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Deconstructing anti-nuclear economic myths

Let me start things off with a disclaimer – I am not an economist. I don’t even pretend to be an economist; I’m a nuclear engineer by training (I hold Ph.D. in Nuclear Engineering). That notwithstanding, economics (and specifically, the economics of energy) are a side interest of mine. So it was with mixed interest and trepidation when I read a recent piece by libertarian economist Veronique de Rugy from the upcoming July issue of Reason, entitled “No to Nukes.”

Plausibly, de Rugy’s animating complaint (given Reason’s market-oriented focus) is in the subsidies for new nuclear (specifically, when I followed up with de Rugy on Twitter, she pointed out the issue of loan guarantees, although nowhere does this specifically appear in her piece). The piece itself is nothing new, however – the bulk of it is in fact a retread of a suspiciously-timed nuclear hit piece which appeared literally two weeks after the Fukushima disaster. (One gets the distinct impression that, despite her protestations to the contrary, de Rugy is more than happy to dance on what she perceives to be nuclear’s grave, particularly given her timing and choice of targets.) In reality, the piece seems to follow on to a frustrating trend of pro-fossil contrarianism as of late, particularly in libertarian circles (contrarian in the sense of singling out the most economical, carbon-free competitor to fossil fuels for special scorn on economic grounds); although perhaps this contrarian turn owes to the fact that conservative heavyweight think tank Heritage has cornered the market in advocating nuclear energy as a free-market energy source. (Who said hipsterism is limited to fashion and terrible beer?)

de Rugy’s piece begins with an long introduction detailing to the reader why nuclear power was destined to fail to live up to its promises, including citing public opinion which she describes as having ” remained steadfast against the technology ever since [Three Mile Island]” (although someone may want to refer de Rugy to the latest polling data on the subject), along with other issues, such as “[d]isputes over waste disposal [which] have never been resolved” (once again however, these are political rather than technical matters).

Finally we get to the meat of the matter – it would appear that a restart of the nuclear industry is, “[…]not just bad politics. It’s awful economics.” Well.


To this end, de Rugy characterizes the recent decision by the NRC to grant Southern Nuclear company a license to build two new AP1000 units at the Vogtle site – the first new units in 30 years, as “[…]an act of desperation by a president who has realized he is running out of other options.” Fortunately, contrary to the opinions of a economists with a particular axe to grind, the decision to award Southern Company is not in fact in the hands of the president, nor are operating licenses granted upon individual opinions about economic viability of the project – they are voted on by the commissioners of the NRC on the basis of safety alone. This fundamental misunderstanding of the process is pervasive throughout the rest of the piece.


Levelized cost of electricityMuch of the piece is particularly scarce on actual sources and utterly devoid of hyperlinks (however, given the fact that the piece is a re-tread of her prior post-Fukushima piece, most of her sources appear to be taken from there). de Rugy cites a 2009 MIT study by Ernest J. Moniz and Mujid S. Kazim as evidence of nuclear’s uncompetitive costs; one assumes she is referring to MIT’s “Future of Nuclear Power” project which includes cost projects of nuclear compared to other conventional fossil sources under a variety of circumstances. In the 2009 update, it reports the following cost comparison: assuming current cost of capital, coal clocks in at 8.4 ¢/kWh, natural gas at 6.5 ¢/kWh, and nuclear at 8.4 $/kWh. The authors specifically note however that this includes a current “risk premium” to capital costs for nuclear – recalculating capital costs at comparative market rates (absent the “risk premium”), they come up with a number far closer to gas and coal: 6.6 ¢/kWh. Even assuming the risk premium stays, with a carbon capture and storage the cost for coal and gas quickly reaches near-parity with nuclear once more. Such an analysis is also borne out in applying levelized cost of electricity estimates to EIA data, resulting in similar conclusions.

Taking up the example of the French (with their nuclear-heavy energy portfolio), de Rugy asserts that because of the France’s (state-subsidized) industry, French consumers pay more for electricity. Specifically, she writes:

But producing nuclear energy in France is not magically cheaper than elsewhere. French citizens are forced to pay inflated costs to support grand government schemes, such as the decision made 30 years ago to go nuclear at any cost after the first oil shock in 1974. 

