Characteristics of Near-Term Applications of The foregoing notes indicate that the early applications of maritime nuclear power will have most or all of the following characteristics: High Shaft Horsepower-since this would maximize total fuel cost differentials; raise the fuel-oil requirement for the conventional ship, thereby increasing the reduction in shaft horsepower and/or the extra cargo capacity which accrues to the nuclear ship; and it also takes advantage of the lower slope on the nuclear-plant capital cost curve in Fig. 1. Fast-Turnaround Cargo Gear-since this will raise the average plant load factor, thus reducing the nuclear fuel cost per shaft horsepower hour and increasing the total annual fuel savings. Long Route Length-since this will tend to increase the average plant load factor and also the conventional ship's fuel-oil requirements with the associated effects upon the conventional ship's shaft horsepower. Operation Between Economically Advanced Areas-since these ports are more likely to allow the development of fast-turnaround facilities, offer cargo attracted to advanced cargo systems, and, by coincidence, are frequently high fuel cost areas. Low Sensitivity to Health Physics and Radiological Protection Considerations-with no ship safety risks over and above those minimum risks found on seagoing ships. Economic Characteristics of Cost-Equivalent On the short to middle term, it is indicated that only pressurized-water reactors will be available for direct ship application, and that they will be economically competitive in high shaft horsepower, high power-plant utilization applications. In such applications, credits accrue to the nuclear ship in reduced displacement from the elimination of the several thousand tons of fuel oil vis-a-vis the conventional ship. This is reflected in a smaller ship and lower power requirements, which reduce both capital and operating fuel costs. These applications are, of course, typified by the 27 to 30-knot container ships being considered in the industry today. Such ships will operate between the major, advanced economies of the world that trade in high value, containerizable commodities and products. As a result, there are only a limited number of such applications, estimated as being about twelve to fifteen ships in our foreign trade and about three to five more for our coastal trades. At some point after these ships have been built, a reactor design must be available which will be directly cost competitive with fossil-fuel plants, since the remaining or major proportion of potential applications will have lower shaft horsepowers and lower plant utilizations than the high-speed, rapid-turnaround ships mentioned previously. At these lower shaft horsepowers, the reduction in ship displacement from eliminating the fuel-oil weight is less significant, and at these lower speeds, the resulting change in required shaft horsepower is less significant. Therefore, the low shaft horsepower nuclear plant must be nearly cost equivalent to a fossilfired plant. By this it is meant that the combination of the annual capital charges, fuel costs, shore staff costs, refueling costs, any increases in costs for maintenance and repair and supplies and stores, and third-party liability insurance premiums for the advanced nuclear plant must be nearly equivalent to the analogous costs of the equivalent fossil-fuel plant. Therefore, it appears that a preliminary delineation of the position of maritime nuclear power can be established by comparing nuclear and conventional plants of equal size and ignoring the beneficial effects of nuclear power upon cargo capacity and/or shaft horsepower. This comparison is most meaningful in the lower power range as noted previously. A brief inspection of the world fleet was made, and it was found that the vast majority of the world fleet has power plants of less than 25,000 shp, although recent developments in the tanker, bulk carrier, and general cargo market indicate a growing market for plants of 25,000 to perhaps 40,000 shp. Noting the importance of powerplant size, plants of 25,000 and 70,000 shp were selected for consideration. Brief calculations indicated that the power-plant load factor might be about 60 percent. On this basis, the fossil-fuel plant power costs were determined as shown in Appendix 1. Assuming that the nuclear power costs must be no more than this, and estimating nuclear power costs other than capital costs and fuel costs, it was possible to determine a required fuel cost associated with any selected capital cost for the requirement of cost equivalence with fossil-fuel power. The following cases were used to generate a range of nuclear power costs other than fuel and capital costs: 1 The only costs for nuclear power were the capital cost of the reactor and the fuel costs. (Used only as a limiting case.) 2 Assume capital, fuel, refueling, and thirdparty insurance costs as only pertinent nuclear costs. (The best long-term case when shore staff is part of normal overhead, plant is fully developed, and industry resources and fully developed.) 3 Consider capital, fuel, refueling, third-party liability, increased M & R, increased stores and supplies, increased shore staff, and contractual support costs or pertinent costs. (Case 2 plus items characteristic of the early application period for a maritime reactor.) This is considered the highest expected total of the incremental costs for the long-term case. 4 Consider all of costs in (3) and add in allowance for crew premiums, (not considered justifiable), and capital charges for added steel, and increased interest cost for construction period. (This total is considered the worst long-term case not because all of these costs will not be reflected, but because they will all be less than that estimated, and the total will be less.) Calculations were carried out for each case in Appendix 1, and a series of equivalence lines were established as shown in Fig. 3. Any combination of reactor capital costs and associated nuclear-fuel costs falling on or below the equivalence line for the assumed incremental cost case in Fig. 3 would be cost competitive with fossil fuel, assuming that the selected case fairly represented the total of all expected added nuclear power costs. The shaded area in Fig. 3 represents the most likely equivalence lines for the long term. For comparison purposes, the long-term costs of a 31,000-shp pressurized-water reactor and a 27,000-shp gas-cooled reactor are shown in Fig. 3. The PWR type reactor appears to have little promise for lower power ranges, since it falls well above the highest possible equivalence line (A ()). The gas-cooled reactor costs appear to at least fall near the acceptable region if that type plant can be designed and manufactured at that capital cost and associated fuel cost. = = A similar analysis was carried out for a 70,000shp plant as shown in Fig. 4. The equivalence line for A $234,000 is comparable to Case 3 in Appendix 1. It is seen that there is little problem with PWR costs in this power range, even before consideration is given to nuclear benefits such as reduced power requirements and/or increased cargo capacity. It is concluded that if the long-term objective of the future nuclear ship program will be to power ships of about 26,000 to 40,000 shp, which will be the next significant market after the high-speed container ships, it appears that the technical feasibility of an integral gas-cooled reactor