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Amory Lovins and His Nuclear Illusion – Part Four (Costs of New Nuclear Plants)

We’re now on our third week of posts seriously looking at Amory Lovins’ and the Rocky Mountain Institute’s latest paper that bashes nuclear energy. Today’s post deals with the paper’s claim that nuclear energy’s “true competitors” (according to RMI) are cheaper and therefore “produce” more “climate solution” than nuclear. I will show that RMI relies on weak sources, no sources, and cherry-picked data for their cost assumptions to exaggerate their claims.

From page 19 in RMI’s paper (pdf):
Every dollar spent on new nuclear power produces 1.4-11+ times less climate solution than spending the same dollar on its cheaper competitors. For a power source merely to emit no carbon isn’t good enough; it must also produce the least carbon per dollar…
To come up with the above statement, RMI’s paper takes the cost assumptions for each technology from their graph below, inverts them to get kWh per dollar, finds each technology’s “CO2 emissions displaced relative to coal,” multiplies the kWh per dollar with the “CO2 emissions displaced relative to coal,” and then compares each technology’s results to nuclear to come up with the above statement. If you understood the first time what I just wrote in the previous sentence, then you’re a genius. It took quite awhile for me to make sense of this, but whatever. My post deals with the cost assumptions in the graph below.Initial Thoughts

I’ve gone through RMI’s Excel spreadsheet, methodology and 52-page paper and what they have basically done is picked and chosen many different data points from many different sources to compile the above graph. The primary cost assumptions are found in rows 20-38 in the worksheet titled “Climate Data” from RMI’s Excel spreadsheet. When digging into the numbers, I found the worksheet was extremely hard to follow, it doesn’t explain certain calculations, and calculates practically everything differently. It’s one big mess in my opinion.

One of the problems with the way RMI put the worksheet together is that the data comes from numerous sources published in different years. RMI compares data from a 2003 MIT study, a 2007 MIT study, a 2006 one-page WADE source, and a 2005 “personal communications” data exchange (will explain below) just to name a few. Picking and choosing certain data points from many different sources just screams the word “cherry-picking.” As I’ll show below, that’s exactly what they did.

Cogeneration Cost Data

The RMI worksheet assumes that the delivered costs (aka levelized costs) of “combined-cycle industrial” and “building-scale” cogeneration plants (aka combined heat and power plants - CHP) are 5.47-5.91 cents per kWh. One component (O&M) of RMI’s levelized costs comes from WADE’s one-pager on gas turbines. What’s interesting is that the WADE one-pager provides a link to the International Energy Agency’s 2008 Combined Heat and Power paper (pdf). According to page 24 in the IEA report, the delivered electricity costs for an “Accelerated CHP” plant are above 10 cents/kWh, nearly twice as high as RMI’s costs. Why didn’t RMI use this data from the IEA paper considering IEA is a more reliable, objective source than themselves or WADE? RMI uses IEA data for one of the cost components of nuclear (O&M). But apparently IEA data on co-gen plants are not good enough for RMI’s comparisons. Looks like cherry-picking to me.

Moving on. The RMI worksheet found that “Recovered-heat industrial cogen” plants are the cheapest power plants in their dataset. I went through a maze trying to find the capital cost assumptions for this type of power plant. In RMI’s “Climate Data” worksheet, the source of the capital costs for this plant was a paper titled “Mighty Mice” (pdf) that Amory Lovins submitted to the Nuclear Engineering International magazine. I found no such mention of the capital costs on “Recovered heat industrial cogen” plants in this paper. Instead, a link “for documentation” in the section titled Comparative Cost sent me to RMI’s page on energy efficiency. This page had nothing to do with the capital costs of “Recovered heat industrial cogen” plants. I went to RMI’s methodology next.