EU electricity prices

Really? Going to the data, the opposite is in fact true: France has one of the lowest retail electricity prices (the 7th lowest in the E.U.); compare this to Germany, which has recently phased out nuclear entirely, which pays the second-highest rate. (Again, these are not hard things to find, but something de Rugy asserts with no evidence and in clear contradiction of the data.) She might try to argue that consumers pay indirectly, but nowhere has evidence been presented to support this, nor is it supported by retail electricity price data.

de Rugy’s main thrust here of course is that capital costs for nuclear in the U.S. are little different than those than in nuclear-friendly France, relying on the analysis of the Vermont Law School’s Mark Cooper, an individual who isn’t exactly private about his own agenda when it comes to nuclear. (Hint: he’s not a fan.) Again, one gets the impression the data is being cherry-picked to fit the desired conclusion. de Rugy makes an incomplete comparison here, citing the high “overnight cost” estimates for nuclear capital costs compared to coal and natural gas, while neglecting to inform her readers that this alone is a highly misleading comparison. (To see how this process is properly unpacked, even with natural gas still coming out favorably compared to nuclear, I invite you to see how Dr. James Conca unfolds the data).

To wit: “overnight” cost is a rough estimate of total capital cost (i.e., total money which must be invested to build the plant), assuming the plant “overnight” – i.e., without the borrowing costs (in other words, interest on loans which continues to pile up while plants are being built and not generating revenue), something which particularly dominates nuclear costs. However, a more accurate comparison is the levelized cost of electricity  (LCOE)- something which calculates both the capital cost and operations & maintenance costs (which include fuel – a cost which dominates natural gas economics). The LCOE calculates the “break-even” cost of electricity from a plant given the projected costs over the plant’s lifetime, with a reasonable discount rate (for example, the expected return of ~3% on treasury bonds) over the life of the facility. Given that the expected lifetimes of different facilities can vary widely by type (i.e., the current fleet of nuclear plants will almost all be relicensed to operate for a total of 60 years, with some potentially operating up to 80 with facility improvements and upgrades), this makes for a more useful comparison of the actual cost of electricity. Once again, something absent from de Rugy’s analysis.

Indeed, taking this out to the logical extension – if nuclear plants were wholly unprofitable to build and operate, why in the world then would operators of the existing fleet of 104 reactors not simply turn each one off tomorrow, much less put a dime into maintenance outages which run up into the millions of dollars? The answer of course is because this is not true; nuclear plants are indeed expensive to build (due to capital costs, including the borrowing costs associated with construction times), but the marginal cost of power from a nuclear unit is tiny – namely because most of the cost is in the cost of capital itself. Nuclear in this sense represents the opposite economics of natural gas, which has a low front-end cost but whose costs are generally dominated by fuel price. (Thus, the levelized cost – something de Rugy does not look at – is extremely dependent upon assumptions of future fuel prices – hence why nuclear is often seen as a hedge against future fossil fuel price increases.)

However, de Rugy comes back with the follow-up that such estimates of nuclear cost come “after taking into account a baked-in taxpayer subsidy that artificially lowers nuclear plants’ operating costs.” Looking at the broader picture of historical energy subsidies however, this point doesn’t seem to carry the impact de Rugy seems to think it does – from the period of 1950-2010, nuclear has been the recipient of about 9% of total federal energy subsidies, compared to a shocking 44% for oil. (For those following at home, the rest include: Natural gas – 14%, Coal – 12%, Hydro – 11%, Renewables – 9%, Geothermal – 1%). Most of nuclear’s subsidy has, contra de Rugy, not been focused on the regulatory side (although the study does point to an approximate regulatory subsidy of $16 billion over the total time period) but R&D, which should surprise few who are conversant with the history of nuclear. (Oil, by contrast, receives the whopping share of its calculated subsidies from tax policy and regulation, while natural gas has almost exclusively benefited from tax policy).

