Economics of Nuclear Power

Mon Mar 06 15:24:38 EST 2006
By Dennis Colenutt, Michael Spackman, and former NERA Special Consultant Gordon MacKerron

The UK's Sustainable Development Commission (SDC) commissioned NERA to contribute the paper "Economics of Nuclear Power" to their review into the potential role for new nuclear power capacity in the UK. The report informed the SDC's position on nuclear generation, which they developed for the UK government's energy review, and launched on Monday, 6 March 2006. The SDC's position is that that on balance, the problems with nuclear, identified in their review, outweigh the advantages. However, the SDC does not rule out further research into new nuclear technologies and pursuing answers to the waste problem, as future technological developments may justify a re-examination of the issue.

NERA co-authored the report with Science & Technology Policy Research, Sussex University (SPRU). It analyzes the costs of building new nuclear power capacity, and outlines the uncertainties that will need to be resolved if the UK is to pursue a new program of nuclear build. These uncertainties arise for a number of reasons:

  • The relevance of overseas nuclear generation capacity experience is limited, as the majority of the facilities being built internationally are out of contention for future UK use. Of the two most likely reactor designs, neither has been built anywhere in the world, or been seriously considered by the UK safety licensing system.
  • Because many of the estimated costs are provided by the supplying contractor, the risks attached to any new build project are "asymmetrical" (i.e., the chances of actual costs turning out to be higher than forecast costs are much greater than actual costs turning out to be lower).
  • The cost of reactors depends on whether a single reactor, or a program of (essentially identical) reactors is being planned. Economies of scale mean that a program offers significantly better value for money (up to between 30-40 percent), but to realize such savings, an up-front commitment to the program is required.
  • It is unclear how any new nuclear capacity would be financed.

To download the report, please visit the SDC's website at www.sd-commission.org.uk.