The difficulty of assessing the cost of nuclear power

2013-06-17

in Economics, Politics, The environment

This post includes some interesting information:

In the EIA’s analysis, which leaves out all incentives, the average cost of “advanced nuclear” or “next-generation nuclear” plants entering service in 2018—long lead times associated with these technologies will make it difficult to open any early—would be $108.40 per megawatt-hour (MWh), equivalent to $0.1084 per kilowatt-hour (kWh), in 2011 dollars. This seems in the right ballpark, as the estimated cost of power from the new nuclear plant under construction in the Kaliningrad region of Russia is around $0.10/kWh, a German lawmaker said in April.

For reference, the 2012 average retail price of electricity in the US was $0.1153/kWh. So the cost of new advanced nuclear power would be just barely below the retail price of electricity—power sold to you and me at home. (Commercial, industrial, and transportation customers all buy power for less than the LCOE cost for advanced nuclear power.)

In other words, it would be very difficult for a utility to make money selling power generated by advanced nuclear plants, if they had to shoulder the entire cost themselves. But they don’t.

Not included in the LCOE analysis is the cost of decommissioning nuclear plants, which is often externalized and pushed onto ratepayers through surcharges on their utility bills, or the cost of managing nuclear waste for decades, which is generally pushed onto taxpayers through the Department of Energy budget. And these are not trivial costs: Edison International estimates that decommissioning its San Onofre Nuclear Generating Station near San Diego, which it permanently retired last week, will cost around $3 billion. So the LCOE analysis actually understates the true, all-in cost of nuclear power.

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{ 9 comments… read them below or add one }

. June 17, 2013 at 11:56 am

“Even while the nuclear industry is able to externalize its costs for insurance (which are federally limited), loan guarantees (which are federally backstopped), decommissioning (which is pushed onto ratepayers) and waste handling (which is pushed onto taxpayers), it still lost. If it had to stand on its own and pay its full insurance costs like every other energy source, we could never build another nuclear plant in America, because no private investors would be willing to take that kind of risk. It’s hard to imagine how the economics could be more tilted in nuclear’s favor (although I’m sure its proponents have ideas on that).”

. June 29, 2013 at 5:18 pm
. July 2, 2013 at 2:23 pm

The half-built reactors at Vogtle are the first new ones to be approved in America since 1979, when a radioactive leak from Three Mile Island, a nuclear plant in Pennsylvania, ruined the industry’s already troubled reputation.

All this is impressive, but Vogtle and two more reactors being built across the river in South Carolina are the last vestiges of what was heralded, four or five years ago, as America’s “nuclear renaissance”.

The Nuclear Regulatory Commission (NRC) has received applications for 24 more reactors, to add to the 104 already running (see table). But none is likely to be built soon. Some are backed by consortia that have fallen apart; others have been withdrawn. In early May, for example, Duke Energy, another utility, told the NRC, which must approve new plants, that it was calling off two of the six reactors it had planned. Far from building new reactors, utilities are closing existing ones. Also in May, Dominion power shut a nuclear plant in Wisconsin that was licensed for another 20 years, “based purely on economics”.

The culprit is the price of natural gas, which fell from over $13 per million British thermal units in 2008, when many of the applications to build new nuclear plants were lodged, to just $2 last year. Although it has since recovered to over $4, America’s huge reserves of shale gas should stop it from rising much for years to come. That makes some old nuclear plants costlier to run than gas-fired ones. Factoring in the massive expense of building new reactors—the pair at Vogtle will cost around $15 billion—makes nuclear power even less competitive. David Crane, the boss of NRG Energy, which scrapped plans to build two reactors in Texas in 2011 after sinking $331m into the project, estimates that new gas-fired generation costs $0.04 per kilowatt-hour, against at least $0.10 for nuclear.

It was not supposed to be this way. In 2005 Congress approved subsidies to bolster the nuclear industry and encourage the construction of new plants. It extended a law limiting owner liability in case of accidents and, for the first few new reactors, offered $18 billion in loan guarantees, $2 billion in indemnification against cost overruns and $1 billion in tax breaks. The NRC streamlined its licensing procedures, hoping to avoid the years of delays that inflated costs for earlier nuclear plants. (Southern ended up paying $8.7 billion for the existing reactors at Vogtle, a far cry from the $660m originally projected.)

. February 3, 2014 at 4:06 pm
. August 6, 2014 at 4:49 pm

Obviously, low- and no-carbon power plants do not avoid emissions when they are not working, though they do incur some costs. So nuclear-power plants, which run at about 90% of capacity, avoid almost four times as much CO{-2} per unit of capacity as do wind turbines, which run at about 25%; they avoid six times as much as solar arrays do. If you assume a carbon price of $50 a tonne—way over most actual prices—nuclear energy avoids over $400,000-worth of carbon emissions per megawatt (MW) of capacity, compared with only $69,500 for solar and $107,000 for wind.