According to the third page of RMI’s methodology (pdf), I can supposedly find the “cost breakdown” of “Recovered heat industrial cogen” plants in a previous RMI document (pdf). It looks like the breakdown is on page 22 in the paragraph on Cogeneration. All the data in this paragraph is based on “personal communications” with Tom Casten, Chairman and CEO of Primary Energy. No capital costs were mentioned in the paragraph, instead, only an “all-in electricity price” was given. To me, relying on “personal communications” from 2005 for cost data is just plain weak. Especially since it is proprietary and there’s no way for me to verify it.

So basically the spreadsheet and methodology pointed me to two different documents which provided no information on the capital costs for a “Recovered heat industrial cogen” plant. Not only that, the source of some of the data is a CEO. Apparently, RMI thinks it’s appropriate to use the info from the CEO of Primary Energy, but when NEI’s CEO says nuclear plants are competitive in a climate-constrained world, Amory Lovins complains that it’s false (as discussed on page 5 in RMI’s paper (pdf)). One word again comes to mind: cherry-picking.

Energy Efficiency Cost Data

RMI assumes, without references to any sources, that efficiency costs 1-4 cents/kWh. How can RMI claim these numbers without any sources?

Here’s what I’ve found when researching efficiency costs. According to the EIA’s 2006 Annual Energy Review, the costs of electric efficiency from utilities have remained between 3-4 cents/kWh since 1996 (adjusting to 2007 dollars, see graph below). The energy savings have also remained flat since 1996 as well. If utilities were to save more with efficiency, I could easily argue that it will cost much more than 3-4 cents/kWh.RMI’s claim that nuclear’s “cheaper competitors” produce “1.4-11+ more climate solution” is grossly exaggerated. Their “11+” number is based on the assumed cost of efficiency of one cent/kWh. Yet, according to EIA data, one cent/kWh is too low. I find it stunning that RMI advocates so much for efficiency, yet they provide no sources on the actual costs! I am not going to get into the RMI’s cost assumptions for coal, combined cycle gas, nuclear and wind because, as I’ll show below, RMI’s assumptions are irrelevant.

So do nuclear plants provide “more climate solution” per dollar than what RMI claims?

Yes they do, at least according to several electric utilities that are planning to build them.

Over the past several years, the capital costs of building different types of power plants have increased substantially. This trend is documented by Cambridge Energy Research Associate’s Power Capital Costs Index. Here’s their press release:
The IHS CERA PCCI – which tracks the costs of building coal, gas, wind and nuclear power plants indexed to the year 2000 – is a proprietary measure of project cost inflation similar in concept to the Consumer Price Index (CPI). The IHS CERA PCCI now registers 231 index points, indicating a power plant that cost $1 billion in 2000 would, on average, cost $2.31 billion today.

“The fundamentals that have driven costs upward for the past eight years—supply constraints, increasing wages and rising materials costs—remain in place and will continue during 2008“ [said Candida Scott].
The RMI paper only discusses CERA’s cost increases for new nuclear plants (from pages 7-10) and fails to note that the “supply constraints, increasing wages and rising materials costs” are affecting all types of power plants, including RMI’s co-generation plants. This trend is important to note because cost estimates older than a year ago are outdated. This further invalidates RMI’s cost estimates that are based on data from older studies.

What are the latest new nuclear plant cost estimates then?

I can't give you exact new plant cost estimates because they vary among different sources. I can, however, provide the overall findings from several utilities who have made their own cost estimates.

In October 2007, Florida Power and Light submitted a Petition to Determine Need for Turkey Point Nuclear Units 6 and 7 (pdf) to Florida's Public Service Commission. Here's what page 11 states:
FPL’s analysis shows that for all of the scenarios evaluated (eight of nine), the addition of new nuclear capacity is economically superior versus the corresponding addition of new [combined cycle] units required to provide the same power output, yielding large direct economic benefits to customers as well as effectively addressing the criteria of section 403.519(4)(b). In fact, in the only scenario in which nuclear is not clearly superior, the natural gas prices are significantly lower than they are today and there are zero future economic compliance costs for CO2 emissions. Of all the scenarios evaluated, FPL believes these two to be the most unlikely. Moreover, even in these two unlikely scenarios, the results of the analysis show nuclear to be competitive or only slightly disadvantaged economically, while retaining the non-quantified advantages of fuel diversity, fuel supply reliability, and energy independence. Based on all the information available today, it is clearly desirable to take the steps and make the expenditures necessary to retain the option of new nuclear capacity coming on line in 2018.
This is a pretty significant statement for FPL to find that a new nuclear plant is “economically superior” considering they are the largest owner of wind capacity in the U.S. and 42% of their generation comes from “state-of-the-art” combined-cycle gas plants.

