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Multi-billion opportunity in nuclear supply chain

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Nuclear power plant construction, long-term plant operation and decommissioning all offer potential multi-billion dollar markets over the next two decades. The nuclear industry generates worldwide revenues of about $300-billion for electricity utilities.

This is according to a newly released supply chain report from the World Nuclear Association, “The World Nuclear Supply Chain Outlook 2035”, which provides a market-oriented view of challenges and opportunities under three scenarios.

In the reference scenario, the number of nuclear reactors grows from 444 operating reactors, as of July 2016, to 462 by 2025, and 547 by 2035. The upper case scenario sees a rise to 530 by 2025 and 720 by 2035, while the lower scenario sees little new construction and a fall to 362 units by 2035.

Under the reference case, revenues from operating nuclear power plants are expected to grow by 2,8% per year over the next 20 years to reach some $500-billion a year, with 62% of the growth occurring in the emerging industrial economies (the non-OECD area, including China). Investment in new nuclear build to 2035 is of the order of $1,5-trillion, with significant international procurement of $24-billion to $30-billion a year after 2025 (up from about $6-billion to $10-billion a year currently).

The value of the investment required to keep existing reactors in long-term operation could amount to $50-billion to $100-billion, with about $4-billion per year in international procurement.

The market for decommissioning is also substantial, with decommissioning work on projects involving immediate dismantling by 2035 potentially worth up to $111-billion. This includes at least $12,4-billion as the estimated cost for cleaning up the Fukushima Daiichi site, and at least $24,2-billion for decommissioning as Germany moves to phase out its nuclear power plants.

Eleven consolidated technology vendors from Canada, China, France, India, Japan, Russia and the US currently offer their services across much of the nuclear fuel cycle, and other significant technology vendors – such as BWX Technologies, Doosan and OMZ-Skoda – are internationally active. Each has built up a supply chain that is increasingly global in scope, and the leading vendors are, for the most part, internationally diversified in terms of their corporate make-up and supplier base, the report notes.

Competitive pressures has encourage localisation of manufacturing, joint ventures and international procurement, resulting in materials, semi-processed and complete fabrications perhaps crossing several borders before reaching their final destination for assembly and installation.

A competitive global market exists for the construction and procurement of nuclear power plants. Several factors, including the cancellation of some planned plants following the Fukushima Daiichi accident, investment by existing suppliers and the transfer of technology and localisation, particularly to China, mean that “choke points” in the supply chain identified a decade ago – notably in terms of heavy forging capacity – do not exist at present.

Bottlenecks could, however, re-emerge in the event of multiple reactor orders being issued at the same time.

“Globalisation has become as much part of the scene for nuclear as it is for other industries,” the report notes. “The World Nuclear Association believes that the system for import and export between countries should be reviewed to streamline procedures while preserving a sound safeguards regime.”

The existing export control regime places the nuclear industry at a disadvantage in comparison with industries such as aerospace and defence, the report notes. Most export control authorities do not issue general export licences for nuclear-related items.

Instead, the report calls for the degree of scrutiny accorded to nuclear technology to be risk-based.

“A nuclear power reactor poses a low technology risk with respect to proliferation. The same is true for components, spare parts, and maintenance or repair services for an existing nuclear facility that is subject to international safeguards.

“Under a risk-based approach the export of components and complete power reactors should be made possible under general authorisation, without a prior individual licence, to another country that is a participating state in the Nuclear Suppliers Group (NSG), subject to notification being provided to the national authorities of the exporting and importing countries concerned. Within free trade areas, like the European Union’s single market, shipments should be notifiable but otherwise unrestricted,” it says.

Enrichment and reprocessing technologies are associated with a higher proliferation risk and there is a “greater justification” for licensing such transactions through individual export licences.

“Export control authorities should be able to recognize good private sector practice by extending authorized (or trusted) economic operator status to companies that apply diligently a robust and comprehensive internal compliance program to their operations,” the report notes. “In the longer run, international trade and investment agreements can help to lower the technical and administrative barriers to trade.”

Greg Kaser, senior project manager at the World Nuclear Association, comments: “The Supply Chain report supplements and expands on the World Nuclear Association’s biennial nuclear fuel report, looking in more depth at the supply side of the question and taking into account developments seen since the publication of last year’s edition of the Nuclear Fuel Report.”