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The costs of nuclear energy in Europe

February 10th, 2014 by William d'Haeseleer, KU Leuven

Nuclear new build is highly capital intensive and currently not cheap, but it may be anticipated that the capital cost will come down in the future (in particular compared to ongoing new build construction in the EU, depending on return of experience and learning effects, ‘fleet effects’, standardization, strict construction schedules, competition in the supply chain,…). Analysis of past cost escalation and opportunities for learning and ‘fleet effects’, suggests that negative learning is not necessarily an ‘intrinsic property’ of nuclear-reactor construction. Nevertheless, it is up to the nuclear sector itself to demonstrate on the ground that cost-effective construction is possible.

The above introduction is one of the messages I have delivered in a recent report commissioned by the European Commission.

Scope
The aim of my report is to establish a comprehensive picture of the cost estimations in the nuclear sector, on the basis of available contemporary information in the open literature, so as to establish a coherent background for the discussions on the cost of nuclear-generated electricity. This would provide guidance for an objective context for electricity generation investments.

The cost estimates comprise investment costs for new-build Generation-III plants, major refurbishment investment costs for long-term operation of existing plants, normal operational expenses and fuel-cycle costs (including waste management and final disposal) and decommissioning. Particular attention is devoted to the historic investment-cost evolution (mostly cost escalation) and possible future improvements in moving from a “First of a Kind” to routine construction, from analyzing learning/serial/fleet effects.

In addition, “external costs” are analyzed and an attempt is made to estimate their order of magnitude. Externalities due to routine operation but also of accidents are considered. Regarding nuclear accidents, reflections on the liability issue and alleged hidden subsidies are offered. Finally, system-integration effects of future electricity systems (consisting of nuclear plants, dispatchable fossil plants, and renewable sources) are estimated.

Methodology
The work is based on literature research, whereby the goal is to establish cost estimations for the EU, but relevant figures from other parts of the world are used on a comparative basis, or as input if the numbers are sensibly transposable.

During the whole project phase, the European Nuclear Energy Forum (ENEF) has served as a Steering Committee, commenting on the approach taken and the results obtained, and supervising the activities.

For the thorniest issue, being the future investments costs, a crucial two-step approach in a two tier structure has been additionally utilized. An exhaustive ‘scan’ of the available numbers in the ‘respectable’ open literature has been made, culminating in 137 cost figures from 28 sources (ranging from a variety of sources, some rather neutral, others tending to be critical of nuclear investment, and still others being hopeful about future cost reductions). Deliberately, no information was asked from market players (reactor vendors, electricity generators) since such a-priori surveys are often unsuccessful. Based on the numbers from the literature, a proposed estimate was “constructed” by the author. In a next phase, the market players were then confronted with that estimate with the aim to provoke a reaction from those “connoisseurs”. As a second layer, and in an attempt to have the report reviewed as to the methodological basics, definitions and assumptions, the preliminary report was reviewed by four knowledgeable energy-economics academics. After this double consultation, and commensurate with the a-priori established methodology, the numbers were slightly revised and more “Europeanized”.

As said, this investment part and the other cost elements have been found in the open literature. Clearly, the numbers and estimates are subject to the conditions and assumptions of those literature sources. The author has tried to “situate” the approaches and results from the literature and has provided the sources, so as to allow the reader to check out these references for further study.

It must be stressed at the outset that there is no unique cost figure fitting all situations. Cost figures depend on a variety of circumstances (many of which are discussed in the report). Our goal is to provide an order of magnitude, usually expressing a range, with a reasonable window of uncertainty.

Messages in Brief
On the basis of a thorough analysis of the published literature on the cost of nuclear power, one can state the points to remember in a few bullet points:

1. Nuclear new build is highly capital intensive and currently not cheap, but it may be anticipated that the capital cost will come down in the future (in particular compared to ongoing new build construction in the EU, depending on return of experience and learning effects, ‘fleet effects’, standardization, strict construction schedules, competition in the supply chain,…). Analysis of past cost escalation and opportunities for learning and ‘fleet effects’, suggests that negative learning is not necessarily an ‘intrinsic property’ of nuclear-reactor construction. Nevertheless, it is up to the nuclear sector itself to demonstrate on the ground that cost-effective construction is possible.

