The Economics of Nuclear Power

Steve Fetter

University of Maryland

Cost of Electricity, U.S. Reactors (2004$/MWh)

Koomey & Hultman (submitted) 2007

0

2

4

6

8

10

12

14

30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 105 110 115 120 125 130 135 140 145 150

Cost of Electricity ($/MWh)

Number of Reactors

30 40 50 60 70 80 90 100 110 120 130 140

Average COE, 2005, all sources

Cost of Electricity, 99 U.S. Reactors (2004$/MWh)

Koomey & Hultman (submitted) 2007Koomey & Hultman (submitted to EP 2007)

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20

40

60

80

100

120

140

0 20 40 60 80 100

Rank

Cost of Electricity ($/MW)

Components of COE

0

20

40

60

80

100

120

140

1 11 21 31 41 51 61 71 81 91

Rank

Cost of Electricity ($/MWh)

Construction, Interest, Capital Additions, Decommissioning

Non-Fuel O&MFuel

Where’s the Learning Curve?

0

20

40

60

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140

1/1/67 1/1/71 1/1/75 1/1/79

Start of Construction

Cost of Electricity ($/MW)

Nuclear Power Economics

Estimated cost of electricity (COE) for a new U.S. nuclear reactor:

ExpenseCOE

($/MWh)

Construction 50

Non-fuel operations and maintenance (O&M)

15

Fuel-related expenses 5

Total 70

Nuclear v. Alternatives ($/MWh)

nuclear coal gas wind solar

capital 50 30 12 60 250

O&M 15 5 3 10 5

fuel 5 10 25-50 0 0

total 70 45 40-65 70 250

+ $100/tC 0 25 12 0 0

new total 70 70 52-77 70 250

Nuclear Capital Cost

• Construction costs in U.S. are highly uncertain– no operating reactors ordered after 1973– last reactor was completed in 1996

• Reasonable estimate for the overnight construction cost of new advanced light-water reactors: about $2000/kWe

– $2 billion for a 1000-MW reactor

Overnight Construction Cost

OCC ($/kW)

Actual

Japan 2300 - 2800

Korea 1800

Estimated

EIA 1500 - 2000

NEA 1800

GE 1400 - 1600

Framatome 1200 - 1300

Westinghouse 1000 - 1700

Finland 1600

Overnight Construction Costs (2004$/kW)

Koomey & Hultman (submitted to EP 2007)

0

2000

4000

6000

8000

0 20 40 60 80 100

Rank

Overnight Construction Cost ($/kW)

From OCC ($/kW) to COE ($/MWh)

Fidc interest during construction factor (~0.2)

Fpreop pre-operating cost factor (~0.1)

Fcont contingency cost factor (~0.1)CF capacity factor (0.85)

Fcrfixed charge rate

Ftax property tax rate

Fins insurance rate

COE

cap=OCC 1+Fidc( ) 1+Fpreop( ) 1+Fcont( )

8766CFFcr +Ftax +Fins( )

(~0.13/y)

From OCC ($/kW) to COE ($/MWh)

COEcap

=

$2000kW

⎛

⎝⎜⎞

⎠⎟1.2( ) 1.1( ) 1.1( )

8760hy

⎛

⎝⎜⎞

⎠⎟MW

103 kW

⎛

⎝⎜⎞

⎠⎟0.85( )

0.13y

⎛

⎝⎜⎞

⎠⎟=

$50MWh

OCC ($/kW)

COEcap ($/MWh)

1200 30

1600 40

2000 50

2400 60

Fixed Charge Rate

Construction costs are financed through debt (bonds) and equity (stock). Electricity sales must be sufficient to pay dividends to investors, after taxes and other expenses are paid, which requires recovering a fraction of total up-front costs each year: “fixed charge rate” or Fcr.

Fcr depends on the rate of return necessary to attract the required capital. For a regulated utility, the average cost of money is modest: 6 to 7%/y (half the rate for large private firms).

Fixed Charge Rate

te corporate income tax rate (38%)b fraction of capital raised with bonds (0.5)

ib rate of return on bonds (5%)

ie rate of return on stocks (8%)N capital recovery/depreciation period (15 y)

Fcr≈

11−te

1−b( )ie

1− 1+ ie( )−N

+bib

1− 1+ ib( )−N

−teN

−bibte

⎛

⎝⎜⎜

⎞

⎠⎟⎟

Fuel Costs: Once-Through Fuel Cycle

Repository

U3O8UF6

Dry Storage

(optional)

Conversion

fresh fuel

LEU

spentfuel

“front end”

“back end”

Wet Storage

Front-end Costs

unit cost units/kg $/kg $/MWh

Uranium $50/kg 10 kg $500 1.3

Conversion $5/kg 10 kg $50 0.1

Enrichment $100/SWU 6 SWU $600 1.5

Fabrication $250/kg 1 kg $250 0.6

Total $1400 3.5

Assumes fuel with 4.4% U235 and burnup of 50 MWtd/kg, tails assay of 0.3% U235, and efficiency of 33%

