If these projects had taken their originally scheduled 5 years, they would have been long since completed prior to COVID or the spike in inflation of the last three years. But they have been running 5 to, in some cases, 12 years beyond their original schedule. The longer a project takes, the more uncertainty enters the equation.
From 2010 to 2020 the core rate of inflation was averaging 1.7%, and 5.25 from 2020-2023. I’d be hugely surprised if any of these projects had estimated the annual inflation rate at less than 2%.
The bankruptcy of Westinghouse was directly tied to their inability to deliver on time/budget. Likewise the cash infusion to Areva to maintain solvency.
Over the history of North American reactors, budget overages have averaged 207% of their original budgets. The industry has a history of overpromising and underdelivering. Companies backing these projects are aware of the history and it’s why finance rates on these projects tends to be quite high. The initial finance rate of the Hinckley Point C project was 9%, for example. The financiers recognize the risks. Financing for gas/wind/solar, in comparison, would be at or close to prime rates typically.
The industry has a history of overpromising and underdelivering.
All of construction industry, not just nuclear power generation, has a history of overpromising and underdelivering, possibly outside of wartime when money for “national security” purposes is of no object.
My working theory is that whether it’s due to the bidding process or inflation or political corruption or anything… Public projects need to be pitched to the public and stuff will never get done if people keep saying “it’s economically unviable!!!”. That’s why we would see a politician try to bring the most favourable numbers possible assuming no delays or mistakes. But you can’t always have no delays or mistakes, and once a project is started it’s way easier for a politician to stick through it than if you use engineer-produced numbers with risk overheads included or inflation adjusted to the time of commissioning.
To your point about financing… The financing rate is inherent to the length of the shelf life of a project. If you were try to buy a 1 yr. vs. a 10 yr. vs. a 30 yr. bond, you would be offered different rates. Risk is inherent over the entire lifespan of a project, and some projects are a major upfront investment that pays off 20-30 years down the line instead of in 5-10 say with a wind or solar project. We see that despite the problems, 50 year old reactors are still running and it would be a problem if we shut it down without a good replacement. Wind and solar tech from 10-15 years ago are already obsolete, but that’s not a bad thing economically because they’d already paid off their value and use. It’s just different natures of projects.
Yeah, I’ve seen that video before. I’ve worked in consulting engineering, primarily in generation for 25 years. The major non-nuclear projects I’ve been involved with have been within a few percentage points of the original budgets. Some of the worst ones were off by 10-15%. Not 150% as in the case of Vogtle.
The last combined cycle gas plant I worked on was the Chinook Generating Station in Swift Current. Fairly small at 353MW, but cost $600M, which was roughly $75M under budget. Those are words you’ll never hear for a nuclear project.
The refurbishment at Point Lepreau was originally expected to run 18 months and cost $1.5B. It ended up being just short of 4 years and cost $2.5B. That’s very expensive for a 660MW unit. CANDU6 have a design life of 30 years, when they need extensive refurbishments, or decommissioning. Lepreau made it to 28 years when reliability was really starting to impact it’s viability. When faced with the same issue at Gentilly on a near identical reactor, Quebec Hydro pulled the plug. Quebec Hydro obviously having other options available to it.
At Pickering A plant, two units (A2 &A3) have been decommissioned. Units A1 and A4 were refurbished in the early 2000s. The refurbishments were supposed to cost $670M, but ended up costing over $2B. The 4 units of B plant were commissioned from 1983-1986. They’ve had life extension work to maintain their licensing to continue operations, but they need complete refurbishment or decommissioning. The Ford government has been dragging its feet. If a decision isn’t made soon, the federal regulator will order them shut down.
The 860MW Combustion Engineering PWR at Maine Yankee only ran from 1972 until 1997, 25 years, when it was powered down for the last time. It was never particularly reliable and only hit a lifetime capacity factor of somewhere around 70%, not nearly enough to be economically viable. The cost to refurbish was estimated to exceed it’s initial construction costs, so it was decommissioned and the site is currently used for storing radioactive waste.
These projects could be getting far better finance rates if they could stick to the 5 year construction schedule. They’re penalized because history is pretty clear that they can’t. With projects like the V.C.Summer plant being cancelled mid-construction due to overruns, financing became even harder to secure.
