Some considerations about the costs and use of nuclear energy for electricity generation
General overview
The current world energy crisis revives the debate on the importance of using nuclear energy for electricity generation to implement the Paris agreement on climate change.
The announcement by France, which will build new nuclear power plants to gain sovereignty and reduce emissions, is joined by the plans of the UK, Japan, Russia, India, South Korea, China, Poland, the Chez Republic, among others to do the same.
The rise in natural gas prices gives wings to the defenders of using nuclear energy for electricity generation to promote the use of this type of energy source as a realistic alternative to reduce the currently high electricity prices. Few analysts anticipated the present brutal rise in gas and coal prices, and virtually no one could predict the monumental bottleneck in supply chains that the economic recovery would bring after several waves of COVID-19 affecting almost all countries and regions. Even less, that nuclear power was going to return with force to the center of the energy debate after more than a period of ten years of decline in Europe and North America since the Fukushima nuclear accident in 2011.
The President of France, Emmanuel Macron, announced in the middle of the Glasgow climate summit and six months before the French presidential elections that new nuclear power reactors will be built in France during the coming years. He also revealed his plan to invest 1 billion euros in developing small modular nuclear reactors (SMRs). The French president later confirmed that the government would relaunch the construction of new nuclear power reactors for the first time in several decades but will continue using renewables for electricity generation. This announcement represents a drastic change in the previous energy policy adopted by the former French government to reduce the role of nuclear energy in the country’s energy mix in the future. In addition, France is pressuring the European Commission to give this technology the “green” label in its new energy classification, thus returning all the lights to a technology that, although CO?-free, other EU parties consider far from being clean.
?According to the PRIS-IAEA database, France has 56 nuclear power reactors in operation with a net capacity of 61,370 MW(e) and one unit under construction with a net capacity of 1,630 MW(e). In 2020, the electricity generated by the nuclear power plants reached 379,500 GWh or 70,6% of the total, the highest in the world. The French nuclear sector employs more than 3,000 companies and 220,000 workers. It is important to single out that France was not the only European country supporting the use of nuclear energy for electricity generation. There may be specific announcements supporting the use of nuclear energy for electricity generation in some Western and Eastern countries such as Poland or the Chez Republic, but a big rebound is not expected in other EU countries. Undoubtedly, the future of nuclear energy on a global scale passes through a few countries such as China, India, Russia, and South Korea, among others.
Until recently, President Macron had shown some ambivalence about the use of nuclear energy for electricity generation. Indeed, the president has always maintained a decidedly pro-nuclear speech, despite that in November 2018, he confirmed the permanent shut down of the Fessenheim nuclear power plant, thus fulfilling a promise made by his predecessor, Fran?ois Hollande, to French environmentalists. His administration described the decision as a key step in France’s commitment to reduce the contribution of nuclear energy to energy production by 50% in the future. The French president also promised to close another 12 nuclear power reactors in the future, although even then, when explaining the strategy, he warned that reducing the role of nuclear energy in the country’s energy mix does not mean renouncing the use of this type of energy for electricity generation.
France is one of the few countries in the EU with nuclear power plants, a reality that constitutes a key element of the French national security strategy. The perception of the French elites is that nuclear energy is important not only for its civil use but also for its military and geopolitical weight. In this vision, Paris is not alone. The four countries with the most nuclear power reactors in the world, the United States (93), France (56), China (50), and Russia (38), are also nuclear-weapon states.
The inescapable double side of the nuclear coin is no secret whispered in the corridors of the Elysee. The president himself has echoed it when defending the importance that the industry has for the French State. France must constantly think in the long term, in the ability to preserve our technical, technological, and industrial skills throughout the nuclear sector in order to protect our sovereign production capabilities, both in the civil and military spheres.
With the announcement of the resurrection of nuclear energy, President Macron embraces a narrative that allows him to reactivate this imaginary about French greatness, its economic, industrial, and military power.
The UK has just given nuclear energy a central role in its latest plans for decarbonization and energy sovereignty while announcing its political and financial backing for a Rolls-Royce project to develop mini and micro-reactors. The UK has 13 nuclear power reactors in operation with a net capacity of 7,833 MW(e) and two units under construction with a net capacity of 3,260 MW(e). The types of reactors mentioned above attract attention from the emerging world and some European countries such as the Netherlands and the Czech Republic.
