Evan is a New Hampshire resident who will be graduating from high school in 2015 and plans to pursue a career in engineering.
Few innovations have shaped the world as dramatically as the development of the airplane. In less than a century, mankind went from riding horses to flying non-stop half way around the world. The travel time for crossing the Atlantic went from several weeks to just a few hours. As the industry was emerging in the early 20th century, few could’ve predicted the impact that it would have. Scientific American claimed in 1910 that “To affirm that the airplane is going to revolutionize the future is to be guilty of the wildest exaggeration”. Despite these predictions, the industry continuously exceeded expectations, and just 110 years after the first flight at Kitty Hawk traversed a few hundred feet, millions of people step onto airliners every day for trips thousands of miles long.
Today, aircraft manufacturing is a $300 billion industry that employs nearly a million people globally. The industry is arguably experiencing a “Second Golden Age” as backorders for Boeing and Airbus are at an unprecedented 9000 aircraft. Over the next 25 years, an estimated 29,000 aircraft will need to be manufactured at a cost of over $3.2 trillion.
The commercial aviation industry is more heavily regulated than virtually every other industry (aside from the nuclear and biomedical industries). The regulatory model the international community has adopted has been aimed at enabling safe, rapid transit from location to location. Even with tight regulations, the industry has learned how to produce multiple $100 million aircraft every day. Each Boeing 737, for example, has 367,000 individual parts and 36 miles of cabling. Many of these components have a major impact on aircraft safety: Their failure could put the lives of thousands of people at risk if a crash were to happen in a major metropolitan area.
There is a lot that the nuclear industry can learn from commercial aviation. The nuclear industry and aviation industry must both navigate stringent regulations imposed by their respective governing agencies. All facets of the industry from reactor operator licensing to reactor commissioning to waste handling is monitored under the oversight of the Nuclear Regulatory Commission. Additionally, the nuclear industry faces stiff competition, not only amongst itself, but from other energy sources.
Nuclear energy must be able to compete with other electricity producers, primarily coal and natural gas before it can compete internally for power station contracts. These power station contracts offer potential costs of $10+ billion. The final factor is production of its units. Designing an aircraft takes nearly a decade from prototyping to production. Similarly, building a nuclear power plant is a decade-long process.
The nuclear industry must improve its economics moving into the coming decades, and by looking to aviation, it can learn much about how to develop a more constructive regulatory framework, address stiff economic competition, and incorporate advanced manufacturing procedures.
Modularity and Managing the Manufacturing Process
One of the greatest issues facing the nuclear industry today is high construction cost. Nuclear reactors are notoriously expensive to construct and often experience cost over-runs that can jeopardize future projects. Construction at the Vogtle Nuclear Power Station where two AP1000 Nuclear Reactors are being built is nearly 3 years behind the original schedule and perhaps $900 million over-budget.
While price over-runs are not unexpected since these reactors are the first built in the US in 30 years, such large delays and cost increases cripple the chances of utilities embracing nuclear energy over natural gas or coal. To counteract such cost over-runs and build nuclear reactors more cheaply, the nuclear industry is focusing much of its attention on modularity. They are designing the next generation of nuclear reactors so that they can be built in a factory.
Modularity presents a number of advantages over traditional construction methods. As a result of factory manufacturing advantages, including greater project to project consistency, the licensing and construction time would drop from ten years to under five. Additionally, modularity would allow for smaller units to be produced in far greater numbers.
Economists observe that doubling the units produced reduces costs by a percentage known as the learning ratio. For the nuclear industry, this ratio is expected to be roughly 10%. After producing 16 reactors, the expected cost of producing a nuclear reactor will drop to less than 66% of the original unit. Finally, reactor construction would become standardized, something that was not achieved when the current fleet of reactors in the US was built. Standardization would make maintenance significantly easier and less expensive.
The airline industry provides a nearly perfect model for how the nuclear industry can embrace large scale manufacturing. Through a ballet of manufacturing, aircraft are able to be built in under two weeks. These aircraft are complex feats of engineering, and required incredible amounts of coordination to produce. Any modular reactor will face similar engineering hurdles in its manufacturing process.
