Economics (Sustainability Assessment)

INPRO Economic Basic Principle (BP) - Energy and related products and services from nuclear energy systems shall be affordable and available.

Introduction

Objective

The goal of this publication is to provide guidance for performing an assessment, as described in the introductory volume of the updated INPRO manual, in the area of economics. The manual is not intended to provide guidance on how to design an NES to meet the INPRO methodology requirements in the area of economics. Rather, the focus is on the assessment method and the evaluation of the criteria in the area of economics.
The assessor, i.e. the individual or team of individuals carrying out a nuclear energy system assessment (NESA), is assumed to be knowledgeable in the area of economics and financial analysis.
An assessment using the INPRO methodology will either confirm that the economic criteria are fulfilled, and hence that the NES is competitive with alternative energy sources in the country assessed or will result in the identification of shortcomings (gaps or non-compliance with criteria) requiring actions, e.g. changing some of the facilities of the NES such as the reactor, or to defining an RD&D program to improve the economic performance of the NES to bring it into compliance.
However, in a situation where energy system planning has been performed prior to undertaking the INPRO assessment and a role for nuclear power as part of a balanced energy portfolio has been identified, the follow-on economic assessment using the INPRO methodology would still be valuable. As discussed further in Section 2, in such a case the INPRO assessment results provide additional information through a study of the sensitivity of important economic parameters and added transparency of the economic results.
An economic assessment using the INPRO methodology could be performed by a variety of assessors, such as government planning departments, academic institutions, international agencies, utilities (private or public) or nuclear technology designers (developers) to understand the economic competitiveness of nuclear power compared with alternative sources of energy. The report contains a general discussion of the INPRO methodology requirements in the area of economics as set out in Table 1, and provides guidance on determining the value of the indicators in the area of economics, and on specifying the associated acceptance limits. It may be noted that some aspects of economics are also discussed in the INPRO manual dealing with the area of legal and institutional measures (infrastructure).
While it is assumed that the assessor is knowledgeable in the area of economics, this volume of the INPRO Manual has been written so that a non-expert can understand the INPRO methodology requirements in the area of economics and, hence, the results obtained from a NESA in this area.

Structure

In Section 2, a short description of the goals and output of an energy system planning study is presented. Such a study is defined as a prerequisite for a NESA.
General background information on performing an INPRO economic assessment, and the inputs that are needed to perform an assessment, is discussed in Section 3.
A discussion of the basic principle, the associated user requirements and criteria is presented in Section 4. It is important to note that an assessor, i.e. a given Member State may choose other specific criteria (and even user requirements) that reflect its national circumstances. Thus, the information presented in Section 4 is to be considered to be guidance and not a prescription.
The requirements presented in the INPRO methodology in the area of economics are set out in Table 1.

Table 1. Overview of the INPRO methodology in the area of economics

INPRO Economic Basic Principle (BP): Energy and related products and services from nuclear energy systems shall be affordable and available.
User Requirement (UR)	Criterion	Indicator (IN) and Acceptance Limit (AL)
UR1 (Cost of energy): The cost of energy supplied by nuclear energy systems, taking all relevant costs and credits into account, CN, should be competitive with that of alternative energy sources, CA. that are available for a given application in the same time frame and geographic region/jurisdiction.	CR1.1: Cost competitiveness	IN1.1: Cost of energy.
		AL1.1: $C_{N}\leq k\cdot C_{A}$ (CN = cost of nuclear energy, and CA = cost of energy from alternative source; factor k is usually > 1 and is based on strategic considerations.)
UR2 (Ability to finance): The total investment required to design, construct, and commission nuclear energy systems, including interest during construction, should be such that the necessary investment funds can be raised.	CR2.1: Attractiveness of investment	IN2.1: Financial figures of merit.
		AL2.1: Figures of merit for investing in a NES are comparable with or better than those for competing energy technologies.
	CR2.2: Investment limit	IN2.2: Total investment.
		AL2.2: The total investment required should be compatible with the ability to raise capital in a given market climate.
UR3 (Investment risk): The risk of investment in nuclear energy systems should be acceptable to investors.	CR3.1: Maturity of design	IN3.1: Technical and regulatory status.
		AL3.1: Technical development and status of licensing of a design to be installed or developed are sufficiently mature
	CR3.2: Construction schedule	IN3.2: Project construction and commissioning times used in economic evaluation.
		AL3.2: Times for construction and commissioning used in economic evaluation are sufficiently accurate, i.e. realistic and not optimistic.
	CR3.3: Uncertainty of economic input parameters	IN3.3: A sensitivity analysis of important input parameters for calculating costs and financial figures of merit has been performed.
		AL3.3: Sensitivity to changes in selected parameters is acceptable to investor.
	CR3.4: Political environment	IN3.4: Long term commitment to nuclear option.
		AL3.4: Commitment sufficient to enable a return on investment.
UR4 (Flexibility): Innovative nuclear energy systems should be compatible with meeting the requirements of different markets.	CR4.1: Flexibility	IN4.1: Are the innovative NES components adaptable to different markets?
		AL4.1: Yes.

While it is assumed that the assessor is knowledgeable in the area of economics, this volume of the INPRO Manual has been written so that a non-expert can understand the INPRO methodology requirements in the area of economics and, hence, the results obtained from a NESA in this area.

Energy system planning and the role of nuclear power

As described in Ref. and in the introductory volume of the updated INPRO manual, an energy system planning study (or energy scenario), which sets out the anticipated growth of energy demand as a function of time and which identifies the available energy supply options and the role of a NES in meeting the energy demand projection, is required.
Generating the electricity and distributing it to customers is complex. A given electrical grid will be fed by a range of generating sources, which usually will include some combination of hydropower, a variety of fossil and nuclear plants, as well as renewable sources of supply such as wind and solar systems. At the end of the day the electricity supplied needs to meet the demand, including transmission losses, with a high level of reliability while meeting technical criteria on voltage and frequency. The demand is not fixed but varies, typically on a cyclical basis — daily, weekly, monthly and annually.
Planning for new electricity supply is also complex and may involve different groups. For the purposes of this report it is assumed that such planning is carried out by a single entity, which is referred to as the utility that takes responsibility for ensuring that there is sufficient generating capacity to meet the demand for some specified grid. While the utility may or may plan to purchase power from a range of generators and may own or plan to own some sources of supply, in this report sources of supply are discussed as if they were all part of the one utility.
In general, a utility will seek to establish and maintain a balanced portfolio of generating sources, taking into account a range of considerations that would be expected to include:

• Overall reliability of supply of electricity;
• Demand variations;
• Risk management/minimization;
• Cost minimization;
• Use of domestic resources, including fuels and human resources;
• National/regional policy positions;
• Balance of payments, etc.

When considering the role of nuclear power, in a balanced portfolio it needs to be recognized that constructing a nuclear power plant is a large scale capital project that will be implemented over many years, typically ten years or more, starting with pre-project planning, and one that requires a large front end investment. For a nuclear power plant, amortization of capital costs are the single most important cost factor, and operating and maintenance (O&M) costs, fuel costs, including the cost of uranium, and other costs such as waste management and decommissioning costs are relatively less important but, of course, still need to be considered.
The situation is similar for hydroelectric plants and for some other renewable energy plants, such as wind turbines and solar electricity plants— the major cost is paying back the investment in the facility. For fossil fuel plants, fuel costs are relatively more important or even dominant, and can account for ~40% of total costs for coal or oil fired plants, and up to ~70 % of total costs for gas turbines.
Because of their large capital cost and relatively low operating and fuel costs, nuclear power plants are usually operated more or less continuously to contribute to meeting baseload demand. Of course, they have to be shut down from time to time for refuelling and maintenance, but modern nuclear power plants can operate with an annual load factor of ~85–90 %, averaged over the lifetime of the plant. The corollary is that the economic competitiveness of nuclear power is adversely affected if such plants operate with low load factors. The effect is that plants with relatively lower capital costs and higher fuel costs are more likely to be used for meeting peak demand and so may operate with a much smaller annual load factor, as low as 10–20%, or even less depending on the mix of generating plants available to supply electricity to the grid.
For some generating options, such as hydro or wind, annual load factors may be limited by natural factors. For example, in the case of hydro, load factors may be limited by reservoir capacity and annual variations in water flow — that is, changes in flow during the year. For wind turbines typical annual load factors are ~20–30%, and are rarely greater than 35% because of the natural variability of wind speeds.
Thus, in the INPRO methodology, when comparing the competitive position of nuclear relative to alternative sources of supply, the alternatives need, in general, to be capable of meeting baseload demand and of operating at high load factors. So, nuclear power will most likely be compared with fossil fuelled plants and, in some countries/regions, with hydro.
When considering the acquisition of new generating sources, either to expand the generating system or to replace generating sources as they are retired, system planning will be used to seek an ‘optimized’ combination of generating options that best takes into account such considerations and the factors mentioned above. Such system planning is not part of INPRO methodology per se but is considered to be a pre-requisite. If such system planning identifies a potential role for nuclear power as a generating source, an assessment in the methodology area of economics can provide useful insights by comparing the competitive positions of nuclear relative to alternative choices using a number of economic indicators. Such an INPRO assessment is not a substitute for system planning but is complementary to it.
Different criteria can be chosen in the economic decision making process when deciding among different options for electricity production. The criteria used will influence the price competitiveness of nuclear energy. For example, in one country the investment decisions could be based on purely commercial rules in a completely deregulated market, whereas in another state a centralized (government) decision making process may be used, leading to different investment figures.
In the first situation, cost of supply may dominate the decision making for a planned energy system in which case the cheapest supply option will be selected, while in the second situation the government may be interested in the deployment of nuclear plants for strategic reasons, in which case higher costs for nuclear power compared with other electricity supply alternatives, up to some level, may be acceptable. An example of such a strategic consideration is the security of energy supply that is one of the energy indicators of sustainable development of a country .
Polices that, for example, favour renewable energy sources or recycling, and environmental considerations that, specify emission limits, can influence the choice of technologies to be included in an energy demand/supply planning study. In defining the energy scenario, such political considerations may reflect strictly local policies or, for a regional or global scenario, they may reflect international considerations.
The IAEA offers Member States on request support to perform a national energy system planning study. This support includes the supply of computer tools such as MAED and MESSAGE and corresponding training in the application of these tools.
A follow-on assessment of economics using the INPRO methodology after the performance of an energy system planning study adds to the transparency of the economic results. The transparency is achieved through the possibility to perform quantitative sensitivity studies on the influence of significant input parameters, e.g. the discount rate, or construction time on key economic figures such as electricity production costs or return of investment using a simple tool called NEST. These sensitivity studies can be performed for several types of power plants — nuclear and non-nuclear — in parallel.
The INPRO assessment covers the attractiveness of an investment into nuclear power (in comparison to alternative energy sources) by determining several financial figures of merit such as internal rate of return (IRR), return of investment (ROI), and net present value (NPV). These figures expand and deepen the understanding of economics since the superiority of an energy supply option depends not only on its power production costs but also on its attractiveness to investors.
Finally, the INPRO methodology addresses the risk associated with the installation of nuclear reactors caused by delays in construction time or by the licensing process.

