Nuclear Energy Loses Cost Advantage Over Solar PV  

The New York Times has an article on the decline into irrelevance of the nuclear power industry as solar PV becomes a more cost effective alternative - Nuclear Energy Loses Cost Advantage. The report mentioned can be found here - NCW Solar Report (PDF).

Solar photovoltaic systems have long been painted as a clean way to generate electricity, but expensive compared with other alternatives to oil, like nuclear power. No longer. In a “historic crossover,” the costs of solar photovoltaic systems have declined to the point where they are lower than the rising projected costs of new nuclear plants, according to a paper published this month.

“Solar photovoltaics have joined the ranks of lower-cost alternatives to new nuclear plants,” John O. Blackburn, a professor of economics at Duke University, in North Carolina, and Sam Cunningham, a graduate student, wrote in the paper, “Solar and Nuclear Costs — The Historic Crossover.”

This crossover occurred at 16 cents per kilowatt hour, they said.

While solar power costs have been declining, the costs of nuclear power have been rising inexorably over the past eight years, said Mark Cooper, senior fellow for economic analysis at Vermont Law School’s Institute for Energy and Environment.

Estimates of construction costs — about $3 billion per reactor in 2002 — have been regularly revised upward to an average of about $10 billion per reactor, and the estimates are likely to keep rising, said Mr. Cooper, an analyst specializing in tracking nuclear power costs.

Identifying the real costs of competing energy technologies is complicated by the wide range of subsidies and tax breaks involved. As a result, U.S. taxpayers and utility users could end up spending hundreds of billions, even trillions of dollars more than necessary to achieve an ample low-carbon energy supply, if legislative proposals before the U.S. Congress lead to adoption of an ambitious nuclear development program, Mr. Cooper said in a report last November.

The report, “All Risk, No Reward for Taxpayers and Ratepayers,” was a response to a legislative wish list developed by the Nuclear Energy Institute, an industry group. The institute has called for a mix of U.S. subsidies, tax credits, loan guarantees, procedural simplifications and institutional support on a large scale.

At the state level, the industry has also pressed the case for “construction work in progress,” a financing system that requires electricity users to pay for the cost of new reactors during their construction and sometimes before construction starts. With long construction periods and frequent delays, this can mean that electricity users start to pay higher prices as much as 12 years before the plants produce electricity.

The institute’s Web site says the financing system “reduces the cost ratepayers will pay for power from the plant when it goes into commercial operation,” by lowering interest payments on capital costs and spreading the costs over time.

“The utilities insist that the construction work in progress charged to ratepayers also include the return on equity that the utilities normally earn by taking the risk of building the plant — even though they have shifted the risk to the ratepayers,” Mr. Cooper said. “If the plant is not built or suffers cost overruns, the ratepayers will bear the burden.”

History suggests that the risk of this is not negligible. In 1985, Forbes magazine dubbed the construction of the first generation of U.S. nuclear plants “the largest managerial disaster in business history.”

The first round of plants resulted in write-offs through bankruptcies and “stranded costs” — investments in existing power plants made uncompetitive by deregulation — which essentially transferred nearly $100 billion in liabilities to electricity users, said Doug Koplow, an economist and founder of Earth Track, based in Cambridge, Massachusetts, which campaigns against subsidies it considers environmentally harmful. “Although the industry frequently points to its low operating costs as evidence of its market competitiveness, this economic structure is an artifact of large subsidies to capital, historical write-offs of capital, and ongoing subsidies to operating costs,” Mr. Koplow said.