Elsevier

Nuclear Engineering and Design

Volume 243, February 2012, Pages 120-134
Nuclear Engineering and Design

Minimizing the economic cost and risk to Accelerator-Driven Subcritical Reactor technology. Part 2: The case of designing for flexibility

https://doi.org/10.1016/j.nucengdes.2011.11.026Get rights and content

Abstract

This paper presents a simple, systematic, and integrated methodology to analyse the expected Levelised Cost Of Electricity (LCOE) generation of a new nuclear technology facing significant technological uncertainty. It shows that flexibility in the design and deployment strategy of a demonstration commercial thorium-fuelled Accelerator-Driven Subcritical Reactor (ADSR) park significantly reduces the expected LCOE. The methodology recognizes early in the conceptual design a range of possible technological outcomes for the ADSR accelerator system. It suggests appropriate flexibility “on” and “in” the first-of-a-kind design to modify the demonstration park development path in light of uncertainty realizations. It then incorporates these uncertainties and flexibilities in the design evaluation mechanism. The methodology improves existing approaches for design and engineering decision-making, providing guidance for government support for a new, secure, clean, and publicly acceptable alternative technology for power generation.

Highlights

► Uncertainty impacts the expected cost of novel nuclear technology development. ► A real-options methodology is presented to analyse expected cost under uncertainty. ► The methodology is applied to analyse a demonstration commercial ADSR park design. ► Flexibility inserted early in design demonstrably reduces expected development cost. ► The method improves existing approaches for design and engineering decision-making.

Introduction

Thorium-fuelled Accelerator-Driven Subcritical Reactor (ADSR) technology is a promising avenue for the transmutation of radioactive wastes (Bowman et al., 1992, Foster, 1974), and for secure, low-emission, and more publicly acceptable power generation (Carminati et al., 1993). It consists of a nuclear reactor core operating subcritically, and a high-power proton accelerator that bombards a spallation target within the reactor core to generate neutrons. These externally supplied neutrons supplement the reactor's own neutron population and sustains a fission chain reaction, as in Fig. 1. This technology offers new opportunities to governments concerned with limiting CO2 emissions, reducing risks associated with nuclear weapons proliferation and geological waste disposal, and sustaining prosperous economic development. In countries with considerable thorium reserves (e.g. India), it has the potential to capture a non-trivial segment of the growing electricity market. In other countries, it can help diversify the portfolio of low CO2-emitting technologies.

Developing thorium-fuelled ADSR technology promises to be technically challenging, economically risky, and capital-intensive. Traditional nuclear power technology demands a large capital cost (Pouret et al., 2009), and requires many years of pre-development, construction, and testing before providing online capacity. An ADSR's further requirement of high-powered accelerator technology will demand additional capital commitment, and will therefore involve significant extra financial uncertainty. Given the high upfront cost, one needs a realistic and reliable picture about the expected returns, one that explicitly recognizes how the first-of-a-kind demonstration of the technology might perform.

There is much uncertainty associated with how technology will develop during the initial deployment phase of a first-of-a-kind ADSR demonstrator. This uncertainty will ultimately affect the Levelised Cost Of Electricity (LCOE) generation, which is a useful metric for evaluating economic performance and the value that a project is expected to return. One concern unique to ADSRs compared to other nuclear technology relates to the reliability of the accelerator supplying the proton-beam. If an unplanned shutdown of an accelerator leads to an ADSR shutdown, costs will be incurred due to failing to supply the electricity grid (Steer et al., 2009). Alternatively if unplanned shutdowns are eliminated through spending additional time performing maintenance on the accelerator, there is less time to schedule electricity generation and sales.

To address these issues, this paper introduces and applies a simple, systematic, and integrated methodology to evaluate design and deployment strategies for innovative systems facing significant technological uncertainty. The starting point of the methodology for ADSRs is the technical design descriptions of a first-of-a-kind ADSR system offered in the companion paper by Steer et al. (2012). The methodology enables engineers and decision-makers to: (1) recognize explicitly uncertainty sources affecting the expected performance of the system; (2) incorporate the concept of flexibility in design and management with the goal of improving performance; and (3) evaluate the design space based on expected economic impact, to guide decision-making for large-scale investment and deployment.

