3 October 2019

Cost Benchmarking Approach Nuclear Power Plant Decommissioning

Karl Sanderson

Head of Cross-Industry Insights

UK£124 Bn (UK£121 Bn last year)

~UK£3 Bn

per year

UK£ 5.7 Bn

income

2018-28

Industry Problem with Estimation P

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Ma

turi

ty

Cost and Schedule Estimates

P10 P50 P80

Stage Gate

Inception

Short Listed Alternatives

Single Concept Selection

Final Investment Decision

End of Project (Actual Outcome)

Base

P10 P50 P80 Base

P10 P50 P80 Base

ATD

P10 P50 P80 Base

P10 P50 P80 Base Rebaseline

Original estimate out by: - up to a decade

- up to 10x the cost

What Good Looks Like P

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me

/Pro

jec

t M

atu

rity

Cost and Schedule Estimates

P10 P50 P80

Stage Gate

Inception

Short Listed Alternatives

Single Concept Selection

FID

End of Project (Actual Outcome)

Base

P10 P50 P80 Base

P10 P50 P80 Base

ATD

P10 P50 P80 Base

Benchmarking at all Stages: - gauging opportunities & threats

- outcomes available to others

Global Nuclear Benchmarking Initiative

Organization for Economic Co-operation and Development (OECD)

Nuclear Energy Agency (NEA)

Working Party on Decommissioning and Dismantling (WPDD)

Decommissioning Cost Estimation Group (DCEG)

Benchmarking Task Group (BTG)

• UK Nuclear Decommissioning Authority coordinated the

Benchmarking Task Group during 2018

• Examined approaches from other industries, and past nuclear

industry alternatives

• European Task Group, Global Working Party

• NEA Report on benchmarking published May 2019

• Moving forward under new NEA Committee on Decommissioning

of Nuclear Installations and Legacy Management (CDLM) and

other related structures

Focus Areas for NEA Benchmarking Report

• Cost (and schedule)

• Nuclear Power Plants, but also temporary surface storage

and ultimate disposal facilities

• Projects, Programmes & Operations

• Learnings from other industries (e.g. Oil & Gas, Construction,

Shipbuilding)

• Barriers and their removal / enablers

• Recommending an approach;

o Database(s) and stewardship

o Interface with database(s)

o Commercial arrangements & legal compliance

o Additional services (e.g. forum and industry studies)

o Roadmap to implementation (years)

NDA Interest in Benchmarking

• Supporting a global initiative, ultimately providing access to

global data

• Eliminating ‘nuclear premium’

• Supporting Decision Makers in selecting the right strategies

and arranging funding

• Supporting Project Teams in optimizing execution plans

• Identifying the full scale of the potential liability (nuclear cost

provision) … then driving it down

• Safer management of the legacy (earlier and reliable

schedules)

• Complementary to other tools; Norms; Optimism Bias

Adjustment; Risk Management; Probabilistic Analysis

Benchmarking Journeys – Other Industries

The Starting Point NPP Decommissioning Now

Internal data

Little external data (e.g. construction only)

Little or no collaboration

No best practice model

Non-global, but growing global demand

Developing Capability

e.g. Construction Industry

Internal/External collection/sharing

Data capture and share

Government Policy requirements

Developing best practice

Global

Current Mature Practice

e.g. Oil and Gas industry

External sharing

Independent facilitation

Shared insight

Cost, Schedule and Project Performance/Maturity

Global

The Vision

NPP Decommissioning in the Future

External data capture & share

Independent verification/custodian

Strategic/Tactical Decisions supported

Support Service Menu

Global buy-in

Source: OECD NEA No.

7460 Cost Benchmarking for

Nuclear Power Plant

Decommissioning

Users of Benchmarking

• Set policy & regulatory framework

• Establish financing requirements

Authorities & Regulators

• Approve programs & projects

• Allocate funding

• Hold contingency

Executive Decision Makers

• Develop and execute decommissioning work Program & Project

Teams

• Engineer and execute specific scopes of work Supply Chain

Source: OECD NEA No. 7460 Cost Benchmarking for Nuclear Power Plant Decommissioning

Barriers to Benchmarking

The Over-arching Challenge for Barrier Removal

How those organizations and decision makers responsible for planned future

nuclear decommissioning can be engaged through benchmarking with those who have progressed similar decommissioning, and

thus have valuable cost data available

No incentive for industry engagement

The industry has commercial, cultural,

security risk concerns which prevent little more

than internal benchmarking, which adds insufficient value

No Investment in Organisation and

Facilitation

A dependency to collect and share cost data and, alignment of

approaches which use it, to enabling industry-wide added value to be

realised

Absence of Actual Cost Data

The lack of collected and shared actual cost

data with definitions which satisfy

boundary conditions sufficient to allow

reliance (with defined risk) on it

Obstacles to Normalisation

The inability to normalise mark (target)

to benchmark data because it lacks context and scope sufficient to

adjust it to align with the subject being estimated

Low Benchmarking Maturity

Benchmarking has low maturity or no track-

record of adding value in NPP

decommissioning, discouraging stakeholder engagement

Competition Law

The requirement for cooperation agreements

aligned to applicable competition law

Source: OECD NEA No. 7460 Cost

Benchmarking for Nuclear Power Plant

Decommissioning

Enablers of Benchmarking

Enablers

Collective and collaborative

industry buy-in to develop and

mature benchmarking An agreed and

lawful industry Strategy and Plan, to develop maturity

& prioritised to future demand for

project/activity type

Database for data collection

and sharing barriers

Collective Industry

Investment

Actual Cost Data contextualised with knowledge and confidence so that it can be

normalised

Independent organisation and

facilitation representing the

industry

Source: OECD NEA No. 7460 Cost

Benchmarking for Nuclear Power

Plant Decommissioning

NEA Recommendation & Implementation

Option F: Rich Functionality with Facilitated Member Group Collection/Sharing Arrangement + normalisation

Managed

collection,

sharing and

benchmark

service

Supports Removal of the Headline Industry Barriers to Benchmarking? Satisfies

Added Value

being

sought?

Relative

Order of cost

Ratin

g

Absence of Actual

Cost data

Obstacles

to Normali-

sation

Low Maturity No incentive for

Industry

engagement

No

investment

in

Organisatio

n/

facilitation

G G G G G G High A

Commentary:

Potential benefit in aligned stakeholder groups. Stakeholders trust in 3rd party data share and normalisation.

Selection of International Organizing

Entity

Mobilization [legal agreements and competition law assessment]

Implementation [database construction

and population]

Steady State &

Evaluation [delivery of

benchmarking service]

Source: OECD NEA No. 7460 Cost Benchmarking for Nuclear

Power Plant Decommissioning