The Nuclear Industry Prices Itself Out Of Market For New Power Plants
In the modern era, nuclear power plants have almost always become more and more expensive over time. They have a “negative learning curve” — along with massive delays and cost overruns in market economies. This is confirmed both by recent studies and by the ongoing cost escalations of nuclear plants around the world, as I’ll detail in this post.
The cost escalation curse of nuclear power
“Ever since the completion of the first wave of nuclear reactors in 1970, and continuing with the ongoing construction of new reactors in Europe, nuclear power seems to be doomed with the curse of cost escalation,” read one 2015 journal article, “Revisiting the Cost Escalation Curse of Nuclear Power.”
In the United States, the cost of Georgia Power’s newest twin Vogtle reactors may top initial estimates of $14 billion and reach $21 billion, according to recent Georgia Public Service Commission testimony. Of course, the first two Vogtle Units begun in 1971 took 18 years to build (a decade over schedule) at a final price of $9 billion — ten times the original price tag. BloombergBusiness wrote last fall, “Even as sympathetic an observer as John Rowe [former chair of the U.S.’s largest nuclear utility] warns that the new units at Vogtle will be uneconomical when — or if — they’re completed.”
Even the French can’t build an affordable, on-schedule next generation nuclear plant in their own nuclear-friendly country. Their newest Normandy plant, which originally was projected to cost €3bn ($3.3 billion) and start producing power in 2012 “will not start until 2018 at a cost of €10.5bn [$11.3 billion],” the Financial Times reported last year.
The high and rising price of new nuclear power plants does not mean new nukes will play no role in the fight to avoid catastrophic warming, as I discussed in January. It does means that, barring a huge unprecedented and ahistorical price drop in next-generation nuclear plants, the role nuclear power plays will be a limited one — a very limited one in market economies especially if the industry can’t reverse decades of cost escalation. Certainly an R&D breakthrough is worth pursuing, but adding even more policies to specifically accelerate deployment of new nukes makes little sense at this point.
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Ironically, even a brand new study in Energy Policy by nuclear advocates, “Historical construction costs of global nuclear power reactors,” purporting to show that nuclear power does not always have a negative learning curve, actually finds the reverse. Once you get past the very early-stage development (mid-1950s to mid-1960s) with its super-high costs, nuclear power plants clearly have a negative learning curve in every country the authors examine. The only small exception is South Korea, which has a tiny fraction of the world’s nukes and for which the cost data is questionable.
Leading energy analyst Dr. Jon Koomey of Stanford University summed up the new study this way:
“With the exception of South Korea, whose nuclear cost data are not independently audited and are therefore of unknown quality, all available cost data paint a consistent picture: the investment risk of nuclear power is significant, costs almost always increased over time in the modern era, and cost overruns and lengthened construction times need to be considered carefully by investors and policy makers alike.”
Moreover, Koomey explains, “adding interest during construction would only strengthen these conclusions.”
What? Yes the authors of this paper — in an effort to downplay the staggering cost of nuclear power plants — make use of the extremely dubious “overnight cost” of nuclear plants, rather than their real costs. The overnight cost is literally the theoretical cost of a power plant if you could build it overnight, if you could built it without interest charges or cost overruns from delays.
For wind and solar projects, which have construction periods typically measured in months, the difference between an “overnight” cost and the actual cost to complete the project is usually not that significant. But nukes typically take many years to complete — and a decade is not uncommon. Cost escalations that occur during this long construction period, plus the financing costs during construction, may easily double the total cost of a project compared to its “overnight” cost. Trying to oversell nukes by focusing on the imaginary overnight costs is tantamount to selling someone a house with “teaser” initial mortgage payments and failing to make clear that the payments will later balloon to a much higher level.
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