Economics of Nuclear Power Generation
The costs of generating electricity from coal, gas and nuclear plants varies from country to country. Coal will remain economically viable in countries such as China, the USA and Australia with abundant and accessible domestic coal resources as long as carbon emissions are negligible. Gas is also competitive for base-load power in a number of places, particularly using combined cycle plants, and however, rising gas prices have removed much of this advantage.Nuclear energy is largely competitive with fossil fuel for electricity generation, even taking into account relatively high capital costs and the fact that all waste disposal and decommissioning must be internalised, which produces an inherent cost. When the health, social, and environmental costs of fossil fuels is also taken into account, the nuclear power option can be compelling.
Costs external to production
The report of a major European study of the external costs of various fuel cycles, focusing on coal and nuclear released in mid 2001, showed that in monetary terms nuclear energy incurs approximately one tenth of the costs of coal. The external costs are defined as those incurred relating to health and the environment and are quantifiable but they are not built into the costs of the electricity. If these costs were included, the EU price of electricity from coal would be doubled and the production of energy from gas would increase 30%.
The European Commission (EC) launched the project in 1991 in collaboration with the US Department of Energy, and it was the first research project of its kind to put plausible financial figures against damage resulting from different forms of electricity production for the entire EU. The methodology considered dispersion, emissions, and impact. With nuclear power the risk of accidents is factored along with high estimates of radiological impacts from mine tailings (waste management and decommissioning being already within the cost to the consumer). Nuclear energy averages 0.4 euro cents/kWh, similar to that of hydro, coal is over 4.0 cents (4.1-7.3), gas ranges 1.3-2.3 cents and only wind power energy generation shows up better than nuclear power, at 0.1-0.2 cents/kWh average.
Fuel Costs
Initially, the basic attraction of nuclear energy has been the low fuel costs compared with non-renewable energy sources such as coal, oil and gas fired plants. Uranium, however, has to be processed, enriched and fabricated into fuel elements, and approximately two thirds of the cost is due to said enrichment and fabrication. One must also make allowances for the management of radioactive spent fuel and the disposal of this spent fuel or the wastes that are separated from it.
However, with these included, the total fuel costs of a nuclear power plant in the OECD are approximately one third of those for a coal fired plant and between one quarter and one fifth of those for a gas combined cycle plant.
Fuel costs are one area of steadily increasing efficiency and cost reduction. For instance, in Spain nuclear electricity cost was reduced by 29% over 1995-2001. This involved boosting enrichment levels and burn-up to achieve 40% fuel cost reduction. Prospectively, a further 8% increase in burn-up will give another 5% reduction in fuel cost.
Nuclear power energy generation compared with traditional energy production sources
For nuclear power plants cost figures will normally include spent fuel management, plant decommissioning and final waste disposal. While usually being external for other technologies, these costs are internal for nuclear power.
Decommissioning costs are estimated at 9-15% of the initial capital cost of a nuclear power plant. However, when discounted they contribute only a few percent to the investment cost and even less to the generation cost. In the USA they account for 0.1-0.2 cent/kWh, which is no more than 5% of the cost of the electricity produced.
The back end of the fuel cycle, including spent fuel storage or disposal in a waste repository, contributes another 10% to the overall costs per kWh, - even less if there is direct disposal of spent fuel as opposed to reprocessing. The $18 billion US spent fuel program is funded by a 0.1 cent/kWh levy.
French figures published in 2002 show (EUR cents/kWh): nuclear 3.20, gas 3.05-4.26, coal 3.81-4.57. Nuclear power generation is favourable because of the huge, standardised plants used.
It can be said that the cost of nuclear power energy generation has been dropping over the last decade. This is due to the declining fuel (including enrichment), operating and maintenance costs, while the plant concerned has already been paid for, or at least is the process of being paid off. Generally speaking, the construction costs of nuclear power plants are significantly higher than those for coal or gas fired plants because of the need to use special materials, and to incorporate sophisticated safety features and back up control equipment. These can contribute to much of the nuclear generation costs, but once the plant is built the variables are negligible.
Construction periods have historically pushed up the financing costs. However, this is less the case in Asia where construction times have tended to be shorter, for example the new-generation 1300 MWe Japanese reactors which began operating in 1996 and 1997 were built in just over four years.
Overall, OECD studies in the 1990s showed a decreasing advantage of nuclear over coal. This was largely due to a decline in fossil fuel prices in the 1980s, and easy access to low-cost, clean coal, or gas. In the 1990s gas combined cycle technology with lower fuel prices was often the lowest cost option in Europe and North America.
