Nuclear Power Is More Affordable Than You Think
Why extending the lives of current nuclear plants is the cheapest source of low-carbon electricity.
When it comes to the economics of electricity, there is no report more important than Projected Cost of Electricity, issued every 5 years by the International Energy Agency (IEA) and the OECD Nuclear Energy Agency (NEA).
This report (now in its 9th edition) collects electricity costs of various technologies from a range of countries and reports on the competitiveness of each. The 2020 version of this report was issued in December and its conclusion is clear — nuclear power is the dispatchable (meaning always available) low-carbon technology with the lowest expected costs.
This is in stark contrast to what we often hear — that even though nuclear power may well be a low carbon solution, its costs are much too high to consider.
Recent projects that have not gone well in the West due to a long absence from nuclear construction coupled with the challenges of building first of a kind (FOAK) designs. The successful economic deployment of nuclear in countries like China, Korea and Russia are ignored. We even have a good example that new countries can successfully build nuclear plants with the recent start up of the Barrakah nuclear power plant in the UAE.
The Project Cost of Electricity report cuts through our biases. This is not a nuclear report. It is about electricity and its costs. The conclusions are based on the results of the analysis, not on any preconceptions the authors may hold. It concludes that all low carbon options have improved their costs since 2015.
One change since the 2015 version of this report is the inclusion of nuclear life extension, or Long-Term Operation (LTO), in addition to the traditional consideration of the economics of nuclear new build. LTO is intended to capture the costs of significant refurbishments that would allow nuclear plants to be extended beyond their original design lives.
The results show that LTO provides the lowest cost electricity of all technologies considered. This makes for a very simple message: extending the lives of current nuclear plants is the most affordable source of low-carbon electricity available to us.
This makes for a very simple message: extending the lives of current nuclear plants is the most affordable source of low-carbon electricity available to us.
Extending the lives of nuclear plants is cheaper than building new nuclear plants (unsurprisingly), but also cheaper than building solar, wind, gas or any other kind of electricity generation.
The Project Costs of Electricity’s authors — the IEA — recognise that generation mixes traditionally dominated by large fossil and nuclear plants are moving to towards increasing variable renewables penetration (more solar and wind). Variable renewables are very different from fossil and nuclear plants, and therefore traditional methods to value their contribution to meeting energy demand such as Levelized Cost of Electricity (LCOE) were recognised as being insufficient.
A new model, called the Value Adjusted Levelized Cost of Electricity (VALCOE) has been developed but adds considerable complexity given, as would be expected, results are very sensitive to the actual system being analysed. This approach continues to be a work in progress. We should expect a more fulsome analysis in the next edition.
When it comes to nuclear, this report notes that countries willing to pursue the nuclear option have three main technology solutions to reduce cost at the system and plant level (interestingly consistent with our previous series on Saving the Planet):
- LTO or investing to keep the current fleet operating into the future.
- Building existing Generation III reactors. These designs have now passed their FOAK demonstrations and are ready to demonstrate improved economics going forward; and
- New designs being developed such as Small Modular Reactors (SMRs). These designs are poised to extend the value proposition of nuclear power.
The IEA/NEA, in its updated Projected Cost of Electricity report, has assessed the costs of the many low carbon options to meet electricity needs going forward. Based on this analysis, nuclear power is well positioned to continue and expand its role in providing reliable, economic, low carbon electricity to the world.