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Nuclear power, Part 2: The price is not right

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"Nuclear power, Part 2: The price is not right"

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nuke-costs.jpgIn mid-2007, a Keystone Center nuclear report, funded in part by the nuclear industry estimated capital costs for nuclear of $3600 to $4000/kW including interest. The report notes,the power isn’t cheap: 8.3 to 11.1 cents per kilo-watt hour. In December 2007, retail electricity prices in this country averaged 8.9 cents per kwh.

Mid-2007 has already become the good old days for affordable nuclear power. Jim Harding, who was on the Keystone Center panel and was responsible for its economic analysis, e-mailed me in May that his current “reasonable estimate for levelized cost range … is 12 to 17 cents per kilowatt hour lifetime, and 1.7 times that number [20 to 29 cents per kilowatt-hour] in first year of commercial operation.”

At the end of August, 2007 Tulsa World reported that American Electric Power Co. CEO Michael Morris was not planning to build any new nuclear power plants. He was quoted as saying, “I’m not convinced we’ll see a new nuclear station before probably the 2020 timeline,” citing “realistic” costs of about $4,000/kW, he said.

So much for being a near-term, cost-effective solution to our climate problem. But if $4,000 per kilowatt was starting to price nuclear out of the marketplace, imagine what prices 50 percent to 100 percent higher will do.


In October 2007, Florida Power and Light (FPL), “a leader in nuclear power generation,” presented its detailed cost estimate for new nukes to the Florida Public Service Commission. It concluded that two units totaling 2,200 megawatts would cost from $5,500 to $8,100 per kilowatt — $12 billion to $18 billion total!(These are the actual costs, not adjusted for inflation.)

Lew Hay, chairman and CEO of FPL, said, “If our cost estimates are even close to being right, the cost of a two-unit plant will be on the order of magnitude of $13 to $14 billion. That’s bigger than the total market capitalization of many companies in the U.S. utility industry and 50 percent or more of the market capitalization of all companies in our industry with the exception of Exelon. … This is a huge bet for any CEO to take to his or her board.”

An October 2007 Moody’s Investors Service report, “New Nuclear Generation in the United States,” concluded, “Moody’s believes the all-in cost of a nuclear generating facility could come in at between $5,000 – $6,000/kw.”

In January 2008, MidAmerican Nuclear Energy Co said that prices were so high, it was ending its pursuit of a nuclear power plant in Payette County, Idaho, after spending $13 million researching its economic feasibility. Company President Bill Fehrman said in a letter, “Consumers expect reasonably priced energy, and the company’s due diligence process has led to the conclusion that it does not make economic sense to pursue the project at this time.”

MidAmerican is a company owned by famed investor Warren Buffet. When Buffet pulls the plug on a potential investment after spending $13 million analyzing the deal, it should give everyone pause.

Let’s take a look at one more example. Earlier this year, Progress Energy informed state regulators that the twin 1,100-megawatt plants it intends to build in Florida would cost $14 billion, which “triples estimates the utility offered little more than a year ago.” That would be more than $6,400 a kilowatt. But wait, that’s not all. As reported by the St. Petersburg Times, “The utility said its 200 mile, 10-county transmission project will cost $3-billion more.” If we factor that cost in, the price would be $7,700 a kilowatt.

Amazingly, the utility won’t even stand behind the exorbitant tripled cost for the plant. In its filing with state regulators, Progress Energy warned that its new $17 billion estimate for its planned nuclear facility is “nonbinding” and “subject to change over time.”

And it gets even better (by I which I mean, worse) for Florida ratepayers. Florida passed a law that allows utilities to recoup some costs while a nuclear plant is under construction. How much? About $9 a month starting as early as next year! Yes, the lucky customers of Progress Energy get to each pay more than $100 a year for years and years and years before they even get one kilowatt-hour from these plants.

This would seem to be the exact opposite of the old claim for the nuclear industry, “Too cheap to meter.” Now it’s so expensive the company raises your rates before the power even gets to the meter!

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16 Responses to Nuclear power, Part 2: The price is not right

  1. Ronald says:

    I’ve read that the costs for new coal plants has also gone way up. I imagine that since many of the materials to build them are the same, such as industrial metals, the increases are partly because of that.

    With China and Asia in a huge building boom and the US dollar having dropped as far as it has, at least industrial metal prices aren’t coming down either. But then prices for Concentrated Solar Power which uses alot of industrial metals would be increasing as well. I’ve read that prices for wind turbines have gone up also, partly because of the demand for them, but I’m sure some because of raw industrial metal prices.

    Which is why it might be helpful to make a comparison accross the board of all energy sources because the building of new plants would be affected by price increases in the same way.

    which makes the case for efficiency improvements.

  2. Ronald says:

    In my previous post, I only mentioned industrial metals as having cost increases. cost increases would be on many constuction items like cement. I had read somewhere that turbine prices were increasing, partly because of all those going to China.

  3. Dennis says:

    Can we get some numbers on what the various power generation plants (gas, coal, nuclear, solar, wind, etc.) cost to build on a per kwh basis? This article is supposed to make me pause, but how do I know nuclear isn’t the cheapest? I’m 100% behind renewables, but have no data to refute the “nuclear is cheapest” argument by looking at this data in isolation.

  4. Joe says:

    Dennis, I have previously blogged on this.
    A very good apples to apples comparison was done for the California PUC.
    http://www.ethree.com/cpuc_ghg_model.html
    Go to “Generation costs (word doc)(11/16/07)”

  5. Mitra Ardron says:

    Costs are also deceptive – what gets included, and excluded is as much political as economic. For nukes, do you count in the cost of waste disposal (never been done); health hazards; insurance against the high magnitude cost of a low-risk catastrophic accident or the surface-to-air missiles needed to protect it. For oil do you factor in the cost of invading someone else’s country to steal it. For centralised systems have you factored in the cost of the grid.