The rise in electricity bill prices within the European Union has once again brought the debate on nuclear energy to the fore. Those who defend it say that it is clean and produced in a stable way, which is why they criticize the plan of the Spanish government to shut down all of its nuclear power plants before 2035. It is important to stress that Spain is the second member of the EU that generates most of its electricity by nuclear power plants (22,2%), only behind France (70,6%). The country has seven nuclear power reactors in operation with a net capacity of 7,121 MW(e) and generated in 2020 a total of 55,793 GWh or 22,2% of the total. That is why the Spanish nuclear sector is pushing the government to take the example of Paris and build new nuclear power plants that complement renewables. However, the Spanish government will continue to bet on renewables and burning gas when there is no wind or sun, and ignoring the country’s historical record of energy costs,?decided to close all existing nuclear power reactors between 2027 and 2035.
But Spain is not alone in rejecting the use of nuclear energy for electricity generation. Nuclear plants have their days counted in several countries in the EU. In Germany, all nuclear power plants will be closed before 2022, and Belgium also has a closure schedule of all of its nuclear power plants. Switzerland will not use nuclear energy for electricity generation again after the closure of its last units.
At the recent UN Climate Change Conference (COP26) held in Glasgow, UK, it was again revealed that, within the EU, there are disagreements over nuclear energy. Germany asked the European Commission not to classify nuclear energy as “green,” arguing its high costs and the waste problem it leaves behind, while France believes that nuclear energy is a good alternative to fossil fuels if the Paris goals are accomplished. Spain has preferred to avoid positioning itself in this pulse that the European Commission will have to settle, but has clearly expressed its support to the use of renewable energies for electricity generation, despite that nuclear energy has been the first source of electricity production for ten consecutive years in this country.
Outside of Europe, China is considering the construction of 150 new nuclear power reactors in the next 15 years, as many as the world has built in the last 35 years, being the greatest nuclear power program in the world. Currently, China has 52 nuclear power reactors in operation with a net capacity of 49,589 MW(e) and 14 units under construction with a net capacity of 13,875 MW(e). The Chinese nuclear power plant program construction is also the largest in the world, and its objective is twofold:
Coal is the most polluting fuel used for electricity generation and contributes more than half of its electricity consumption in China.
Even in Japan, where nuclear power has been anathema since the Fukushima nuclear accident in 2011, the new prime minister, Fumio Kishida, has defended the return to operation of twenty nuclear power reactors that remain inactive ten years after the accident.
One of the best indicators of the growing interest - for now, at least rhetorically - in nuclear energy for electricity generation is the price of uranium. After years of depression and in the heat of new plans to install more nuclear power reactors in some countries, the value of uranium is today at a high of almost a decade. Although still light-years from its peak in 2007 - when it more than tripled current values - it is already clearly above the historical average.
For more and more countries, nuclear energy is becoming, once again, a realistic alternative to the use of coal, oil, or gas for electricity generation and as a complement to renewables. There are two reasons to be considered:
Undoubtedly, nuclear power would be a backup technology for photovoltaic and wind power when it is not sunny or too windy, exactly the role that gas or coal have assigned today. Modern nuclear power reactors can now adapt more easily their electricity production to current demand. However, despite the recent announcements supporting the use of nuclear energy for electricity generation, the weight of nuclear power in the global electricity matrix has followed a decreasing trend. Today, this technology supplies around 10% of the electricity consumed in the world, and while demand continues to rise, the production provided by nuclear power has remained constant for the last two decades at around 2,500 TWh ( about ten times the Spanish consumption). Because the current fleet of nuclear power reactors is aging rapidly in several countries, the announcements that have been reported could, at best, replace the units that are closing down. Besides, a nuclear renaissance in Europe and North America is far from being a reality.
In the USA, a Bill Gates company, TerraPower, has announced that it will build a US$4 billion high-tech experimental nuclear power plant in Wyoming and that the US administration will provide almost half of that amount. The facility will be located in the remote town of Kemmerer, where the Naughton coal-fired power plant is due to close in 2025.