If these projects had taken their originally scheduled 5 years, they would have been long since completed prior to COVID or the spike in inflation of the last three years. But they have been running 5 to, in some cases, 12 years beyond their original schedule. The longer a project takes, the more uncertainty enters the equation.
From 2010 to 2020 the core rate of inflation was averaging 1.7%, and 5.25 from 2020-2023. I’d be hugely surprised if any of these projects had estimated the annual inflation rate at less than 2%.
The bankruptcy of Westinghouse was directly tied to their inability to deliver on time/budget. Likewise the cash infusion to Areva to maintain solvency.
Over the history of North American reactors, budget overages have averaged 207% of their original budgets. The industry has a history of overpromising and underdelivering. Companies backing these projects are aware of the history and it’s why finance rates on these projects tends to be quite high. The initial finance rate of the Hinckley Point C project was 9%, for example. The financiers recognize the risks. Financing for gas/wind/solar, in comparison, would be at or close to prime rates typically.
All of construction industry, not just nuclear power generation, has a history of overpromising and underdelivering, possibly outside of wartime when money for “national security” purposes is of no object.
Here’s a Practical Engineering video on “Why Construction Projects Always Go Overbudget”.
My working theory is that whether it’s due to the bidding process or inflation or political corruption or anything… Public projects need to be pitched to the public and stuff will never get done if people keep saying “it’s economically unviable!!!”. That’s why we would see a politician try to bring the most favourable numbers possible assuming no delays or mistakes. But you can’t always have no delays or mistakes, and once a project is started it’s way easier for a politician to stick through it than if you use engineer-produced numbers with risk overheads included or inflation adjusted to the time of commissioning.
To your point about financing… The financing rate is inherent to the length of the shelf life of a project. If you were try to buy a 1 yr. vs. a 10 yr. vs. a 30 yr. bond, you would be offered different rates. Risk is inherent over the entire lifespan of a project, and some projects are a major upfront investment that pays off 20-30 years down the line instead of in 5-10 say with a wind or solar project. We see that despite the problems, 50 year old reactors are still running and it would be a problem if we shut it down without a good replacement. Wind and solar tech from 10-15 years ago are already obsolete, but that’s not a bad thing economically because they’d already paid off their value and use. It’s just different natures of projects.
Yeah, I’ve seen that video before. I’ve worked in consulting engineering, primarily in generation for 25 years. The major non-nuclear projects I’ve been involved with have been within a few percentage points of the original budgets. Some of the worst ones were off by 10-15%. Not 150% as in the case of Vogtle.
The last combined cycle gas plant I worked on was the Chinook Generating Station in Swift Current. Fairly small at 353MW, but cost $600M, which was roughly $75M under budget. Those are words you’ll never hear for a nuclear project.
The refurbishment at Point Lepreau was originally expected to run 18 months and cost $1.5B. It ended up being just short of 4 years and cost $2.5B. That’s very expensive for a 660MW unit. CANDU6 have a design life of 30 years, when they need extensive refurbishments, or decommissioning. Lepreau made it to 28 years when reliability was really starting to impact it’s viability. When faced with the same issue at Gentilly on a near identical reactor, Quebec Hydro pulled the plug. Quebec Hydro obviously having other options available to it.
At Pickering A plant, two units (A2 &A3) have been decommissioned. Units A1 and A4 were refurbished in the early 2000s. The refurbishments were supposed to cost $670M, but ended up costing over $2B. The 4 units of B plant were commissioned from 1983-1986. They’ve had life extension work to maintain their licensing to continue operations, but they need complete refurbishment or decommissioning. The Ford government has been dragging its feet. If a decision isn’t made soon, the federal regulator will order them shut down.
The 860MW Combustion Engineering PWR at Maine Yankee only ran from 1972 until 1997, 25 years, when it was powered down for the last time. It was never particularly reliable and only hit a lifetime capacity factor of somewhere around 70%, not nearly enough to be economically viable. The cost to refurbish was estimated to exceed it’s initial construction costs, so it was decommissioned and the site is currently used for storing radioactive waste.
These projects could be getting far better finance rates if they could stick to the 5 year construction schedule. They’re penalized because history is pretty clear that they can’t. With projects like the V.C.Summer plant being cancelled mid-construction due to overruns, financing became even harder to secure.
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Here’s a Practical Engineering video on “Why Construction Projects Always Go Overbudget”
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