Claymore mine
Image: Wikipedia

Notably absent from de Rugy’s analysis is how the most important subsidy fossil fuels (especially coal) have come to rely upon, which is treating the atmosphere like an open cesspool. Indeed, looking to the above costs from the MIT study, were we truly dealing with a “level playing field” in the sense that carbon-intensive industries were required to give the same degree of scrutiny that nuclear already does, the much-ballyhooed “cost difference” largely vanishes. (Again however, discussions of energy subsidies invariably seem to only go one way: like a claymore.)


No doubt though de Rugy is invoking the issue of nuclear liability insurance of course (known under the moniker of the “Price-Anderson Act”, passed in 1957). What is not noted is the exact taxpayer liability to date under Price-Anderson – which is exactly $0. Again, contrary to the claims of nuclear opponents like de Rugy who dress up their objections in economist’s language, nuclear is not “uninsurable” on the private market – in fact, each nuclear unit is required to carry an individual liability of $375 million; following the exhaustion of the individual commercial policy, each operator-licensee is required to kick in up to another $111.9 million (pro-rated), producing what amounts to a collective cross-insurance arrangement of $11.975 billion. One can dispute whether such a sum is “sufficient,” but the idea that the industry is utterly absolved of tort liability is clearly at odds with the the current reality.

When I pressed de Rugy over what particular subsidies she was complaining about and why her complaint so specifically singled out nuclear (looking at her publication history, there is nary an article devoted to the issue of energy subsidies for other sectors), she responded by pointing me to an analysis she did on the market-distorting effects of loan guarantees. (This after I pointed out that I was in favor of removing all subsidies – but it would seem, like many in the punditry business, the conclusion comes first).

Frankly, I won’t get into all of the analysis – because once again, I am not out to defend loan guarantees or any other form of energy subsidy. However, one thing that did jump out at me once more was the use of extremely cherry-picked data in her report – the few items that do mention nuclear (most of the piece pertained to loan guarantees for solar – which incidentally, was not required to pay the credit subsidy fee which nuclear was) are, shall we say, “factually challenged.” de Rugy rolls out the several-times-over debunked trope of the 50 percent default rate with nuclear loan guarantees – based on poorly-documented projections over a program which was never passed. While de Rugy immediately pointing out that the CBO revised this number (without specifying how much), the supporting evidence she gives to this revision doesn’t even pertain to civilian nuclear power – rather, the study she points to is a comparative economic analysis of nuclear power for naval propulsion.

The only other nuclear-specific studies de Rugy cites in this study come from Peter Bradford – a well-known anti-nuclear activist with the Nonproliferation Policy Education Center (simply google “Bradford” and “nuclear” if you don’t believe me) – along with Henry Sokolski (also affiliated with the same). The extremely selective use of sources known to have a hostile agenda to nuclear (that is, when the sources even accurately refer to de Rugy’s claims) again strongly implies a rushed, cherry-picking approach that implies a “conclusion-first, evidence later” approach that is all too familiar with established punditry. Indeed, it might make for impressive-looking studies (and good sound bites), but it hardly suffices for serious scholarly work. Indeed, if the evidence is as strong as she claims it to be, it would behoove her case greatly to find such evidence from more objective and less clearly agenda-driven sources.

Of course, all of this is the problem: even rather sloppy studies like this, particularly when attached to someone with a Ph.D. in economics, sound plausible and require the time and energy to deconstructing their myriad of errors and misplaced assumptions – something which amounts to a non-trivial task for one when most of their day is typically occupied by honest employment, alas.

Steve Skutnik's picture

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Jim Stack's picture
Jim Stack on June 28, 2012

The US imports 90% of the uranium used in it’s 104 nuclear plants.

Nuclear plants have to be shut down and refueled every 18 months.

The waste is all stored on site and was running out but now they were granted more storage can be placed on site, with no solution is site for the waste.

A paper was presented at the G8 summit stting nuclear energy cost 50 cents a KwH! or more since waste has never been solved.