The integrated methodology has been applied to investigate the hypothesis that inserting flexibility early in the conceptual design of an ADSR can improve the expected economic performance while testing and validating the technology. One anticipates that flexibility will lower the expected development and deployment cost of the system. The methodology builds upon and extends standard practice for design and decision-making in engineering by considering a priori a range of uncertain outcomes affecting costs, and adequate flexible responses. This approach differs from sensitivity analyses performed after an initial design is selected. It recognizes intelligent design and pro-active system management as uncertainty unfolds. The methodology provides a framework for evaluating designs, and assessing the expected value of flexibility so it can be compared to the cost of acquiring the flexibility.

The remainder of the paper is structured as follows. Section 2 provides an overview of related work in flexibility/real options analysis in an engineering context, together with previous work specifically focusing on the nuclear sector. Section 3 explains the integrated methodology, and Section 4 follows with an example application to the deployment of a demonstration commercial ADSR park. Section 5 concludes by discussing modeling assumptions and limitations, as well as findings. It also provides guidance for future work.

Section snippets

Flexibility in engineering design/real options

Flexibility in engineering design enables a system to change easily in the face of uncertainty (Fricke and Schulz, 2005). It is associated to the concept of real options, providing the “right, but not the obligation, to change a project in the face of uncertainty” (Trigeorgis, 1996). Real options “on” a project tend to involve higher-level managerial decisions such as abandoning, deferring until favorable market conditions arise, and investing in research and development (R&D) (Trigeorgis, 1996

Integrated methodology

The described methodology is inspired from the four-step process described by de Neufville and Scholtes (2011) and Walker et al. (2001) for adaptive policy-making. It relies heavily on designers’ and decision-makers’ expertise with the system to identify uncertainty sources and candidate flexibilities. The methodology taps explicitly and systematically into this expertise to identify the major uncertainty source(s) to focus on, to devise flexible strategies, and enable the design to use the

Case application and results

This section demonstrates an application of the methodology above to the deployment of ADSR technology for power generation. It identifies a major uncertainty source affecting technology required for ADSRs. It suggests a set of flexible strategies and engineering/planning enablers to deal with this uncertainty in deploying the system. It then evaluates quantitatively the flexible alternatives to recommend the best strategies to minimize expected LCOE, and favor electricity production.

Discussion and conclusion

This paper has presented and applied a simple, integrated methodology intended to improve or ratify the design of innovative technology in terms of its economic performance and costs. The impact of uncertainties associated with a technology's future performance on its economic performance has been emphasised, specifically with relation to decisions that are made in the early conceptual design phase. Suggestions were made on how the expected cost of the case study technology, the ADSR, could be

Acknowledgements

The authors would like to thank the U.K. Engineering and Physical Sciences Research Council (EPSRC), the Electricity Policy Research Group at the University of Cambridge, the National Science and Engineering Research Council of Canada, the M.I.T. Portugal Program, and M.I.T. Engineering Systems Division for their financial support. This work was supported, in part, by the EPSRC under grant EP/G009864/1. The authors are also grateful to the Cambridge Nuclear Energy Centre and the Electricity

Non-standard abbreviations/terms

Effective availability
represents the percentage of time over the year that an accelerator is not undergoing maintenance, assuming at these times the ADSR is scheduled to sell electricity
Real option
a design and/or management component providing the right, but not the obligation, to change and adapt the system flexibly in the face of uncertainty resolution
Target curve
a different name for Cumulative Mass Function (CMF), showing the cumulative probabilities of attaining different performance and/or

References (63)

  • M.B. Abdelhamid et al.

    A real options approach to investing in the first nuclear power plant under cost uncertainty: comparison with natural gas power plant for the Tunisian case

    International Journal of Oil

    (2009)
  • M. Amram et al.

    Real Options: Managing Strategic Investment in an Uncertain World

    (1999)
  • T.A. Arnold et al.
  • B. Barman et al.

    A Streamlined Real Options Model for Real Estate Development Department of Urban Studies and Design

    (2007)
  • F. Black et al.

    The pricing of options and corporate liabilities

    Journal of Political Economy

    (1973)
  • D. Braha et al.