Inputs necessary for an economic assessment

This section discusses the inputs necessary for an assessment of a NES in the INPRO methodology area of economics, and provides some background information. In general, most of the necessary economic input data related to the design of a NES can be retrieved from the public domain. However, INPRO recommends that the NESA team establish cooperation with potential suppliers of the NES to facilitate the receipt of reliable input data related to the design.
Within the NESA support package, the assessor is offered a collection of web addresses that contain a significant amount of input data useful for an economic assessment using the INPRO methodology.
The report describing the cost estimating guidelines developed by the economic modelling working group (EMWG) within the Generation IV International Forum (GIF) contains, in addition to economic values for some of the reactor designs developed within the GIF project, generic economic data on existing LWRs and associated fuel cycles .

Cost data for deploying an NPP

If an NPP is planned to be deployed, an evaluation of its cost competitiveness against alternative energy sources requires financial data on costs and also on revenues — costs for deploying the NPP and for deploying alternative generating sources (AGSs), and revenues to be generated from the sale of electricity produced by these power plants (NPPs and AGSs). As mentioned before, AGSs should be power stations suitable for baseload operation as with an NPP.

Concept of levelized unit energy costs

In the INPRO methodology, it is recommended that levelized discounted costs (LDC), also called levelized unit energy costs (LUECs), be used as input for comparing the electricity production costs of different plants. It is a well developed method for many applications. .
The LUEC is equivalent to the average price that would have to be paid by consumers for electricity delivered at the plant bus bar to repay all costs incurred by the owner/operator of a plant such as capital costs, including capital for anticipated backfitting, operating and maintenance costs, decommissioning, and fuels costs at the selected discount rate in a defined time frame (lifetime of the plant).
It is to be noted that a calculation of LUEC is, in principle, not part of an INPRO methodology assessment. However, it is recommended that the assessor determine the value of LUEC using the simple Excel based code NEST for this purpose (thereby becoming an analyst).
To calculate the LUEC of a NES — consisting of an NPP and its associated fuel cycle — and of AGSs, the following economic input parameters are to be determined:

• Country specific: Discount rate, price of unit electricity sold, tax rate (needed only in some options);
• Power plant specific: Overnight capital cost, capital investment schedule, contingency cost, owners cost, back fitting cost, decommissioning cost, fixed and variable operation and maintenance (O&M) cost, fuel costs.

If the nuclear fuel costs are calculated directly — considering all stages of a nuclear fuel cycle — the following additional economic input parameters need to be determined:

• Nuclear fuel cycle specific: Natural U purchase cost, U conversion cost, U enrichment cost, fuel fabrication cost, and back end cost, such as spent nuclear fuel (SNF) reprocessing cost, storage and disposal cost.

In addition the following technical parameters of the NES should be determined:

• Power plant specific: Net electric output, lifetime, average load factor, net thermal efficiency.

In case the nuclear fuel costs are calculated directly — considering all stages of a fuel cycle — the following additional technical input parameters are to be determined:

• Nuclear fuel cycle specific: Reactor first core power density, enrichment of first core and reloads, and losses of uranium (or plutonium) in each stage of the fuel cycle.

Attractiveness of investment in deploying an NPP

Investors interested in the deployment of an NPP can look at a variety of financial indicators when evaluating attractiveness of investments, including IRR, the closely related indicator NPV, the payback period, ROI, etc. The financial indicators used in a given market will reflect the investment climate and requirements of a given country or region, including the source(s) of investment funds. It is up to the assessor to determine what relevant financial data will be used as evaluation parameters for evaluating the attractiveness of an investment in deploying a given NPP. The INPRO methodology recommends that at least the NPV, IRR and ROI be used by the assessor.
As discussed above for LUECs, a calculation of IRR, NPV and ROI is, in principle, not part of an INPRO assessment. However, it is recommended that the assessor determine the value of these parameters using the simple Excel based code NEST for this purpose (thereby becoming an analyst).
To calculate the IRR and the ROI using NEST, the reference price per unit of electricity sold (PUES) is required. The assessor should expect to obtain this from the energy scenario under consideration, taking into account historical trends, etc. Knowing the costs for the plant (capital, fuel and O&M costs), the selling price of electricity (PUES), and the average production per year, one can calculate the IRR and ROI.
The estimated IRR from the deployment of the NPP or of the AGS is the discount rate at which the discounted income resulting from the sale of electricity produced by the NPP or AGS, over the lifetime of the plant, exactly balances the discounted costs (capital, O&M and fuel) of producing the electricity. This is obtained by calculating the NPV of the difference between incomes and expenditures using trial discount rates, and adjusting the trial discount rate, in an iterative fashion, to determine the value of the discount rate at which the NPV equals zero. The estimated IRR for the NPP is then compared with the IRR for the AGS to determine if it is superior.
The ROI can be calculated from the average net income, i.e. the total income from the sale of electricity produced by the plant over its lifetime less the O&M cost and fuel cost, expressed as a fraction of the capital invested in the plant, over its lifetime, i.e. the capital cost. It should be noted that ROI is not a levelized parameter.

Limit of investment needed for deploying an NPP

Since the deployment of an NPP, even a so-called small or medium size NPP, requires a significant capital investment, raising the required capital funds in a given market may be a challenge, even if the cost of electricity from the NPP and the investment financial figures of merit are attractive. Thus, the assessor has to evaluate whether the required capital funds can be raised by the future operator, .
For a private utility as a potential investor, there is usually a limit of investment it can perform based on its total income and profit (in the NEST tool a simple method is included how to calculate such a limit of investment). If the assessor is from a utility, the assessor would have ready access to this information. In other situations the assessor might need the assistance of a capital market specialist knowledgeable about the capital market in the country or region in which the NPP is to be deployed. Assistance can be obtained from competent organizations such as the IAEA that offer support in using a tool called FINPLAN to determine the impact of an investment into the expansion of an energy system or into a single plant on the financial health of a company.
For a government as investor the limit is defined by the available budget for a nuclear power programme. The assessor has to determine and assemble the information needed to make this judgment.
The necessary total investment in deploying AGSs such as fossil power plants is usually lower than for an NPP and, therefore, is not considered a limiting factor. However, in case of a hydro plant, the total investment will be comparable.

Risk of investment in deploying an NPP

To determine the risk of investment, the INPRO methodology has specified logical and numerical criteria related to licensing status of the proposed NPP, NPP project construction and commissioning times, the sensitivity of the costs of electricity and other financial figures of merit to changes in market conditions, and the political climate in the country (or region) in which the NPP is to be deployed.
Information on the licensing status and on project construction and commissioning times should be obtained by the assessor from the supplier of the NPP. Licensing risk is lowest for plants that have already been constructed and licensed for operation in the country of origin or for which the regulator in the assessor’s country has confirmed that the plant could be licensed for operation in that country.
The assessor should have access to the results of a sensitivity study with an appropriate variation of economic input parameters used to calculate the LUEC, IRR, NPV and ROI.
Information on the national political climate regarding nuclear power is needed for an assessment in the INPRO methodology area of infrastructure. The issue of the political climate is included in the area of economics, primarily to ensure that an assessment in the area of infrastructure has been carried out and that the political climate is favourable for deployment of NPP. If such an assessment has not been done, the assessor in the area of economics should conclude that the investor is faced with an unknown and important risk that needs to be addressed by the proponent of the project. It is not the responsibility of an economic assessor to judge the political climate, but rather to ascertain that the issue has been addressed properly.
The risk caused by licensing, delay of construction and due to a negative political climate is usually considerably lower for alternative generation sources such as fossil power plants than for an NPP, and therefore is not considered as a limiting factor. However, for hydro plants a similar risk is to be taken into account.