Nuclear power plants, however, are vastly expensive. A new plant at Hinkley Point, in south-west England, for example, is likely to cost at least $27 billion. They are also uninsurable commercially. Yet the fact that they run around the clock makes them only 75% more expensive to build and run per MW of capacity than a solar-power plant, Mr Frank reckons.

. June 7, 2015 at 11:16 am

THE CALCULATOR

This page estimates the levelized cost of electricity (LCOE) for each of the three configurations of the nuclear fuel cycle considered by this tool. Below, users can select the fuel cycle they would like to examine, change cost estimates for each component, and alter the form of the model output. The simulations represented in the plots below can be used to, for example, evaluate the model’s sensitivity to a given parameter (e.g., how much does the median LCOE change as the price of uranium fluctuates?). They can also be used to observe changes in the simulated extremes (tails of the distribution) according to a given parameter’s uncertainty (e.g., what is the simulated maximum LCOE when you increase the uncertainty in the overnight cost – the cost of constructing a nuclear power plant if it were built instantaneously without any financing costs?).

. September 8, 2015 at 1:24 pm

Nuclear costs remain competitive, says IEA/NEA report

The cost of nuclear power is in line with other baseload energy technologies, but new nuclear power plants can generate more electricity and more cheaply over their full lifetime if financing costs are low. This is the conclusion of a recent joint study by the OECD Nuclear Energy Agency (NEA) and the International Energy Agency (IEA).

Projected Costs of Generating Electricity: 2015 Edition is the eighth edition of the IEA and NEA’s joint study of the levelised lifetime costs of generating electricity for a broad set of generation technologies. The 2015 study focuses on the expected costs of technologies being built now and commissioned by 2020. The study has been published at varying intervals since 1981, with the last edition dated 2010.

Flamanville EPR timetable and costs revised

French utility EDF has put back the start-up date of the EPR unit under construction at Flamanville by about one year while the cost of the project has now tripled from its original estimate.

. September 8, 2015 at 1:35 pm

For baseload generation – combined cycle gas turbine, coal and nuclear – the study found nuclear to be the lowest cost option or all countries at a 3% discount rate. However, nuclear plants are more capital-intensive than either gas or coal, and this is reflected in increasing projected costs for nuclear at the 7% and 10% discount rates. Overnight costs for nuclear technologies in OECD countries ranges from $2021 per kWe of capacity (in Korea) to $6125 per kWe (in Hungary), but the levelised costs of electricity from nuclear, at the 3% discount rate, range from $29 per MWh (Korea) to $64 per MWh (United Kingdom). At the 7% discount rate the range increases to $40-101 per MWh and at 10% to 51-136 per MWh.

The data also suggests that an increase in the costs of baseload generation noted in the 2010 report has halted. This is particularly notable for nuclear technologies, “undermining the growing narrative that nuclear costs continue to increase globally”, the report concludes.

The report looks into the cost and deployment perspectives for small modular reactors (SMRs) and generation IV reactor designs – including very high temperature reactors and fast reactors – that could start being deployed during the 2015-2030 time frame. Although it finds that the specific per-MW costs of SMRs are likely to be 50% to 100% higher than those for large generation III reactors, these could be offset by potential economies of volume from the manufacture of a large number of identical SMRs, plus lower overall investment costs and shorter construction times that would lower the capital costs of such plants. “SMRs are expected at best to be on a par with large nuclear if all the competitive advantages … are realised,” the report notes.

Generation IV technologies – the report highlights China’s prototype high-temperature reactor and sodium-cooled fast reactor prototypes – aim to be “at least as competitive as generation III technologies” in terms of generation costs. Additional benefits over generation III reactors, in terms of fuel utilisation and waste management or high thermal efficiency, also offer potential economic advantages over other alternative technologies.

Finally, life extension of existing nuclear power plants also needs to be considered in the discussion, the study finds. “While not an emerging technology in the strict sense, since the technologies involved are well known, this constitutes an emerging issue in the nuclear power industry,” the report states. As a large number of existing nuclear plants approach the end of their initial 30- or 40-year design lifetimes, major refurbishments – and the associated major capital investment costs – should be factored in.

. June 13, 2017 at 5:16 pm

Is saving nuclear worth the cost?

From a climate perspective, paying to keep existing nuclear plants open can be a relative bargain, analysts say, since the reactors have already been built and their capital costs are sunk.

A paper by Michael Buchdahl Roth and Paulina Jaramillo of Carnegie Mellon University estimated that the country’s at-risk nuclear plants would require additional support of $8 to $44 per megawatt-hour of electricity produced to stay open, depending on the type of plant.

For comparison, an analysis by Third Way, a centrist think tank, calculated that federal subsidies for wind power could be worth $20 to $29 per megawatt-hour, and support for solar worth $26 to $85 per megawatt-hour. While the prices of wind and solar keep falling, nuclear plants have the added benefit of running around the clock.

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