Assessing the costs of nuclear power
The economics of nuclear power involves consideration of several aspects:
Capital costs, which include the cost of site preparation, construction, manufacture, commissioning and financing a nuclear power plant. Building a large-scale nuclear reactor takes thousands of workers, huge amounts of steel and concrete, thousands of components, and several systems to provide electricity, cooling, ventilation, information, control and communication. To compare different power generation technologies the capital costs must be expressed in terms of the generating capacity of the plant (for example as dollars per kilowatt). Capital costs may be calculated with the financing costs included or excluded. If financing costs are included then the capital costs change in proportion to the length of time it takes to build and commission the plant and with the interest rate or mode of financing employed. It is normally termed the ‘investment cost’. If the financing costs are excluded from the calculation the capital costs is called the ‘overnight cost’, because it imagines that the plant appeared fully built overnight.
Plant operating costs, which include the costs of fuel, operation and maintenance (O&M), and a provision for funding the costs of decommissioning the plant and treating and disposing of used fuel and wastes. Operating costs may be divided into ‘fixed costs’ that are incurred whether or not the plant is generating electricity and ‘variable costs’, which vary in relation to the output. Normally these costs are expressed relative to a unit of electricity (for example, cents per kilowatt-hour) to allow a consistent comparison with other energy technologies. To calculate the operating cost of a plant over its whole life (including the costs of decommissioning and used fuel and waste management), we must estimate the ‘levelised’ cost at present value. It represents the price that the electricity must fetch if the project is to break even (after taking account of the opportunity cost of capital through the application of a discount rate).
External costs to society from the operation, which in the case of a nuclear power is usually assumed to be zero, but could include the costs of dealing with a serious accident that are beyond the insurance limit and in practice need to be picked up by the government. The regulations that control nuclear power typically require the plant operator to make a provision for disposing of any waste, thus these costs are ‘internalised’ (and are not external). Electricity generation from fossil fuels is not regulated in the same way, and therefore the operators of such thermal power plants do not yet internalise the costs of greenhouse gas emission or of other gases and particulates released into the atmosphere. Including these external costs in the calculation gives nuclear power a significant advantage over fossil fuelled electricity generation.
Operating costs
Fuel costs have from the outset given nuclear energy an advantage compared with coal, oil and gas-fired plants. Uranium, however, has to be processed, enriched and fabricated into fuel elements, and about half of the cost is due to enrichment and fabrication. In the assessment of the economics of nuclear power allowances must also be made for the management of radioactive used fuel and the ultimate disposal of this used fuel or the wastes separated from it. But even with these included, the total fuel costs of a nuclear power plant in the OECD are typically about a third of those for a coal-fired plant and between a quarter and a fifth of those for a gas combined-cycle plant. The US Nuclear Energy Institute suggests that for a coal-fired plant 78% of the cost is the fuel, for a gas-fired plant the figure is 89%, and for nuclear the uranium is about 14%, or double that to include all front end costs.
The economics of nuclear power involves consideration of several aspects:
Capital costs, which include the cost of site preparation, construction, manufacture, commissioning and financing a nuclear power plant. Building a large-scale nuclear reactor takes thousands of workers, huge amounts of steel and concrete, thousands of components, and several systems to provide electricity, cooling, ventilation, information, control and communication. To compare different power generation technologies the capital costs must be expressed in terms of the generating capacity of the plant (for example as dollars per kilowatt). Capital costs may be calculated with the financing costs included or excluded. If financing costs are included then the capital costs change in proportion to the length of time it takes to build and commission the plant and with the interest rate or mode of financing employed. It is normally termed the ‘investment cost’. If the financing costs are excluded from the calculation the capital costs is called the ‘overnight cost’, because it imagines that the plant appeared fully built overnight.
Plant operating costs, which include the costs of fuel, operation and maintenance (O&M), and a provision for funding the costs of decommissioning the plant and treating and disposing of used fuel and wastes. Operating costs may be divided into ‘fixed costs’ that are incurred whether or not the plant is generating electricity and ‘variable costs’, which vary in relation to the output. Normally these costs are expressed relative to a unit of electricity (for example, cents per kilowatt-hour) to allow a consistent comparison with other energy technologies. To calculate the operating cost of a plant over its whole life (including the costs of decommissioning and used fuel and waste management), we must estimate the ‘levelised’ cost at present value. It represents the price that the electricity must fetch if the project is to break even (after taking account of the opportunity cost of capital through the application of a discount rate).
External costs to society from the operation, which in the case of a nuclear power is usually assumed to be zero, but could include the costs of dealing with a serious accident that are beyond the insurance limit and in practice need to be picked up by the government. The regulations that control nuclear power typically require the plant operator to make a provision for disposing of any waste, thus these costs are ‘internalised’ (and are not external). Electricity generation from fossil fuels is not regulated in the same way, and therefore the operators of such thermal power plants do not yet internalise the costs of greenhouse gas emission or of other gases and particulates released into the atmosphere. Including these external costs in the calculation gives nuclear power a significant advantage over fossil fuelled electricity generation.