Summary of information needs for an economic assessment

The discussion presented above has set out various input data that an assessor needs in the area of economics and has also identified sources that could supply such information. This information is summarized in Table 2 and cross-referenced to the discussion above to facilitate its use.

Table 2. Summary of information needed for an economic assessment and the source of the information

Information needed by assessor	Source of information for a deployment assessment
Electricity demand to be met by the NPP or AGS (size of plant).	Energy scenario in country assessed.
Electricity production cost (LUEC) of the NPP and AGS.	To be calculated using tools such as NEST, or supplied by technology holder
Financial figures of merit (IRR, NPV and ROI) of the NPP and AGS.	To be calculated using tools such as NEST, or supplied by technology holder
Investment limit of owner/operator of the planned NPP.	To be determined by the assessor (e.g. using the NEST code), or supplied by the owner/operator of the plant.
Licensing status of the planned NPP.	Technology supplier.
Project construction and commissioning times of the planned NPP.	Technology suppliers.
Results of a sensitivity analysis for the planned NPP and AGS regarding LUEC and financial figures of merit.	To be performed using a tool such NEST.

Cost data, attractiveness and risk of investment in developing an NPP

The INPRO methodology for the area of economics has been developed primarily for a nuclear technology user to assess the economics of reactors and fuel cycles that the user intends to install, i.e. those that are available in the market as proven designs. However, in principle the INPRO methodology could also be used by a technology developer to assess the economics of a planned development of reactors and associated fuel cycles as discussed in the following.
To assess the cost competitiveness of a reactor under development against other AGSs, i.e. reactors available in the market, another development option or non-nuclear power stations, the INPRO assessor needs the value of the LUEC of the reactor under development and of the AGS.
To calculate the LUEC of a reactor under development, the same basic input data as for the deployment of a reactor (of proven design) and its fuel cycle are needed, as discussed in the previous sections. They include the overnight capital cost for materials and construction, O&M costs, fuel costs, etc. The costs used in the calculation of LUEC should be representative of the prices to be quoted to a customer, i.e. they should represent the cost to the customer. The price could include a component that represents the payback, to a (private) development organization, of the investment to be made in carrying out the development. The value of the LUEC should be provided by the development team to the assessor.
Within the Generation IV International Forum , a comprehensive and versatile economic model has been developed for advanced reactors and fuel cycles costs. The economic modelling working group (EMWG) within GIF has produced detailed guidelines on how to determine (estimate) such costs — including the costs of RD&D — and calculate the LUEC. This GIF cost model is based on a cost of accounts (COA) approach originally developed by the IAEA for the economic evaluation of bids . Taking into account the limited amount of information on costs during the development process of advanced designs, the COA approach developed by the IAEA has been simplified and slightly modified by the EMWG. The cost estimate can be done using a bottom-up or top-down approach depending on the stage of development, i.e. the availability of detailed cost data. EMWG has also developed a corresponding software (Excel sheet) called G4-ECONS that includes all equations presented in the cost estimating guidelines . This economic tool can be used by developers — continuously during the development process with increased accuracy — to calculate the LUEC of advanced reactors, including their fuel cycles.
To assess the attractiveness of an investment to develop (and deploy) an NPP compared with competing energy sources, the INPRO assessor has to obtain information on the value of financial figures of merit such as IRR, ROI, and NPV of the NPP. These data have to be supplied again by the development team of the NPP.
To assess the risk of investment the INPRO assessor — when deciding on investing in development — will need information on the results of sensitivity studies for discussion with a marketing team with the aim of determining the sensitivity of financial figures of merit including the LUEC, to changes in market conditions in the countries of prospective customers and, also, to examine the sensitivity of the expected pay back, to a (private) development organization, to changes in these market conditions.
As development proceeds, a marketing team (e.g. as a part of the development organization) will have to perform ongoing evaluations of the political climate in the countries of prospective customers to ensure that the expected customer base has not been eroded, which is clearly a risk of investment in a new design. The political climate has to be made available to the INPRO assessor by the marketing team. Throughout the development process the development team needs to be aware that, at the time that the NPP is offered for sale, prospective customers will require hard information on the licensing status of the plant, and on project construction and commissioning times to enable them to judge the associated risks.
Thus, licensing activities will need to be initiated at an appropriate stage in the development process and the cost to the developer of these activities will need to be taken into account as an investment cost. The developer should also keep in mind that, in contract negotiations, customers would expect suppliers to agree to penalties to be incurred by the supplier for delayed completion of projects. Thus, the development team needs to determine realistic schedules for construction and commissioning that can form the basis of an appropriate contractual agreement and make them available to the INPRO assessor.

Basic principle, user requirements and criteria of the inpro methodology in the area of economics

The overall goal captured in the INPRO basic principle in the area of economics is to ensure that nuclear power is available and the energy supplied is affordable. The corresponding user requirements are focused on the competitiveness of energy from an NPP in comparison with other energy sources available in the country for the same purpose. The competitiveness of the NPP is checked by evaluating production costs of electricity and financial figures of merit, such as ROI or the IRR. In addition, the potential risks of investment in an NPP are considered.
In some cases, significant differences in the results of economic assessments could be caused by different methods, codes and assumptions used by different assessors. The aim of this section is to provide clear definitions for INPRO methodology economic indicators and acceptance limits so that differences in assessment results are not caused by confusion about terminology and formulas, but can be explained by differences in other factors, such as NES characteristics or market conditions or energy supply options. The section also provides general background information to assist an assessor in understanding the basic principle and user requirements of the INPRO methodology.
In the area of economics, the INPRO methodology has developed a simple structure (see Table 1) of a single basic principle (BP) and four user requirements (UR1 to UR4). For each UR, at least one criterion (CR), consisting of an indicator (IN) and an acceptance limit (AL), is defined.

INPRO basic principle in the area of economics

The availability of energy is an important indicator of sustainable development in each of its dimensions — economic, social and environmental. Ensuring the availability of commercially supplied energy is one important aspect of governments’ ultimate responsibility for national security and economic growth. Not only must energy be available, but it also needs to be affordable. These considerations are reflected in the economic BP, set out below.
INPRO Economic Basic Principle (BP) - Energy and related products and services from nuclear energy systems shall be affordable and available.
The best way of ensuring that nuclear energy and related services are affordable is for the price to the consumer to be competitive with low cost/priced alternatives. If energy and related products and services are to be available, systems to supply the energy and related products need to be developed and deployed. To develop and deploy energy systems requires investment and those making the investment, be they industry or governments, must be convinced that their choice of investment is wise. The alternatives for investment may be other energy technologies seeking investment for development or deployment. So, to be developed and deployed, a NES must compete successfully for investment.
Given the nature of nuclear technology, it is recognized that government policies and actions will have a significant bearing and influence on investor decision making (in some Member States governments may participate in investment), when deciding whether or not to invest in development and also when deciding to invest in technology deployment/acquisition. For private sector investment, profitability and return will be key factors in the business case. For governments, the availability of low cost energy represents an important national asset as it is one prerequisite for a competitive national industry. Other factors include confidence in long term stability and arrangements to protect against political risk.
As mentioned earlier, the INPRO methodology includes four user requirements — UR1 to UR4 — for the economic BP as laid out in the following sections. All economic URs defined by INPRO are addressed to and have to be fulfilled by the designer (or developer) of a NES.
The role of an INPRO assessor considering whether to deploy a NES, is to check whether the NES offered by the designer is cost competitive, the necessary investment can be raised, and the risk for the investment is tolerable. The role of an INPRO assessor considering whether to develop a NES is to check whether s it will be cost competitive in the target market, whether the necessary investment can be raised, and whether the risk for the investment will be acceptable. For such an assessor, UR4 in the INPRO methodology has been proposed to check whether the NES under development is sufficiently flexible to be adapted to changing conditions.

UR1 (Cost of energy)

The definition of UR1 is: The cost of energy supplied by nuclear energy systems, taking all relevant costs and credits into account, C_N, must be competitive with that of alternative energy sources, C_A, that are available for a given application in the same time frame and geographic region/jurisdiction.
This UR relates to the cost competitiveness of different energy sources available in a country, region, or globally. In comparing the costs of electricity (or other energy products) from a NES, C_N, and competing alternatives, C_A, discounted costs (LUEC) are used. In this comparison all relevant costs are to be included.
Depending on the jurisdiction in a country, one energy source may be burdened with costs, e.g. for waste management, while another may not. In a number of Member States, the external costs of nuclear power that are not accounted for are small, since producers are required by law to make provisions for the costs of waste management, including disposal, and decommissioning, whereas the external costs of competing (non-nuclear) energy sources that are not accounted for may be significant, e.g. CO₂ emission from fossil power plants. Ideally, all external costs should be considered and, where possible, internalized, when comparing a NES with competing energy systems, but only costs that are internalized (in the price to the consumer) should be taken into account, and other external costs should be ignored.
The single criterion defined for UR1 is set out in Table 1 and discussed below.