What’s hilarious is that the RMI paper (on pages 6 and 7) used FPL’s high cost estimates to imply that nuclear plants are becoming even more uneconomical. Yet they neglected to mention FPL’s key findings on page 11 as well as the whole point of the filing. Here’s FPL’s page 2:
While FPL continues to advance reduced electricity usage and load management techniques through industry-leading conservation efforts and demand side management (“DSM”) programs, and actively cultivates and pursues the development of additional renewable generating capacity within the state, by themselves these efforts are not enough. FPL must also at times construct large, baseload capacity additions if the Company is to continue “keeping the lights on.” The proposed Project is intended to help meet FPL’s growing need for additional baseload capacity, which is the essential foundation of any utility’s supply portfolio, because these plants run year-round to provide the continuous supply of electricity that customers require. The Project also will enhance the reliability of FPL’s system by reducing reliance on fossil fuels and diversifying the resource mix.
Failure to note these statements is another clear example of RMI’s cherry-picking. Here’s what Progress Energy Florida had to say in their Petition to Florida’s PSC (pdf) back in March 2008 for two new nuclear units (page 4):
PEF made its determination that Levy Units 1 and 2 were needed and the most cost-effective source of power to customers after fully accounting for the express considerations for nuclear power plant need determinations that the Florida Legislature set forth. Levy Units 1 and 2 will meet a reliability need in 2016 and beyond, while capturing cost-saving efficiencies and economies of scale from the successive construction of two nuclear power plants. Levy Units 1 and 2 will help the Company achieve greater fuel diversity and will enhance fuel supply reliability and security. The Levy units will avoid 864 million tons of carbon dioxide (“COz”), 1.4 million tons of NOx, 5.8 million tons of SO*, and 28,800 pounds of mercury over a sixty-year time frame and will, accordingly, position the Company to better respond to existing fossil fuel environmental regulations and future greenhouse gas (“GHG) regulations.
And here is SCE&G’s application to the South Carolina PSC (pdf, docketed in May 2008) to build two new nuclear units at its Summer nuclear plant station (page 6):
SCE&G’s total net reliable generation capacity, including its two-thirds share of the output of the VCSNS Unit No. 1, is 5,687 MW, compared to a 2007 peak demand of 4,998 MW. The Company’s peak demand continues to increase and is presently forecasted to be 5,791 MW by 2016 and 6,133 MW by 2019. SCE&G can efficiently meet as much as 209 MW of this increased demand through conservation, load-shifting, off-system purchases, renewable energy resources or through the installation of gas-fired peaking units. However, without the additional base load capacity represented by the proposed Facilities, SCE&G will not be able to meet the increasing need for efficient base load power in its electric service territory and assure reliable, reasonably priced electric supply to its customers and the State of South Carolina.
At least three utilities tasked with providing reliable power to their customers contradict RMI’s findings on nuclear plant costs. I’m sure the companies planning to build new nuclear plants in this list would also agree with the statements made by FPL, Progress and SCE&G.


The Energy Tribune sums it up best:
Lovins has a number of critics, and among the most prominent is Paul Joskow, a professor at the Massachusetts Institute of Technology. “My rule of thumb,” Joskow wrote me in an e-mail, “is to double his [non-nuclear] cost estimate and divide his energy saving estimate in half to get something closer to reality.”
Pretty much.

