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Uncertainty and misperceptions drive up nuclear costs

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Uncertainty and misperceptions drive up nuclear costs

Photo by Bloomberg

2nd March 2015

By: Keith Campbell
Creamer Media Senior Deputy Editor

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Uncertainty as to how much new nuclear power plant (NPP) programmes will cost, in countries where there have not been any recent such programmes, is driving up cost estimates by authorities and agencies fearful of underestimating these costs. This was noted by World Nuclear University (WNU) lecturer Milt Caplan at the WNU one-day course at the University of Pretoria on Monday.

"In the US, the EIA [Energy Information Agency] estimated, in 2011, the cost of an AP1000 reactor [produced by Westinghouse Electric] at $5 339/kW," he reported. "China estimated, also in 2011, that its first four AP1000 reactors would cost $2 600/kW, with the next units expected to be $2 000/kW. This is because the Chinese were building and building, and the West was not. So the Chinese had more confidence [in their cost estimates] and in the West there was less confidence and this pushed up the estimates. The Chinese are benefiting from having a continuous build programme, while the Americans are just restarting and so things cost more."

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For countries seeking to establish nuclear industries, the are certain fundamentals that must be met. "To have a local industry, you must have a local infrastructure. You must have a local regulator," he cautioned.

No country has zero content in an NPP programme, and no country has 100% content in an NPP programme. Each country must decide how much localisation it is willing to trade off against risk. "The more things you localise, the more things you do for the first time, the more your risk goes up. You need a balance."

The high costs of NPPs are "definitely an issue". Nuclear has high investment costs and takes a long time to come into operation. But thereafter, it has low and stable operating and maintenance costs.

Financing is thus a key factor in NPP programmes. Long-term projects, like NPPs, need low interest (or discount) rate financing. "The discount rate or interest rate is really a measure of risk," he observed. Unfortunately, financial institutions tend to see nuclear as a high risk sector. This has given rise to suggestions in both the US and UK that these governments should give financial guarantees for NPP, to keep the interest rates down and share risk. This is despite the fact that, Caplan highlighted, "[t]he existing nuclear power industry is one of the safest in the world."

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