User:Pennynm/Economics of nuclear power plants

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Nuclear power construction costs have varied significantly across the world and in time. Large and rapid increases in cost occurred during the 1970s, especially in the United States. There were no construction of nuclear power reactors between 1979 and 2012 in the United States, and since then, more new reactor projects have gone into bankruptcy than have been completed.Recent cost trends in countries such as Japan and Korea have been very different, including periods of stability and decline in costs.

New nuclear power plants typically have high capital expenditure for building plants. Fuel, operational, and maintenance costs are relatively small components of the total cost. The long service life and high capacity factor of nuclear power plants allow sufficient funds for ultimate plant decommissioning and waste storage and management to be accumulated, with little impact on the price per unit of electricity generated. Additionally, measures to mitigate climate change such as a carbon tax or carbon emissions trading, would favor the economics of nuclear power over fossil fuel power.

Overview

Although the price of new plants in China is lower than in the Western world, John Quiggin, an economics professor, maintains that the main problem with the nuclear option is that it is not economically viable. Professor of science and technology, Ian Lowe, has also challenged the economics of nuclear power. However, nuclear supporters continue to point to the historical success of nuclear power across the world, and they call for new reactors in their own countries, including proposed new but largely uncommercialized designs, as a source of new power. Nuclear supporters point out that the International Panel on Climate Change (IPCC) climate panel endorses nuclear technology as a low carbon, mature energy source which should be nearly quadrupled to help address soaring greenhouse gas emissions.

During 2012 in Ontario, Canada, costs for nuclear generation stood at 5.9¢/kWh while hydroelectricity, at 4.3¢/kWh, cost 1.6¢ less than nuclear. By September 2015, the cost of solar in the United States dropped below nuclear generation costs, averaging 5¢/kWh. Solar costs continued to fall, and by February 2016, the City of Palo Alto, California, approved a power-purchase agreement (PPA) to purchase solar electricity for under 3.68¢/kWh lower than even hydroelectricity. Utility-scale solar electricity generation newly contracted by Palo Alto in 2016 costs 2.22¢/kWh less than electricity from the already-completed Canadian nuclear plants, and the costs of solar energy generation continue to drop. However, solar power has very low capacity factors compared to nuclear, and solar power can only achieve so much market penetration before (expensive) energy storage and transmission become necessary. This is because nuclear power "requires less maintenance and is designed to operate for longer stretches before refueling" while solar power is in a constant state of refueling and is limited by a lack of fuel that requires a backup power source that works on a larger scale.

In the United States, nuclear power faces competition from the low natural gas prices in North America. Former Exelon CEO John Rowe said in 2012 that new nuclear plants in the United States "don’t make any sense right now" and won't be economic as long as the natural gas surplus persists.

The Governor of New York, Andrew Cuomo, directed the New York Public Service Commission in 2016 to consider ratepayer-financed subsidies similar to those for renewable sources to keep nuclear power stations profitable in the competition against natural gas.

A study in 2019 by the economic think tank DIW Berlin, found that nuclear power has not been profitable anywhere in the World. The study of the economics of nuclear power has found it has never been financially viable, that most plants have been built while heavily subsidised by governments, often motivated by military purposes, and that nuclear power is not a good approach to tackling climate change. It found, after reviewing trends in nuclear power plant construction since 1951, that the average 1,000MW nuclear power plant would incur an average economic loss of 4.8 billion euros ($7.7 billion AUD).

Investments

Very large upfront costs and long project cycles make nuclear energy a very risky investment: fluctuations in the global economy, energy prices, or regulations can for example reduce the demand for energy, or make alternatives cheaper. Such was the case after the 2009 recession, were the worldwide demand for electricity fell, and regulations became more permissive of unclean but cheap energy. In Eastern Europe, a number of long-established projects are struggling to find financing, notably Belene in Bulgaria and the additional reactors at Cernavoda in Romania, and some potential backers have pulled out. Where cheap gas is available and its future supply relatively secure, this also poses a major problem for clean energy projects. Former Exelon CEO John Rowe said in 2012 that new nuclear plants in the United States "don't make any sense right now" and would not be economic as long as gas prices remain low.

Current bids for new nuclear power plants in China were estimated at between $2800/kW and $3500/kW, as China planned to accelerate its new build program after a pause following the Fukushima disaster. However, more recent reports indicated that China will fall short of its targets. While nuclear power in China has been cheaper than solar and wind power, these are getting cheaper while nuclear power costs are growing. Moreover, third generation plants are expected to be considerably more expensive than earlier plants. Therefore, comparison with other power generation methods is strongly dependent on assumptions about construction timescales and capital financing for nuclear plants. Analysis of the economics of nuclear power must take into account who bears the risks of future uncertainties. To date all operating nuclear power plants were developed by state-owned or regulated utility monopolies where many of the risks associated with political change and regulatory ratcheting were borne by consumers rather than suppliers. Many countries have now liberalized the electricity market where these risks, and the risk of cheap competition from subsidised energy sources emerging before capital costs are recovered, are borne by plant suppliers and operators rather than consumers, which leads to a significantly different evaluation of the risk of investing in new nuclear power plants. Generation III+ reactors are claimed to have a significantly longer design lifetime than their predecessors while using gradual improvements on existing designs that have been used for decades. This might offset higher construction costs to a degree, by giving a longer depreciation lifetime.