10.4.5 – The dark arts of mass production

But the key question is, could we mass produce nuclear reactors cheaply? Could we run them off by the thousands and keep pace with renewables? Tricky! Mass production of any product is always a black art. What it amounts to is spending a large amount of capital on your production plant and design process with the goal of reducing the overall unit cost.

Imagine we are currently building a particular product for $1 million each. We spend $50 million on a mass production facility, plus a further $100 million designing the product for mass production, such that we can build each unit for a cost of $300,000…..but a share of that $150m must come from each product sold. We’d need to sell around 215 units before we’d be breaking even. If we sold 500, and lowered the price to $750,000 we’d still be raking it in….but if we only sold 200 units we’d make a loss, more so if we foolishly lowered the sales price below $1m before proving there was a market out there. Equally in order to sell at a price of $1m (or $0.75m) we’d need to prove that a market for several hundred units at this price existed. Another pitfall is if our R&D costs or the plant construction costs turn out to be higher than we’ve estimated. If they worked out as double our original estimate, than even with the 500 unit sales case, we’d still lose money. Then there’s other issues, notably materials costs can unexpectedly go up, as can labour, transport or energy costs. If they rise, the production cost of each unit rises too (as does the minimum number of units to break even), but we may not be able to raise the price to compensate for fear of reducing sales volume. And it is unlikely we’d find any of this out until after production has already started.

It is not unheard of in many cases of mass produced products for the company bean counters to do the sums after the product has already been on sale for some time and work out that the firm is loosing money on every unit sold! I’m told that this happens all the time in the car industry, which has been mass producing products for a good century! If they can screw it up you can imagine how easy it would be for our nuclear reactor production to do the same. And making a loss with mass production is worse than individually sold reactors as it means any losses are multiplied by a factor of hundreds or thousands (i.e. each unit sold!).

This is the problem with mass production; you are multiplying your mistakes many times over, so you need to get it right first time. If you make a tiny flaw in the design, that flaw gets repeated and made hundreds of times over, before you actually notice it. The end result is either a lot of scrap metal or a messy product recall that will drastically undermine your customer’s confidence in you as a supplier and hurt sales. This is why it’s crucial to iron out any design issues at the development stage, not when you’re building 10 units a day! Of course, more careful design means higher development costs, which again gets deducted from every unit sold.

Another problem with mass production is start up problems. Almost every product has some production problems when mass production starts. I once worked for an electronics company and was surprised to learn that 50% of our new product was failing or being scraped at various points in the process. This was considered perfectly normal! The one small stage we were overseeing was seeing a failure rate of +20% due to a small change we’d made in the manufacturing method! Of course as diligent engineers we soon cut that down to less than 2%, with commensurate drops by our colleagues at other production stages over the preceding year. But if we’re talking about nuclear reactors rather than mobile phones or laptops, that’s an awful lot of scrap metal to be throwing away. Worse, as the consequences of a “dud” reactor being loaded with fuel and turned on are unthinkable, we’d need to enforce a strict (and expensive) system of inspection of said reactors to ensure no “duds” leave the factory.

Weighing all these factors up should tell you that developing a small or micro reactor capable of mass production, isn’t going to be easy and would be expensive. It is difficult to see whether this expense would be justified, given the likely small market for such reactors.

10.4.6 – Small batch production

An alternative is so-called batch production of products. Here you use many of the techniques of mass production, just on a lower volume scale, which reduces the financial risks somewhat. This is already being performed with reactors such as the French EPR. However, Batch production suffers from many of the above problems, notably all you’re R&D plus manufacturing infrastructure costs have to be deducted from each unit sold. If they are too high, or you simply don’t sell enough units, you make a loss, although not as much of a loss as with a higher volume mass production process. Equally though by building on a smaller scale the “volume gain” is much smaller, as you are producing much less units and the price reduction (if any) is smaller.

A view of Avera’s Factory floor for EPR production

10.4.7  Don’t forget the dome!

Finally in the case of nuclear, don’t forget that big (or small) concrete containment vessel. Those would inevitably have to be built on site and most of the recent problems with nuclear construction, in terms of delays and cost overruns, have been in the construction of those. So mass production isn’t really going to help solve that bottle neck.

 

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