2. Long Term Operation (LTO) is an interesting intermediate cost-effective route if safety standards can be guaranteed.

3. The back-end fuel-cycle costs are low; the full fuel-cycle is quite cheap.
4. External costs of nuclear are small, including accidents (and much smaller than the external costs of fossil-fuel generation).

5. Systems costs of nuclear plants are small, comparable to dispatchable fossil-fired plants, and according to two independent recent calculations (subject to given modeling assumptions), much lower than systems costs of intermittent non-dispatchable renewables.

If supported politically at national level and authorized by the national Nuclear Regulatory Authorities (the first being related to public acceptance, and the second subject to adequate safety characteristics), upgrades for long-term operation of existing nuclear plants may continue to provide a very competitive low-carbon, secure, stable and reliable source of electricity for the next decades. Nuclear new build may come along, inter alia to replace existing plants at time of shutdown (brownfield), to be part of national energy mix on the longer run. This will be much dependent on the investment decisions which will be linked to the effective control of the construction costs.

All other costs beyond extensive upgrades of existing plants and construction of new build, be it O&M, fuel-cycle costs, waste and decommissioning, liability costs, systems costs, and other external costs are marginal and position nuclear generation economically favorably versus other generation sources, certainly if all externalities of other generation sources as well would be internalized.

Summarizing Numbers
All concluding orders of magnitude of the chapters to come are summarized. The reader can easily make the total calculation. The focus is on the levelized cost of electricity (LCOE) of nuclear electricity generation; the LCOE of other generation means is out of the scope of this report, but can be found in illustrative figures further in the report. The reader certainly knows those orders of magnitude. For the external costs and the system costs, we are obliged to quote numbers for the other generation means so as to be able to put the values for nuclear in perspective.

The orders of magnitude arrived at are the result of sifting through and analyzing a considerable amount of the published literature. The final numbers are based on a common sense “engineering judgment” to be able to appreciate the situation.

But, behind that engineering judgment, there is a substantial amount of interpretation, nuances, assumptions, boundary conditions, etc. It is on purpose that those “ifs-and-buts” are not repeated here in this summary. If interested, the reader should make the effort to read through the report and properly absorb those “qualifying conditions”.

New Build Nuclear Reactors – Levelized Electricity Cost (LCOE)

→ Overnight Construction Cost (OCC):

For NOAK2 (5+) on a brownfield: 3,060…3,400…3,910 €2012/kW
For FOAK2 twin unit on brownfield: 3,128…3,910…5,083 €2012/kW
For FOAK2 single unit on brownfield: 3,400…4,250…5,525 €2012/kW

→ Fuel-Cycle Cost-Part of LCOE:

Full fuel-cycle cost ~ 6 €2012 /MWhe (± 0.75 €2012 /MWhe)

→ Operation & Maintenance (O&M):

Generic order of magnitude O&M cost ~ 10 €2012 /MWhe (± 3.5 €2012 /MWhe)

→→ LCOE New Build (rounded numbers):
NOAK (5+) brownfield generic single/twin
3,060 € (ref – 10%) → LCOE(5%)= 41€2012/MWh & LCOE(10%)= 69€2012/MWh
3,400 € (ref) → LCOE(5%)= 43€2012/MWh & LCOE(10%)= 75€2012/MWh
3,910 € (ref + 15%) → LCOE(5%)= 48€2012/MWh & LCOE(10%)= 84€2012/MWh

FOAK2 brownfield twin
3,128 € (ref – 20%) → LCOE(5%)= 41€2012/MWh & LCOE(10%)= 70€2012/MWh
3,910 € (ref) → LCOE(5%)= 48€2012/MWh & LCOE(10%)= 84€2012/MWh
5,083 € (ref + 30%) → LCOE(5%)= 57€2012/MWh & LCOE(10%)= 104€2012/MWh

FOAK2 brownfield single
3,400 € (ref – 20%) → LCOE(5%)= 43€2012/MWh & LCOE(10%)= 75€2012/MWh
4,250 € (ref) → LCOE(5%)= 50€2012/MWh & LCOE(10%)= 89€2012/MWh
5,525 € (ref + 30%) → LCOE(5%)= 61€2012/MWh & LCOE(10%)= 111€2012/MWh

For each of these LCOE numbers, there is an additional uncertainty of the fuel-cycle cost (± 3.5 €2012 / MWh) and the O&M cost (± 0.75 €2012 / MWh). If we simply combine the uncertainties and round them off, then the above numbers each have an extra uncertainty of ± 4 €2012 / MWh.

