Tuesday, August 05, 2008

NEI White Paper on New Nuclear Plant Costs

Titled "The Cost of New Generating Capacity in Perspective" found on our Financial Center section at nei.org:

Like all new generating capacity, there is considerable uncertainty about the capital cost of new nuclear generating capacity. Credible estimates of overnight capital costs range from $2,400/kWe to as much as $4,540/kWe. This wide variation in costs can be attributed to several factors:
  • uncertainty about escalation of commodity prices and wages,
  • the fact that design work is not complete and, until it is, it will be impossible to produce a precise cost estimate, and
  • some early estimates did not include all the costs involved in the construction of a power plant (see “Understanding the Cost Components of New Generating Capacity,” page 4).
While these costs are daunting, it is important to recognize that capital costs are only the starting point for any analysis of new generating capacity. A more accurate measure of economic competitiveness, and one that is more important to regulators and consumers, is the cost of electricity produced by a particular project compared to alternative sources of electricity and to the market price of electricity when the power plant starts commercial operation. This generation cost takes into account not only capital and financing costs, but also the operating costs and performance of a project.

Analysis by generating companies, the academic community, and financial experts shows that even at capital costs in the $4,000/kWe to $6,000/kWe range, the electricity generated from nuclear power can be competitive with other new sources of baseload power, including coal and natural gas. These results are absent any restrictions on carbon dioxide emissions. With regional or national programs that put a significant price on carbon emissions, nuclear power becomes even more competitive.
NEI's White Paper is based on a number of studies including FPL's (pdf) and Progress Energy's (pdf) Petitions for new nuclear plants to the Florida PSC, Connecticut's Integrated Resource Plan (pdf), and the Congressional Budget Office's report titled "Nuclear Power's Role in Generating Electricity." Here's more from the White Paper:
Although nuclear project costs are undeniably large, total project cost does not measure a project’s economic viability. The relevant metric is the cost of the electricity produced by the nuclear project relative to alternative sources of electricity and relative to the market price of electricity at the time the nuclear plant comes into service. As illustrated by the detailed financial modeling cited above, new nuclear power plants can be competitive, even with total project costs exceeding $6,000/kWe, including EPC and owners’ costs and financing.

These findings are confirmed by results from a Nuclear Energy Institute (NEI) financial model (see Table 1). NEI’s modeling shows that a merchant nuclear plant with an 80 percent debt/20 percent equity capital structure, supported by a federal loan guarantee, will produce electricity in the range of $64/MWh to $76/MWh. (The range reflects EPC costs from $3,500/kWe to $4,500/kWe) A high-cost ($4,500/kWe EPC cost) nuclear plant producing electricity at $76/MWh is competitive with a gas-fired combined-cycle plant burning $6-8/mmBtu gas or a super-critical pulverized coal (SCPC) plant.


NEI’s modeling shows that, in the absence of a significant price for carbon, loan guarantees and supportive state policies (such as CWIP) are essential for merchant and regulated nuclear plants, respectively. Without this federal and state government support, it is difficult to see how new nuclear plants can be financed and constructed competitively. With this support as a transition to a carbon-constrained world, the next nuclear plants should be competitive and economically viable.
Be sure to check out the rest.


Matthew66 said...

I would also point out that the design life of a nuclear power plant is a lot longer than the design life of a gas turbine and most coal plants, meaning that the owner has a lot longer to recover those costs. The plants being proposed today have a 60 - 80 year design life, probably with replacement of major components like steam generators every 20 - 25 years. After the debt is paid off, in maybe 15 years, these plants will be the most incredible cash cows for their owners, much as the plants built in the 1970's and 1980's are now.

Charles Barton said...

The problem I have with the "NEI White Paper on New Nuclear Plant Costs" is simple. The cost of a new nuclear plants is appalling, yet no attention is given to remedies. This is very much a practical consideration, because the climate scientists tell us that we should replace all fossil fuel power plant by 2050, and further more we need to acknowledge that far more of society's energy will be delivered then in the form of electricity than is the case today. Even with efficiency, we will need far more electricity than we use now.

I believe that this can be accomplished with nuclear power, but not with dinosaurs like the AP-1000 and the ESBWR. We need to be thinking about how nuclear plants can be built on the cheap, and this will involve developing Generation IV reactors, mass produced in factors, with improved but low cost safety technology, innovative attention to siting, and a very different approach to capitalization.

It is time that the nuclear industry woke up and faced its problems.

gunter said...

More NEI fluff.

The May 2008 Moody's Corporate Finance Special Report has new reactor construction starting out at minimum $7000 /kw.

So NEI is still behind the financial curve. The financial community has recognized that there is no way of tallying the actual financial cost at this point other than to say the cost of nuclear is still sharply rising.

Anonymous said...

There's a number of good speakers discussing plant lifecycle management at this month's Managing Outage and New Build Risk conference in Orlando.