CR1.1: Cost competitiveness

ᅠ Indicator IN1.1: Cost of energyᅠ

The value of indicator IN1.1, i.e. costs of energy (CN and CA) of competing energy supply options to be deployed, is determined using a discounted cost (LUEC) model , taking into account all relevant cost determinants for both the NES and the competing energy technology. CN is, in principle, the LUEC for a complete NES, excluding FOAK cost but including external costs and credits if they are fully included in the price setting mechanism, and using contingency allowances and a discount rate that reflects the economic decision making investment environment. In practice, a technology user would compare the cost of electricity from the NPP, which would include an allowance for the back end costs for waste management and decommissioning for the NPP, with that of the alternative energy source. Costs of other components of the NES, including costs for decommissioning and managing wastes from these components, would be reflected in the cost of fuel. CA is the LUEC for the (strongest) competitor A (for power generation investment), excluding FOAK cost but including external costs and credits if they are fully included in the price setting mechanism, and using contingency allowances and the same discount rate as applied for calculating CN . Further, the competing alternative energy source is to be available for the same application in the same time frame and geographic region/jurisdiction. This is an important limitation since an NPP is usually operated at high load factors, primarily for meeting base load demand. So, usually, the competing alternative will be a fossil fuelled plant, e.g., coal, oil or a combined cycle gas turbine plant or, in some jurisdictions, a hydro plant. Further, the cost comparison should be based on costs for the relevant region/market and the time frame for the deployment of the NES. Acceptance limit AL1.1 AL1.1 is defined as: $C_{N}\leq k\cdot C_{A}$ This means that the discounted energy cost (LUEC) of a NES to be deployed or developed should be comparable, within a factor of k, to the LUEC of an available system with a competing energy source. As mentioned above, the LUEC of a NES and of a given competing energy source can be calculated using the NEST tool). Again, the case of deployment and development are distinguished. First, the case of deployment will be considered. Deployment of a NES In the case of deployment of an NPP, the competing energy sources are alternative (non-nuclear) energy sources available and suitable for base load in the country assessed, e.g., fossil power plants or hydro plants. The factor k used in comparing CN to CA could, in principle, be 1, less than 1, or greater than 1 in a given Member State or region, depending on whether or not nuclear costs are offset by other considerations relative to the alternative energy source or vice versa. Thus, Member States and investors should determine the value of k depending on their particular circumstances. Such a determination could well be made in the decision making process as part of taking into account factors for which it is hard to assign definitive costs, such as the cost of externalities. It was already mentioned above that LUEC does not present a complete economic picture and in that discussion the impact of high discount rates devaluing the worth of power generated later in the life of a plant was discussed. In a given country or region in addition to economics many other factors can enter into the decision making regarding the choice(s) of energy supply. These include, for example: considerations of security of energy supply, long term stability in energy costs, diversity of energy supply technologies, i.e. the energy mix, of both the market as a whole and of a given producer/supplier; the desire for industrial development and the role nuclear technology can play in such development; judgments about environmental impacts, either positive or negative, avoided emissions, safety, sustainability, waste management; utilization of domestic resources, such as mineral and labour resources and industrial capacity; public and hence political acceptance, etc. In some jurisdictions, land use can be an important factor. The much higher energy output of nuclear plants for a given plant footprint, MW(e)/hectare, may then be one of nuclear technology’s competitive advantages compared with other sources such as renewables. Such considerations may lead decision makers and investors, particularly governments, to accept a somewhat higher cost for one energy option compared with an alternative, i.e. select a value of k greater than 1. See, for example Refs , which discuss the credit that could be assigned to the security of energy supply in Japan. System energy planning can be used to seek an optimal combination of generating options. In such planning, a variety of constraints and drivers can be included to reflect some or all of the issues discussed in the preceding paragraph. As well, policies established by state or national governments may have an important impact on choices. So, if energy planning has determined that there is a defined role for nuclear power within the optimized mix of generating options the comparison of CN to CA, is not, of itself a determining consideration. But if CN is larger than CA, the comparison will show this explicitly and the assessor might set out the benefits and explanation of why the cost difference is acceptable in the circumstances. Once a new NPP has entered into service, it is important that actual costs of generation be determined so that future energy planning studies take experience with recent projects into account. If the actual costs of nuclear exceed those used in planning, the results of a new energy planning study, which factors in actual performance, may well lead to a different mix of generating sources. If the actual CN is consistently less than the actual CA, there would be a preference for a larger role of nuclear in the mix and vice versa. In the case where CN is larger than CA, CN might be compared with the current selling price of electricity to determine whether the introduction of a first or additional nuclear plant will put upward pressure on the price of electricity. If that were the case, communicating the need for and desirability of the chosen optimized mix of sources will become important in gaining/maintaining public support (see also Volume 3 of the INPRO Manual discussing public acceptance). Development of a nuclear reactor and its fuel cycle In the case of a planned (or ongoing) development of a NES (or a facility thereof) the competing energy source could be a comparable NES (or a facility thereof) licensed and already in operation. . Similar to deployment in case of development, the factor k could be 1 or greater than 1 (see also Appendix IV for a discussion of economics and the development cycle). A factor k greater than 1 could be justified by advantages of the design under development in other areas of the INPRO methodology, such as availability of resources (Volume 8 of the updated INPRO Manual) or proliferation resistance (Volume 5 of the updated INPRO Manual). Member States may well develop their own specific criteria for some of the INPRO user requirements, taking their national boundary conditions and circumstances into account.

UR2 (Ability to Finance)

The definition of UR2 is: The total investment required to design, construct and commission nuclear energy systems, including interest during construction, should be such that the necessary investment funds can be raised.
There are two aspects to investment, somewhat related to each another, namely, the attractiveness of the investment in terms of the financial return to be expected and the size of the investment that is required. Even if the financial indicators used to analyse return are attractive, a given utility may not have the wherewithal to raise the funds needed — neither from its own resources nor from other investors.
The total investment required to deploy a given NES, or component thereof, comprises the costs to adapt a given design to a given site, and then to construct and commission the plant, including the interest during construction. The latter depends on construction time and the time to commission. A universally applicable criterion for what constitutes an acceptable ‘size’ of investment cannot be defined a priori since this will vary with time and region and will depend on many factors, such as alternatives available, etc. But a judgment must be made that the funds required to implement a project can be raised within a given expected investment climate. Factors influencing this ability may include the overall state of the economy of a given region/country, the size of the investment relative to a utility’s annual cash flow (and hence the size of the unit relative to the size of the grid), and the size of the investment compared with that needed for alternative sources of supply.
The attractiveness of an investment may be expected to have some influence on the acceptability of the size of the investment but in the INPRO methodology the two are treated as independent. Since, however, there is some influence of attractiveness on acceptability of size, we treat attractiveness first.
The attractiveness of an investment is usually quantified by determining economic parameters called financial figures of merit. Examples of such figures are IRR, the ROI, NPV of cash flows, and payback period. IRR and NPV are more or less two sides of the same coin, as are ROI and payback time.
INPRO has defined two criteria for UR2, one related to the attractiveness of the investment and the other to the size of the investment (Table 1).

