(The author is a Reuters market analyst. The views expressed
are his own.)
By Gerard Wynn
LONDON May 18 The costs of nuclear power are
rising in developed countries, where fossil fuel and renewable
energy prices are stable or falling, suggesting present
proposals for a major programme of new investment are
Overall, the picture is one of uncertainty about nuclear
costs, but a clear upward trajectory is evident in developed
countries, urging a re-think on construction plans in Britain,
the United States, France, Canada, Finland and Poland.
The picture is different in India and China where vast plans
with economies of scale plus cheaper labour may favour the
Capital costs make up the biggest part of nuclear costs and
have been rising since lows in the 1970s when massive expansion
programmes in the United States, France, Germany, Japan and
Britain captured economies of scale.
Costs rises reflect increased regulation, project delays and
skill shortages, plus more recently the impact of concerns from
the Fukushima crisis.
The problem argues in favour of an alternative, more nimble
energy model, at least in the industrialised world.
That could include a bigger focus on energy trading across
more intelligent and internationally connected grids, and on
efficiency in demand and fossil fuel supply.
Such a transition would have to happen gradually to avoid
rises in carbon emissions, rather than precipitously shutting
reactors, as planned in Germany in the wake of the Fukushima
The smartest nuclear policy in industrialised economies may
therefore be one of nuclear lifetime extensions, in a gradual
phase-out with no new construction.
That is already effectively the stance of the United States,
where more than half the existing plants have had their lives
extended to 60 years from an initial 40 years, and increasingly
so in France.
The World Nuclear Association lists 20 countries which have
new plans to build reactors beyond those under construction,
including nine industrialised countries.
Nuclear reactor starts: link.reuters.com/qun38s
U.S. reactor capital cost: link.reuters.com/run38s
RISING CAPITAL COST
Capital costs of selected U.S. reactors rose about fourfold
(in constant 2010 dollars) from 1975 to 1985, to more than
$7,000 per kilowatt (KW), calculated University of California's
Lucas Davis in a recent discussion (not peer-reviewed) paper,
"Prospects for nuclear power".
When included, the cost of borrowing would raise these
so-called overnight costs by about as half as much again.
The U.S. Energy Information Administration (EIA) gave a
bleak outlook in 2010, before Fukushima, raising its capital
cost estimate by nearly 40 percent over the previous year.
It attributed the increase to higher commodity prices and an
inadequate supply chain for complex engineering projects.
The impact of Fukushima, raising financing and regulation
costs, pushed up construction costs by another 5 to 10 percent,
the International Energy Agency (IEA) said last November.
The IEA, EIA and various other groups put the overnight
capital costs in developed countries at between $3,500 and
$5,500 per KW, in present dollars.
But costs are rising in Europe, as shown by two flagship
projects in Finland and France.
French utility EDF last year estimated the
overnight cost of its new Flamanville 3 reactor, the first to be
built in France in 15 years, at 3,600 euros ($4,600) per
kilowatt, up from an initial estimated 2,000 euros ($2,500).
Increasing the capital cost by $1,000 per KW raises long-run
power generation costs by a quarter, according to the IEA.
The Flamanville reactor would also be over-due by four
Delays increase financing costs, as interest payments
continue over a longer period. EDF blamed the higher costs and
delays partly on stiffer regulation.
In Finland, the Olkiluoto 3 reactor, would be commissioned
five years behind schedule and also massively over-budget at
about 4,125 euros ($5,200) per KW.
Once financing costs are included, a new nuclear reactor in
the United States could cost more than $6,000 per KW, estimated
the University of California's Davis.
The trouble is that the lower operating cost of nuclear
power and lower carbon emissions no longer compensate for those
rising upfront costs.
The financial crisis has led to record low carbon prices in
Europe, and helped block a planned cap and trade scheme in the
United States, undermining a key potential advantage over fossil
Meanwhile, U.S. gas prices have fallen precipitously and
wind and solar equipment prices have fallen.
Davis calculated the present full generation costs of a new
U.S. nuclear reactor at double that of gas.
The U.S. EIA last year estimated that the full generation
costs of both gas and wind power would undercut nuclear in
future decades, while the IEA projected nuclear power to be more
expensive than almost all rival technologies in the United
States in 2020, but the cheapest in China.
A better energy model may be a low-cost, modular approach
focused more on the grid, demand and fossil fuel efficiency plus
renewable power rather than massive centralised nuclear and
carbon capture and storage projects.
($1 = 0.7869 euros)
($1 = 0.6324 British pounds)
(Editing by Keiron Henderson)