Published on June 9th, 2017 | by Michael Barnard
June 9th, 2017 by Michael Barnard
Virginia is about to receive approval for the most expensive nuclear reactor ever built in the USA. It’s been a 10-year hunt with reactor technologies changing at least twice to add a third unit to the North Anna nuclear generation plant. But they are closing in on regulatory approval.
How much would its electricity cost if it actually goes forward?
Nuclear math is hard. That’s not the math behind nuclear physics, by the way. That’s actually straightforward compared to the financial black arts accounting that occurs with nuclear plants. A tremendous amount of the costs are typically swept under the rug as overruns occur and governments and utilities try to save face. Ontario, as one example, is on its 30th year and 4th administration of pushing its nuclear debt down the road to future politicians and taxpayers.
But let’s pretend the numbers will be relatively transparent and do some simple math.
Let’s make a few assumptions:
- Capital costs are $19 billion USD as per the economic analysis cited.
- The $600 million USD already spent as per the reference is included in the cost of electricity.
- Capacity is 1.6 GW as per the reference, which is higher than the 1.52 GW originally specified in 2007 when this process started.
- Capacity factor on most years of operation would be 90%, but 60% for the first year of operation and after refurbishment. Obviously, it would be 0% during construction and during the two years of refurbishment.
- Operational costs are 5% to 10% of capital costs per year. That would be $0.95 billion to $1.9 billion per year.
- At 20 years of operation, the reactor would be refurbished, taking two years and costing $5 billion, approximately 25% of original capital outlay.
- It would take 8 years of actual construction and be on time and on budget.
- Lifespan of the reactor before decommissioning would be 40 years.
Let’s see what the numbers tell us for 5% operating costs for the cost of electricity per MWh:
- 10 years — $237 per MWh or 24 cents per kWh
- 20 years — $177 per MWh or 17.7 cents per kWh
- 30 years — $155 per MWh or 15.5 cents per kWh
- 40 years — $136 per MWh or 13.6 cents per kWh
Oops. At an unrealistically low operating cost, after 40 years of spreading the capital cost across the decades, the cost of electricity is still much higher than alternatives. This price is well above IEA and EIA estimates for the cost of new nuclear, two agencies which have historically been very favourable to this technology.
What about at 10%?
- 10 years — $329 per MWh or 32.9 cents per kWh
- 20 years — $265 per MWh or 26.5 cents per kWh
- 30 years — $241 per MWh or 24.1 cents per kWh
- 40 years — $220 per MWh or 22.0 cents per kWh
Oops again. At a more realistic operating expense, the costs are much worse.
What operating expense needs to be assumed in order for the 40 year cost of electricity to get under 10 cents per kWh?
You have to get down to an operating cost of 2.8% of capital costs or about $530 million per year before the 40 year price of electricity drops into reasonable ranges. That’s assuming no cost of capital, which is unrealistic. It’s also excluding the externalities which ExternE calculated. With Washington, DC, being about 80 miles (130 km) away, those externalities are likely quite high.
What are the alternatives by the way? Well, new wind energy purchase power agreements in the USA haven’t gone above 5 cents per kWh in several years. Utility-scale solar PPAs are hunting in the 5 cents per kWh range right now too. Those PPAs are typically for 20 years, so the comparison is to the 17.7 to 26.5 cents per kWh above. Being generous, solar and wind are three to five times cheaper. If wind farms only lasted 20 years instead of 30, it would still be cheaper to build them twice rather than build nuclear once.
And of course equivalent wind and solar can be built in three to four years, including permitting. How much would be needed, assuming a 50:50 split and capacity factors of 35% and 15% respectively, to be equivalent to a 1.6 GW nuclear reactor at 90% capacity factor? About 2 GW of wind and about 5 GW of solar would suffice. China put in about 14 times that much solar and about 11 times that much wind in 2016 alone. Spreading the much smaller amounts over 5 years when there are robust supply chains and suppliers in the USA is relatively trivial.
There are provisos of course with the potential economic insanity on the part of Virginia. There’s no guarantee that the nuclear plant will be built. Obviously, the math doesn’t add up for most people, even though the owners of the plant would disagree from their perspective and are undoubtedly spending lobbying money hand over fist in Washington just down the road. And the calculations don’t take into account net present value, so they are a simpler view; however, as capital costs are front end loaded and I didn’t bother to include decommissioning costs or the costs of financing, it’s a bit of a wash.
It’s hard to see why Virginia is even considering this option and continuing to take it through the approvals process. They should turn left. Modern technologies are much cheaper and faster to build exist.
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