Nuclear uses huge amount sof water. In France they had to trunk in cold water last summer to keep them operating in the heat.

wiki pedia has the facts about the high subsides and mismatch in power from Nuclear. Solar is the only power we need.

 

http://en.wikipedia.org/wiki/Nuclear_power_debate

Steve Skutnik's picture
Steve Skutnik on June 29, 2012

Jim – much of said “imported” uranium is in fact from the Megatons to Megawatts program, in which weapons-grade material from the former Soviet Union is downblended to be destroyed. That being said, the U.S. has ample uranium deposits (including in the state of Virginia), and generally speaking major uranium holdings tend to be in relatively friendly countries – like Canada and Australia. So the imports argument is a bit of a canard.

As to the point about a requirement for shutdown and refueling – what exactly is your point here? They run 24/7 for 18 months at a time – that 90+% uptime figure includes time down for outages. And almost any energy source is going to require outages for routine maintenance. Find me any source – including solar – which can achieve anything close to that level of capacity factor. Solar doesn’t even come close.

Further, without a citation for your paper, there is absolutely no way to critique your cost estimate. Needless to say, many, many reputable studies have been conducted and none come up with numbers anywhere near what you are quoting.

As for water usage – again, a canard. Any energy system which relies on a steam cycle to turn turbines requires water (as does hydro, which uses water in a more mechanical fashion). However, that water “used” isn’t just magically “gone” – either the water is discharged back into the source with the waste heat, or a much smaller amount is used in evaporative cooling towerrs. Again, this objection doesn’t really pertain to nuclear as much as it does steam cycles and hydro writ large – in other words, close to 3/4 of our energy portfolio.

Finally, I provided adequate information about subsidies across all sectors – with a link to the original report such that you can draw your own conclusions. If you’d care to dispute those numbers, I invite you to do so. As of right now, you have not.

Alex Chapman's picture
Alex Chapman on June 29, 2012

You repeatedly attack the commentator rather than the commentary. If someone has historically supported the anti-nuclear side, you suggest that they and their arguments can be dismissed. Were that sensible, then someone like yourself – with an academic specialty in the nuclear field and a career spent serving the nuclear industry – should be dismissed just as readily. You decry cherry-picking of data and biased discourse, yet you do precisely the same yourself. It weakens your entire narrative, and casts doubt on all your other points.

Michael Hogan's picture
Michael Hogan on June 29, 2012

I’m afraid your economics need a little work. First, can we not be a little more current on the likely overnight cost of new nuclear? And that goes for de Rugy as well, assuming she really based her critique on the now-outdated 2009 MIT “update”. The latest numbers from EdF themselves, for example, on their proposed Hinckley Point project in the UK put the cost of two new reactors to be built at an existing nuclear plant site (i.e., one that already has some of the infrastructure a nuclear plant needs to function) at £4,300/kW, which at current exchange rates is about $6,700/kW, which translates to a levelized cost of roughly £150/MWh which at current exchange rates is about 23¢/kWh. One needs to be cautions about simply translating UK capital costs to US dollars at current exchange rates and it’s not entirely clear what was and was not included in EdF’s latest estimates, but it is abundantly clear that the cost of new nuclear is not anywhere close to 6.6¢ or even 8.4¢/kWh. CERA, a dyed-in-the-wool power industry consultant, put the levelized cost of new nuclear at over 12¢/kWh, and that was a couple of years ago before the latest revelations from the industry itself of where costs are headed. The latest cost estimates for the two new plants in the U.S. Southeast are already heading north. and the estimated completion schedules are heading sideways, and they’ve only just begun construction. The average cost overrun for the U.S. nuclear industry during the heyday of the late 1960s and 1970s was 203%; this time it was supposed to be different, but so far it looks awfully familiar. Also, your comment about the problem in using “overnight” costs was surprising; in fact, using “overnight” costs is a favorite ploy to hide the real comparative disadvantage of nuclear precisely because it ignores the massively greater contribution that interest and escalation make to the final cost of nuclear compared to other generating alternatives, given nuclear’s very long lead time. Lifecycle costs are indeed captured in levelized cost calculations, but levelized cost calculations are based on total final cost, which includes interest and escalation, which means that nuclear’s “overnight” construction costs vastly understate the true cost of new nuclear. Your citation of the operators of the 104 reactors in the U.S. as proof that new nuclear makes good economic sense is likewise off the mark. The book values of nearly every reactor in the U.S. fleet were written down to close to zero in the succession of utility restructurings and bankruptcies that took place in the early 1980s and again in the early part of the last decade (e.g., Boston Edison’s Pilgrim plant was sold to its current owner in about 2002 for $100/kW, less than 2% of what it would cost to build that plant today, which not only essentially removes return of capital from the new owners’ financial calculus but tells you all you need to know about what the market in 2002 thought of the value of a nuclear plant in a competitive wholesale market), and those plants that weren’t restructured are nearly fully depreciated. The financial health of current U.S. reactor operators says nothing whatsoever about the financial wisdom of building new reactors. Finally, what much of this demonstrates is the underlying fatal flaw in the commercial use of nuclear power, which is that what 54 years of commercial nuclear industry experience has told us over and over and over again, as recently as last year, is that we still haven’t found the human institutions capable of responsibly and reliably managing this industry to the level of safety and economy the public deserves. The technology has vast and wonderful potential, but the human institutions to which it has been entrusted have repeatedly demonstrated that they are unworthy as stewards. We wouldn’t give Apple 54 years to get the iPad right; why do we treat the nuclear industry differently?

