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.