Here are links to my previous posts for this series: Amory Lovins and His Nuclear Illusion – Intro, Amory Lovins and His Nuclear Illusion – Part One (The Art of Deception), Amory Lovins and His Nuclear Illusion – Part Two (Big Plants vs. Small Plants), and Amory Lovins and His Nuclear Illusion – Part Three (Energy Efficiency and “Negawatts”). I have two more posts left to publish – one on nuclear and grid reliability (also incorporating thoughts on decentralization) and then my overall conclusion of RMI’s paper. Stay tuned.


Joseph Somsel said…
Ever get the impression that Lovins tries too hard?

He's on a mission to kill nuclear and will make whatever muddled, poorly sourced, incoherent statement he can to make that point.

As others have noted, I too tend to believe the assessment of people who have skin in the game.

Lovins' only interest is making as much anti-nuclear noise as possible so to keep his audience of true believers and to gain furhter foundation and government handouts.
Anonymous said…
Regarding the industrial cogen costs, it seems to me that Lovins is leaving the territory of cherry-picking to bravely enter the la-la-land of making things up.
bw said…
Lovins is supporting diesel, natural gas and biomass power (a combined 75% of the micropower.)

Air pollution and other deaths, 25 per TWH from diesel, 4 per TWH from natural gas and about 10 per TWH from biomass. to replace nuclear 0.65 per TWH all figures from Externe) this would cause 10,000+ deaths per year to displace nuclear.

Lovins has said nuclear has been in decline for decades. Since 1980 (when Lovins was first making the claims of the death of nuclear power) nuclear power has increased 400%.

My critique of Lovins
Anonymous said…
Go ahead spend all your private savings on nuclear, but please, please stop asking for tax dollars.

After 60 years of massive public funding, it's time for nuclear to walk on its own feet.
David Bradish said…
Go ahead spend all your private savings on nuclear, but please, please stop asking for tax dollars.

We're not asking for tax dollars, we are asking for loan guarantees which are government backing. The only way taxpayers will pay anything is if a new nuclear plant defaults. The likelihood of default is very unlikely.

After 60 years of massive public funding


it's time for nuclear to walk on its own feet.

After 60 years, nuclear plants provide 75 percent of the US' emission-free electricity while achieving record breaking performances. I believe nuclear energy IS walking on its own feet.
Anonymous said…
Not only does the nuclear industry ask for tax dollars:
(Not to mention all the public resarch funding that went into new reactor designs and endless fusion development.)

It of course also forces the electricity consumers to pay for a new nuclear plant in advance:

After 60 years of massive public funding, it's undoubtely time for nuclear to walk on its own feet.

Btw, nuclear covers 2.6% of the US energy needs.
U.S. total electricity production DOE (2005): 3891.72 TWh
U.S. total energy consumption DOE (2005): 104.279 EJ = 28967 TWh
Therefore: 13.4% of the U.S. energy consumption is electricity consumption.
Now , the nuclear contribution to the U.S. electricity consumption is 19.6%.
19.6% * 13.4% = 2.6%
This information is from the IAEA (The international organization which is paid by the tax-payer to promote nuclear energy):
It's even worse in China:
China has way more solar hot water capacity installed than nuclear power.
Needless to say: Solar hot water capacity in China has not received a single penny of tax money as opposed to nuclear power.

Btw, Euratom is also paid by the tax-payer. Go ahead and spend all your private savings on nuclear, but please, please stop asking for our tax dollars.
David Bradish said…
Btw, nuclear covers 2.6% of the US energy needs.

Anon, your calculation is incorrect. Here's a link to EIA's energy flow diagram (pdf). According to their data, nuclear energy in the U.S. provided 8.3% of the energy needs in 2007.

The error you're making is that you're not counting the heat energy lost during electric production. The total energy consumption you use counts the heat lost from the other sectors such as transportation, manufacturing and industrial so you need to include the heat lost from the electric sector as well.