Steve Skutnik's picture
Steve Skutnik on June 29, 2012

Alex, I think you’re confusing my point here. It is not a dismissal out of hand, it is pointing to the use of selective, agenda-driven sources at the expense of unbiased sources which can be used as the basis of a common analysis. You’ll notice I didn’t in fact dismiss de Rugy’s arguments on these grounds – but I absolutely think it appropriate to point out the background of the sources from which she draws her claims. Part of my objective here was to rebut the piece using this standard of evidence – which in fact, I did. Your point would hold much more merit if I’d simply relied upon a similar cherry-picked set of sources from interested parties – say NEI. However, I have not. This is my point – cherry-picking from authors known to have an agenda favorable to your pre-defined conclusion is an intellectual shortcut.

Does it mean one should discount everything such sources have to say? Absolutely not. However, it is certainly merits treating said claims with appropriate skepticism. And if you believe I’m similarly agenda-driven (in spite of the fact that I’ve never actually been employed by the nuclear industry, and my research interests would keep me employed for a long time even if the industry shut down tomorrow…), I invite you to show similar skepticism of my claims. But unlike de Rugy, I’ve provided you with a wealth of resources from neutral sources to check my claims. Again, my goal here is to avoid the intellectual shortcuts that de Rugy is taking.

Finally, I invite you to re-read the piece if you’ve come away with the impression that I repeatedly “attack the commentator and not the commentatary.” Again, I have fairly thoroughly unpacked de Rugy’s claims and provided evidence to why they don’t hold up – and done so with evidence from unbiased sources. If there is a claim you feel I’ve inadequately addressed, by all means, make it known. But the meantime, contrary to your assertion, I have in fact gone to great lengths to address the specific arguments de Rugy has brought up.

Michael Hogan's picture
Michael Hogan on June 30, 2012

Skutnick,

With all due respect, you do impugn the credibility of de Rugy’s sources, two in particular. You characterize Mark Cooper as having an “agenda” and you characterize Peter Bradford as being a “well-known anti-nuclear activist.” Both comments, in context, are clearly meant to dismiss them as untrustworthy arbiters of the facts you place in evidence. You neglect to mention that Peter Bradford was a well-respected Chairman of the Nuclear Regulatory Commission for nearly five years, appointed by Jimmy Carter, the most knowledgeable pro-nuclear President we’ve ever had. He is also a former chair of the Maine and New York energy regulatory commissions and a much-sought-after expert on the historical experience with commercial nuclear power. I know both of them and both have come to their public positions on nuclear not out of any personal agendas but rather based on long, close familiarity with the industry and a genuine interest in what’s best for consumers, the industry and the environment. That doesn’t mean they’re necessarily right, but they are sincere searchers for the truth and deserve to be treated as such. MIT’s Ernie Moniz (whom I also know a little bit) has as much of an agenda as any of the sources you reference – he’s a nuclear physicist who generally supports the commercial use of nuclear power. And with all due respect to MIT (I’m an alumnus, so yes I respect MIT), the institution tends to give a tad too much deference to technology as the solution to society’s problems. The bottom line, though, is that one must be cautious in impugning the credibility of public figures and institutions who take a public position on an issue simply because of the nature of that position. Sometimes they turn out to have good reason to have done so. And it’s always best to steer well clear of pejorative labeling.

