CostEffectiveness of Nuclear Power and Alternatives

1
Cost-Effectiveness of Nuclear Power and
Alternatives

• Presentation by Richard Tyssen to the
• Citizens Inquiry on the Impacts of the Uranium
  Cycle
• Peterborough, Ontario
• April 15, 2008

2
Values Framework for Analysis
Taken from Cost-Effectiveness of the Nuclear
Fuel Cycle in Meeting Future Demand for Energy
Services, Presentation by Christopher Paine,
Senior Nuclear Program Analyst, Natural Resources
Defense Council

• We inhabit and share a Global Commons energy
  choices have global implications and impacts.
• Environmental progress in one area should not be
  purchased at the expense of environmental
  degradation somewhere else.
• All energy sources create some harm, but some
  forms of energy production are more harmful than
  others.
• Environmental impacts are an increasingly
  critical factor in assessing the cost
  effectiveness of energy options.

3
Values Framework (contd.)
Taken from Cost-Effectiveness of the Nuclear
Fuel Cycle in Meeting Future Demand for Energy
Services, Presentation by Christopher Paine,
Senior Nuclear Program Analyst, Natural Resources
Defense Council

• Preference should be given to energy alternatives
  that are sustainable, i.e. that do not result
  in permanent depletion of resources or
  irreparable harms to the natural systems on which
  all life depends
• To the maximum feasible extent, wholesale and
  retail electricity prices should reflect relative
  risks and costs to society imposed by various
  energy options

4
Criteria for Cost Effectiveness
Taken from Cost-Effectiveness of the Nuclear
Fuel Cycle in Meeting Future Demand for Energy
Services, Presentation by Christopher Paine,
Senior Nuclear Program Analyst, Natural Resources
Defense Council

• Life cycle GHG emissions
• Other full fuel-cycle environmental and public
  health impacts
• Sustainability of the resource
• Energy security risks/benefits
• Levelized full life-cycle costs (one but not the
  only criterion) (Focus of this presentation)

5
Nuclear Power Life-Cycle Costs

• Extracts of a presentation by Jim Harding to the
• National Academy of Sciences/National Research
  Council Panel
• January 22, 2008, Washington, DC

6
How Do Current Cost Estimates Compare? What
Factors Are Most Important?

• Capital cost is most important
• Energy Information Administration (EIA) -
  2083/kW
• MIT - 2000-2500/kW (2003)
• Keystone - 3600-4000/kW (June 2007)
• SP - 4000/kW (May 2007)
• Moodys - 5000-6000/kW (October 2007)
• FPL - 5200-7800/kW (Fall 2007)
• Operating costs less important but not
  insignificant
• Assumptions and methodology often opaque
• Life cycle cost estimates range from 5-17
  cents/kWh
• Why is this so?

7
The Easy Reasons

• Lack of a consistent economic methodology
• Capital cost usually stated in mixed current
  dollars at Commercial Operation Date (COD),
  rather than discounted real dollars
• Subsidies often included in cost estimates,
  though they affect price not cost
• Very important issue for long lead time, capital
  intensive units
• Example Keystone Center high case for nuclear
  was 2950/kW overnight, 4650/kW using mixed
  current dollars at the Commerical Operation Date
  (COD), and 4000/kW in discounted 2007 dollars.
• All the same number!

8
Recent Asian Experience
Cost data from MIT 2003 Future of Nuclear Power
study. Average does not include South Korean
units, owing to labor rates. Real escalation
from 2002-2007 at 4 percent/year.
9
Major Keystone Center Assumptions

• Take Asian experience at face value (important)
• Escalate costs using the Electric Power Research
  Institute (EPRI) estimate for heavy construction,
  2002-2007 in low case and through Commercial
  Operation Date (COD) in high case (very
  important)
• 5-6 year construction period and no major finance
  or regulatory issues conventional IOU financing
  (all very important)
• Use current spot prices for uranium, and
  predicted enrichment prices for long term fuel
  prices (not very important)
• Operation Maintenance costs and capacity factor
  at current fleet average include
  decommissioning, capital additions, and
  Administrative General costs 30-40 year life
  (somewhat important)
• Life cycle cash flows discounted at weighted
  after tax cost of capital (somewhat important
  first year cost rate shock - can be twice as
  high as levelized life cycle cost)
• No major new transmission required (important,
  but site specific)

10
Real Escalation is the Biggest Problem
Provided to Keystone panel by EPRI
11
Steeper Curve Than in the Mid 80s
12
Cost Escalation Likely Worse for Nuclear

• Industry moribund in Western Europe, US, and
  Russia since TMI and Chernobyl
• Twenty years ago (US) 400 suppliers, 900
  N-Stamp holders today 80 and 200
• Only one forge for large parts Japan Steel
  Works maybe Creusot Forge (France)
• Skilled labor and contractor limits
• World uranium production well below current
  consumption

13
Recent Estimates

• Keystone Center - 3600-4000/kW 8-11 cents/kWh
• Discounted real 2007 dollars would be 5600/kW
  (16-17 cents/kWh) at American Electrical Power
  escalation rate from 2002-Commercial Operation
  Date
• Standard Poors - 4000/kW 9-10 cents/kWh
• Basis not stated levelized fixed charge rate
• Life cycle costs reflect Keystone OM and fuel
  costs
• Moodys - 5000-6000/kW
• Basis not stated operating and fuel costs not
  estimated
• Florida Power Light - 5200-7800/kW
• Basis not stated major transmission included