CR2.1: Attractiveness of investment

ᅠ Indicator IN2.1: Financial figures of merit ᅠ

Acceptance limit AL2.1: Figures of merit for investing in a NES are comparable with or better than those for competing energy technologies. Investors can look at a variety of financial indicators when evaluating investments. The financial indicators used in a given region will reflect the investment climate and requirements of a given country or region, including the source(s) of investment funds. In some countries or regions implementation of a NES will require private sector investment, e.g. in deregulated electricity markets, while in other countries or regions installment of a NES may require government investment or guarantees, e.g. in countries embarking on a nuclear power programme. Private sector investors will be attracted by a competitive IRR, provided the IRR is commensurate with their judgment of associated risks. However, the NPV of cash flows may be more suitable for government investors than private sector investors because this financial figure may facilitate taking into account other benefits such as security of energy supply and technology development. The ROI may be attractive as an indicator that is complementary to the IRR. In the end, the acceptance limit is that the values of the financial indicators chosen, for a given NES, be attractive compared with investments in competing energy technologies. To be attractive, the values for the NES must be at least comparable to values for competitive energy sources and preferably better. For indicator IN2.1, three items of financial figures of merit, namely, IRR, ROI and the NPV of cash flows are recommended as evaluation parameters (EP2.1.1 to EP2.1.3), with corresponding acceptance limits, as discussed below. IRR, ROI and NPV can be calculated using the NEST tool. ᅠ Evaluation parameter EP2.1.1: IRR ᅠ Evaluation parameter EP2.1.1 is defined as the internal rate of return (IRR) at the calculated real selling price of electricity produced by a complete NES (IRRN). A more precise definition is: The IRR produced by selling the net electricity produced by a NES at the defined real reference price per unit of electricity sold (PUES), excluding (external) costs not defined in price setting mechanisms and including costs for expected life cycle operation, decommissioning and waste management. The IRR depends on factors such as the PUES, the load factor of the plant, and the costs (LUEC) of production including amortization cost, O&M costs, fuel costs, waste management costs, etc. The IRR is obtained by calculating the NPV of the difference between incomes and expenditures. In this calculation trial discount rates are used, and adjusted in an iterative fashion to determine the value of the discount rate at which the NPV equals 0, which is the value of IRR. For consistency, the IRR needs to be calculated using a similar modelling process as chosen for calculating LUEC. So, if inflation is not included in calculating LUEC, it would not be included in calculating IRR. In this case, the IRR would be less than what would arise from a model that included inflation. The IRR would normally be calculated for the total cash flow of a single NPP. As for LUEC, the economics of fuel cycle facilities is covered within the fuel costs of the NPP. So, if it is foreseen that the price of uranium is expected to increase over the life of the NPP, such a price increase should be reflected in the fuel cost used in the analysis. Only costs and credits that are defined in the price setting mechanism should be considered. Externalities should be excluded if they are not supported by an acknowledged price calculation process. Acceptance limit AL2.1.1: $IRR_{N}>IRR_{A}$ The internal rate of return IRRN of an investment into a NES should be comparable, i.e. higher or at least equal than IRRA an investment in competing (alternative) energy technologies. In case of an investment into a planned deployment of a NPP the competing technology could be either another type of NPP or most probably a non-nuclear generating technology available and suitable for base load in the country assessed. In case of an investment into a planned development of a NFC facility/component of a NES, the competing technology would be a licensed and operating facility of an existing NES. As was discussed above, when comparing the LUEC of competing energy supply options, if energy planning has determined that there is a defined role for nuclear power within an optimized mix of generating options the comparison of IRRN to IRRA, is not, of itself a determining consideration. But if IRRN is less than IRRA, the comparison will show this explicitly and the assessor might set out the benefits and explanations of why the difference is acceptable to the investor in the circumstances. ᅠ Evaluation parameter EP2.1.2: ROI ᅠ Evaluation parameter EP2.1.2 is defined as: The life cycle plant average ROI of a complete NES (ROIN). It can be even more precisely defined: The ROI calculated for the average life cycle total plant invested capital and life cycle average operating net income produced from the sale of electricity. The return on investment, ROI, of an investment into a NES — also like IRR — depends on the price of electricity, the load factor and production costs. The ROI is calculated from the average net annual income, i.e. the total income from the sale of the output (electricity or heat) produced by the plant over its lifetime less O&M and fuel costs and other costs such as waste management and decommissioning costs over its lifetime, expressed as a fraction of the capital invested in the NES. Due to the simplicity of ROI, even for a complex NES with several plants of different type, a single ROI for a NES consisting of several plants to be deployed could be calculated using the average net income and investment per plant. On the other hand, for a technology user evaluating the use of nuclear power as an option, the INPRO methodology recommends that the ROI be calculated for a single NPP. So, in this case, the ROI is the ratio of the net annual income to the capital investment averaged over the lifetime of the plant. In addition, only the investment in the generating plant is included and the investment in the necessary fuel cycle facilities is not explicitly included; however, that investment would be reflected in the fuel costs used to calculate net income, and thus is ultimately accounted for. ROI is not a levelized parameter. Thus, it is not sensitive to discount rate as is the case for LUEC. So, in the case where a high discount rate is used in calculating LUEC, the income from the production of electricity over the lifetime of the plant contributes to the ROI. In this way, the evaluation of ROI complements the evaluation of LUEC to present a more comprehensive economic picture. Life cycle plant investment means that all the investments, including back fitting and major refurbishments, are taken into account, if it is foreseen that such investments are needed during the operating lifetime of the plant, and they may be accounted for by an annual charge and become in effect an annual operating cost. If this is done, then the ROI would be based on annual net income and the initial capital investment. Under these circumstances, INPRO would recommend that IDC be included in calculating the ROI when considering a single NPP. If, however, investments in foreseen costs are considered explicitly, as a capital investment, INPRO would recommend not including IDC. Life cycle average operating income covers the situation that there could be some fluctuations in the operating income during lifetime, e.g. due to a low load factor during a back fitting period, or during the first operating years. Acceptance limit AL2.1.2: $ROI_{N}>ROI_{A}$ This means that ROI for a planned NES (ROIN) should be comparable with the return of investment in a competing energy technology (ROIA). In case of an investment into a planned construction of an NPP, the competing technology would be a non-nuclear generating technology available and suitable for base load in the country being assessed. In case of an investment into a planned development of another nuclear fuel cycle (NFC) facility of a NES, the competing technology would be a licensed and operating NFC facility of an existing NES. As was discussed above, if energy planning has determined that there is a defined role for nuclear power within an optimized mix of generating options the comparison of ROIN to ROIA, is not, of itself a determining consideration. But if ROIN is less than ROIA, the comparison will show this explicitly and the assessor might set out the benefits and explanation of why the difference is acceptable in the circumstances. In any case, actual performance needs to be tracked and be taken into account in ongoing energy optimization planning studies. ᅠ Evaluation parameter EP2.1.3: NPV ᅠ NPV analysis is a useful tool for looking at project cash flows and the recovery of investments. In principle, one can use actual investments and incomes, expressed in the actual values. Such an analysis would not account for the time values of money and so in INPRO methodology discounted values are used, namely the NPVs of the cash flows. So, for a given project investment, the cash flow starts out as a negative value at the start of a project, and the cash flows and their integrated values, the NPV of the total cash flow, continues to be negative as cash flows out during construction. Once construction ends and cash starts to flow in from the sale of energy (electricity), annual cash flows turn positive, as does the slope of the NPV. With a positive slope from net revenues the NPV increases over time, rising towards zero, and then turning positive. The NPV will then continue to increase until the end of plant life, at which point it would be expected to decrease as money is spent on plant shutdown and decommissioning. Overall, the NPV should remain positive once decommissioning is complete if the project is to return a net benefit to the investor; the greater the NPV the greater the net benefit. In INPRO methodology, NPV can be used as an evaluation parameter for measuring the net financial benefit of a project investment. In principle, such a parameter can be used for looking at a complex mix of projects involving a variety of project investments and revenues. In practice, however, it is recommended to limit the time horizon for estimating NPV to a few decades — no more than 4 and preferably 3 or less. Evaluation parameter EP2.1.3 is defined as the NPV at the calculated real selling price of electricity produced by a complete NES (NPVN). A more precise definition is: the NPV produced by selling the net electricity produced by a NES at the defined real referencePUES, excluding (external) costs not defined in price setting mechanisms and including costs for expected life cycle operation, decommissioning and waste management. The NPV depends on factors such as the total plant investment, the PUES, the load factor of the plant, and the costs of production including, O&M costs, fuel costs, waste management costs, etc. NPV is obtained by calculating the NPV of the difference between incomes and expenditures, discounted to a reference point in time. The NPV would normally be calculated (using the NEST tool) for the total cash flow of a single NPP. In this case, the NPV would be calculated using a similar modelling process as chosen for calculating LUEC for the NPP (Recall that LUEC is the price that results in an NPV of 0.). So the reference time for discounting purposes would be the start of plant electricity generation, and if inflation were not included in calculating LUEC, it would not be included in calculating NPV. In this case, the NPV would be less than what would arise from a model that included inflation. Since the NPV is based on the actual selling price of electricity, which would be expected to be higher than the LUEC, the NPV would be expected to be a positive number. Since it represents the total net value of the investment, discounted to time 0, its absolute value will depend on the size of the investment. For this reason INPRO recommends that the NPV be normalized to the initial (discounted) capital investment made up to the start of plant operation or to the power output of the plant. As for LUEC, the economics of fuel cycle facilities is covered within the fuel costs of the NPP. So, for example, if it is foreseen that the price of uranium is expected to increase over the life of the NPP, such a price increase should be reflected in the fuel costs used in the analysis. Acceptance limit AL2.1.1: $NPV_{N}>NPV_{A}$ The (normalized) NPVN of an investment in a NES should be comparable, ideally greater, than the NPVA for an investment in competing energy technologies. In the case of an investment in a planned NPP, the competing technology would be a non-nuclear generating technology available and suitable for base load in the country being assessed. In the case of an investment into a planned development of an NFC facility/component of a NES, the competing technology would be a licensed and operating facility of an existing NES. As has been discussed several times, if energy planning has determined that there is a defined role for nuclear power within an optimized mix of generating options, the comparison of NPVN to NPVA is not of itself a determining consideration. But if the NPVN is less than NPVA, the comparison will show this explicitly and the assessor might set out the benefits and explanations of why the difference is acceptable to the investor in the circumstances. In any case, the actual performance needs to be tracked and be taken into account in ongoing energy optimization planning studies. For final assessment of acceptance limit AL2.1: Acceptance limit AL2.1: Data for investing in a NES are comparable with or better than those for competing energy technologies. The acceptance limit AL2.1 of CR2.1 is met if the financial figures of merit selected by the assessor meet their corresponding limit.

CR2.2: Affordability of investment

Indicator IN2.2 is defined as: The highest single plant total investment up to commissioning the reactor within a complete NES.
Acceptance limit AL2.2: The total investment required should be compatible with the ability to raise capital in a given market climate.