Many of the components inside of an aircraft are critical to the structure’s safety. Landing gear, electronics, hydraulics, and skin components all must meet strict quality standards in order to ensure their safety. The failure of just a single component in an aircraft can lead to a crash that kills hundreds of people on the plane and potentially thousands of others on the ground. Similarly, in a nuclear reactor vendors must meet strict standards for pumps, reactor components, piping and electronic monitoring equipment.
One company whose culture is indicative of the industry’s manufacturing innovation is The Boeing Company. Boeing’s manufacturing process is constantly improving, thanks to a culture of innovation, and with several models the assembly time has been cut nearly in half. The company has invested heavily in optimizing the manufacture of its aircraft, and its manufacturing abilities are unmatched.
Innovations in Boeing’s manufacturing process are largely governed by a plan it created called the “Nine Step Plan”. Each of the nine pillars outlines a method that can be applied to any area of Boeing’s assembly line which can lead to minute but significant time improvements. Some of these steps include balancing the line, standardizing work, putting visuals in place, and value stream mapping and analysis. Thanks to this culture of innovation, Boeing has been able to decrease its product costs while improving safety and technology infrastructure.
The nuclear industry already recognizes the need to embrace modular construction. The airliner industry has the ability to produce multiple $100 million dollar aircraft each day, a cost similar to those expected for smaller generation IV reactors. Any company that decides to manufacture reactors on a large scale will have to ultimately embrace the aircraft sector’s model of manufacturing: Lean, rapid, and often outsourced construction. It will have to embrace a culture of innovation so that it can continue to decrease its costs to the consumer. Modularity has the potential to remake the nuclear industry, but it must be executed in a way that will live up to its true potential.
How Aircraft Manufacturers Compete With Themselves and Other Transportation Modes
The nuclear industry must ultimately fight competition on two different fronts; from other energy sources and from itself. Natural gas and coal are both reliable resources that are in constant competition with nuclear energy in order to meet electricity demands. Fossil fuels have the advantage of being cheap in many locations, so the challenge the nuclear industry faces is matching their price of production. Internally, there are over a half dozen reactor vendors constantly fighting to win contracts to build new power plants.
The commercial airline market is split nearly 50-50 between Airbus and Boeing, with no other companies building an airliner that can even approach their size. The Boeing-Airbus Rivalry is one of the most fascinating of the business world. Each company has gambled its futures on two very different visions of how airliners will operate in the coming decades. Boeing’s 787 is a smaller, efficient, technologically-advanced, long-range aircraft, and Airbus’s A380 is a mega-airliner capable of carrying 550-800 people depending on the configuration.
Airbus’s gamble on the A380 supports the existing model of airliner operations, where smaller aircraft fly shorter routes to a small number of centralized hubs where passengers transfer to larger aircraft for longer flights. Boeing’s gamble focused on a model where airliners embrace direct, long-distance flights. The 787 has larger windows, higher ceilings, and larger restrooms… amenities that benefit fliers regardless of class. Since 1990, the number of direct city-pairs more than 3000 miles part has more than doubled, so its gamble is well-supported. As Marty Bentrott of Boeing explained, “Our strategy has been to design and build an airplane that will take passengers where they want to go, when they want to go, without intermediate stops”.
Commercial aviation as an industry must also compete against other forms of transportation. While the airline industry has successfully carved out a niche as the fastest and safest form of transportation, getting to this point took years of development. Over the past three decades, the amount of cargo shipped through the air has increased over 1200% to 1.13 trillion metric ton kilometers. While growth in other transportation sectors has also been significant, no sector’s growth compares to that experienced in the air industry. This growth occurred because of qualitative advantages over the other transportation sectors.
The nuclear industry has struggled with external competition from natural gas and coal power. Before the industry can compete internally for contracts, it must gain traction in the broader electricity marketplace. In other words, before the nuclear industry can compete for power plant contracts, there have to be contracts to go around. The air cargo industry was able to expand significantly more rapidly than other sectors because its qualitative advantages made it the ideal means of transport for high-value cargo. Transporting high-value cargo quickly and safely is important. As an industry, the nuclear sector must lobby to ensure that its ultra-low emissions and reliable generation qualities are valued by the market. When this happens, the contracts for new facilities will follow, and the industry will compete on a more internal-level.
