The Economics of Nuclear Reactors: Renaissance or Relapse?by Mark Cooper
Within the past year, estimates of the cost of nuclear power from a new generation of reactors have ranged from a low of 8.4 cents per kilowatt hour (kWh) to a high of 30 cents. This paper tackles the debate over the cost of building new nuclear reactors. The most recent cost projections for new nuclear reactors are, on average, over four times as high as the initial “nuclear renaissance” projections. The additional cost of building 100 new nuclear reactors, instead of pursuing a least cost efficiency-renewable strategy, would be in the range of $1.9-$4.4 trillion over the life the reactors.
The key findings of the paper as follows:
* The initial cost projections put out early in today’s so-called “nuclear renaissance” were about one-third of what one would have expected, based on the nuclear reactors completed in the 1990s.
* The most recent cost projections for new nuclear reactors are, on average, over four times as high as the initial “nuclear renaissance” projections.
* There are numerous options available to meet the need for electricity in a carbon-constrained environment that are superior to building nuclear reactors. Indeed, nuclear reactors are the worst option from the point of view of the consumer and society.
* The low carbon sources that are less costly than nuclear include efficiency, cogeneration, biomass, geothermal, wind, solar thermal and natural gas. Solar photovoltaics that are presently more costly than nuclear reactors are projected to decline dramatically in price in the next decade. Fossil fuels with carbon capture and storage, which are not presently available, are projected to be somewhat more costly than nuclear reactors.
* Numerous studies by Wall Street and independent energy analysts estimate efficiency and renewable costs at an average of 6 cents per kilowatt hour, while the cost of electricity from nuclear reactors is estimated in the range of 12 to 20 cents per kWh.
* The additional cost of building 100 new nuclear reactors, instead of pursuing a least cost efficiency-renewable strategy, would be in the range of $1.9-$4.4 trillion over the life the reactors.
Whether the burden falls on ratepayers (in electricity bills) or taxpayers (in large subsidies), incurring excess costs of that magnitude would be a substantial burden on the national economy and add immensely to the cost of electricity and the cost of reducing carbon emissions.
ApproachThis paper arrives at these conclusions by viewing the cost of nuclear reactors through four analytic lenses.
* First, in an effort to pin down the likely cost of new nuclear reactors, the paper dissects three dozen recent cost projections.
* Second, it places those projections in the context of the history of the nuclear industry with a database of the costs of 100 reactors built in the U.S. between 1971 and 1996.
* Third, it examines those costs in comparison to the cost of alternatives available today to meet the need for electricity.
* Fourth, it considers a range of qualitative factors including environmental concerns, risks and subsidies that affect decisions about which technologies to utilize in an environment in which public policy requires constraints on carbon emissions.
The stakes for consumers and the nation are huge. While some have called for the construction of 200 to 300 new nuclear reactors over the next 40 years, the much more modest task of building 100 reactors, which has been proposed by some policymakers as a goal, is used to put the stakes in perspective. Over the expected forty-year life of a nuclear reactor, the excess cost compared to least-cost efficiency and renewables would range from $19 billion to $44 billion per plant, with the total for 100 reactors reaching the range of $1.9 trillion to $4.4 trillion over the life the reactors.
Hope and Hype Vs. Reality in Nuclear Reactor CostsFrom the first fixed price turnkey reactors in the 1960s to the May 2009 cost projection of the Massachusetts Institute of Technology, the claim that nuclear power is or could be cost competitive with alternative technologies for generating electricity has been based on hope and hype. In the 1960s and 1970s, the hope and hype analyses prepared by reactor vendors and parroted by government officials helped to create what came to be known as the “great bandwagon market.” In about a decade utilities ordered over 200 nuclear reactors of increasing size.
Unfortunately, reality did not deliver on the hope and the hype. Half of the reactors ordered in the 1960s and 1970s were cancelled, with abandoned costs in the tens of billions of dollars. Those reactors that were completed suffered dramatic cost overruns (see Figure ES-1). On average, the final cohort of great bandwagon market reactors cost seven times as much as the cost projection for the first reactor of the great bandwagon market. The great bandwagon market ended in fierce debates in the press and regulatory proceedings throughout the 1980s and 1990s over how such a huge mistake could have been made and who should pay for it.
In an eerie parallel to the great bandwagon market, a series of startlingly low-cost estimates prepared between 2001 and 2004 by vendors and academics and supported by government officials helped to create what has come to be known as the “nuclear renaissance.” However, reflecting the poor track record of the nuclear industry in the U.S., the debate over the economics of the nuclear renaissance is being carried out before substantial sums of money are spent. Unlike the 1960s and 1970s, when the utility industry, reactor vendors and government officials monopolized the preparation of cost analyses, today Wall Street and independent energy analysts have come forward with much higher estimates of the cost of nuclear reactors.
Figure ES-1: Overnight Cost of Completed Nuclear Reactors Compared to Projected Costs of Future ReactorsThe most recent cost projections are, on average, over four times as high as the initial nuclear renaissance projections.
Even though the early estimates have been subsequently revised upward in the past year and utilities offered some estimates in regulatory proceedings that were twice as high as the initial projections, these estimates remain well below the projections from Wall Street and independent analysts. Moreover, in an ominous repeat of history, utilities are insisting on cost-plus treatment of their reactor projects and have steadfastly refused to shoulder the responsibility for cost overruns.
One thing that utilities and Wall Street analysts agree on is that nuclear reactors will not be built without massive direct subsidies either from the federal government or ratepayers, or from both.
In this sense, nuclear reactors remain as uneconomic today as they were in the 1980s when so many were cancelled or abandoned...