendency is to examine the safety of the existing nuclear plants, through the lessons of the Fukushima accident. These stress tests – in France we call them “complementary safety evaluations” – will probably lead to raising safety standards. In this given context, third generation reactors have very clear edges in terms of solidity. According to the tests we’ve performed, the EPR would have resisted at the Fukushima site. Those who have chosen to develop third gen reactors will certainly have a brilliant future. Since several years, our product catalogue only offers third generation reactors – the only ones capable of meeting the highest security standards.

You mentioned the Koreans. We shouldn’t underestimate their ability to move upmarket: sooner or later, their will able to produce third generation. Our relative advantage will be a limited one on the long-term, although we are clearly ahead for now.

Regarding the safety of reactors, the EPR is often presented as the safest in the world. You said it would withstand natural events such as Fukushima. What makes you think that?

Claude Jaouen - The EPR reactor design has benefited from the CEA’s R&D, as well as the active collaboration of European utilities such as EDF and Eon, of French and German nuclear safety authorities; and of course it has benefited from unparalleled feedback from Areva engineering teams. More than 2000 years of light water reactors operation were used to enhance the safety systems of this generation 3+ reactor.

In its report drafted after further safety evaluation of safety on the EPR reactor being built at Flamanville (among others), the French nuclear safety authority said that “the reinforced design of this type of reactor is already providing improved protection against severe accidents. From the beginning, this reactor was designed in order to deal with the possibility of accidents with fusion of core and combination of attacks,” adding that “all systems necessary to manage accidental, including serious situations is expected to remain operational for an earthquake or flood considered in the safety reference.”

This approach has helped develop a product with an enhanced safety level through major changes: preventing a merger of the core, extreme robustness against external aggression, as, for example, the fall of a military aircraft or a large commercial aircraft, or resistance to an extreme natural event such as a strong earthquake or a destructive wave.

This position of a regulator among the most stringent in the world confirmed the analysis conducted by our experts following the accident at Fukushima. Their calculations showed the high resistance of plants to a massive earthquake and the sealed doors of the emergency power buildings to a major flood.

The first results of the EPR aren’t very encouraging. Could this reactor end up as one of those technological jewels that turn out to be an industrial disappointment and ultimately, a commercial fiasco?

Olivier Wantz - Of course not! We are only at the beginning of the EPR adventure. Third gen reactors are extremely powerful, they run at very competitive costs together with unprecedented safety standards. They are promised to a great future, even more since Fukushima, when safety has become an absolute requirement. No other product can meet with the EPR offer on these three levels. This being said, we do also make smaller products with equal safety standards for countries where the power network can’t sustain a 1650 megawatt reactor or who aren’t as power hungry.

Claude Jaouen – We very well know that for governments and power producers, one of the most important aspects regarding technological choices is the certainty for the investors that the product will be delivered in time. But one should keep in mind that third gen is still in development phase. And we are in progress: at Taishan, China, the EPR construction site is meeting the deadlines and production costs – unlike in Finland. The idea of progress is at the heart of our industrial culture. We learn from our first construction sites – although each case is unique and that at Taishan, problems are quite specific to this site.

Getting back to Europe: Germany’s long-term energy plans include importing 30% of its electricity by 2030. Implicitly, these importations will be of nuclear origin. In this case, it would be in Germany’s interest to construct nuclear power plants in bordering countries such as Poland, the Czech Republic, France and Belgium. Did you ever feel this ulterior motive in your contacts with German officials?

Olivier Wantz - Absolutely not. The German public opinion is thoroughly antinuclear and the government certainly doesn’t want their decision of moving out from nuclear energy to be corrupted or weakened by a nuclear belt of reactors around their country. From the public opinion’s point of view, the risk would be the same. Besides, the German Green Party wants to promote the antinuclear ideology as broadly as possible.

So, how do you judge the German position? Visionary? Cynical?

Olivier Wantz - The Germans understood that the nuclear energy they turned their back to will not be fully replaced by renewables. Their 2011 historic decision will automatically imply more gas and coal on their territory, which means more CO2 emissions. You’re right in saying there is some hypocrisy in the decision because they will eventually have to import nuclear electricity. They don’t have a choice.

In a post-Fukushima denuclearized Germany, will Areva be able to keep the technical and commercial platform it built there for over 12 years?

Olivier Wantz - Only a little more than a third our activities in Germany are dedicated to Germany itself. We have lines of activities whose global CEOs are based in Germany. Some crucial capabilities have their teams working in Germany: for example, the reactor command controls (the systems that ensure automatic measurements, regulations or protection functions). Our German resources are committed to the Flamanville project, to the Finnish EPR and to our Chinese projects, Taishan 1 and 2. To question our presence there is not in our agenda.

And yet, Germany’s move to phase out nuclear power can destabilize the group.