Operating costs
Fuel costs have from the outset given nuclear energy an advantage compared with coal, oil and gas-fired plants. Uranium, however, has to be processed, enriched and fabricated into fuel elements, and about half of the cost is due to enrichment and fabrication. In the assessment of the economics of nuclear power allowances must also be made for the management of radioactive used fuel and the ultimate disposal of this used fuel or the wastes separated from it. But even with these included, the total fuel costs of a nuclear power plant in the OECD are typically about a third of those for a coal-fired plant and between a quarter and a fifth of those for a gas combined-cycle plant. The US Nuclear Energy Institute suggests that for a coal-fired plant 78% of the cost is the fuel, for a gas-fired plant the figure is 89%, and for nuclear the uranium is about 14%, or double that to include all front end costs.
Fuel costs are one area of steadily increasing efficiency and cost reduction. For instance, in Spain the nuclear electricity cost was reduced by 29% over 1995-2001. This involved boosting enrichment levels and burn-up to achieve 40% fuel cost reduction. Prospectively, a further 8% increase in burn-up will give another 5% reduction in fuel cost.
Uranium has the advantage of being a highly concentrated source of energy which is easily and cheaply transportable. The quantities needed are very much less than for coal or oil. One kilogram of natural uranium will yield about 20,000 times as much energy as the same amount of coal. It is therefore intrinsically a very portable and tradable commodity.
The contribution of fuel to the overall cost of the electricity produced is relatively small, so even a large fuel price escalation will have relatively little effect. Uranium is abundant and widely available.
There are other possible savings. For example, if used fuel is reprocessed and the recovered plutonium and uranium is used in mixed oxide (MOX) fuel, more energy can be extracted.
Comparing the economics of different forms of electricity generation In 2013 the US Energy Information Administration published figures for the average levelized costs per unit of output for generating technologies to be brought on line in 2018, as modeled for its Annual Energy Outlook. These show advanced nuclear, natural gas (advanced combustion turbine), and conventional coal in the bracket 10-11c/kWh. Combined cycle natural gas is 6.6 cents, advanced coal with CCS 13.6 cents, and among the non-dispatchable technologies: wind onshore 8.7 cents, solar PV 14.4 cents, offshore wind 22.2 cents and solar thermal 26.2 c/kWh. The actual capital cost of nuclear is about the same as coal, and very much more than any gas option.
It is important to distinguish between the economics of nuclear plants already in operation and those at the planning stage. Once capital investment costs are effectively “sunk”, existing plants operate at very low costs and are effectively “cash machines”. Their operations and maintenance (O&M) and fuel costs (including used fuel management) are, along with hydropower plants, at the low end of the spectrum and make them very suitable as base-load power suppliers. This is irrespective of whether the investment costs are amortized or depreciated in corporate financial accounts – assuming the forward or marginal costs of operation are below the power price, the plant will operate.
Uranium has the advantage of being a highly concentrated source of energy which is easily and cheaply transportable. The quantities needed are very much less than for coal or oil. One kilogram of natural uranium will yield about 20,000 times as much energy as the same amount of coal. It is therefore intrinsically a very portable and tradable commodity.
The contribution of fuel to the overall cost of the electricity produced is relatively small, so even a large fuel price escalation will have relatively little effect. Uranium is abundant and widely available.
There are other possible savings. For example, if used fuel is reprocessed and the recovered plutonium and uranium is used in mixed oxide (MOX) fuel, more energy can be extracted.
Comparing the economics of different forms of electricity generation In 2013 the US Energy Information Administration published figures for the average levelized costs per unit of output for generating technologies to be brought on line in 2018, as modeled for its Annual Energy Outlook. These show advanced nuclear, natural gas (advanced combustion turbine), and conventional coal in the bracket 10-11c/kWh. Combined cycle natural gas is 6.6 cents, advanced coal with CCS 13.6 cents, and among the non-dispatchable technologies: wind onshore 8.7 cents, solar PV 14.4 cents, offshore wind 22.2 cents and solar thermal 26.2 c/kWh. The actual capital cost of nuclear is about the same as coal, and very much more than any gas option.
It is important to distinguish between the economics of nuclear plants already in operation and those at the planning stage. Once capital investment costs are effectively “sunk”, existing plants operate at very low costs and are effectively “cash machines”. Their operations and maintenance (O&M) and fuel costs (including used fuel management) are, along with hydropower plants, at the low end of the spectrum and make them very suitable as base-load power suppliers. This is irrespective of whether the investment costs are amortized or depreciated in corporate financial accounts – assuming the forward or marginal costs of operation are below the power price, the plant will operate.
Exact figures for the construction of nuclear power plants are often commercially sensitive and hard to provide. However, a typical cost for construction of a Generation III reactor between 1400 - 1800 MW in OECD countries might be in the region of USD 5 - 6 billion. In non-OECD countries such as China, the cost of reactors is lower. Generally reactors which are first-of-a-kind are more expensive to build than those which are built in a series with previous experience of construction.