Nuclear Power Plant - Economics

Economics

The economics of new nuclear power plants is a controversial subject, and multi-billion dollar investments ride on the choice of an energy source. Nuclear power plants typically have high capital costs, but low direct fuel costs (with much of the costs of fuel extraction, processing, use and long term storage externalized). Therefore, comparison with other power generation methods is strongly dependent on assumptions about construction timescales and capital financing for nuclear plants. Cost estimates also need to take into account plant decommissioning and nuclear waste storage costs. On the other hand measures to mitigate global warming, such as a carbon tax or carbon emissions trading, may favor the economics of nuclear power.

In recent years there has been a slowdown of electricity demand growth and financing has become more difficult, which has an impact on large projects such as nuclear reactors, with very large upfront costs and long project cycles which carry a large variety of risks. A study of plants constructed worldwide between the 1960s and 2000 compared the economies of scale of the earlier plants (typically about 300 MWe) with plants completed at the end of the period (with a typical capacity of about 1,300 MWe); variations in construction costs over the period only allowed a general conclusion, that in terms of capital expenditure bigger plants were more cost effective. A more specific study of the French generating industry over the period identified that their typical installations increased in capacity from 300 MWe to 1,350 MWe and that this more than four-fold increase in capacity required a capital uplift of only 130%.

In Eastern Europe, a number of long-established projects are struggling to find finance, notably Belene in Bulgaria and the additional reactors at Cernavoda in Romania, and some potential backers have pulled out. Where cheap gas is available and its future supply relatively secure, this also poses a major problem for nuclear projects.

Analysis of the economics of nuclear power must take into account who bears the risks of future uncertainties. To date all operating nuclear power plants were developed by state-owned or regulated utility monopolies where many of the risks associated with construction costs, operating performance, fuel price, and other factors were borne by consumers rather than suppliers. Many countries have now liberalized the electricity market where these risks, and the risk of cheaper competitors emerging before capital costs are recovered, are borne by plant suppliers and operators rather than consumers, which leads to a significantly different evaluation of the economics of new nuclear power plants.

Following the 2011 Fukushima I nuclear accidents, costs are likely to go up for currently operating and new nuclear power plants, due to increased requirements for on-site spent fuel management and elevated design basis threats.