economics of nuclear projects

The economics of nuclear power plant

The economics of new nuclear power plants is controversial issue, since diverging views on this topic, a multi- billion dollar investments ride on the choice of an energy source. Nuclear power plants typically have high capital costs for building power plants, but low direct fuel cost ( with much of cost fuel extraction, processing, use and long term storage externalized ) cost estimates also need to take into account plant decommissioning and nuclear waste storage costs. On the other hand measures to mitigate global warming, such as a carbon tax or carbon emission trading may favor economics of nuclear power.

In recent years there has been slow down of electricity demand growth and financing has become more difficult, which has  an impact on large projects such as nuclear reactors with large upfront costs and long project lead time which carry variety of risks. In eastern Europe, Bulgaria and Romania, where gas is available cheap and future supply relatively secure this relatively secure this also poses a major problem for nuclear projects. Other problem who bears the  risk of future uncertainties while taking  into account of economics nuclear  projects. 

Normally all operating nuclear power plants were developed by government utility monopolies.  In India nuclear power corporation of India is responsible for building nuclear power plants. There are several risks associated with construction costs operating performance, fuel price and other factors were borne by consumers rather than suppliers. Many countries have liberalized the electricity market when these risks and risk of cheaper competitiveness emerging before capital costs are recovered are borne by plant suppliers and operates rather than consumers which leads to a significantly different evolution of the economics of nuclear power plants.

Because of large capital costs for nuclear power and relatively long construction period before revenue is retuned, servicing , the capital costs of nuclear power plant is most important factor determining the economic competitiveness of nuclear energy. The investment can contribute about 70% to 80 % of costs of electricity. The discount rate chosen to cost nuclear power plants capital over its life time is arguably the most sensitive parameter to over all costs.

The recent liberalization of electricity market in many countries has made the economics of nuclear power generation less attractive. Previously monopolistic provider could guarantee out put requirements decades into future. Private generating companies now have to accept shorter out put contracts and risks of future lower -cost competition so they desire shorter return on investment period-this favors generation plant types with lower capital costs even if associated fuel cost are higher.  A further difficulty is that due to large sunk costs but unpredictable future income from liberalized electricity market, private capital is unlikely to be available on favorable terms which is particularly significant for nuclear as it is capital intensive.

Another consideration is that even  though consumer demand is not guaranteed , nuclear place among the lowest operating cost options. Once plant is built , it has distinct advantage over, coal ,gas  other fuel based generation supply in winning the monitory supply auctions, thereby resulting in operations at full reactor capacity. In this regard upper (P.V.) calculations for risk adjusted discount could be applied carefully, possibly approaching the guaranteed captive market levels.


Recent construction costs

In 2007 estimates have considerable  uncertainty in over night cost, and vary widely from $ 2950/ Kwe  ( over night cost) to  a Moody;s investor service conservative estimate of between $ 5000 and $ 6000/ Kwe  ( final or all in cost .

The reported prices at six new pressurized water reactor are indicative of costs for that  type of plant.

February 2008 -for two new AP 1000 reactors at turnkey point site Florida power & light calculated overnight capital cost from $ 2444 to $ 3528 per KW,which were grossed up to include cooling towers, site works , land costs , transmission costs and risk management for total $ 3108 to $ 4540 per Kilo watt. Adding financing charges increased to overall figures to$ 5780 to $ 8071 per KW.

November 2008 for two new AP 1000 reactors at Beltifonte  site TVA updated its estimates for overnight capital costs ranged to $ 2516 to $ 4649 KW for combined construction cost $ 5.6 to 10.4 billion ( total cost $ 9.9 to 17.5 billion )

In comparison with the AP 1000 units already under construction in China have been reported with substantially lower costs due to significantly lower labor costs.

In 2010, Chinese nuclear commission expect construction cost would fall significantly once full scale mass production is under way. In addition a domestic CAP 1400 design based as AP1000 is due to start construction in April 2013 with schedule short of 2017. Once CAP 1400 design has been proven work is scheduled for CAP 1700 design with largest  construction cost $ 1000/ KW.

COST OVERRUN

Construction delays can add significantly to cost of plant.  Because  a power plant does not earn income  during construction, longer construction times translate directly into higher finance charges.  Modern nuclear power plants are planned for construction in four years or less ( 42 months for CANDU ACR -1000, 60 months from order to operation for AP1000,48 months from first concrete to operation for EPR and 45 months for ESBWR)as of forced to over decade for some previous plants. However  Japanese success ABWR two of the four EPR under construction ( in Finland and France) are significantly behind schedule. In some countries notably U.S. in past unexpected changes in licensing, inspection and certification of nuclear power plants added delays and increased construction costs. However regulating process for siting
Licensing and construction have been standardized.


OPERATING COST

In general coal and nuclear plants have same type of operating costs ( operations and maintenance plus fuel costs) . However nuclear projects have lower fuel costs but higher operating and maintenance costs.

Security  costs

Unlike other plants nuclear plants must be carefully guarded against both attempted sabotage ( general with goal considered to be causing radiological accident, rather than just preventing the plant operating ) and possible theft nuclear material. Some nuclear energy plant require higher security, like natural gas storage facilities and oil refineries.

Uranium

While  amounts of uranium  used are a fraction of amounts while comparing coal or oil used conventional power plants, fuel cost account for about 28%  of  nuclear power plant operating expenses. Other recent sources cite lower fuel costs such as 16% . Doubling the price of uranium would add only 7% to the cost electricity produced. Mining activity is growing but developing a uranium mines takes long time some times 10 years. This means that uncertain uranium prices can have a grave impact on plant operating costs.

Waste disposal

All nuclear  plant produce radio active waste. To pay for cost storing, transport ting and disposal these waste in permanent location in U.S. a surcharge of  a tenth of cent per Kilo Watt hour is added to electricity bills.

Advantages  of nuclear energy when compared to other energy sources.
. Nuclear energy produces zero green house gases, which will reduce global warming on earth, while  this is the important point while considering use of nuclear energy.

. The life of nuclear power plant is more than 60 years and hence the cost of construction nuclear power plants and overrun cost will be recovered  due to long life of nuclear project.

. Cost of fuel is cheaper when compared to coal or natural gas.

. New technologies are being developed to reduce cost on construction and operating costs of nuclear projects and improving construction delays.