Nuclear cost competitiveness in the future
The OECD does not expect investment costs in new nuclear generating plants to go up because advanced reactor designs are becoming further standardised.
The future competitiveness of nuclear power will depend largely on the additional costs, which could accrue versus coal generating plants. It is uncertain as to how the real costs of meeting targets for reducing sulphur dioxide and greenhouse gas emissions will be attributed to fossil fuel energy production plants.
Under current regulatory measures, the OECD expects nuclear power to remain economically competitive with fossil fuel generation, except in regions where there is direct access to low cost fossil fuels. For example, in Australia there are coal-fired generating plants that are close to both the mines supplying them and the main population centres, and there are large volumes of gas available on low cost, long term contracts.
A joint report by the OECD Nuclear Energy Agency and the International Energy Agency showed that nuclear power had increased its competitiveness over the past seven years. The principal changes since 1998 are the increased nuclear plant capacity factors and the rising gas prices. The study did not factor in costs for carbon emissions from fossil fuel generators and focused on over one hundred plants able to come on line in the years 2010-15, including 13 nuclear plants. Nuclear overnight construction costs ranged from US$ 1000/kW in Czech Republic to $2500/kW in Japan, and averaged $1500/kW. A cost analysis of coal plants was $1000-1500/kW, gas plants $500-1000/kW and wind capacity $1000-1500/kW.
A 1997 European electricity industry study compared the electricity costs from nuclear, coal and gas for base load plant commissioned in 2005. At a 5% discount rate nuclear (in France and Spain) at 3.46 cents/kWh (US), was cheaper than all but the lowest priced gas scenario. However, at a 10% discount rate nuclear, at 5.07 c/kWh, was more expensive than all but the high-priced gas scenario. (ECU to US$ at June 1997 rates)
A detailed study of energy economics in Finland published in mid 2000 shows that nuclear energy would be the lowest cost option for energy generation capacity. The study compared nuclear, coal, gas turbine combined cycle and peat. Nuclear has a higher capital cost than all of the others --EUR 1749/kW including initial fuel load, which is approximately three times the cost of the gas plant, however, its fuel costs are much lower, and so at capacity factors above 64% it is the cheapest option.
In 2003 the MIT published the outcome of a 2-year study of nuclear energy prospects in the USA. Adjusting its assumptions to those more in line with industry expectations ($1500/kW & 4 year construction, 90% capacity factor, interest rate 12%, and adding fees & taxes) the generation cost comes out at 4.2 c/kWh, which is the same as coal without any carbon costs.
A UK Royal Academy of Engineering report in 2004 looked at electricity generation costs from a new plant in the UK. In particular it aimed to develop "a robust approach to compare directly the costs of intermittent generation with more dependable sources of generation". This meant taking into account the cost of standby capacity for wind, as well as carbon values of up to £30 per tonne CO2 (£110/tC) for coal and gas. Wind power was shown to be more than twice as expensive as nuclear power.
Generally, plant choice is likely to depend on a country's international economic situation. Nuclear power is extremely capital intensive, while fuel costs are much more significant for systems based on fossil fuels. Therefore, if a country such as Japan or France has to choose between importing large quantities of fuel or spending a lot of capital at home, simple costs may be less important than wider economic considerations.
Development of nuclear power could provide work for local industries, which build the plant and also minimise long the dependency on buying fuels abroad with the corollary of not being subject to wildly fluctuating prices. Overseas purchases over the lifetime of a new coal-fired plant in Japan, for example, may be subject to price rises which could be a more serious drain on foreign currency reserves than the less costly uranium.
Uranium factors
An advantage of Uranium is that it is a highly concentrated source of energy, which is easily and cheaply transportable. The volumes needed in nuclear energy production are much less than for coal or oil energy production. One kilogram of natural uranium will yield approximately 20,000 times as much energy as the same amount of coal.
Uranium’s contribution to the overall cost of the electricity produced is quite small, so even with a large fuel price escalation this would have a little effect. For example, a doubling of the 2002 U3O8 price would increase the fuel cost for a light water reactor by 30% and the electricity cost by approximately 7% (as opposed to the doubling of the gas price which would add 70% to the price of electricity).
Summary
- In summary we can take the following three broad points from this analysis of the economic aspects of nuclear power energy production:
- Fuel costs for nuclear plants are of a minor proportion of total generating costs, though capital costs are greater than those for coal-fired plants.
- Nuclear power is cost competitive with other forms of electricity generation, except where there is a direct access to low cost fossil fuels.
- When assessing the cost competitiveness of nuclear energy, one must take into account the decommissioning and waste disposal costs.
posted by Admin @ 17:23
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