14
Keystone Center Updated Lifecycle Costs
Costs are in real discounted 2007 cents/kWh.
Highest high case based on Moodys capital cost.
Low high and low case exclude South Korea.
15
S P Assessment - w/ carbon controls
Keystone operating costs are used instead of
those estimated by SP

16
US Projections Decades Ago
Mark Gielecki and James Hewlett, Commercial
Nuclear Power in the United States Problems and
Prospects, US Energy Information Administration,
August 1994. Data is in 2002 dollars.
17
Efficiency and Renewables Can Be Disruptive
Technologies

• A disruptive technology is often cheaper than the
  operating cost of the existing system
• Efficiency resources cost less than operating
  costs for existing gas (or coal with carbon
  taxes) they pay for themselves with 3x more
  carbon savings per dollar
• Wind was disruptive from 2002-2005 and may be
  again
• Photovoltaics may soon become one
• Only disruptive energy technologies can grow fast
  enough to solve climate challenges

18
Rapid Worldwide Growth in Renewables

19
Technical Innovation Driven by Standards
20
Compact Fluorescent Market Penetration
21
The Bottom Line

• Twenty years from now reactor technology will be
  roughly the same as it is today
• Efficiency resources, wind turbine technology,
  and photovoltaics are improving rapidly
• Take one example --- Nanosolar
• started by the Google founders, backed also by
  Swiss Re
• Building two 430 MW/yr thin film PV production
  facilities this year in Germany and California,
  using a technology they equate to printing
  newspapers
• Currently shipping and reportedly profitable at
  0.99/watt (not including installation and
  balance of system)
• The cheapest, least risk strategy is rapid
  development of efficiency and conservation
  resources

22
Cost-Effective Alternative to Nuclear Power
23
Cost-Effective Strategy for Ontario to Phase Out
Nuclear Power

• Provide 20 billion over 15 years through loan
  guarantees, grants, and tax credits for energy
  conservation and demand management from savings
  realized through the elimination of funding for
  new nuclear reactors and associated transmission
  capacity.
• Allow electricity rates to reach their true,
  unsubsidized cost.
• Ban exports of non-emergency and non-renewable
  power.
• Provide 200 million per year for low-income
  households to convert from electric space
  heating.
• Increase the maximum provincial energy-efficiency
  grant for home owners to 12,000 per household.
• 6,000 grant to convert to geothermal heating and
  cooling.
• 2,000 grant for solar hot water heating
  conversion.

24
Cost-Effective Strategy for Ontario to Phase Out
Nuclear Power (contd.)

• Introduce a 10-year 600 million grant program
  for green and LEED municipal building projects.
• Mandate conservation and efficiency as a primary
  element of the Ontario energy mix for the Ontario
  Power Authority (OPA).
• Require all new construction to have solar water
  heating and energy-efficient home orientation.
• Require greenhouse gas (GHG) emission and energy
  consumption labels on all appliances and
  energy-consuming devices.
• Require all large appliances to provide real-time
  electrical consumption information.

25
Cost-Effective Strategy for Ontario to Phase Out
Nuclear Power (contd.)

• Reform the Ontario Building Code as follows
• Advance the dates for Ontario Building Code (OBC)
  energy-efficiency targets.
• Require all new homes to be built to a minimum of
  R2000 standards and all commercial, industrial,
  institutional , and apt. buildings to be built to
  a minimum of LEED-certified rating.  
• Simplify the approval process for the
  installation of environmental technologies.
• Create a knowledge bank of best practices for
  environmental technologies.
• Mandate a 40 heating-emission reduction over the
  2007 Building Code.

26
Cost-Effective Strategy for Ontario to Phase Out
Nuclear Power (contd.)

• Create a MOE secretariat to coordinate
  information sharing and research on renewable
  technology.
• Create a long-term supply management plan to
  provide regulatory stability in the renewable
  energy sector.
• Provide 250 million over 10 years to convert
  government building heating systems to combined
  heat and power.
• Work with municipalities to create renewable
  energy zones.
• Create a peak-energy trading system to encourage
  businesses to use less power during peak times.
• Tie renewable-energy standard offer program (SOP)
  payment rates to the Ontario Consumer Price
  Index.

27
Cost-Effective Strategy for Ontario to Phase Out
Nuclear Power (contd.)

• Create a sliding scale for wind power supply
  purchase based on the wind availability at the
  build site.
• Raise the Standard Offer Program payment rate for
  photovoltaic (PV) systems to 0.60/kWh from
  0.42, and to 0.24/kWh for biogas technologies
  for the first 15 years.
• Remove the 10 MW cap on standard offer program
  projects.
• Facilitate the ability of small renewable energy
  generators to sell to the grid.
• Direct Hydro One to establish grid connection
  charges at a rate proportional to rated power
  production.
• Negotiate with the Fed. Govt. for a first year
  100 capital cost allowance for PV systems on
  commercial structures.