According to the TerrraPower company, the Natrium project developed in cooperation with GE Hitachi Nuclear Energy will have a fast nuclear power reactor with a capacity of 345 MW cooled by sodium with an energy storage system based on molten salts. The system will be able to increase power up to 500 MW. That is equivalent to the energy needed to supply 400,000 homes and allow the nuclear power plant to support the operation of plants that would operate with renewable energy.
The Natrium project will receive about US$1.9 billion from the US federal government, of which US$1.5 billion corresponds to the bipartisan infrastructure bill that President Joe Biden signed this week and which includes US$2.5 billion for advanced nuclear power reactors. It is a very important government grant that reflects the government’s interest in supporting the use of nuclear energy for electricity generation. That support came at a proper time because the US government and the nuclear industry were falling behind other countries despite having the largest number of units operating in the world. According to the PRIS-IAEA database, in November 2021, the United States had 93 nuclear power reactors in operation with a net capacity of 95,523 MW(e) and two nuclear power reactors under construction with a net capacity of 2,234 MW(e). In 2020, the electricity generation of nuclear power plants in the US reached the figure of 789,919 GWh, or 19.7% of the total.
On the other hand, the US Secretary of Energy, Jennifer Granholm, pointed out that the new nuclear power plant would give hope to a city after learning about the closure of a coal power plant operating in the area and the loss of many jobs.
The Natrium nuclear power plant is scheduled to begin operation in 2028, within the deadline set by the US Congress. According to estimates, approximately 2,000 workers will be needed to build the plant at its peak, and once the nuclear power plant is operational, about 250 people, including facility security personnel, will work there.
In Asia, the growth in electricity demand continues to be vertiginous, and the need to decarbonize quickly, imperative. That makes the use of nuclear energy for electricity generation a realistic alternative to reduce the level of contamination of two of the three most polluted countries in the world (China and India).
Through the roof, the prices of natural gas are giving wings to those who defend the use of nuclear technology for electricity generation. However, others doubt the path that this kind of nuclear revival could take because it is still very expensive, while some believe that it is very dangerous. In the West, except in very specific moments, such as now, when gas is so expensive, nuclear energy cannot compete with a combined cycle in which natural gas is burned to generate electricity and even less so with renewables.
Third-generation nuclear power reactors, the most modern nuclear technology yet in the market, until SMRs, mini or micro-reactors are a tangible reality, are the most expensive energy source globally. The construction of two EPR third-generation nuclear power reactors in France or the UK confirmed the statement mentioned above, even more so if they are built to act as a backup for renewables. On the other hand, SMRs, mini and micro-reactors, have not proven themselves technically to be safer and economically viable.
According to some experts, the cost of electricity generated by a new nuclear power reactor is four times higher than from second-generation renewable sources, wind and solar. They also take five times longer to be connected to the grid due to the long construction period of a nuclear power plant.
?Cost of Nuclear Power
The cost of generating power using nuclear energy as fuel can be separated into four main components:
Construction Costs
The construction costs of a nuclear power plant include two main components. One is the initial capital cost, and the second is operation and maintenance costs. Each of these two major cost categories consists of several cost elements.
According to Zeina Hazem (2018) “Construction software project management,” the capital cost for constructing a nuclear power plant includes the expenses related to the initial establishment of the plant. These expenses are the following:
According to Project Management for Construction: Cost Estimation (cmu.edu), the operation and maintenance costs include the following expenses:
The magnitude of each of these cost components depends on the following issues:
It is important to understand by professionals and construction managers that while the construction costs of a nuclear power plant may be the single largest capital cost component, other costs could be relevant. For example, according to Project Management for Construction: Cost Estimation (cmu.edu), land acquisition costs could be a major expenditure for constructing a nuclear power plant in high-density urban areas. Construction financing costs can reach the same order of magnitude as large projects such as nuclear power plants.
From the owner’s perspective, estimating each cost component associated with the operation and maintenance costs is equally important to analyze the life cycle costs for a proposed nuclear power plant. The large expenditures needed for nuclear power plant maintenance, especially for public-owned companies, are reminders of the problems faced in the past due to not considering the inclusion of operation and maintenance costs in the design stage of the nuclear power plant.
