By David R. Ward, Jr., Duke EnergyCharlotte, N.C., and Electric Utility Costs Group (EUCG) Nuclear Committee Chair
In a seamless world such as ours, there are very few boundaries aside from those that demarcate national territories and prevent the flow of information, ideas, trade and people. It is often pointed out that those who do not recognize that the “world is flat” and that globalization is a levelling factor in all aspects of trade, ideas and practices will be left behind in the global race to excellence. Those who fail to recognize this feel they are different or they that they have the best, so why look?
Globalization is particularly relevant and important for companies that want to succeed given current global issues such as shrinking economies, credit availability, demographics and climate change. There is a need to better understand real value drivers, the ability to act with agility and exploit good opportunities. The sources of these factors for success are not just national, but global.
The Electric Utility Costs Group (EUCG) Nuclear Committee came to recognize the significant positives about “going global” a number of years ago and began its initiative to expand membership beyond North America. It has turned out to be a very progressive move in all respects, not only fostering the exchange of good ideas, but creating a meaningful way to forge positive links toward improving and sustaining the nuclear world community.
The EUCG started out as a cooperating group of member utilities primarily exchanging financial data in a forum that comprised mainly U.S. and Canadian utilities. In early 2000, the EUCG adopted a strategy to look for international members beyond North America and into Europe and the Far East. At the same time, there were overtures by some internationals that saw value in participating in the EUCG. The EUCG seized the opportunity to foster these connections premised on the fact that there was valued experience in nuclear operations in Europe and there was an expanding nuclear industry in the Far East.
Along with the strategy to bring in new member utilities, the EUCG also saw the opportunity to strengthen its role in related international associations. This forged a partnership with the International Atomic Energy Association (IAEA) to drive projects and initiatives of mutual interest.
Aside from the Canadian utilities who have been long-standing members of the association, the EUCG now includes members from Spain, Romania, France, China and Japan. This representation brings with it almost as many operating units as there are in the U.S. today, providing a larger population from which to select benchmarking peers. It also brings:
- Lessons and practices from different nuclear technologies
- Information on new nuclear build
- Lessons and practices from different operating modes, socio-economic conditions and regulatory umbrellas.
This variety in practices brings valuable mutual benefits to all members who actively participate and importantly, provides a list of contacts for utilities to exchange ideas.
In its effort to improve benchmarking costs across nations (currencies), the EUCG developed a feature in its nuclear integrated information database (NIID) called the purchasing power parity feature that factors out the “currency vacillations” and drives to a truer basis for benchmarking costs. The NIID is the cornerstone of the EUCG. The Nuclear Committee’s vision is to be the recognized industry source for economic and performance benchmarking data and information used by member companies to improve plant and industry performance.
The NIID not only captures plant and unit cost, performance and staffing data, it also provides qualitative information that enables better understanding of the data. The fundamental purpose of this database is to support benchmarking and target-setting and improve members’ access to industry best practices.
One limiting factor when nuclear energy stations try to benchmark operating costs with plants in other countries is the currency exchange issue. Some databases use a point-in-time currency exchange rate, which is for a specific date in the reporting period. However, database reporting periods can cover multiple periods such as monthly, quarterly and in most cases, annually. An exchange rate between two currencies can fluctuate significantly during a reporting period, so trying to determine which rate is the most effective can be difficult.
The EUCG Nuclear Committee databases have been collecting data since 1986 and consist of plant/unit performance and cost data, operating and outage cost data, capital cost data and staffing information. The databases are updated annually by participating members and are recognized as the most comprehensive source of nuclear plant data in the world. EUCG data is shared on a “give-to-get” basis among members, meaning that the data is only available to members that participate by providing their plant data. In 2007, the EUCG Nuclear Committee Leadership Team approved an initiative to address this issue.
A task team of member representatives North American and internationalsdeveloped a proposal to utilize the purchasing power parity (PPP) published by the Organization for Economic Co-operation and Development (OECD). This PPP is the most suitable and internationally accepted currency conversion that both converts to a common currency and equalizes the purchasing power of different currencies. In other words, the differences in price levels between countries in the process of conversion is eliminated.
As noted on the OECD website, the use of PPP is a first step in making inter-country comparisons in real terms of gross domestic product (GDP) and its component expenditures. GDP is the aggregate used most frequently to represent the economic size of countries and, on a per capita basis, the economic well-being of their residents. Calculating PPP is the first step in the process of converting the level of GDP and its major aggregates, expressed in national currencies, into a common currency to enable these comparisons to be made.
The recommended PPP initiative was approved by the Nuclear Leadership Team and the Nuclear Committee membership so the next step was implementing the recommendation into the annual data exchange process. This required programming changes to the EUCG cost databases. The EUCG database manager reconfigured each cost database to allow each participating member to select its respective country’s currency to enter plant cost data into the databases. The input data would then use the respective year/country PPP factor and convert the stored data into U.S. dollars. This saved time for the international members of EUCG by not having to use a currency exchange rate to recalculate the currency then enter the data. The output side also realizes time savings by allowing a country to select the desired currency and then all reports/graphs are displayed as requested. This type of output saves time for additional analysis and allows “last minute” management requests to be met in a timely manner. The EUCG Nuclear Committee databases have many years of historical data that required confirmation and then transformation using the given PPP factor for each related year.
Even though the original intent of this change was to benefit the international members of the EUCG Nuclear Committee, the North American companies have increased usage of the international data because of the ease of obtaining cost and performance information. With increased usage, data definitions are being refined to recognize international elements in order to ensure data consistency across the different countries. An additional benefit that is being realized at the nuclear committee workshops, which are held twice a year, is the increased participation/discussion by the international members during the presentations. This provides all attendees with insight to nuclear energy operations in different areas of the world and identifies the similarities in the issues all companies face. This also allows for differences to be uncovered for possible consideration in other parts of the world to improve the benchmarking capabilities.
Sharing data and best practices has gone a long way toward the transformation of the EUCG into a more global association. It is important to note that the aforementioned “give to get” principle not only applies to the annual data exchange but also implicitly applies to the level of participation in workshop discussions and agenda-setting by members who attend workshops. The workshops provide a very useful forum to table company issues, better understand data analysis issues, engage in discussions, exchange ideas and set future workshop agendas. This forum now has greater importance and benefit with the infusion of members from many countries.
The nuclear industry data in Figures 1 and 2 were retrieved using the latest EUCG data. The graphs shown include all current EUCG Nuclear Committee members. Each member company can drill down into more details of this information to identify relevant differences that each company can address when comparing to its peers.
Going forward, the EUCG’s strategy is to increase the exchange of valued ideas and practices across international boundaries by continuing its effort to make the database more global without sacrificing the good aspects of its current configuration and by holding workshops with a similar focus. For more information about the EUCG please contact David Ward at 704-382-4943 or visit the EUCG website at eucg.org.
Author: David R. Ward, Jr., is a senior business consultant in the nuclear generation department of Duke EnergyCharlotte, N.C. He is currently the EUCG nuclear committee chair and has served on numerous industry task teams in regards to nuclear cost and staffing-related initiatives.