27 Sep (NucNet): The median cost for building new nuclear power plants is the lowest among energy technologies – including renewables such as wind and solar – surveyed in a report published today by the International Atomic Energy Agency (IAEA).
The report says there is “significant overlap” in the range of the average levelised cost of electricity (LCOE) produced by the various technologies, but despite its significant up-front costs nuclear is competitive.
LCOE is the long-term price at which the electricity produced by a power plant or wind farm will have to be sold at for the investor to cover all their costs. The figures are based on a discount rate of 7%. The discount rate is an estimate of the cost of capital for a given project.
The report, ‘Climate Change and Nuclear Power 2016’, says the LCOE for the construction of new nuclear power plants ranges from $40 per MWh to $100 per MWh. The LCOE for onshore wind is between $40 and $180 per MWh and for offshore wind from $130 to $270 per MWh.
For concentrated solar power, the range is from $100 to $350 per MWh and for hydro $25 to $250 per MWh.
At higher discount rates, up-front capital expenditures will make up a greater share of generation costs. Capital intensive technologies such as nuclear and renewables will tend to be more sensitive to discount rates and the ranking of nuclear power relative to other technologies consequently drops with increasing discount rate.
The report says two factors in particular shape the challenges for new nuclear power projects: the high share of capital costs in total generation costs, and very large project sizes. This means that the funding required to realise a single project is much higher for nuclear plants than for other technologies, except certain very large hydropower schemes and coal plants. Consequently, investors tend to be wary of the associated risks as the balance sheets of even the largest power companies in the world could be stretched by taking on a project of this size.
This is, for instance, illustrated by the concerns over the planned Hinkley Point C nuclear power plant project in the UK.
Nuclear power projects can exceed $10bn in value, the report says.
Even if the per unit cost of the electricity produced from nuclear is kept low, the sheer scale of such projects may render them unviable in the absence of government support, the report says.
Once built, on the other hand, nuclear plants will usually have very low running costs and tend to earn high margins in most electricity markets.
The report is online: http://bit.ly/2douGa4