Long Term Operation Refurbishment – Levelized Electricity Cost (LCOE)

→ Overnight Refurbishment Cost (ORC):

Specific ORC ~ 400 – 850 €2012/kW

→ Fuel-Cycle Cost-Part of LCOE:

Full fuel-cycle cost ~ 6 €2012 /MWhe (± 0.75 €2012 /MWhe)

→ Operation & Maintenance (O&M):

Generic order of magnitude O&M cost ~ 10 €2012 /MWhe (± 3.5 €2012 /MWhe)

→→ LCOE LTO (rounded numbers):

ORC = 400 € (ref – 33%) → LCOELTO(5%)= 21€2012/MWh & LCOELTO(10%)= 23€2012/MWh
ORC = 600 € (ref) → LCOELTO(5%)= 23€2012/MWh & LCOELTO(10%)= 26€2012/MWh
ORC = 850 € (ref + 42%) → LCOELTO(5%)= 26€2012/MWh & LCOELTO(10%)= 30€2012/MWh

For each of these LCOE numbers, there is an additional uncertainty of the fuel-cycle cost (± 3.5 €2012 / MWh) and the O&M cost (± 0.75 €2012 / MWh). If we simply combine the uncertainties and round them off, then the above numbers each have an extra uncertainty of ± 4 €2012 / MWh.

External Costs

Without Accidents
External costs for nuclear-generated electricity → 1 – 4 €2012/MWh

Compare with other means (cfr [IER, 2013] – Fig 7.8 in this report)
Coal ~ 40 €2012/MWh
Gas ~ 20 €2012/MWh
PV ~ 10 €2012/MWh
Wind ~ 2 €2012/MWh

Nuclear Accidents

Order of magnitude of external cost due to nuclear accidents is ~ 0.3 … 1 … 3 €/MWh.

System Costs
System costs are considered in two steps:
1. grid-level system costs
2. overall system costs (encompassing 1., but also variable and fixed savings or increases due to displacement of generation from conventional units)

Grid-Level System Cost
For penetrations of 10% & 30% for each technology
Includes: Back-up (adequacy); Balancing Cost; Grid Connection; Grid Reinforcement and Extension
Does not include: merit-order effects nor fuel savings
Nuclear: ~ 2 – 3 $2011/MWh
Coal: ~ 1 $2011/MWh
Gas: ~ 0.5 $2011/MWh
Wind onshore: ~ 20 – 30 $2011/MWh
Wind offshore: ~ 30 – 40 $2011/MWh
PV: ~ 35 – 55 $2011/MWh

Overall System cost
Two independent computations for the German electricity system are shown (permitting validation of obtained results) – other cases are discussed in the main text. Both are published in [NEA, 2012a].

i.Results from Excel-based model for Germany (by NEA/OECD economists)
Total cost of electricity generation in Germany in $2011/MWh. The situation without renewables (“Reference” for comparison) and with renewables at penetration levels of 10% and 30% of annual electricity generation/consumption are compared. The total costs and the cost increases are shown in the table. In this table, the mix of dispatchable generation plants is the same as in the “Reference”.

Capture d’écran 2014-02-09 à 16.22.39
ii.Comprehensive in-depth modeling for Germany, using two integrated computer codes (by IER)
Capture d’écran 2014-02-09 à 16.23.13
Total cost of electricity generation in Germany in €2007/MWh. Four renewables penetration levels are considered (15%, 35%, 50% and 80%, in terms of TWh/a) for three cases of nuclear installed capacities: 20.7 GW – before Fukushima, and two extreme cases, the double (41.7 GW) and 0. The conventional dispatchable generation mix is adjusted conforming to renewables penetration.