According to Ravishankar K.R. (2012-2013, University of Nizwa), in most construction budgets associated with large projects as a nuclear power plant, “there is an allowance for contingencies or unexpected costs occurring during construction. This contingency amount may be included within each cost item or be included in a single category of construction contingency.” The contingency amount is based on historical experience and the expected difficulty of a particular nuclear power plant construction. For example, a construction firm could make estimates of the expected cost of the construction of a nuclear power plant in five different areas:
Contingent amounts not spent during a nuclear power plant construction can be released either to the owner or additional budget project components near the end of its construction. Construction costs associated with large projects, such as a nuclear power plant, are very difficult to quantify but dominate the cost of nuclear power. The third-generation nuclear power reactors claimed to be substantially cheaper and faster to construct than the second-generation nuclear power reactors now in operation throughout the world. Four-generation nuclear power reactors, SMRs, and mini and microreactors are expected to be even cheaper and more secure than third-generation nuclear power reactors.
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Construction Cost Overruns
There were massive cost overruns for plants built in the USA in the 1970s and 1980s. According to Kamis (2015), there were several reasons for these.
In contrast, the French nuclear power program settled on a standard design that satisfied the French Regulatory Commission. The nuclear industry achieved economies of volume in plants’ production and, in general, completed construction on time.
Operating Costs
According to Kamis (2015), operating costs are much easier to quantify and are independently verified as they relate directly to the utilities’ profitability that operates them. “Any discrepancies are soon discovered through accounting audits.” Company’s that operate the US’s nuclear power reactors have made excellent profits over many years. However, for different reasons, the US nuclear power industry has finally lived up to its promise made in the 1970s to produce electricity reliably and cheaply. Nuclear power plant availability has increased from 67% to over 90% in recent years. The operating cost includes a charge of 0.2 cents per kWh to fund the eventual disposal of waste from the reactor and decommissioning activities. The price of uranium ore contributes approximately 0.05 cents per kWh.
Management of Nuclear Plant Operations
According to Morales Pedraza (2014), it’s clear, from both the French and US experience, “that pro-active industry organization are vital in obtaining efficient plant utilization and minimizing running costs.” On the other hand, and according to Kamis (2015), in the US in the late 1980s and early 1990s, “there was little pooling of knowledge and experience amongst nuclear power operators. This was caused by a combination of industry inexperience, the lack of standardized designs, and the industry’s fragmentation. Once again, this was in contrast to the French experience, where the uniform design and the single state-owned organization allowed knowledge to be more easily shared.”
It is important to single out that the US nuclear industry has since gone through several cycles of changes. Specialized companies focusing on specific activities have mostly taken over the US’s fleet of nuclear power reactors. In addition, the US nuclear industry has learned the benefits of pooling knowledge. This combination has demonstrably improved the performance of the US nuclear power reactor fleet and is reflected in the share price of the nuclear operation companies.
Waste Disposal
Management of radioactive waste, particularly high–level nuclear waste, is an unresolved problem for the public opinion of many countries. Uranium, plutonium, actinides, and fission products are the main irradiated fuel constituents discharged from nuclear power reactors. Uranium constitutes about 96% of the fuel unloaded from commercial nuclear power reactors. In the case of LWRs, the spent fuel on discharge still contains 0.90% enriched in the fissile isotope U-235, whereas natural uranium contains only 0.7% of this isotope.?Plutonium constitutes about 1% of the weight of discharged fuel, and it is a fissile material used as fuel in the present and future commercial nuclear power reactors.?Minor actinides constitute about 0.1% of the weight of discharged fuel.
A typical 1000-MW(e) PWR unit operating at 75% load factor generates about 21 tons of spent fuel at a burn-up of 43 GWd/t; this contains about 20 tons of enriched uranium; 230 kg Pu; 23 kg minor actinides, and 750 kg fission products.?
It is important to note that the management of spent fuel should ensure that the biosphere is protected, and the public must be convinced of the effectiveness of the methods used. There are two means to reach this goal. These are the following:
In the opinion of several experts, deep geological repository disposal is the most appropriate solution available today.