should be reviewed. If that review is promising, an approach should be prepared to de velop a technically desirable design. Since such a program may be a five to ten-year effort, it is important that consideration be given to advanced maritime reactor requirements at once. Selection of Industry Segment for Early Maritime Nuclear Power Application With the aforementioned background, Appendix 2 lists the various industry segments and indicates the pertinent factors developed previously which are important in the economics of maritime nuclear power. It is possible to eliminate all except high-speed, rapid-turnaround ships as desirable, early applications of nuclear power if the application is to be economically attractive. If these ships can be commercially applied, they have a power-plant size and load-factor combination that is bettered only by passenger ships, which cost too much subsidy. Factors other than lower power level and plant utilization are also important. Breakbulk liners and irregulars must be able to visit a wide range of ports. The large tankers are able to bunker in the lowest fuel cost areas in the world. Feasibility of High-Speed Container Ships The requirements for a successful high-speed container service are well known. There must be cargo which would be attracted by rapid delivery to reduce inventory and obsolescence costs, and so on, and by reductions in pilferage, damage, export packing, and cargo insurance costs. This type cargo will most likely be highvalue cargo flowing between relatively advanced economies. This is consistent with the container system requirement that advanced inland transportation system be available. Finally, it is important that this cargo be flowing between as few ports as possible to facilitate container balance and control, and to allow the most effective utilization of the ships. Fig. 5 shows curves developed on a trade route between two advanced economies. For four commodity groups, the ratio of the cargo that moved in ships of different speeds to the total available cargo cubic that moved at that speed during that period was determined. Later investigations determined the declared inventory values of these specific shipments as shown in Fig. 5. It was found that the cargo inventory values, which were not known to the initial researchers, are entirely consistent with the postulated relative attraction of high-value cargo to rapid delivery. It appears that this effect may develop at a cargo value of $700 to $1000 per long ton. Freight rates under a commodity tariff structure may be based upon cost of service for the lowvalued cargos, which cannot bear high transportation costs, and are believed to be frequently based upon what the traffic will bear, or value of service rendered, in the case of higher valued cargos. Therefore, it is possible that the margin between the freight rate and direct costs such as cargo handling may be highest for the highvalue cargos, making them most desirable. Cargo tonnage and value data were examined for several trade routes between advanced economics. Table 1 shows that for two of the three cases examined, between 20 and 60 percent. of the total liner cargo tonnage on the route has an inventory value of $700 to $1000 per ton or more, which might be attracted to a rapid delivery container services. Table 1 also shows that the percent by inventory value of the total liner cargo on the trade route that is worth between $700 to $1000 per ton or more may be as high as 80 percent. If the cargo inventory value is considered an upper limit index of the percentage distribution of the total liner revenues available on the route, then a large proportion of the total revenues on the route are subject to attraction by rapid delivery in containers. Table 1 also shows that between 25 and 60 percent by tonnage of the cargo on these routes moves between five or less major ports, and that the proportion of high-value cargo tonnage flowing between these ports is three times greater than the proportion of high-value cargo on the trade route. Table 2 shows this explicitly for one route, where it was determined that between 27 and 39 percent of the cargo by tonnage, or 53 to 65 percent of the cargo by value moved between five or less ports on the route. Furthermore, the cargo moving between these major ports had a value of about $1400/LT in comparison to a value of about $400/LT for the cargo moving from, to, or between the secondary ports. Table 3 shows that the American operator is very heavily committed to this market segment at this time in the export trade and has an opportunity to increase to a similar level in his inbound trade. The indications of the cargo analyses summarized here are several fold. There is a heavy concentration of high-value cargo presently moving between a very few major ports. If cargo value is considered an index to its attraction to a rapid-delivery container service and an index of its relative freight rate, then the cargo which pays the higher revenues and is the most easily attracted to a rapid-delivery container service is distributed in the most desirable manner for the introduction of a rapid-delivery container service. Furthermore, there is some real probability that cargoes presently moving through secondary ports can be attracted to the primary ports by a superior service. New York City container operators are presently developing cargoes from as far inland as 1000 miles, and 500 miles up and down the coast. This trend will strengthen the effects noted in Tables 1 and 2. Further, it appears that the American operators are strongly committed to this market at this time and have an opportunity to improve their inbound position by offering a service most suited to this cargo, and an opportunity to protect and improve their outbound cargo market position. In view of current container manufacturer's projections of 15 to 20 percent per year growth rates in container production and pools, and recent development on the North Atlantic trade routes, the foregoing statistics are not surprising. The Future Potential Applications of Nuclear On the basis of the type analyses indicated previously, it appears that there will be a very strong container ship segment in the liner trades. It has been estimated that there may be up to fifteen or more such ships introduced in our foreign trade and at least three to five more in our coastal trade. These form the most probable initial application of maritime nuclear power using current pressurized-water technology, Economic Criteria for Evaluating Maritime There are a large number of economic criteria for evaluating alternate opportunities. They are not universally applicable, nor do they necessarily lead to the same conclusions. The most common criteria is transportation cost per long ton, developed by selecting a cost of capital for determining an annual capitalrecovery charge. This is most applicable in bulk carriers where there is no difference in the cargo tonnage and revenue per ton being carried under the various alternatives. In situations where cargo tonnage, cubic, and revenue relationships change between alternatives, this criteria is not applicable. Return on investment, determined by calculating the capital-recovery factor, does recognize the effects of changes in the revenue as well as cost structures of different alternatives. However, it is a valid criteria for the investment of corporate funds only if certain conditions are satisfied: |