William D. D’haeseleer, Professor at the University of Leuven

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2 Responses to “The costs of nuclear energy in Europe”

  1. Christian von Hirschhausen Says:

    Dear William, dear all,

    your new posting „The costs of nuclear energy in Europe” came at an appropriate time for me: The dinner of the „Berlin Energy Forum 2014“, held by the European Commission in Berlin yesterday and today, had just ended, and we had had an animated discussion about the „economics“ of two nuclear newbuild projects at Pacs with some Hungarian specialists. “Economics does not count in the decision, and the nuclear waste will be shuttled back to Russia, anyways…” In the afternoon Commissioner Oettinger himself had publicly mentioned in his opening address that nuclear energy was not competitive, be it in the UK, in Eastern Europe, or elsewhere…

    I appreciate your blog post and your study “Synthesis on the Economics of Nuclear Energy”, for the European Commission (DG Energy) of November 27, 2013, highly. And I will come back to you on many of the points in more detail. For today, let me suggest to re-orient the debate: While the controversy about figures is useful (all modelers need figures for their models), it misses the central point: due to the inherent technical risks, high capital intensity and enormous social costs, nuclear energy was never economic, and will never be.

    Let me elaborate: The civil use of nuclear fission developed after WW II in the hope to reap synergies with the military use, and to gain a cheap and abundant source of electricity. The US, the UK, France went for it straight away, while Japan and Germany developed “only” the civil use, in the hope to acquire the necessary knowledge for later military competence (a full account of post-war nuclear policy that I can recommend is provided by Radkau, J., Hahn, L. (2013): Aufstieg und Fall der deutschen Atomwirtschaft. München, Oekom Verlag). The socialist countries also developed the technology, such as the Soviet Union (later emulated by other East European countries), China, etc. Nowadays, can anyone deny a close relation between the civil and the military use of nuclear energy in countries like Iran and North Korea?

    In none of even the market economies, “economic” considerations have ever played a role in the political discussions of developing nuclear power. In fact, not a single plant world-wide has ever been built under “economic” conditions; by this I mean private investment under market competitive conditions that would cover private and social costs. Organizational forms varied, such as public support to private nuclear energy companies (such as in the US or Germany), or public ownership (UK, France); but the patterns of public support were similar, such as R&D and development, monopoly rents to operators, public risk take overs, absence of private risk insurance, insufficient regard to storage questions and disposal costs, etc., lead to situations where no plant was “economic” You mention some of them in your study, but you do not go all the way to the conclusion. And the pattern continues today: could you tell an exception from this rule?, certainly not Hinckley Point, Vogtle, Pacs, let alone Olikluoto or Flammanville…

    In that sense, your conclusion “it is up to the nuclear sector itself to demonstrate on the ground that cost-effective construction is possible” is both unfair to industry (it can work as well as ever, and not attain the objective), and to the public (since it creates a false hope into a “low cost” source of low-carbon energy).

    This blog is conceived to stir debate, and that’s our task as academic, anyway. So let’s continue this debate in our traditional CESSA’ian spirit of academic friendship,

    best wishes

    Christian

  2. Patty VanHorn Says:

    I first want to respond to Christian’s comment that no nuclear plant has ever been built under economic conditions (fully private, covering social costs also). I am unable to come up with any elements of our electric system that were built under such conditions – not renewables, not networks, maybe a few gas or coal plants for the economic part but they are obviously excluded if we include social costs.

    As for the overall issue of costs, I put my hopes in the countries that are seriously pursuing new nuclear development with effective public/private cooperation to find cost réductions from learning and fleet effects. We can only get these benefits when we have consistent policies followed through over time (at least 10 years). One major cost problem for nuclear is political flip flopping.

    As for the evalution of social costs, I strongly recommend the new book by François Leveque (Nuclear On/Off – published in French in 2013) which contains an excellant presentation of the problem of making estimâtes for very low probability very high cost events – our statistical methods are weak at dealing with events in the tails.

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