ᅠ Indicator IN2.2: Total investment ᅠ

The total investment consists of the overnight capital, the interest during construction (the size of which depends on construction and commissioning times), contingency allowances, owners cost and (if not considered in the O&M cost) the capital needed for (foreseen) back fitting and decommissioning. It can be calculated using the NEST tool. This indicator has been formulated in a general sense to cover investments in the different facilities of a NES, such as one or more NPPs, fuel cycle facilities and waste management facilities. For simplicity, it is recommended that an initial assessment focus on the investment needed for an NPP, since this is the energy machine and has to be made if a given country is to benefit from the energy produced by nuclear power. Of course, in a given country, there may be interest in investing in front end fuel cycle facilities, such as mines or fuel manufacturing facilities, but in general the investment in an NPP is more challenging. And, if this investment is made and nuclear power becomes/continues as part of a balanced portfolio of generating plants, the revenue from the NPPs can be used to finance the associated waste management activities and facilities. And investments in front end facilities can be evaluated taking into account the status of nuclear power in the country and worldwide. Consequently, in the discussion below only the issue of investing in the NPP is considered. FOAK costs, together with R&D costs, would in general not be explicitly included in this indicator because such costs are different from simple electricity oriented fundraising mechanisms and are more related to R&D investment policies used by governments and/or private investors. FOAK and R&D costs born by the developer would be expected to be reflected in prices quoted by a vendor/developer, and so such costs would be implicitly included. But should a company (utility) consider the purchase of a FOAK reactor, requiring significant FOAK investment by the purchaser, the company would have to take this investment into account in one way or another. It might simply accept the cost and include it in its analyses. But, generally, such a company would be expected to negotiate for some additional benefit. For example, it could negotiate with the supplier to secure price reductions for future orders, or even to share in the profit from future sales of the reactor to other utilities. In such cases, FOAK investment might be analysed using different variables/parameters. Nonetheless, the total investment required for the project would need to be raised and so in this circumstance the additional FOAK investment would need to be included. Acceptance limit AL2.2: $Investment_{N}<Investment_{LIMIT}$ InvestmentLIMIT is the maximum level of capital that could be raised by a potential investor in the market climate. To meet this limit the investment needed for installing an NPP investmentN must be equal or lower than the maximum capital that can be raised by a potential investor. The limit is strongly dependent on the investment environment in which an NPP is to be deployed, above all on the nature of the organization making the investment — a private sector commercial enterprise operating in a deregulated market, a private sector enterprise operating in a regulated market, or a State owned company. In case a private company (utility) is planning to install an NPP, the maximum investment it can raise for this purpose (making a sound business case) will depend on the total size of the national electricity market, the utility’s share of the total market, and its profit margin. A simplified example how to determine the maximum reasonable investment of a private investor is available in the NEST tool. The source of funds — whether the utility obtains funds from external investors , or are drawn from the utility’s own capital reserves (equity) or some combination of the two sources will influence this limit. For example, if only reserves are used the size of the reserves will establish an upper limit, taking into account that the utility would probably not want to draw down all its reserves. If external investors are involved they would want to be assured that the utility’s cash flows will be sufficient to pay back the investment while also covering all other costs to which that the utility is exposed, including total operating and maintenance costs, payback of earlier investments etc. As noted in Section 3.3 the IAEA offers support to Member States on how to determine the economic viability of investing in an expansion of an energy system or in a single power plant. The Excel based tool to be offered is called FINPLAN , which helps to analyse the impact of a planned investment on the financial health of a utility planning to invest. In case a government is planning to install a NES, the investment limit could be defined by the budget available for the national nuclear power programme. A variety of additional factors could influence the available budget, including the following: A State oriented approach might establish a limit for any given project at some fraction of the total investment budget to be used in the energy sector. The limit could be influenced by issues related to the currencies that are required for debt servicing. In effect, the acceptance limit for deployment of the first few NPPs in a country is that the total investment required should be compatible with the ability to raise the necessary capital in the country at the time of committing to construction of the NPP. And for the deployment of additional units of the same basic type of NPP, the acceptance limit is that the total investment required is compatible with the ability to raise the necessary capital in the country at the time of committing to construction of the additional units, taking into account actual performance and costs for nuclear power in the country. In case of an investment into a planned (or ongoing) development of a NES (or component thereof), the investment limit could be defined by the available budget of the organization involved.

UR3 (risk of investment)

User requirement UR3 states: The risk of investment in nuclear energy systems should be acceptable to investors.
As for any large scale project, there are many risks that can impinge on an NPP project. These include, among others:

• Technology risk: Is the design mature, so that there is confidence that the plant performance will not be adversely affected by unforeseen technical problems and so will operate at the planned lifetime capacity?
• Schedule risk: Will the NPP be constructed and brought into service on the schedule used in financial analyses?
• Licensing/regulatory risk: Will there be regulatory issues that impinge on the construction schedule and operating capacity of the plant?

INPRO has defined several criteria for UR3 (Table 1).

CR3.1: Maturity of design

Indicator IN3.1: Technical and regulatory status.
Acceptance limit AL3.1: Technical development and status of licensing of a design to be installed or developed are sufficiently mature.

ᅠ Indicator IN3.1: Technical and regulatory status ᅠ

Regulatory and technical uncertainties represent a project cost and schedule risk and a risk that the plant will not operate with the load factor assumed in the financial analysis. Regulatory uncertainties are linked to technical maturity, and so in the INPRO methodology the two are considered together. Broadly speaking, two different situations can be identified deciding whether to invest in technology development and deciding whether to invest in technology deployment. When investing in technology deployment, there is a requirement that the technology’s maturity and safety have been adequately demonstrated in the development programme and licensing process as part of the technology adoption process. In the case of technology development, a judgment is required that once development is complete the technology can be licensed in the country of origin. Thus, early in the development process, and before significant investment has been made, there is a requirement that the development team start a dialogue with the regulator to identify issues of concern and to establish a process and plan for addressing these issues during development so that sufficient information would be available to license an FOAK plant. Acceptance limit AL3.1: Technical development and status of licensing. As shown below, AL3.1 of CR3.1 is split into four different parts depending on the situation, i.e. it is adapted to the situation in a country planning to install its first NPP, add a new NPP to an existing NES, and install a FOAK (AL3.1.1, AL3.1.2, and AL3.1.3, respectively), and for the case that a technology developer is planning to develop a NES (AL3.1.4). Acceptance limit AL3.1.1: For deployment of the first few NPPs in a country: Plants of the same basic design have been constructed and operated. Acceptance limit AL3.1.2: For deployment of additional units of the same basic type of NPP: Plants of the same basic design have been licensed, constructed and operated in the country and there are no outstanding technical or licensing issues which impact negatively on plant performance. Acceptance limit AL3.1.3: For deployment of a FOAK plant in a country with experience operating NPPs: Design is licensable in the country of origin. The acceptance limits AL3.1.1 (first NPP), AL3.1.2 (follow-up units) and AL3.1.3 (FOAK) are discussed together below. In the case of technology deployment, regulatory risk is minimized if the plant under consideration is similar to a plant that has already been licensed and operated, preferably in the country in which the plant is to be deployed. For a country deciding whether to deploy its first NPP, this is not possible. Then, the regulatory risk is minimized if plants of the same design have been licensed and operated in the country of origin. Thus, a country adopting its first nuclear power plant would generally want a plant that is similar to plants already operating in the country of origin, i.e. proven technology. In the case of an innovative design (an advanced design which incorporates radical conceptual changes in comparison with existing practice), construction and operation of a prototype or a FOAK plant will provide confidence that technical uncertainties affecting safety have been addressed and lay the foundation for the licensing of additional plants, in the country of origin and also for deployment outside the country of origin. Thus, for a country adopting its first NPP, the minimum requirement is that similar plants have been licensed and operated. These arguments also apply to a country that has experience with operating NPPs but is considering a new type of plant. Once a utility has had experience with a given type of plant and is considering the deployment of additional units of the same basic type, an assessor should still determine whether or not there are outstanding technical or regulatory issues that might impact negatively on project performance (retrofits, schedule delays, etc.) and/or plant operational performance. If there are such issues they should be taken into account in the project schedule and plant load factors used in the financial analyses. In some rare situations, a country may wish to consider investing in a FOAK plant that has been developed in another country, for example because of its superior economic performance. In this case, the minimum requirement is that the country deploying the plant have domestic experience with licensing and operating other NPPs, and that the supplier of the FOAK plant provide evidence from the regulatory authority of the country of origin that the FOAK plant could be licensed for operation in the country of origin. In all cases, but particularly when considering an FOAK plant, it is important to clarify the expectations of the regulatory authority in the adopting country and to come to an informed judgment that these can be met before making a final commitment. Evidence that a plant has been/can be licensed in the country of origin is a necessary condition, but does not remove completely the risk associated with the regulatory process. Thus, the purchaser may seek evidence that the supplier understands the regulatory requirements to be met in the country of deployment and that the supplier has a plan to manage this regulatory process and its attendant risks. In general, regulatory problems lead to project delays and hence cost overruns. So, regulatory risks to the customer can be offset in contractual arrangements, for example by imposing penalties for late project completion. In the following, the fourth acceptance limit AL3.1.4 (Technology development) is discussed. Acceptance limit AL3.1.4: For technology development: Plan to address regulatory issues and the costs included in development proposal. Throughout the development process the development team needs to keep in mind that prospective customers will want evidence that the regulatory authority in the developer’s country would be prepared to license an FOAK plant. Usually, the FOAK plant would be constructed in the developer’s country and the development team should assume that this will happen. Thus, the team needs to have a plan for ensuring that regulatory issues are identified and addressed, as discussed above. In fact, resolving regulatory issues often play a major role in defining the overall development plan. Thus, an economic assessor looking at investment in development needs assurances from the development proponent that such issues have been identified, a plan has been developed to address them, and that the cost of the necessary development work has been estimated and has been included in the estimate of total development costs. Hence, once development has proceeded to the point of committing to FOAK plant, all major technical issues should be resolved and there should be no unresolved technical issues that would prevent a construction license being issued.

