New Nuclear Power Costs Too High ?  

FuturePundit has a post on a recent report from Citibank (pdf) on the economics of nuclear power - New Nuclear Power Costs Too High?.

A November 2009 report by Citibank about nuclear power costs and viability of new nuclear plants in the UK and Europe provides useful information to those (such as myself) interested in the economics of nuclear power. The Citi report claims most of the time new nuclear power would cost more than the the wholesale price of electricity in Britain. See the graph on page 10 (PDF).

Power Price: Nuclear power stations have very high fixed costs and relatively low variable costs. Their cash flows and profitability are therefore particularly sensitive to the price that they sell their power. As we show later, even at the low end of the build cost estimates, we calculate that a new nuclear station will require €65/MWh (£58.5/MWh) in real terms year in/year out to hit its breakeven hurdle rate. As we show in Figure 5, the UK has only seen prices at that level on a sustained basis for 20 months of the last 115 months. It was a sudden drop in power prices that drove British Energy to the brink of bankruptcy in 2003. No nuclear power station has ever been built to our knowledge where the developer takes the power price risk.

I've come across reports claiming that nuclear power can't compete in Europe without a carbon tax of at least 40 Euro per metric tonne.

The report points to cost and schedule overruns in recent nuclear plant projects and argues that new nuclear plants have considerable construction cost risks. These risks raise the cost of capital (the market wants higher interest rates on bonds) and therefore raise total costs.

Both Westinghouse and Areva claim to be able to construct a new third generation plant (AP-1000 and EPR, respectively) in 3 years from first pouring of concrete. However, evidence to date suggests this is not necessarily the case, as Olkiluoto and Flamanville projects have both suffered delays, while the first AP-1000 unit under construction, in SanMen China, is running significantly over its $1,000/KW construction cost target and is expected to be over $3,500/KW target on current estimates.

The SanMen delay tells us that the Olkiluoto and Flamanville are not outliers.

Note the wide range of cost estimates. This is an indication of uncertainty and uncertainly means risk and higher capital costs.

Georgia Power stated in mid 2008 that two 1100MW reactors would cost up to $14 billion, depending on financing terms. This gives significantly high cost assumptions of $6,360 per kilowatt.

In November 2008, Tennessee Valley Authority updated its estimates for Bellefonte units 3 & 4 relating to two AP1000 reactors of 2234MW combined. It said that overnight capital cost estimates ranged from $2,516 to $4,649/kW for a combined construction cost of $5.6 to $10.4 billion.