Advanced Fuel Cycle Cost Basis – 2017 Edition

iii PREFACE v SUMMARY vii ACKNOWLEDGMENTS xv ACRONYMS xxi NOMENCLATURE xxv 1. INTRODUCTION 1 1.1 Background 1 1.2 Related Program Interfaces and Related Key Evaluations 2 1.3 NTRD Cost Basis 3 1.4 Cost Module Description 3 1.5 Structure of the Report 5 2. NTRD COST BASIS DEVELOPMENT PROCESS 7 2.1 Process Description 7 2.2 Fuel Cycle Data Collection 8 2.3 Cost Data Normalization 8 2.3.1 Government versus Private Facility Ownership 8 2.3.2 Technology Readiness Level (Program/Project R&D Status) 8 2.3.3 Code of Accounts/Work Breakdown Structure 8 2.3.4 Common Currency (U.S.$) 11 2.3.5 Common Year (Current Year Basis) 11 2.3.6 Differences in Cost Estimating Methodologies (Top Down vs. Bottom Up) 11 2.4 Cost Data Verification 11 2.5 Data Gap Analysis 12 2.6 Cost Data Documentation 12 3. Cost Estimating Methods 15 3.1.1 Analogy 16 3.1.2 Parametric 16 3.1.3 Engineering 17 3.2 Cost Indices 18 4. FUEL CYCLE REFERENCE COST MODULES 19 Advanced Fuel Cycle Cost Basis – 2017 Edition xviii September 29, 2017 NTRD-FCO-2017-000265 (September 2017) xviii Advanced Fuel Cycle Cost Basis 5. STRATEGY COSTING PROCEDURE 25 5.1 Process Description 25 5.2 Define Scenarios 26 5.3 Define Parameters 26 5.4 Cost Module Coupling 26 5.5 Cost Module Scaling 26 5.6 Handling of Credits for U, Pu, and Other Materials 27 5.7 Develop Total Fuel Cycle Costs 27 5.8 Develop Total Cost of Electricity Costs 27 5.9 Economics of Private Sector vs. Regulated Nuclear Fuel Cycle Facilities 28 6. ECONOMIC COMPARSION GUIDELINES 29 7. USE OF PRICE DATA IN NTRD COST-BASIS ESTIMATES 31 7.1 Introduction and Scope 31 7.2 Costs and Prices Defined 31 7.3 Cost and Prices in the Context of the Cost Basis Report 33 7.3.1 Objectives for Cost Basis Reports 33 7.3.2 Short Run, Long Run, and Very Long Run 34 7.3.3 Observed and Predicted Prices 34 7.3.4 Comparison of Costs with Prices – The Problem of Market Penetration 34 7.4 Price Data Irrelevance 35 7.4.1 Constrained Markets and Price Volatility 35 7.4.2 “Implicit Competition” 35 7.4.3 Reference Quantities 36 7.5 Summary of Principles 37 8. ESCALATION CONSIDERATIONS 39 9. DISCOUNT RATE FOR NUCLEAR ECONOMIC ANALYSIS 45 9.1 Background Information 45 9.2 Discounting in the Private Sector 48 9.2.1 The Chicago Study 49 9.2.2 WACC Numerical Values 50 9.2.3 Debt to Equity Ratios 50 9.2.4 Regulation 51 9.2.5 The MIT Studies of 2009 and of 2011 51 9.2.6 A Note on Alternative Approaches to the Pricing of Risk for Nuclear Projects 52 9.2.7 Recommended Discount Rate 52 9.3 Discounting in the Public Sector 53 9.3.1 Discounting US Federal Projects, OMB Circular A-94 and A-4 53 Advanced Fuel Cycle Cost Basis 2017 Edition September 29, 2017 xix NTRD-FCO-2017-000265 (September 2017) xix Advanced Fuel Cycle Cost Basis 9.3.2 Intergenerational Discounting 54 10. TREATMENT OF UNCERTAINTY IN THE COST BASIS REPORT 59 10.1 Introduction 59 10.2 Representation of Uncertainty in the AFC-CBR 59 10.3 Treatment of Correlated Uncertainties 60 11. MODULARITY ANALYSIS 63 12. ECONOMIC COMPUTER MODELS 67 12.1 Integration of Cost Modules into Cost Models 67 12.2 Computer Software and Simulations 67 12.2.1 NFCSim 67 12.2.2 Dynamic Model of Nuclear Development (DYMOND) 67 12.2.3 Harvard Spreadsheets 68 12.2.4 Generation IV Economic Modeling Working Group Levelized Cost of Electricity Model ....