Innovating in an Industry Whose Regulations Stifle Innovative Thinking
The Federal Aviation Administration (FAA) and the Nuclear Regulatory Commission (NRC) are the regulating bodies for the aviation and nuclear industries respectively, and their primary task is to ensure the public’s health and safety through imposing standards on their industries. The FAA regulates airspace, pilot licensing, aircraft certification and registration and aircraft design certification. The NRC similarly regulates the nuclear fuel cycle, operator licensing, design certification, and power plant licensing. Both agencies are very similar in culture. Ultimately, it falls on the company or individual to prove that they meet or exceed the standards imposed by their regulating agency. Both are conservative in nature and take pride in maintaining separation from their industries (contrary to what many critics claim).
The biggest difference is that the regulations imposed by the FAA haven’t crippled innovation in the aviation industry whereas the nuclear industry has developed a culture and regulatory model that combine to discourage change outside of narrow boundaries. This can be attributed to the entire structure of the nuclear industry compared to that of the aviation industry. Boeing and Airbus are behemoths. Boeing is worth $94 billion on the NYSE and the Airbus Group is worth $40 billion. Spending $100 million on licensing an aircraft is small change for a company of that size. The same cannot be said for the nuclear industry. With the majority of Generation IV reactor designs coming from startups, paying for the licensing of their reactors will be unachievable. Several companies have estimated costs of just licensing new reactors to be over $200 million. Their only hope of licensing their technology is to be acquired by a larger company, like General Electric or Fluor Construction.
Perhaps the greatest issue facing the licensing of new nuclear reactors is that Generation IV reactors are dramatically different than previous designs. Never before has the design paperwork come before the NRC for a molten salt reactor design. The NRC hasn’t adapted its regulations so that small modular reactors will be feasible under current regulations. For Generation IV reactors, developers will have to first pay the NRC $279 per professional staff hour to understand their designs and to develop rules for licensing them. After they develop their licensing procedures, the company will have to pay for the licensing fees themselves.
Something needs to change. Either new startups will need to find large corporate backers or the NRC will have to change its fee structures so that smaller companies can afford to license their technologies. The high capital costs associated with developing and demonstrating new nuclear technologies and the costly and demanding process of licensing reactors have coupled together to stagnate innovation in the nuclear industry.
Tying Everything Together
There are many similarities between the nuclear industry and the aviation industry. Not only does each industry have to navigate stringent regulations, but they have to survive intense competition. The nuclear industry must compete against the fossil fuel industry, specifically coal and natural gas used for generating electricity. Similarly, the aircraft industry faces competition from other sources of transportation.
In both cases, industry participants work cooperatively with each other to instill confidence that they are competent, well-regulated industries that focus on providing a safe and economical product. In addition to cooperating, they must compete against one another to win contracts and grow their market share. Both industries must develop complex systems that take the better part of a decade to design. The challenges each industry faces are unlike those that any other experiences. They need to ensure that their products are compatible with existing systems, use common components to each company’s advantage, and develop proper emergency response plans.
With this said, the nuclear industry is in worse condition than the aerospace industry. The aircraft industry is experiencing a “Second Golden Age of Aviation” as more nations gain access to air transportation infrastructure and airlines look to modernize their fleets. The North American and European nuclear industry is struggling with fierce competition from coal and natural gas fired power generation, an aging fleet, and a tough regulatory climate that is only getting tougher in the wake of the accident at Fukushima.
This doesn’t mean that the nuclear industry is dead… Far from it. The first new construction projects are underway in North America and Europe. Several startups, such as NuScale and Transatomic Power recognize the value of ultra-low emissions and fuel that has an energy density millions of times greater than chemical fuel. Additionally, there are numerous bright spots in Asia, Russia and the Middle East that are pursuing nuclear power.
Moving into the future, the biggest priorities for the nuclear industry are to maintain the operation of the current fleet for as long as possible, speed up its innovation cycle, encourage sensible regulation, and improve the economics of its next-generation reactors. If it can control these factors, the “nuclear renaissance” that has been promised for nearly a decade will arrive.
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