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Nuclear Tide
by Richard Karn 27-07-2006 |
page 4 |
With most American nuclear reactors now well into their peak operational phases, the low cost of nuclear-generated electricity is regularly being trotted out as proof positive of how competitive the industry is. This is misleading to say the least. By far the largest cost associated with a nuclear power plant is its construction and financing, which is generally assumed to account for between half and two-thirds of total costs, but this cost is not reflected in the price of nuclear electricity today because those costs have long been written off
[33]. So what the nuclear energy industry is submitting as electrical generation costs bears no more resemblance to the truth than a hacker bragging about his golf score--if you but disregard the times he shot over par.
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If is this not enough to make you skeptical of nuclear claims regarding cost, it should be remembered that the industry has a 30-year history of promising one price and then delivering another, passing its cost over-runs on to customers via rate increases. “The nuclear industry has never delivered a project on time and on budget,” claims Alan Nogee of the UCS
[34]. In 2005 dollar terms, 75 of our 103 nuclear power plants exceeded their budgets by nearly two billion dollars apiece
[35]— approximately the same amount the Energy Information Agency (EIA) now estimates a new reactor would cost to build (see below).
Studies by the Massachusetts Institute of Technology (MIT), and Britain’s Royal Institute of International Affairs in 2003 both concluded that nuclear energy is not “economic without subsidy.
[36]” Anecdotal support for this conclusion comes from the fact that no new nuclear plants have been ordered in the US since 1978
[37], suggesting that when government subsidies ended, so did plans to build them
[38]. Indeed, in inflation adjusted terms , the Economist magazine points out that the nuclear energy industry has “already received half of all subsidies lavished on the energy industry in OECD countries over the past fifty years.”
[39]
The issue of cost is central to the energy debate in the US today, but it is far from a simple matter of price comparisons. For it has to be pointed out that mis- and disinformation is not just the province of anti- and pro-nuclear camps—it’s prevalent throughout the Electrical Industry.
Coal and natural gas are touted as being the cheapest electrical energy sources in the US without ever having to make any accounting whatsoever for the millions and millions of tons of carbon dioxide and other waste they are responsible for pumping into the atmosphere each year (see below). In terms of cost accounting, it’s as if they are not producing any. The US Electrical Industry, as represented by the Bush administration
[40](and previously by the Clinton administration), is adamantly opposed to any kind of carbon accountability simply because the cost is horrendous, with some estimates running as high as $200-250 per ton
[41]. In contrast, the nuclear industry had put aside $22.5 billion as of 1998 to cover decommissioning costs and another $18 billion for waste disposal as of 2002.
[42]
Typically, the cost of a nuclear power plant is two to four times that of a fossil fueled plant
[43]—if it has no provisions for cleaning emissions in the pricing. What the ETR has done in the following comparison is to take the data from the Energy Information Agency’s (EIA) “Assumptions to the Annual Energy Outlook 2006
[44]” and adjusted it numerically in order to present uniform production capacities and construction estimates. By this we mean that because the EIA presented estimates for the costs of power stations ranging from 160 to 1000 megawatts (mW) capacity, we adjusted the figures to reflect the uniform cost of building a plant of 1000 mW capacity of each type; we made no adjustment to the estimated lead times.
| PLANT TYPE (1000 mW capacity))
|
COST ($Billions) |
Lead times (years) |
| Scrubbed Coal |
2.081 |
4 |
| Integrated Coal-Gasification Combined Cycle (IGCC) |
2.623 |
4 |
| IGCC with Carbon Sequestration |
5.431 |
4 |
| Conventional Gas/Oil Combined Cycle (CCGT) |
2.336 |
3 |
| Advanced CCGT |
1.438 |
3 |
| Advanced CCGT with Carbon Sequestration |
2.867 |
3 |
| Advanced Nuclear |
2.014 |
6 |
| Conventional Hydropower |
2.904 |
4 |
|
Source: Department of Energy, report #DOE/EIA-0554, table 38.
[45]
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Although useful for comparison purposes in pointing out how utterly changed the cost structures for fossil fuel plants are expected to be by carbon capture and sequestering, the ETR would be loath to rely on these estimates. Because no nuclear plants have been built for nearly 30 years, we also find it doubtful that anyone can accurately assess the true costs of building one today, but history suggests cost over-runs will be the norm. Similarly, carbon capture and sequestration are new technologies that are as yet undeveloped in the commercial sense (see next section), so we would expect unanticipated problems to increase costs. However, and for what it’s worth at this juncture, where the estimated cost of a nuclear plant is remarkably consistent with estimates from experts not aligned with the nuclear industry
[46], the estimate for an IGCC coal plant with Carbon Sequestering is considerably higher than a similar increase Sasol has recently quoted the Chinese to build a coal-to-liquid fuels plant with carbon sequestration.
[47]
With time and experience, the price of all this technology would be expected to come down considerably, but
the clear take-away from all of this is that energy will not be cheap in the future. The energy source we choose today for tomorrow’s world clearly cannot be based on cost alone because those costs in light of Energy Security and Global Warming are simply unknowable at present. This leads the ETR to the conclusion the focus should not be on costs but on policy—we have to find a better energy policy, one we can live with for generations to come. And in this regard, nuclear energy holds far more promise than either coal or natural gas.
In the following sections for subscribers, the Emerging Trends Report continues its assessment of the viability of natural gas, coal and nuclear energy as primary sources of base load electrical power in the US as well as our investment approach to nuclear energy, our stock recommendations, and our substantial Sources/Further Reading section.
To purchase either this 39-page individual report or an annual subscription to our service, please visit our website at
www.emergingtrendsreport.com.
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