    Complex Engineered Systems: Science Meets Technology

    (2006)
  • L. Burgazzi et al.

    Reliability studies of a high-power proton accelerator for accelerator-driven system applications for nuclear waste transmutation

    Reliability Engineering and System Safety

    (2007)
  • A.C. Bryan

    Thorium as a secure nuclear fuel alternative

    Journal of Energy Security

    (2009)
  • M.-A. Cardin

    Quantitative Performance-based Evaluation of a Procedure for Flexible Design Concept Generation

    (2011)
  • Cardin, M.-A., Kolfschoten, G.L., de Neufville, R., Frey, D.D., de Weck, O.L., Geltner, D.M. Empirical evaluation of...
  • F. Carminati et al.

    An Energy Amplifier for Cleaner and Inexhaustible Nuclear Energy Production Driven by a Particle Beam Accelerator, CERN/AT/93-47

    (1993)
  • T. Copeland et al.

    Real Options: A Practitioner's Guide

    (2003)
  • R. de Neufville

    Uncertainty Management for Engineering Systems Planning and Design

  • R. de Neufville et al.

    Airport Systems: Planning, Design, and Management

    (2003)
  • R. de Neufville et al.

    Flexibility in Engineering Design

    (2011)
  • O.L. de Weck et al.

    Staged deployment of communications satellite constellations in low earth orbit

    Journal of Aerospace Computing, Information, and Communication

    (2004)
  • A.K. Dixit et al.

    Investment under Uncertainty

    (1994)
  • C.M. Eckert et al.

    Engineering change: drivers, sources and approaches in industry

  • A. Engel et al.

    Designing systems for adaptability by means of architecture options

    Systems Engineering

    (2008)
  • European Synchrotron Radiation Facility (ESRF)

    Highlights 2007. ESRF Annual Report

    (2007)
  • European Synchrotron Radiation Facility (ESRF)

    Highlights 2008. ESRF Annual Report

    (2008)
  • Cited by (12)

    • Design and analysis of flexible multi-layer staged deployment for satellite mega-constellations under demand uncertainty

      2022, Acta Astronautica
      Citation Excerpt :

      One method is Decision Analysis (DA) [15], which relies on decision trees and dynamic programming to compare different design alternatives as a structured sequence of decisions and uncertainty realizations. The decisions emulate those that are made by system operators based on uncertainty realizations, depending on adaptation capabilities embedded in the design to deal with changing conditions [16]. DA, however, is limited by the curse of dimensionality, as decision trees can grow exponentially with increasing decisions and uncertainty nodes, making them more difficult to use and interpret in practice.

    • Real options and flexibility analysis in design and management of one-way mobility on-demand systems using decision rules

      2017, Transportation Research Part C: Emerging Technologies
      Citation Excerpt :

      Later, the binomial approach proposed by Cox et al. (1979) was applied to value options in real investments. A decision tree is another method to assess the value of flexibility (VoF) where a tree-structure graph is utilized to represent the decisions and their associated consequences – see example studies in (Babajide et al., 2009; Cardin et al., 2012). An important aspect of these ROA methodologies is that the evaluation process relies on dynamic programming.

    • Strategic real option and flexibility analysis for nuclear power plants considering uncertainty in electricity demand and public acceptance

      2017, Energy Economics
      Citation Excerpt :

      Besides, other studies have focused on valuing alternative reactor technologies that could help improve the economic performance of a nuclear system. Cardin et al. (2012) considered a first-of-a-kind commercial thorium-fuelled Accelerator-Driven Subcritical Reactor as a safer alternative for nuclear power generation. Jain et al. (2013b) focused on small- and medium-sized reactors (SMRs) and investigated the economic impact of modular construction of such reactors.

    • Minimising the economic cost and risk to accelerator-driven subcritical reactor technology: The case of designing for flexibility: Part 1

      2012, Nuclear Engineering and Design
      Citation Excerpt :

      In a follow-on from this study the real options technique and the decision analysis methodology have been applied with greater scope to the design suggestion of an ADSR reactor park (Cardin et al., 2012).

    View all citing articles on Scopus
    View full text