    And also timing … Coal Sequestration may be initially cheap but what happens when the cheap storages run out. And do you count the cost of Solar now, or based on the economies of scale already evident in price reductions?

    - Mitra

  6. Joe,
    Thanks for the reply, giving us the Energy & Environmental Economics Inc. website. This comparison is helpful in seeing where we stand with current economics of different options.
    Nuclear energy estimates are rising dramatically, outpacing the cost increases for coal, natural gas, etc. This is due to the fact that the nuclear industry was underestimating the costs toward the beginning of the decade.
    The nuclear industry was underestimating costs in the last round. The average 1980s finished cost of a nuke was about 3.2 times the original cost estimate, compared with coal plants at 1.5.
    This time around, cost estimates have gone from $1000-2000/kilowatt installed, a few years ago, to up to $10,000/KW today — a five to tenfold increase!
    A nuke at 10,000/KW, at a 40-year lifespan at 85% capacity factor (total number of KW produced divided by the design rating of KW), assuming an annual fixed charge rate of 15% (levelized annual payback per year for 30 years), the capital payback portion alone would be $151 per megawatt-hour. This is just capital payback and does not include fuel, operation and maintenance (O&M), waste management, subsidies, or transmission and distribution.
    The study you refer us to estimates costs for nuclear to be $154/megawatt-hour, including capital, fuel and O&M. Of course, this study was done last year, and the authors have some catching up to do.
    My guess is that we will be catching up for a long time to the increasing costs of nuclear energy. This will be especially true when we throw in a Yucca Mountain waste facility or two, or more, and start to remediate the other aspects of waste like mine and mill tailings.
    A new website I have been working on at http://www.SafeEnergyAnalyst.org is put together to help with some of these cost issues.
    Again, it is helpful in formulating solutions to get these analyses out there.

  7. Lou Grinzo says:

    We have an interesting situation developing…

    1. Righties love the free market and hate government support–look at their repeated attempts to kill Amtrak funding, for example.

    2. Righties love nuclear power.

    3. Nuclear power can’t possibly stand on its own in a free market.

    Perhaps once the righties’ heads start exploding we can harness the released energy.

  8. hapa says:

    Perhaps once the righties’ heads start exploding we can harness the released energy.

    like fusion, i fear this is an impossible dream. cognitive dissonance just isn’t a reliable catalyst in some brains — or i should say that it is suppressed in the reaction by ideological fury. reduce the inhibitor, and you get better thinking, reducing the cognitive dissonance. it’s a no-win situation.

  9. In October 2007, Florida Power and Light (FPL), “a leader in nuclear power generation,” presented its detailed cost estimate for new nukes to the Florida Public Service Commission. It concluded that two units totaling 2,200 megawatts would cost from $5,500 to $8,100 per kilowatt — $12 billion to $18 billion total!(These are the actual costs, not adjusted for inflation.)

  10. Andrew says:

    Go to “Generation costs (word doc)(11/16/07)”

    That document is a fantasy. A 27-40% capacity factor for wind?

    In practice (eg. Germany), it’s closer to 17-20%. That alone puts wind on an equal cost footing with even their estimate nuclear, furthermore the cost estimate for wind totally ignores the cost of grid integration (smart grid technology and monitoring to counteract wind’s intermittency is expensive as hell).

    And their estimate for the cost of fuel for nuclear is totally off the wall – they have it costing an equal amount to coal for equivalent energy generated! That would require a ten-fifty fold increase in the price of uranium…

  11. flash games says:

    Which is why it might be helpful to make a comparison accross the board of all energy sources because the building of new plants would be affected by price increases in the same way.

  12. msn nickleri says:

    Which is why it might be helpful to make a comparison accross the board of all energy sources because the building of new plants would be affected by price increases in the same way.

  13. sak says:

    *Disclosure* I come from an engineering family who has built nuclear, coal, and garbage burning plants [they often burn pot!!! seized by the gov't]

    Personally, I’m not wedded to any one particular energy source and believe that different parts of the country have advantages in using one source over another. Which is great.

    Here’s a couple things to ponder: Part of the nuclear costs- a massive part- is due to a) increased commodity prices [which have since plummeted] b) Federal approval process which has added years to the process as past administrations were not interested in seeing nuclear plants go forward and kept delaying the process.

    As far as solar goes, the process for creating semi-conductors is dirty. I’ve heard the Silicon Valley has several EPA waste sites. So it’s not ‘clean’ until it’s up and running.

    What would be most helpful is a comprehensive study that looks at the entire process for each source: all require mining at some point- how do you generate wind power without metal blades??? What would nuclear power really cost if the approval process was thorough, but not obstructionist?

    When I see my greenest friends examining all options clearly, without visceral, knee-jerk responses, I’ll feel a lot better…and let the energy chips fall where they may.

    Cheers!

  14. sak says:

    Oh… and let’s get real engineers to submit details, not PAC organizations who select data based on what their constituent members desire.

    Idealistic? Yes. But isn’t that the promise of our new administration?

  15. jay bearu says:

    President Obama could be a great energy leader by promoting nuclear power steam turbines. No carbon dioxide produced! He would have to rise above political biased obstructionist regulation, like his recent foolish Yucca mountain declaration. He should quit letting Maddam Pelosi threaten
    him on this and other issues., especially border security!
    Respectfully submitted.