Lessons from Fukushima: The Nuclear Industry’s Key Challenges in the Aftermath of Japan’s Disaster

Booz & Company assess the capabilities that the nuclear industry must develop – following Japan’s 2011 nuclear crisis – in order to reassure watchful regulators and the global public.

Japan is still reeling from the earthquake and tsunami that struck its north-east coast in March 2011. The disaster severely disabled the multi-unit Fukushima Daiichi nuclear facility located on the Pacific coast of Ōkuma, causing an unpredictable crisis situation and serious concerns over the safety of the nuclear power industry. Management consulting firm Booz & Company has established that, to secure a future for nuclear power, the industry must incorporate the lessons of Fukushima into its operational planning, and develop improved risk analysis and project management capabilities.


Immediate Response Post-Fukushima

The most immediate response to the events at Fukushima Daiichi came from politicians.  Political leaders in Japan are still in a debate about whether to keep the country’s other reactors offline, given their similarities with the Fukushima design as well as questions about local siting conditions.

Nuclear Shutdown: Within two months, all of Japan’s plants were shut down and it was more than a year before the first one reopened in June 2012. Many other nations quickly followed suit: Germany planned to phase out its nuclear plants by 2022 and even in France, then-opposition leader and now president François Hollande called for shutting down 28 of its 58 reactors by 2025.

Reactions also affected some of the proposals for nuclear energy expansion that had gathered momentum in the previous years. Several countries decided to cancel all new constructions; the net effect of the shutdowns was significant as approximately 15 percent of current capacity was taken offline – at least temporarily – by the end of 2011.

In the Middle East in particular, reactions differed per nation: while some delayed or shelved their announced nuclear energy programs, others were less prone to do so. In the UAE, The Emirates Nuclear Energy Corporation’s plans to build four reactors over the next decade or so – for a total capacity of 5.6 GW – went ahead as intended and even crossed two major milestones earlier this year. The company received regulatory approval and awarded procurement contracts to various international firms for the supply of nuclear fuel to cover 15 years of operations and has integrated the lessons learnt from Fukushima. In truth, much of this progress is due to the UAE’s strong adoption of the highest standards of security, transparency and non-proliferation. Because of this careful, safety-driven approach, the country is considered a true role model by international organizations as well as other regional states. “Despite the UAE being rich in oil and gas, nuclear energy is still seen as a safe and cost-effective source of power needed to produce water,” said George Sarraf, Partner with Booz & Company. “It provides an opportunity to free up oil and gas resources for export or other value-add uses, create domestic growth and diversify the energy mix by embracing new sustainable and clean sources of energy.”

At A Crossroads: In the aftermath of the incident, public and political responses were also mixed; while some believed that the role of nuclear technology as a viable source of power was diminished, others viewed the catastrophe as a localized highly improbable phenomenon with few long-term implications.

Despite the setbacks, the nuclear industry’s longstanding history is still recognized as exemplary on a global scale. Currently, nuclear power accounts for about 368 gigawatts (GW) of installed capacity. “Given this hefty contribution, energy decision makers – including government leaders, regulators, and executives in the nuclear industry – must approach both the short- and long-term response to Fukushima pragmatically,” said Tom Flaherty, a Senior Partner with Booz & Company. “They need to contemplate how to build in better preventive measures and responses in the future.”


Charting a New Course

As result of the crisis, significant emphasis was placed on reforming the nuclear regulatory pro-cess. Several nations initiated safety reviews and the United States’ Nuclear Regulatory Commission (NRC) – considered a world leader in nuclear power oversight – formed its Fukushima Daiichi Near-Term Task Force and completed its evaluation in July 2011.

An Adequate Regulatory Framework: “The resulting NRC recommendations are built on the “design basis” principle, which has long been the foundation for nuclear power reactor regulations,” explained Christopher Dann, a Partner with Booz & Company. “They include more stringent requirements for the design and construction of nuclear plants, intended to ensure that these can withstand a more extreme accident than Fukushima without loss to the systems, structures, and components necessary to ensure public health and safety.”

The NRC’s first orders include:

  1. Establishing a logical, systematic, and coherent regulatory framework.

  2. Requiring licensees to reevaluate and upgrade their design-basis seismic and flooding protection.

  3. Evaluating longer-term potential enhancements to the ability to prevent or mitigate seismically induced fires and floods.

While the nuclear industry supports these three orders, it is less clear what will be the ultimate price tag of implementing the full equipment, instrumentation, and software fixes related to the current orders, and just how manageable or costly any forthcoming requirements will be.

The real challenge to the economics of nuclear power lies in the current low natural gas price environment, not the new safety requirements. If other countries implement similar regulatory regimes, planning for nuclear power’s future will entail design modifications and enhanced administrative actions.

“The nuclear industry should broaden its understanding of operating risk and its implications at both the plant and enterprise levels, with an eye towards prevention as well as improved response,” added Dann. “It should also enhance its project management capabilities to successfully deliver the next generation of new nuclear units. Both of these capabilities require an increased level of transparency into the industry’s decision-making processes. While this will be a challenge, it also offers an opportunity for the industry to demonstrate its commitment to superior risk management, design, planning, and execution.”

Lessons in Risk Management: After Fukushima, the way in which the industry evaluates risk must change, and owner resiliency and responsiveness will need to increase. Operators also have to develop enhanced risk analysis methodologies.

The industry must strengthen its current methodologies and improve existing processes and tools – to help identify potential risks. Traditional thinking about ‘known unknowns’ must be expanded to include ‘unknown unknowns’, as such scenario planning can be a useful tool in expanding leaders’ range of thinking when assessing risks and vulnerabilities.

The end goal is to develop an industry-wide approach to defining and quantifying Fukushima-level improbable events, which will both satisfy regulatory safety requirements and assuage public concerns, while being implementable and cost-effective. A further imperative involves building the plant, enterprise, and industry resilience needed to withstand these unpredictable events.


The Future of Nuclear Power

To retain its long-term credibility, the nuclear industry must diverge as little as possible from its planned investment levels and schedule. If projects currently on the drawing board fail to deliver on expectations for cost and schedule performance, the ability to build the next-generation nuclear fleet will be impaired.

It is actually fortunate that the nuclear renaissance – the economic revitalization of the nuclear power industry – has begun slowly as it provides owners, original equipment manufacturers (OEMs) and engineering, procurement, and construction (EPC) groups with additional time to improve procedures.

“Successful construction of a nuclear plant hinges on the ability of its owners to deploy effective project management capabilities, including project planning, progress measurement, and direct oversight, as well as the detailed performance metrics and insightful reporting processes necessary to achieve a successful project outcome,” said Flaherty. “A robust project capabilities framework that addresses all the activities required to complete construction can provide owners with a model for project management success.”

A well-designed project management framework alone will not ensure success; owners must also overcome constraints in resources, limits to process rigor and controls, and infrastructure inadequacy.

The nuclear industry must reassure both regulators and the public that the current nuclear operating fleet is safe, and this can only be achieved if it is willing to submit to an increasingly rigorous regulatory regime. Leaders within this sector should also remind themselves and others of its track record as a decades-long model for safe and reliable operations, as this will provide the political capital needed to guarantee the future role of nuclear power. Owners and operators will need capabilities of intelligent risk management and high-touch project execution to build the next cycle of nuclear plants within established cost and schedule frameworks – as well as achieve high levels of quality in construction and operations. Building these capabilities is a critical step in establishing a ‘right to play’ in energy generation and enabling the industry’s future.