Mike Hogan

Paul O's picture
Paul O on June 30, 2012

Mike, your approach and comment in this debate is far preferential to the comment preceding it. And I’d like to hear (read) Skutnik’s response.

While Skutnick does appear to impugn De Rugy’s sources, I cannot see where he has attacked De Rugby as claimed by Alex.

Michael Hogan's picture
Michael Hogan on June 30, 2012

Paul,

Not sure whose or which “comment preceding it” you’re referring to, but I agree that Skutnick’s “attacks” (probably too strong a word but I’ll run with it) are more focused on de Rugy’s sources rather than on de Rugy herself. That said, it strikes me as a distinction without much of a difference – he’s implying that de Rugy is unrelable because in his view the sources upon which she relies are unreliable. I don’t know de Rugy and have no opinion on her reliability as a commentator on nuclear power issues one way or the other; Skutnick’s implied criticism of de Rugy herself may well be valid as far as I know. My concern is with the pejorative treatment of at least some of her sources. And of course I’m curious as to how Skutnick will respond to the points I’ve raised elsewhere.

In any case, like you, I await Skutnick’s response with interest.

Mike

Glenn Carlson's picture
Glenn Carlson on June 30, 2012

Your point would hold much more merit if I’d simply relied upon a similar cherry-picked set of sources from interested parties – say NEI”?  Such as, for example, the “broader picture of historical energy subsidies,” the sponsorship of which by the Nuclear Energy Institute you conspicuously omit from your  text.  The NEI is an advocacy organization whose objective is, according to its website (www.nei.org), to “promote the beneficial uses of nuclear energy.” Whatever its merits, the NEI is hardly a neutral or unbiased source.

Also, the article by Dr. James Conca that you reference is laughable in that it cites “The Onion,” a fake news comedy site, as the reference for “a new labor market study [which] found that the fracking industry hired more PR graduates than any other industry last year.” In a reply to a comment on his article, Dr. Conca claims he knows about The Onion and was trying to be humorous.  He also claims that The Onion’s “description of the PR hiring of the fracking industry is real,” but does not (cannot?) cite a legitimate source.  On the contrary, according to the “Houston Business Journal” (http://bit.ly/Ja1gKY), such a study is “not.. rooted in reality” and “likely fictional.”

Now, I admit that citing interested parties and fake news sites for data to support one’s argument goes to the weight of the evidence, not necessarily its substance.  But, when advocating any cause, it’s advisable to check one’s own pot before decrying the color of another’s.

But my larger point is that there is no unbiased, neutral, or uninterested party in the nuclear energy debate. We need to stop wasting time and effort throwing stones and defending against stones thrown on the false idea that such a party exists (or worse, that we are that party). This does not mean we surrender the debate. Our goal is to persuade, and while we cannot persuade the unpersuadeable, we can alienate the vast persuadeable middle with petty bickering and namecalling.

The choice is ours. Do we just make ourselves feel good by preaching to the choir and scoring cheap debating points, or do we get serious about building a rational nuclear energy policy AND the public support needed to sustain it?

Steve Skutnik's picture
Steve Skutnik on July 1, 2012

Your point would hold much more merit if I’d simply relied upon a similar cherry-picked set of sources from interested parties – say NEI”?  Such as, for example, the “broader picture of historical energy subsidies,” the sponsorship of which by the Nuclear Energy Institute you conspicuously omit from your  text.  The NEI is an advocacy organization whose objective is, according to its website (www.nei.org), to “promote the beneficial uses of nuclear energy.” Whatever its merits, the NEI is hardly a neutral or unbiased source.