CR3.2: Expericence with construction schedule

Indicator IN3.2: Project constructions and commissioning times used in economic analyses.
Acceptance limit AL3.2: Times for construction and commissioning used in economic analysis are sufficient accurate, i.e. realistic and not optimistic.

ᅠ Indicator IN3.2: Project construction and commissioning times ᅠ

When considering indicator IN3.2, the following should be noted: Project delays lead to cost overruns, particularly in project management and engineering support costs and in IDC. The greatest impact of project delays, particularly on IDC, arises during construction and commissioning. Thus, the time taken to construct new facilities and to bring them into operation (and so to start generating revenue) should be as short as practicable and specific targets can and should be set as development objectives. In assessing the time taken to design, construct and commission an NPP, it needs to be recognized that front end design work, environmental assessment, and licensing applications, while potentially lengthy, represent a relatively small investment compared with the investment required to procure, construct, install, staff and commission new facilities. Commissioning comes at the end of the process when the majority of investment funds have been expended and when the rate at which interest during construction accumulates is largest so it is important to minimize the duration of commissioning. Acceptance limit AL3.2: Construction and commissioning times. As shown below, the acceptance limit AL3.2 of CR3.2 can be divided into four different categories depending on the situation, i.e. it is adapted to the situation in a country planning to install its first NPP, additional units and a FOAK (AL3.2.1, AL3.2.2 and AL3.2.3, respectively) and for the case that a technology developer is planning to develop a NES (AL3.2.4). Acceptance limit AL3.2.1: For deployment of the first few NPPs in a country. Construction schedule times used in financial analyses have been met in previous construction projects for plants of the same basic design. Acceptance limit AL3.2.2: For deployment of additional units of the same basic type of NPP. Construction schedule times used in the financial analysis are based on actual construction schedules achieved in previous projects in the country. The financial risk associated with potential project delays is minimized if the financial analyses are based on a schedule that is similar to that which has been achieved in past construction projects for plants of the same basic design. Thus, when investing in a first NPP, the project times used should reflect actual performance by the supplier with constructing a plant of the same basic design and should include contingency. Next, the acceptance limit AL3.2.3 (FOAK) is presented. Acceptance limit AL3.2.3: For deployment of a FOAK plant in a country with experience operating NPPs. A convincing argument exists that the construction schedule is realistic and consistent with experience with previous NPP construction projects carried out by the supplier and includes adequate contingency. For an FOAK plant, it will not be possible to use past experience with a plant of the same design. In this case the supplier needs to present an argument that the schedule used is realistic. This argument must include a discussion of previous experience, by the supplier, with constructing NPPs of a comparable complexity. Reductions in the duration of the project schedule, when compared with past experience, should be justified. Schedule risks should be identified and their financial consequences should be estimated when performing a sensitivity analysis (see criterion CR3.3). Finally, the Acceptance limit AL3.2.4 (development) is discussed below. Acceptance limit AL3.2.4: For technology development. Schedules are analysed to demonstrate that scheduled times are realistic, taking into account experience with previous NPP construction projects. For technology development, a goal should be to reduce construction times to the lowest practical values using advanced construction techniques. Different plant designs may have different project execution times. Recent construction times for reactor projects have been as short as 52 months (first concrete to criticality) and commissioning periods from first criticality to full power have been as short as two to three months for repeat projects. Thus, a construction period of 48 months is judged to be an achievable target, for repeat reactor projects, within the near future. In due course, with innovation, use of in-shop modular construction, and for repeat plants, construction periods as short as 36 months might be achievable.

CR3.3: Uncertainty of economic input parameters

Indicator IN3.3: A sensitivity analysis of important input parameters for calculating costs and related financial figures of merit has been performed.
A sensitivity analysis can be performed rather easily using the tool NEST.
For relative costs based on LUEC, the sensitivity of the ratio C_N/C_A should be studied for changes in the discount rate, overnight capital costs, construction time, and plant lifetime assumed in the calculation, and fuel costs, changes in the cost of fuel the nuclear plant and for the alternative competing technology. Here it may be noted that the high capital cost of nuclear makes its LUEC sensitive to the discount rate, while the LUEC for fossil fuel plants tends to be relatively more sensitive to fuel costs.
The sensitivity of the relevant financial figures of merit IRR, ROI and NPV — should be determined for changes in overnight capital costs, capacity factor, construction schedule, plant lifetime, availability of plant, fuel cost, and NPV, and additionally for changes in the discount rate.
For the critical input parameters, a range of possible values has to be specified. The range of variation of the parameters affecting the values of the economic indicators should not be unrealistically large to avoid being overly cautious, but should also not be unduly restrained. In the case of a design under development, it is evident that the higher the maturity of a design the lower the uncertainty of its economic input parameters. Thus, it is expected that the range of possible input values will be larger for an innovative design compared with an evolutionary design. If, in addition to the range of possible values, the corresponding probability is also available, one carry out a probabilistic analysis producing a distribution of LUEC, IRR, etc. Such an analysis would provide additional insights to the user. The aim of such a sensitivity study is to understand how changes in modelling assumptions impact the economic analyses, to obtain a good understanding of the relative importance of various factors and associated risks.
The INPRO methodology is an assessment method and does not include analysis per se. Nonetheless, the INPRO assessor needs the result of such analyses. The result of the sensitivity analysis is a case in point. In this case the assessment team might perform the analysis itself using the NEST tool, or it could seek to obtain the information from the designer/developer of the NPP, or from other experts, e.g. the IAEA.
The results of such a sensitivity analysis should be presented so that the sensitivities of LUEC and the relevant financial data to changes in the values of the parameters of interest are clear. For most if not all projects, various risk contingencies are included in the project cost and schedule estimates. Such a sensitive study can be used to test the adequacy of such contingencies and/or to see the impact on economic parameters. For example, how does a delay in the project schedule of the NPP impact the cost of C_N relative to C_A?.
Acceptance limit AL3.3: Sensitivity to changes in selected parameters is acceptable to the investor.
The criterion requires a sensitivity analysis covering the potential range of important (economic) input parameters in postulated sets of circumstances. The indicator IN3.3 can be related to the INPRO economic Basic Principle that states that a NES to be sustainable in the long term needs to be affordable and available. Thus, the sensitivity analysis should demonstrate that acceptance limits of CR1.1 (LUEC) and CR2.1 (financial figures of merit) will still be met under different (economic) market conditions and so ensure that nuclear energy will be available and affordable under these different market conditions.

ᅠ Indicator IN3.3: Sensitivity analysis ᅠ

Indicator IN3.3: A sensitivity analysis of important input parameters for calculating costs and financial figures of merit has been performed. For relative costs based on LUEC, the sensitivity of the ratio CN/CA should be studied for changes in the discount rate, overnight capital costs, construction time, and plant lifetime assumed in the calculation, and fuel costs, changes in the cost of fuel the nuclear plant and for the alternative competing technology. Here it may be noted that the high capital cost of nuclear makes its LUEC sensitive to the discount rate, while the LUEC for fossil fuel plants tends to be relatively more sensitive to fuel costs. The sensitivity of the relevant financial figures of merit IRR, ROI and NPV — should be determined for changes in overnight capital costs, capacity factor, construction schedule, plant lifetime, availability of plant, fuel costs, and NPV, and additionally for changes in the discount rate. For the critical input parameters, a range of possible values has to be specified. The range of variation of the parameters affecting the values of the economic indicators should not be unrealistically large to avoid being overly cautious, but should also not be unduly restrained. In the case of a design under development, it is evident that the higher the maturity of a design the lower the uncertainty of its economic input parameters. Thus, it is expected that the range of possible input values will be larger for an innovative design compared with an evolutionary design. If, in addition to the range of possible values, the corresponding probability is also available, one carry out a probabilistic analysis producing a distribution of LUEC, IRR, etc. Such an analysis would provide additional insights to the user. The aim of such a sensitivity study is to understand how changes in modelling assumptions impact the economic analyses, to obtain a good understanding of the relative importance of various factors and associated risks. The INPRO methodology is an assessment method and does not include analysis per se. Nonetheless, the INPRO assessor needs the result of such analyses. The result of the sensitivity analysis is a case in point. In this case the assessment team might perform the analysis itself using the NEST tool, or it could seek to obtain the information from the designer/developer of the NPP, or from other experts, e.g. the IAEA. The results of such a sensitivity analysis should be presented so that the sensitivities of LUEC and the relevant financial data to changes in the values of the parameters of interest are clear. For most if not all projects, various risk contingencies are included in the project cost and schedule estimates. Such a sensitive study can be used to test the adequacy of such contingencies and/or to see the impact on economic parameters. For example, how does a delay in the project schedule of the NPP impact the cost of CN relative to CA? Acceptance limit AL3.3: Sensitivity to changes Acceptance limit AL3.3: Sensitivity to changes in selected parameters is acceptable to the investor AL3.3 is met if the results of such a sensitivity analysis are available to the assessor and if the sensitivity to changes in selected parameters is acceptable to the investor. Acceptable sensitivity means that the overall result of the economic assessment is not reversed, e.g. that a small increase in construction time does not make nuclear power non-competitive against an alternative energy source.

