ON THE ECONOMICS OF NUCLEAR BETWEEN PROMISES AND FULLFILMENTS
Reinhard HAAS
Energy Economics Group, Vienna University of Technology, 1040 Wien, E-mail: haas@eeg.tuwien.ac.at
Overview
Low costs of electricity generation are a major argument put in the discussion in favour of new nuclear power plants. Despite some
concessions has been made by the advocates of nuclear since the period of “Too cheap to meter” this argument is still used to
favour supply-side nuclear generation vs renewables and energy conservation on the demand-side.
The core objective of this paper is to document why this argument is still no longer valid and how the wrong predictions regarding
investment costs and construction times look like for some recent developments. Major focus is put on the costs for interest which
strongly depend on the construction time.
Methods
Our method of approach is based on three issues: (i) a discussion of technological learning; (ii) an analysis of the empirical
historical data of construction times and costs and (iii) a simple calculation of the Net Present Value (NPV) of power plants
depending on interest rates, price increases and construction times. We show how the NPV of power plants develops if the
construction time changes.
Results
The major results of our analysis are:
With respect to “Learning”: As Fig. 1 depicts nuclear was even the times of booming plant construction one of the few exceptions
in the sense that additional capacities constructed did not lead to resulting cost reductions. The reasons are explained in Fig. 2.
Technological Uncertainties:
Learning rates (push) and market growth (pull)
1.5
1.5
0.1%
Nuclear Reactors France 1977-2000
Cost index ($/kW)
Technological learning:
why not for nuclear?
Real costs
1.0
1.0
50% interval
90% interval
mean learning rate
(115 case studies):
-20% per doubling
0.5
0.5
PVs Japan
1976-1995
0.1%
0.0
0
1
2
3
4
0.0
5
6
7
8
9
10
11
12
13
14
15
Number of doublings (installed capacity)
Source: Nakicenovic, Schrattenholzer, Grübler various papers
Fig. 1. Technological learning for various technologies
Public subsidies
Financial subsidies
(by banks by means of
low interest rates)
Industry subsidies = Dumping
Perceived costs
MW cumulative
Fig. 2. Why technological learning did not take place for nuclear
Fig. 3 depicts the principle of cost increases due to delays in construction times for the currently constructed nuclear power plant in
Olkiluoto in Finland. We can see for the example of a delay in construction time of 3 years lead to a cost increase from 3.8 cent
/kWh to 5.1 cent /kWh simply due to the icreases in interest costs.
Nuclear: catalogue price = 1500 EUR/kW:
unfavourable case
Nuclear: catalogue price = 1500
EUR/kW: favourable case
3000
3000
Net present
value at t=0:
1800 EUR/kW
(c=3.8 c/kWh)
2000
2000
1500
Interest rate: 5%,
Price increase: 0.5% /yr;
construction time: 6 years
1000
Net present
value at t=0:
2900 EUR/kW
(c=5.1 c/kWh)
2500
EUR/kW yr
EUR/kW yr
2500
1500
Interest rate: 10%,
Price increase: 1.5% /yr;
construction time: 9 years
1000
500
500
0
0
-6
-5
-4
Invest.costs
-3
Interest
-2
-1
0
price increases
-9
-8
-7
-6
Invest.costs
-5
-4
Interest
-3
-2
-1
0
price increases
Fig. 3. Principle of cost increases due to delays in construction times for the nuclear power plant Olkiluoto in Finland
Conclusions
ÊUR/MW
Regarding the economics of NPP in Western industrialized countries a huge gap between the promises of the industry with respect
to Learning as well as with respect to announced and achieved costs of plant construction exist, see Fig. 4. As this situation now
persists almost 40 years we conclude that in the near future there is no sign that the promised economic benefits looking at the full
costs of construction only will ever be provided.
THE DYNAMICS OF THE COSTS OF NUCLEAR
IN COMPARISON TO THE COSTS OF ENERGY
CONSERVATION
Cost of nuclear:
Announced and actual
Actual after
finished
Actual development
Costs of energy
conservation
Costs of nuclear
Announced by the nuclear apologetes
announced in advance
time
Argument by nuclear apologetes: „If more reactors are
constructed costs will go down!“ (see also „Learning“)
Fig. 4. Announced and actual costs of nuclear
time
Fig. 5. Cost promises and fulfilment of Nuclear vs costs of
energy conservation measures
Another major conclusions refers to the relation to energy conservation measures: the gaps between the promises of the nuclear
industry were and are a major impediment for investments in energy efficiency, see Fig. 5. The argument was/is as follows:
 Announcement in advance: Nuclear leads to cheaper electricity making energy conservation economically unattractive;
 After (delayed) completion: Nuclear leads to higher electricity prices which in the aftermath would have made energy
conservation comparably economically attractive;
References
Grübler Arnulf: Nuclear power, Energy Policy, 2011.
Grübler/Nakicenovic: technology diffusion, 1995.
Harding Jim: Seven Myths of the Nuclear Renaissance, 2007.
Thomas Steve: The economics of nuclear power, 2005.