It is also important to stress that the technology for the safe management of nuclear waste is now available and can be used by any country with an important nuclear power program. The USA, Finland, France, and Sweden have progressed regarding the final disposal of high-level radioactive nuclear waste. The technology used by these countries could represent a real and objective solution to this problem for other countries. According to Kamis (2015), in the USA, nuclear power operators are charged 0.1 cents per kWh for nuclear waste disposal, and in Sweden, this cost is 0.13 cents per kWh. These countries have utilized these funds to pursue research into geologic waste disposal, and both now have mature proposals for the task. “In France, the cost of waste disposal and decommissioning is estimated to be 10% of the construction cost. So far, provisions of 71 billion euros have been acquired for this from the sale of electricity.”
Decommissioning Costs
The experiences with decommissioning commercial nuclear power reactors are very limited. Thus also the costs are uncertain. The figures depend heavily on who is presenting them. The costs also depend on decommission strategy adopted. Fast dismantling to unrestricted site use is most expensive but not necessarily the best choice everywhere. This strategy also makes funding a more urgent issue, as much money is needed earlier.
It should be noted that decommission in Russia does not need to be equally expensive as estimated in Western Europe, US, and Japan. Costs are generally lower, and the plant site need not necessarily be returned to its original state to be used for alternative purposes with restrictions.
Factors deciding the decommissioning costs
Many factors influence the decommissioning costs. These are the following
Generally speaking, decommissioning smaller nuclear power reactors is more expensive than larger ones, if expressed in dollars per MW. Many uncertainties exist and will remain for some decades because only a few large nuclear power reactors with normal operating lives (20-30 years) have been dismantled yet.
The cost of decommissioning nuclear power plants is based on the following factors:
In addition, decommissioning costs depend on such country and site-specific factors as the type of reactor, waste management, disposal practices, and labor rates. As already mentioned, several other factors influence the choice of decommissioning strategy and, therefore, the costs involved. Total decommissioning costs include all costs from the start of decommissioning until the site is released for unrestricted use. As mentioned, in countries with a lot of space, it is not necessarily needed to release the site for unrestricted use in a short period, and thus the decommissioning costs will be smaller.
The decommissioning cost estimates are based on previous decommissioning and decontamination experience, on maintenance, surveillance, and component replacement costs, and the costs of non-nuclear work. They are also based on a minimum storage period of 30 years (this time-varying also from country to country) to allow for significant decay of radioactivity, and a period of 100 years, to allow worker access, generally without the need for shielding or remote operations.
According to Nuclear Regulatory Commission (NRC), in the US, three factors contribute to the ultimate decommissioning costs:
Although NRC regulations do not require the inclusion of used-fuel storage costs in decommissioning funds, some companies include such costs in their estimates because no federal repository or interim storage facility is still available. Therefore, they must allow for the storage of used fuel on-site and non-nuclear-related site restoration costs.
?Official estimates of decommissioning costs
Several European countries, Japan, Canada, and the US, have made estimates on decommissioning costs. However, there is no agreement on these estimates between the nuclear industry and independent experts.
NRC and the Nuclear Energy Agency (NEA) have estimated decommissioning costs between 9 to 15% of original construction costs. According to some experts, this is too low, claiming that data of closed nuclear facilities and have been or are being decommissioned show much higher real decommissioning costs than estimated before. According to Friends of the Earth France, the French nuclear operator COGEMA has estimated that the decommissioning cost for its reprocessing plants in La Hague and Marcoule will be 30% of the construction costs.
EDF, the main Frech operator, estimates the cost to be 230 euro per kW of power. Independent experts do not agree with the EDF estimates. According to their view, the decommissioning costs should be between 308 and 954 euros per kW. Official French estimates now suggest decommissioning cost at 258.86 euros per installed kW. That means that decommissioning costs are equal to 15% of construction costs and discounted at 3%. Provision is calculated for 40 years of operation.
The costs of decommissioning the Ignalina NPP in Lithuania, with RBMK reactors the same as the Leningrad nuclear power plant, are expected to be 1 billion euros by official documents. But according to preliminary estimations done by Lithuanian economists, the total decommission costs exceeds 3 billion euros.