CR3.4: Political environment

ᅠIndicator IN3.4: Long term political commitment to a nuclear option ᅠ

Acceptance limit AL3.4: Commitment sufficient to enable a return on investment In assessing the risk of investment in nuclear energy systems the ‘political climate’ or environment in a country should be considered to determine whether there is political support for nuclear power, and whether such support is likely to be sustained. Information on the political climate is needed for an assessment based on the INPRO methodology area of infrastructure. The issue of the political climate is presented in the area of economics primarily to ensure that an assessment in the area of infrastructure has been carried out and that this assessment has established that the political climate is favourable. Thus, if this issue has been addressed AL3.4 is met. If such an assessment has not been done, the assessor in the area of economics should conclude that the investor is faced with an unknown and important risk that needs to be addressed by the proponent of the project. It is not the responsibility of an economic assessor to judge the political climate but rather to ascertain that the issue has been addressed.

UR4 (Flexibility)

User requirement UR4: Innovative nuclear energy systems should be compatible with meeting the requirements of different markets.
This requirement is directed primarily at a technology developer/investor and relates to the ability to recover development investment.
Given the uncertainty about the future, ideally, an innovative NES (which includes evolutionary and innovative designs of nuclear facilities) should be sufficiently flexible to be able to evolve and adapt in a manner that provides competitive energy for as wide a range of plausible futures and markets as possible. So, in deciding whether to develop an innovative NES, or a NES component, the developer would be expected to examine whether and how that component might be adapted to different markets or changing market conditions, recognizing, for example, that a given design of reactor would not be expected to meet the needs of all markets. Adaptation of a NES, for example, to accommodate different size modules, or to accommodate different fuels, would usually require additional investment. So, the more markets where a given component could be sold, with only relatively minor changes, the greater would be the attractiveness of developing the component and the greater would be the expected contribution that the component could make meeting the global energy needs of the 21st century in a sustainable manner, the principal objective of INPRO.
While it is easy to ask for such flexibility, there can be inherent limitations that need to be taken into account. For example, designing and licensing a reactor is a costly exercise and changing the design to modify its output is not easy. To date, economy of scale has resulted in larger and larger size units being designed and developed to the state of being commercially available. Such units are not suitable for small grids, and operating them at less than full power is not economically viable. Thus, various developers are looking at smaller modular units which, if brought to the state of proven technology, will offer a considerable degree of flexibility. But designers of larger units can consider other degrees of flexibility to adapt to a changing world. Once such example is the ability to accommodate different fuels, e.g. higher burnup fuels, MOX fuels, recycling of uranium (RU) from reprocessing LWR fuel in CANDU reactors. Much has already been done in this area. Another example is taking advantage of possible synergies between different types of reactors, which has already been the subject of two INPRO studies . On the other hand, when designing new fuel cycle facilities, there may be more flexibility in adopting module construction techniques to offer the ability to increase production capacity in a staged manner or to adapt the facilities to the production/reprocessing of different fuel types. The ongoing INPRO Synergies Project and similar studies may identify the best potential for further developments to achieve flexibility of future NES.
INPRO methodology has defined one simple criterion for UR4 (Table 1).

CR4.1: Flexibility of innovative designs

The designer of an innovative facility (reactor or fuel cycle facility) should make sure that the new design is as flexible as possible for sale under different market conditions. Examples of how to increase the flexibility of a design have been presented above.
Given the uncertainty about the future, as reflected, for example, in the wide range of possible future scenarios considered in the SRES, ideally, an innovative NES should be sufficiently flexible to be able to evolve and adapt in a manner that provides competitive energy for as wide a range of plausible futures and markets as possible. So, in deciding whether to develop an innovative NES, or a component thereof, the developer should examine whether and how that component might be adapted to different markets or changing market conditions, recognizing that a given design of reactor would not be expected to meet the needs of all markets. Adaptation would usually require additional investment. So, the more markets where a given reactor can be sold, with only relatively minor changes, the greater would be the attractiveness of developing this plant and the greater would be the expected contribution that the plant could contribute to meeting the global energy needs of the 21st century.

Decision on investing in the development of an innovative NES

The ability to adapt specific components of an innovative NES, as well as the overall adaptability of the system, for example, to accommodate different size modules, to accommodate different fuels, to meet different energy applications, and to meet the needs of different countries/regions is desirable but is not considered to be essential.

Extending an economic assessment to facilities of a NES other than the NPP

The INPRO methodology in the area of economics assesses the competitiveness of nuclear power generating electricity in a country in comparison to other available energy sources. Thus, the assessment is focused on an NPP. Other facilities of a NES are dealt with by considering the costs, to the operator of the NPP, for the products/services produced in the other nuclear facilities. This is a reasonable approach when making a decision to use nuclear energy to meet a national (or even regional) need and when one is dealing with an evolutionary design of an NPP. The NPP is the unit that produces the final energy product (heat or steam or electricity) needed by the customer and this product is to compete with alternative energy sources.
If the reactor is of proven design, the other components of the NES needed to operate the NES can be assumed to exist (except for disposal facilities for used fuel/and high level waste) and the cost of their products should be known.
To assess the economics of developing an innovative design of a NES that requires not only investment in the NPP but also investment in new processes for fuel supply and fuel processing, the investment in developing these new processes must also be considered. One approach is to look at the investment needed to develop each innovative process and at the cost of constructing and operating the facilities, once the process is developed, and so arrive at the price of the product. This can then be translated into fuel cost for the NPP, and hence a contribution to the levelized discounted cost of the energy produced by the NPP. This would then be compared with the LUEC for the available alternative energy source.

Checking the economic viability of adding domestic fuel cycle facilities

In the INPRO methodology, the term ‘nuclear energy system’ includes the complete spectrum of nuclear facilities (components) that comprise the nuclear fuel cycle, including front end facilities (mining, milling, refining, conversion, enrichment, fuel fabrication), as well as back end facilities (spent fuel storage, reprocessing, repository), and the reactor itself.
To perform an economic assessment on whether to install a fuel cycle facility of a NES domestically , the following information needs to be considered:

1. The production unit (e.g. U ore, UF₆, UO₂, fuel cladding, fuel element, etc.), i.e. the output of the facility.
2. The amount of production planned, e.g. the amount required for a national NES in terms of tonnes of Unat, etc.
3. The cost of each production unit generated domestically, and the price of the production unit available in a global market.
4. The anticipated cost evolution of the production unit, if it is applicable.

To calculate the levelized cost (minimum price) of the production unit that covers all levelized costs of installing and operating a domestic nuclear facility, the following data are needed as input for the calculation: overnight capital cost to construct the facility; O&M cost covering staffing, cost for input materials (such as UF₆), waste management cost, and provision for decommissioning; time distribution of each payment (capital, and O&M) needed to install and run the facility; and the discount rate.
To justify the deployment of a nuclear fuel cycle facility in a country (other than the nuclear reactor) on economic grounds, the cost of each product (e.g. uranium ore, UF₆, fuel element, etc.) of a domestic facility to be installed should be competitive with the same product available outside the country.

Non-electrical application of nuclear power

The IAEA has continued to promote nuclear desalination and has been providing its Member States with the publication of guidebooks, technical documents and computer programs on nuclear desalination as well as the provision of technical assistance through the framework of technical cooperation programs”.
One of the main goals of these activities is to determine the economics of desalination, i.e. the costs of water produced in different types of desalination plants using either heat (steam) or electricity from an NPP in comparison to non-nuclear energy sources such as fossil fuels (coal, oil, gas),and renewables (photovoltaic, and electricity from a grid).
To calculate the water costs produced in different types of desalination plants, such as multistage flashing (MSF), multi-effect distillation (MED), reverse osmosis (RO), and hybrid options (RO-MSF, RO-MED), a code was developed called DEEP (Desalination Economic Evaluation Program) , which is available cost free to IAEA Member States. The code needs technical and economic data of the energy source and the desalination plant. In case an NPP is used as an energy source for a coupled desalination plant, the main economic input data for an NPP are: specific costs of construction, operation and maintenance; fuel, and decommissioning of the NPP; and the discount rate. The main technical data of the NPP plant needed in DEEP are: Thermal and net electrical output; availability (planned and non-planned outages); and lifetime and construction time. DEEP uses a levelized cost model in a comparable manner as proposed for the INPRO methodology and incorporated in the NEST code.
The main difference between DEEP and NEST regarding the calculation of the LUEC of an NPP is the level of detail on how to determine the fuel cost of nuclear fuel cycles. In DEEP, these data are inputted, whereas in NEST for several different fuel cycles (open, partially closed and fully closed) these data are calculated for all stages of a fuel cycle (mining to waste disposal) based on detailed input information.
In addition to nuclear desalination, the IAEA has recently developed and released a code called HEEP (Hydrogen Economic Evaluation Program) that covers the production of hydrogen using an NPP and non-nuclear energy sources in a similar manner as in DEEP; this program is also available cost free to IAEA Member States.
Thus, the economic models DEEP and HEEP can be used to extend the INPRO methodology in the area of economics for non-electrical applications of nuclear power by using the output of NEST for a specific NPP with a defined fuel cycle as input for DEEP or HEEP.

See also

Simplified numerical example of NEST application

	[ + ] Assessment Methodology
Areas of INPRO Sustainability Assessment Overview • Economics • Safety (Nuclear Reactors) • Safety (NFCF) • Waste management • Environmental Impact on Stressors • Environmental Impact from Depletion of Resources • Infrastructure Requirements Basic Principle • User requirements • Criteria