 

The study itself was performed by Management Information Services, an independent consulting firm. Indeed, the particular, detailed sutdy referenced above was commissioned by NEI, however unless MIS’s forecasting services also include predictions of their future clients, their conclusions are cosistent with a prior (more abbreviated) study they published in 2006:

http://www.misi-net.com/publications/IIST-Spring06.pdf

No doubt NEI commissioned and trumpted the study because it is favorable to their interests. Nonetheless, MIS has published similar numbers well before NEI commissioned MIS to perform a broader study.

Re: Conca’s article – I was aware of his rather embarassing reference to The Onion – and regardless of whether or not he intended to play it off as a joke, it comes across as a serious blight on what is otherwise a very good unpacking of what goes into levelized energy cost projections. Again, most of the reason I cited the article is for this explanation – one which in fact does not privilege nuclear over gas. 

Re: the issue of no unbiased/disinterested parties to the debate – even taking this as a given (I’m not sure I immediately buy this conclusion on face), it seems like anyone who is seeking to make a genuine assessment of the facts would take care to draw upon sources which take into account these known biases and attempt to produce a reasonable set of “uncertainty bounds” as a result. Drawing exlcusively from sources favorable to one’s own interests implies cherry-picking to make a point. Which I believe we agree is not conducive to a productive discussion. 

With regards to the original author, this was my point, really – simply that de Rugy draws very heavily upon sources on one side of the debate with a well-known agenda. I’m not trying to dismiss these sources out-of-hand necessarily (in fact, for the most part, I tried to address the arguments on their own merits), but I do think her choice of source speak greatly to her own biases when constructing her argument.

Andy Dawson's picture
Andy Dawson on July 3, 2012

“First, can we not be a little more current on the likely overnight cost of new nuclear? And that goes for de Rugy as well, assuming she really based her critique on the now-outdated 2009 MIT “update”. The latest numbers from EdF themselves, for example, on their proposed Hinckley Point project in the UK put the cost of two new reactors to be built at an existing nuclear plant site (i.e., one that already has some of the infrastructure a nuclear plant needs to function) at £4,300/kW, which at current exchange rates is about $6,700/kW, which translates to a levelized cost of roughly £150/MWh which at current exchange rates is about 23¢/kWh.”

 

That’s not quite true….Those aren’t figures from EdF, but figures extrapolated by the UK Guardian newspaper, claiming to have “seen” numbers in an internal EdF report.  However, they seem distinctly flaky, for a number of reasons.

The Gaurdian claimed them to have been based on a reassessment of costs from Flammanville, which is currently stated by EdF to be likey to come in at approximately €4.5 – 5 Bn.  In , that’s £3.6 – 4Bn.

The Guardian article used this to forecast a cost of around £7Bn for the two reactors of the Hinkley C plant  – which seems in line with fairly conservative economy of scale assumptions of shared facilities, etc.  Note that includes no significant learning curve effects (as have already been demonstrated at Taishan, the site of the 3rd and 4th EPR builds).

Each of the EPRs destined for Hinkley is 1.6GW – giving a total output of 3.2GW nominal, a number which in its turn gives roughly £2.2K/Kw – at current exchange rates, $3,450/Kw.  Using your own conversions, that equates to £76/MWh, or about 11.6c/KWh.

What I think the Guardian had done here was a very basic, and rather obvious error – they’d taken the costs for a twin reactor plant, but then treated them as though they were for a single reactor plant.  Note, if they were to stand muster, they imply a 75% cost escalation between the second plant in a series build, and the fith and sixth – when most experience suggests a cost fall of perhaps 20%, simply from avoidance of early construction errors, and working to a proven design.

Nathan Wilson's picture
Nathan Wilson on July 8, 2012

Thanks for another great post Steve.  Your patience and commitment to objectivity are appreciated.

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