Interest rate
An important factor that will influence the decommissioning costs is discounting. Discounting is the accounting term in English to describe the value of money changes over time. For instance, spending 1 million euros in 2050 would cost less than half that amount today. That is because if you put half a million in the bank today, it will have increased to 1 million by 2050. The discounting is very convenient for nuclear power plant operators. But the interest rate is not always as high as believed, and considering inflations, the discounting can be misleading.
The German Oko-Institut has shown that the nuclear industry operates at unrealistically high rates. The rates cannot be used for discounting the decommissioning costs for two reasons:
Ways of reducing the decommissioning costs
To delay the process and not decommission to the last stage, at least not once, is a common way to reduce costs in Western countries. According to Nuclear Monitor Issue #485 (1998), “it has been done in the UK, where the policy is adopted to wait 130 years before decommissioning is completed. French policy is to spread decommissioning over 50 years or more. The result is that only a relatively small amount of money has to be put aside now. Thinking that by getting interest during (half) a century, the capital grows until it is enough to pay the decommissioning bill. The UK nuclear utilities also assume that decommissioning would become cheaper in the future as robot and decontamination technologies are being developed.”
The financial disadvantages of this approach are that the costs of protecting or monitoring the site for 100 years or more are quite high, and during this time, the site cannot be sold or used for other purposes. That is an important element in a country such as the UK, with little free space and thus relatively high land prices, and it is not likely to be an issue in Russia.
According to Nuclear Monitor Issue #485, recent developments in the US tend towards immediate decommissioning. For example, the Yankee Rowe nuclear power plant decommissioning, which closed in 1997, started in 1998 and was planned to be completed in ten years into greenfield condition. Decommissioning costs were first estimated at US$368 million, but within “two months, cost estimates went up to US$508 million due to increased spent fuel storage costs.”
According to the EC communication COM (2004) 719 final, the Czech Republic, Hungary, the Netherlands, and Slovakia have opted for a strategy of deferred decommissioning. This strategy does not require sums as large as those needed for immediate decommissioning to be made available as soon as a nuclear power plant is shut down. Installations are, in fact, surrounded for several years to allow radioactivity levels to decrease. However, it is essential “to ensure that the chosen mode of management guarantees that the financial resources will be fully available and adequate when the time comes.”
Economic competitiveness and financial investment
Nuclear power is cost-competitive with other forms of electricity generation, except where there is direct access to low-cost fossil fuels. Fuel costs for nuclear power plants are a minor proportion of total generating costs, though initial capital costs are greater than coal and oil-fired power plants. The price of uranium increased significantly since 2004 from US$50 (both spot price and long term price) to US$250 spot price and to around US$190 long term price, an increase between four and five times in four years. However, this increase in the uranium price does not make more expensive the use of nuclear energy for electricity production in comparison with fossil fuels power plants. The reason is the following: Nuclear power is hardly sensitive to fluctuations in the price of uranium, so that price shocks and market volatilities, as experienced recently, influence the generation price marginally.
?According to the World Nuclear Organization in its report entitled “The Economics of Nuclear Power (2008)”, in assessing the cost competitiveness of nuclear energy for electricity production, decommissioning and waste disposal costs should be considered. According to some experts’ calculations, decommissioning costs are about 9-15% of the initial capital cost of a nuclear power plant. “But when discounted, they contribute only a few percent to the investment cost and even less to the generation cost. In the US, they account for 0.1-0.2 cent/kWh, which is no more than 5% of the cost of the electricity produced.” That makes the nuclear energy option more expensive than other energy sources because this type of cost is not included in the construction costs of any other electricity-generating power plants. However, if the social, health and environmental costs of using fossil fuels to generate electricity are also considered, then the use of nuclear energy for electricity generation is outstanding.
The increased cost due to delay in constructing a nuclear power plant is another important element that needs to be considered when analyzing the overall cost of using nuclear energy for electricity generation.
Based on the report mentioned above, it can be stated that the future competitiveness of nuclear power will depend substantially on the additional costs, which may accrue to coal generating power plants and the cost of gas for gas-fired power plants. However, it is uncertain how the real costs of meeting targets for reducing sulfur dioxide and greenhouse gas emissions will be attributed to fossil fuel plants is going to be included in the generation cost of conventional power plants.