Economics of Nuclear Power Plant

There are at least four types of costs linger around the implementation of a new nuclear power plant. These costs are basically:

1. Capital costs
2. Production costs
3. Levelised costs
4. Decommissioning and Waste Management costs

Of course there are some other additional costs, but at this point, the stated four are the most prominent.

Capital Costs

Economically speaking, nuclear plant is indeed a highly capital intensive technology. If other factors are discounted, nuclear plants do not appear as palatable as other generation sources since big bucks have to be forked out. Actual nuclear power generation & capital costs vary considerably depending on the location, country and where the plants were built.

Techno-economics studies carried out for Tenaga Nasional Berhad (TNB) - Korea Electric Power Corporation (KEPCO) Nuclear Power Pre-Feasibility Study has concluded that there is a big range of costs associated with nuclear plants. According to IEA/NEA study, typically, 1 unit of 1000MW nuclear plant’s overnight cost ranges between USD2,000/kW to USD4,500/kW. The capital cost of a coal plant ranges between USD1,000/kW to USD1,500/kW. Meanwhile, a gas plant mostly ranges between USD400 to USD800/kW. Nuclear plant has the highest overnight construction costs. Nuclear plant construction costs are generally higher, compared to coal or gas-fired plants, because of higher level of technology, sophistication of equipment, quality of material & quality assurance standards.

Production Costs

On the other hand, operation wise, nuclear plants appear to be more favourable compared to other sources due to its lower operating costs. Once the plants are commissioned, variable or operating costs are minor. Despite the highest capital cost and Operations & Maintenance (O&M) costs among other sources, overall production cost for a nuclear plant is still the lowest. In fact, nuclear power plants have achieved the lowest production costs between coal, natural gas and oil since 2001. Production costs are the O&M and fuel costs of a power plant. Fuel costs make up 26% of the overall production costs of nuclear power plants. Fuel costs for coal, natural gas and oil, however, make up more than 80% of the production costs. Observe figure below for breakdown of production costs between various generating sources.

Doubling of fuel costs will not affect the production costs due to minor percentage of fuel cost portion. As compared to gas and coal plants, nuclear plants need refuelling only once in every 15-24 months. Hence, nuclear plants are not subject to fuel price volatility like natural gas, coal and oil power plants. The graph below shows the effect of doubling the costs of fuel.

In addition, fuel costs are one area of steadily increasing efficiency and cost reduction. For instance, in Spain, nuclear electricity cost was reduced by 29% over 1995-2001. The success is attributed to boosting enrichment levels and burn-up to achieve 40% fuel cost reduction. Prospectively, a further 8% increase in burn-up will give another 5% reduction in fuel cost.

Levelised Costs

Levelised cost is another important factor in determining and comparing the economic cost of energy produced by a nuclear plant with similar base-load alternatives. Levelised cost is the minimum price at which a technology option produces electricity. It is an economic assessment of the cost of the technology over its lifetime which includes initial investment, operations and maintenance, cost of fuel and cost of capital. Levelised costs vary accordingly with figures used for discount rate, fuel price assumption, plant life, construction period as well as capacity factor. Based on the TNB-KEPCO Nuclear Power Pre-Feasibility study, by using certain assumptions for parameters mentioned above, the cost is as follows:

Economic Levelised Cost of Energy (sen/kWh)	Nuclear (Case I)	Nuclear (Case II)	Conventional Coal	Gas Combined Cycle
Without Carbon Tax	17.2	10.9	15.8	17.9
With Carbon Tax (USD 10/tCO2)	17.2	10.9	17.6	18.7

From the table, in comparison with coal and gas plants, the economic levelised cost of energy from nuclear is almost comparable to coal, and 9% lower than gas with natural gas at economic market price. Note that with added tax on carbon, the economic levelised cost of energy from nuclear plant is lower than both alternative and nuclear is economically feasible based on the assumptions in the Case I and Case II. Case I uses the nuclear capital costs of USD4,000/kW while Case II uses the nuclear capital cost of USD2,300/kW. Nuclear becomes more economically favourable when climate change mitigation method such as carbon tax is considered.

Decommissioning and Waste Management Costs

Another cost associated with nuclear plants is decommissioning costs. For nuclear power plants, any cost figure normally includes spent fuel management, plant decommissioning and final waste disposal. These costs, while usually external for other technologies, are internal for nuclear power (i.e. they have to be paid or set aside securely by the utility generating the power, and the cost passed on to the customer in the actual tariff). 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 USA, they account for no more than 5% of the cost of the electricity produced. Total cost for spent fuel management and final nuclear or radioactive waste disposal, or back-end costs of the nuclear fuel cycle usually accounts for an additional 10% of the nuclear electricity cost. However, if the spent fuel is to be directly disposed of, instead of being reprocessed to extract the unused uranium and plutonium produced in routine nuclear power plant operation, the costs may be less.

Source: TNB Website - Think Nuclear, Think Green.