If you think the heat loss numbers shouldn't be included, then you need to find a total energy consumption number that also doesn't include the heat loss from other sectors. Otherwise, you're comparing apples to oranges.
Anonymous said…
Actually the data is provided by IAEA (funded by the tax payer to promote nuclear energy - be happy: Renewables don't get that benefit) and this simple calculation is correct:
19.6% * 13.4% = 2.6%
Here's a calculator, check for yourself:

One can buy oil, gas, wood etc. and heat ones house with it.
However, one cannot buy or consume waste heat from a nuclear power plant and do anything with it.
Someone who compares the electricity output of hydro power plants with the total energy output of nuclear power plants and then claiming that nuclear energy is producing more energy than hydro power plants even though hydro power plants produce more electricity, is making misleading claims. After all: Only useful, consumable, buyable energy matters; at least on this planet.
David Bradish said…
this simple calculation is correct:
19.6% * 13.4% = 2.6%
Here's a calculator, check for yourself:

No need to be patronizing. Your error is that you're using the wrong numbers. Total electricity consumption is 41% of total energy consumption, not 13.4%. If you substitute 13.4% with 41% in your equation, then nuclear provides about 8% of the total primary energy, not 2.6%.

After all: Only useful, consumable, buyable energy matters; at least on this planet.

I have no clue what you mean here. Thermal power plants are about 30-40% efficient. Are you saying that we should only be buying 30-40 percent of the gas, coal, oil and nuclear fuel that generates electricity? Cars are about 20% efficient. So does that mean we should only be buying 20% of the gasoline?

We know how much energy is in a ton of coal, a barrel of oil, a cubic foot of gas and a pound of uranium. The issue is that our current technology can only convert a fraction of the energy from these fuels into useful energy.

What EIA and other energy agencies do is provide numbers for both the total energy consumed (including efficiency losses from all technologies) and total useful energy consumed. Like I said earlier, you're mixing them up.
Anonymous said…
U.S. total electricity production DOE (2005): 3891.72 TWh
U.S. total energy consumption DOE (2005): 104.279 EJ = 28967 TWh
This information is from the IAEA
Check for yourself.
You are claiming that this data is wrong by a factor of over 3 - which is not explainable with the efficiency losses alone as heating systems oil, gas have an efficiency of over 90%. Needless to say that hydro power has no efficiency losses as far as this data is concerned -, you are therefore also saying that the IAEA is lying. Wouldn't this be another reason to stop funding this organization which is paid by our hard earned tax money? Or do you like to pay taxes for false data?

Cars are about 20% efficient. So does that mean we should only be buying 20% of the gasoline?
I have no clue what you mean here.
If nuclear power plants deliver 100% energy but we only pay 30% for their useful energy they actually produce, does that mean we should actually pay 3 times more for their electricity as opposed to the electricity we consumed from the hydro power plants eventhough we can't actually do 3 times more with the electricity produced from nuclear power plants?
Wood, oil, gas heating systems actually have an efficiency of over 90%. Does your concept also mean that the oil-, gas-seller has to adapt the sales price depending on the end-user efficiency?

Again: Someone who compares the electricity output of hydro power plants with the total energy output of nuclear power plants and then claiming that nuclear energy is producing more energy than hydro power plants even though hydro power plants produce more electricity, is making misleading claims.
David Bradish said…
Anon, are you even looking at my links? The first link showed that nuclear power in the US was 8% of total ENERGY consumption not 2.6%. The second link I provided showed that electricity was 40% of total ENERGY consumption, not 13.6%.

Someone who compares the electricity output of hydro power plants with the total energy output of nuclear power plants and then claiming that nuclear energy is producing more energy than hydro power plants even though hydro power plants produce more electricity, is making misleading claims.

This is what EIA does in my first link. Are you saying EIA is wrong? You're contradicting yourself when you use one set of numbers from EIA and then turn around and say another set of their numbers are wrong. If you only want to talk useful energy, then stick with megawatt-hours. Otherwise, when you try to convert a few numbers, you're confusing yourself and the readers. Keep it simple.

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