Olivier Wantz - The group has 6000 employees in Germany. We have been there for a long time, since Siemens decided to join Framatome ANP in 2000 by bringing in the nuclear activities within its KWU firm (Kraftwerk Union), which led to the creation of Areva NP. When Germany will completely stop its nuclear capabilities in 2022, it will have a very great impact our activity in Germany. We have already drawn the consequences by announcing a strategic action plan at the beginning of 2011 which includes significant staff reduction in Germany for the period from 2012 to 2016. These reductions also concern the numerous subcontractors that work for us, like in all engineering field. But Germany will certainly offer new opportunities.

Could a denuclearized German still be an important market?

Olivier Wantz - Definitely. Our firm is growing in the field of renewable energies. It’s one of our fastest activity growths: solar, wind and biomass energies. In terms of orders, the renewable field represents already 2 billion euros on a 43 billion total. Germany is already a very important development platform for Areva. Besides, we have invested since a long time in dismantlement processes of nuclear plants and Germany will become a very important market. Dismantlement is a complex long-term project, where Areva’s experience and capabilities will prove precious assets. The dismantlement of the reactor is a crucial stage, because of the radiations involved. The less sophisticated tasks can be performed by subcontractors.

What are the next technological breakthroughs in terms of reactors?

Olivier Wantz - The fourth generation isn’t planned for tomorrow yet. Research teams are digging into two different directions: very powerful reactors that reuse their own wastes and very small modular reactors that are delivered as turnkey products, pre-assembled and pre-packaged in factory. These ready-to-use reactors could be assembled in series to achieve the desired power. The research phase will be very long. I don’t believe we’ll see a fourth generation prototype before 2035-2040.

The project of submerged mini-reactors, using the same technology as in nuclear submarines, seems to have an interesting market share, especially in big African cities. Where is Areva, in that respect?

Claude Jaouen - There is indeed, throughout the world, a rising market for small modular reactors: between 50 and 300 MW. Our subsidiary, Technicatome, has specific capabilities and experience for the segment between 100 and 150 MW. Obviously, we aren’t the only ones looking into it: at this day, there are over twenty competing models, made by Russia, China, the US and France.

The limits of this market are well-known: these devices only make sense in specific areas, with an important geographic dispersion which makes the costs of a powerful reactor prohibitive, or when infrastructures don’t exist. Powerful models are more affordable in other contexts, simply because the maintenance, safety and operating costs are the same, whatever the power capacity.

Another small market share should come from the reconversion of small coal plants. Submerged nuclear reactors are also under study, as they offer other configurations in terms of public acceptability and safety. We’ve launched a feasibility study, as well as a market study, with other partners (EDF, DCNS and the CEA). The results will be known at the end of this year. The market study will be crucial as the development costs of this type of reactor reach to several million euros, in a very competitive market. On their side, the Americans have decided to move forward thanks to significant subsidy promise from the Department of Energy.

Taking in account the number of players in this market, we could very well imagine alliances, based on the capabilities of the partners; we already work that way with EDF and other partners. We could perfectly imagine alliances with the Chinese or the Americans.

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  • Redrawing the map of nuclear industryon June 18th, 2012
  • Sophia Majnoni

    I don’t think this is such a complete review of the reality of nuclear power globally and more specially after Fukushima.
    It is right that Fukushima is far to be the only reason why the market is slowing down. Actually this tendancy started a few years ago basically around the 90′s in Europe and a bit later for the whole world. Between 2006 and 2010 the electricity production from nuclear decreased to 103 TWh. Between 2008 and 2011, 10 reactors were built and 11 closed (with 6 at Fukushima but without 8 in Germany).
    And this situation will continue. The average age of nuclear reactors globally is 26, the average of closed nuclear reactors is 22… There is no nuclear reactor older than 46 today in the world.
    The IAEA says that 64 reactors are today under construction but during the golden age of nuclear, in 1979, there were 233 reactors under construction.
    This situation will be worse and worse for the nuclear industry. After Tchernobyl there is not even one reactor taking into account the experience return of the accident which has been fully built. There is no gen 3 reactor producing electricity yet and we do not know the final price of gen 3 reactors. Nuclear reactors is the only technology with a negative learning curve. While Areva and EDF were saying the cost of new nukes would be around 43€/MWh we can see that the cost of Flamanville 3 may be around 70-90€/MWh (Cour des comptes) and EDF just announced a price of 8,6bn€/EPR in the UK…
    Basically the cost of gen 3 reactors will be far too high compared to RE on the markets to hope that the 434 current reactors (50 for Japan?) will be fully replaced one day.
    The only market for Areva after that is the life time extension… which no one really knows about: how much will it cost after Fukushima and what is the appropriate technology in terms of life time and ageing?
    The nuclear could slowly disappear just because the market will no more want to support it. The question is just when will it be fully out of the game.
    Sophia Majnoni d’Intignano, Greenpeace France

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