The Czech APR1000 Contract

Welcome to the nuclear renaissance, sir. Would you prefer our Vogtle 3/4 or our Hinkley Point 3?

One of GKN's biggest blunders was my misread of the first reports of the Czech's purchasing two Korean APR1000's to conclude that the contract price was around $3000/kW. The actual price turned out to be about $8600/kW. My abject embarrassment was more than matched by my disappointment. I should not have been surprised.

The Koreans had just completed four APR1400's for the UAE at about $4000/kW. The contract had firm cost and schedule requirements. I know from an insider I trust that the Koreans not only met those requirements, but they earned bonuses for beating them. The Koreans were happy to build more plants in the UAE for that price. Why the better than factor of two increase?

The possibilities include:

1) Inflation.
2) Cooling system.
3) Localization.
4) Differences between the APR1400 and the APR1000.
5) Regulatory uncertainty.

Inflation

The four UAE plants were built between 2012 and 2019. If we base dollar valuation on the CPI and 2015 and 2025, $4000 in 2015 is $5500 in 2025. Perhaps 35% of the difference can be explained on this basis.

Cooling System

Barakah used once through cooling. The Czech plants will use cooling towers. Ordinarily, this difference would increase CAPEX by about 2% percent. But the Persian Gulf is about the worst place in the world for once through cooling, and required significant modifications of the APR1400 to handle the very warm sea water temperatures. I suspect this was close to a wash.

Localization

The contract reportedly calls for 60% localization. It's not clear what that means; but KHNP's main equipment supplier is Doosan. Doosan bought the storied Czech engineering company Skoda in 2009. Before and since the purchase, Skoda has successfully competed with the Koreans and others in supplying equipment to coal and nuclear plants around the world.

The APR1000

The APR1000 is a strange design. There are very strong economies of scale in Pressurized Water Reactors. Table 1 shows some numbers in meters for the APR1400 and APR1000.

The APR1000 is nearly the same size as the APR1400. Both are two loop designs with the same number of components. Both will require essentially the same staff. The APR1400 had already been certified by the EUR (and the NRC). The Koreans gained almost nothing in return for a 400 MW derating. The Czechs clearly want more than 1000 MW. They contracted for 2000 MW and are seriously talking about another 2000. The Koreans know all this and they are the opposite of stupid. The only explanation I can come up with is some regulatory idiocy that I don't understand.

The APR1000 has three safety "enhancements" that the APR1400 does not:

1) An extra natural circulation driven decay heat cooling loop, called a PAFS, Figure 1.

Figure 1. Extra APR1000 Decay Heat Cooling Loop

2) A fancier core catcher, Figure 2.

Figure 2. APR1000 Core catcher

3) Doubled walled containment, Figure \ref{fig:apr1000_dbl_cont}.

Figure 3. APR1000 Double Walled Containment

I like the PAFS. If it isn't taken out by whatever took out all your other cooling systems, the reactor depressurizes, and the untestable squibb isolation valves work, it gives you a week before you have to do anything. And it shouldn't cost much, a percent at most. By the way, the 1505 MW APR+ has a PAFS. Why did not the Koreans offer the APR+ and gain a little scale, rather than losing a lot?

It is not clear what advantage, if any, the APR1000 core catcher has over the APR1400's cavity cooling system, which uses the same concept. Both depend on the IRWST (In containment Reserve Water Storage Tank) not being drained, to prevent a casualty that has never happened. But the difference in cost shouldn't be much. If the difference is large, why would the Koreans make this cosmetic change?

The double walled containment will be expensive. I can see this costing up to 7 or 8 percent and extending the build time significantly. In return, the Czechs get almost nothing. Just about anything that's going to penetrate the APR1400's 1.37 m thick containment is going to get thru the APR1000's walls. For the exceptions, a determined attacker is going to send two weapons, the first to take out the outer wall, and the second the inner.

Even the clueless Europeans now understand this. The EPR1200, which EDF offered the Czechs instead of the original hopelessly expensive EPR, gets rid of the EPR's double containment. Double wall was obviously not a requirement. I have no idea what the Koreans were thinking here.

Regulatory Uncertainty

In EDF's suit attempting to block the deal, EDF pointed out that, given the exposure to EU regulatory whims, there was no way that KHNP could offer a firm price and schedule without state help from the Korean government. It's a good point.

The Koreans managed to convinced the Czech courts that there was no such back up. If that really is the case, the only possible defense the Koreans had is to mark up their price enough to cover their risk. They had a big cost advantage over EDF. (or at least did until they gave away a portion of it with the inexplicable APR1000). What I would have done is made my best guess at what EDF would come up with, set my price at slightly less, and then ask myself is that enough cushion to accept the regulatory risk.

In the event, neither Westinghouse which was eliminated earlier nor EDF was willing to offer a firm price or schedule. In short, while other factors were at play, regulatory uncertainty by itself is enough to explain all the difference between the Barakah price and the Czech price.

The moral is you will never get anything close to should-cost nuclear, as long as you have a system in which the regulator can change the rules while the game is being played. You won't even get within a factor of four of should-cost. And you won’t get a fixed price and schedule contract.

Here's the worst part. By European standards, the Czechs have their heads screwed on straight. The Koreans recently dropped out of the Dutch bidding process, after earlier doing the same in Sweden. As far as I know, KHNP gave no concrete reason for dropping out of a competition in which they were head, shoulders, waist, and ankles above the likes of EDF and Westinghouse. My guess is that the Korean engineers have had enough of dealing with hopelessly muddled, unpredictable, lawyer ridden, Western nonsense.

So now the the West is at the tender mercies of EDF and Westinghouse. Welcome to the nuclear renaissance, sir. Would you prefer our Vogtle 3/4 or our Hinkley Point 3?