hankyoreh

Comparison of Contract Amounts for Nuclear Power Plant Construction

The day of destiny is approaching for Shin-Kori nuclear reactors 5 and 6. After the public debate committee’s citizen jury spends three days and two nights together to debate the issue from Oct. 13 to 15, the final public opinion survey on the pros and cons of ending construction on Shin-Kori reactors 5 and 6 will be held. Since the government has announced that it will accept the results of the survey from the citizen jury, the verdict that the public debate committee submits on Oct. 20 is expected to determine once and for all whether construction on the reactors will be halted or allowed to proceed.

The nuclear power industry claims that the ARF1400, South Korea’s third-generation nuclear reactor, is cheap to build, but its construction costs have reportedly increased by 54.9% (1.53 trillion won per reactor, US$1.34 billion) over the past nine years. While the price increase has been affected by the extension of the construction period and by inflation during that period, analysis shows that another factor affecting the increase is the stronger safety standards that have been applied since the Fukushima nuclear accident in Japan in 2011 and the earthquake in Gyeongju last year. Put another way, the cost of construction was low because of inadequate safety measures, which has kept electricity cheap.

According to documents about the construction and operating costs for each APR1400 nuclear reactor produced by Korea Hydro & Nuclear Power (KHNP) and released on Oct. 9 by Woo Won-sik, a lawmaker for the Democratic Party, the construction cost on the initial contract for Shin-Kori reactors 3 and 4, on which construction began in 2007, was 5.57 trillion won (US$4.89 billion), while the construction cost on the initial contract for Shin-Kori 5 and 6 was 8.63 trillion won (US$7.58 billion) – with the cost of construction increasing by 54.9% over nine years.

“The reason construction has become more expensive is because equipment was changed and added as part of strengthened safety standards, including follow-up measures to Fukushima and enhanced earthquake-resistance,” Woo’s office said.

The price of the nuclear reactor supplied by Doosan Heavy Industries & Construction was listed as 905.8 billion (US$ 795.4 million) in the initial contract for Shin-Kori 3 and 4 but more than doubled to 1.83 trillion won ($US 1.61 billion) for Shin-Kori 5 and 6. The final construction cost of the major equipment at the reactor was 727.8 billion won (US$639.1 million) at Shin-Kori 3 and 4 (built by Hyundai Engineering & Construction (E&C) and SK E&C) but was 1.31 trillion won (US$1.15 billion), nearly twice as much, for Shin-Kori 5 and 6 (built by Samsung C&T, Doosan Heavy Industries & Construction and Hanwha E&C).

While the construction cost for Shin-Kori 5 and 6 is currently expected to be 8.63 trillion won (US$7.58 billion), some expect that the final construction cost will be even greater. The final construction cost of the four APR1400 reactors that have already been built has been between 12% and 32% greater than the cost on the initial contract, the Hankyoreh confirmed.

The final construction cost for Shin-Kori 3, which has already entered commercial operation, and Shin-Kori 4, which will go online as soon as the fuel is loaded, was 7.36 trillion won (US$6.46 billion). That was 1.80 trillion won (US$1.58 billion), or 32.3%, greater than the initial contract price of 5.57 trillion won (US$4.89 billion). The reasons that the cost of construction increased were a four-year extension of the period of construction because of corruption among suppliers in 2014 and malfunctions in a test run (1.16 trillion won, about US$1.02 billion, including indirect costs such as inflation and labor), the material cost for replacing faulty cables (100 billion won, approximately US$88 million) and changes to the design to reinforce safety (530 billion won, about $465 million).

The final contract amount for Shin-Hanul reactors 1 and 2 – which began construction in 2010 and were 95.92% complete as of Aug. 2017 – also increased 11.9% from the initial contract amount, from 7.13 trillion won (US$6.26 billion) to 7.98 trillion won ($7.01 billion). The reasons for the higher cost included a one-year extension of the construction period because of delays (620 billion won, about US$544 million including indirect costs such as inflation and labor) and changes to the design to reinforce safety (200 billion won, about US$176 million).

Given these precedents, some expect that 1 trillion won (US$880 million) more will have to be poured into Shin-Kori 5 and 6 (which are currently 29.93% complete), bringing the final construction cost close to 10 trillion won (US$8.8 billion). The “sunk cost” of 1.6 trillion won ($1.4 billion) that the nuclear industry offers as the grounds for resuming construction on Shin-Kori 5 and 6 is just 16% of that amount.

Increases in the cost of building a nuclear reactor cause the unit cost of generating energy to go up. It’s generally believed that construction costs account for at least 50% of the unit generation cost. “If Shin-Kori 5 and 6 are built, they won’t be able to provide cheap electricity during the 60 years of their lifespan as we have now. They could ultimately become major headaches that depend on subsidies from the government, as in the US,” Woo said.

By Choi Ha-yan, staff reporter

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