Quantifying Investment Risk: Analysis of the Purchase Decision of a Nuclear Power Plant

Conference · Sun Jun 16 04:00:00 EDT 2024

OSTI ID:2480699

Spangler, Ryan Matthew ^[1]; Hansen, Jason K ^[1]; Gevondyan, Erna ^[2]; Kim, TK ^[2]

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1. Idaho National Laboratory
2. Argonne National Laboratory

Cost overruns are an ill-fated part of the deployment history of nuclear power plants (NPPs) in the United States, and yet studies increasingly show the important role nuclear technologies must play in decarbonizing the U.S. economy. Paradoxically, then, a key piece of a coherent decarbonization strategy depends on attracting investor action to a purchase where historical cost overruns have been sizeable. To address this challenge, this study aims to develop a financial model that quantifies risk of cost overruns in the decision-making process for purchasing advanced reactor concepts. Using the concept of Value at Risk (VaR), the model is built to evaluate financial risk nuclear construction with the aim to identify risk mitigation strategies. The objective is to identify strategies to mitigate cost-risk challenges and to assess the potential reduction in investor risk exposure. The paper presents the initial development and preliminary verification of the financial risk analysis model. The development of this model involved a comprehensive approach to estimating financial risk over the operating life of NPP that stems from construction uncertainties. By utilizing net present value (NPV) with discounted cash flows, the model captures the complex interconnections of project costs, construction timelines, revenue, and uncertainties. Verification of the model involved testing historical data from previous reactor construction projects against the construction project of Vogtle 3 and 4. The results of this paper present the comparison of the preconstruction cost overrun prediction with the current cost estimates from a nearly complete Vogtle 3 and 4.

• Research Organization: Idaho National Laboratory (INL), Idaho Falls, ID (United States)
• Sponsoring Organization: 58
• DOE Contract Number: AC07-05ID14517
• OSTI ID: 2480699
• Report Number(s): INL/CON-24-78613-Rev000
• Country of Publication: United States
• Language: English

Related Subjects

29 ENERGY PLANNING, POLICY, AND ECONOMY
Construction
Cost Overruns
Levelized Cost of Electricity
Nuclear Power
Value at Risk