Back-end Costs

$/kg $/MWh

Wet storage included in capital, O&M

Dry storage $200 0.5

Geologic disposal $400 1.0

Total $600 1.5

Total front + back $2000 5.0

From $/kg to $/MWh

$2000

kgHM

⎡

⎣⎢

⎤

⎦⎥

kgHM

50MWthd

⎡

⎣⎢

⎤

⎦⎥

3MWth

MWe

⎡

⎣⎢

⎤

⎦⎥

d24 h

⎡

⎣⎢

⎤

⎦⎥=

$5MWh

• Compare to total COE of $70/MWh– fuel related costs ~ 7% of COE

• Conversion, enrichment, fabrication costs stable• At $50/kg, uranium 25% of fuel costs, 2% COE

– average price paid by U.S. operators in 2006– if price doubles, COE increases 2%

Uranium Prices

0

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1970 1975 1980 1985 1990 1995 2000 2005 2010

Uranium Price ($2006/kg U)

Spot market price

Average paid by US reactoroperators

Direct Disposal v. Reprocessing in LWRs

Pu

Repository

U3O8UF6

Interim Storage

Conversion

LEU fuel

MOX fuel

spent LEU

spent LEU

spent MOX

HLW and ILWDU

ConversionUF6

rU

LEU

spent LEU

spent MOX

Reprocessing and Recycle• Widespread agreement that today R&R is more

expensive than direct disposal– official studies in France and Japan– recent studies by MIT, Harvard, Chicago

• Advocates argue difference is small: additional 1.5 to 4 $/MWh (~3-8% of COE)– but total cost is high: $1-3 billion/yr, plus $50-100

billion to reprocess 60,000 tons already discharged

• Advocates argue difference will disappear soon if nuclear power grows and U price increases– but premium is likely to persist for 50-100 yr even if

nuclear grows substantially

Premium for R&R in LWRs

-1

0

1

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3

4

0 40 80 120 160 200 240

Price of Uranium ($/kgU)

ΔCOE

( / )mill kWh1000/$ kgHM

2000/ = $ kgHM reprocessingprice

1500/$ kgHM

500/$ kgHM

$200/kg interim storage for DD

$200/kg waste credit for R&R

($/M

Wh

)

Breakeven Uranium Price

0

200

400

600

800

500 1000 1500 2000

Reprocessing Price ($/kg HM)

Breakeven Uranium Price ($/kg U)

Monte Carlo

5%

95%

Central Case

50%

$200/kg interim storage for DD

$200/kg waste credit for R&R

These estimates are favorable to R&R

• $200/kg interim-storage charge included for direct disposal (but not R&R)

• $200/kg (50%) cost savings for waste disposal

• MOX fuel fabrication well below recent prices

• No charges for Pu storage, Am removal, reactor relicensing, or extra security for MOX

• Equal disposal costs for spent MOX and LEU (or continuous recycle of without cost penalty)

LWR (direct disposal) v. FBR

Pu

Repository

U3O8UF6

Interim Storage

Conversion

LEU fuel

HLW, ILW

DU ConversionUF6

rU

LEU

spent LEU

MA

Premium for R&R in FBRs

-5

0

5

10

15

0 50 100 150 200 250 300 350 400

Uranium Price ($/kgU)

Δ ( / )COE mill kWh 0$

100$

200$

300$

400$

ΔC cap

( /$ kWe) Utility OwnerUtility Owner

$1000/kg reprocessing

($/M

Wh

)

Uranium Resources• Breakeven U price > $130/kg even in best case

• How much U is available? Red Book gives 16 Mt available at $130/kg, but…

– high-cost resources in many countries (e.g., Australia) not estimated;

– unconventional resources (e.g., phosphates) not included;

– little investment in exploration in last 20 y

– most minerals have steadily decreased in price with increasing consumption

43 of 47 Elements Have Decreased in Price

0.01

0.10

1.00

10.00

100.00

0 20 40 60 80 100

Percent of Cumulative Production (to year 2000)

Rato of Price to Price in 2000Tl

Ta

Sr

Sr

Co

Cs

A Very Rough Estimate of Ultimately Recoverable Uranium Resources

• Red Book give 2.1 Mt at $40/kg• Hore-Lacy: “a doubling of price from present

levels could be expected to create a tenfold increase in measured resources.”

• So there should be 21 Mt available at $80/kg and 210 Mt at $160/kg

• In general:

R ~ 2.1(P/40)

where = long-term price elasticity of supply

Recoverable Resources

Source

Long-term

elasticity of supply

MtU recoverable at price less than

$40 $80 $130

UIC (doubling price creates ten-fold increase in measured resources)

3.32 2.1 21 105

Deffeyes and MacGregor (ten-fold decrease in concentration = 300-fold increase in resource, p ~ c)

2.48 2.1 12 39

Gen-IV (based on U.S. reserves for various mining methods)

2.35 2.1 11 34

Red Book 2.1 11 16

IIASA/WEC Global Energy Perspectives

0

5,000

10,000

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25,000

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45,000

1980 2000 2020 2040 2060 2080 2100

Nuclear Electricity Production (TWh/y)

Cumulative U consumption:LWRs with direct disposal

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30

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2000 2020 2040 2060 2080 2100

Cumulative Uranium Consumption (Mt U)

17 Mt U @ $130/kg (Red Book)

34 Mt U @ $130/kg ( = 2.35)

40 130/ (Mt U @ $ kg = 2.48)