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Essay: Is Nuclear Power a viable source of energy?

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  • Subject area(s): Economics essays
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  • Published: 11 July 2022*
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  • Words: 1,060 (approx)
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  • Tags: Nuclear energy

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6th Form Economics project:

Nuclear power, the energy of the future of the 1950s, is now starting to feel like the past. Around 450 nuclear reactors worldwide currently generate 11% of the world electricity, or approximately 2500 TWh in a year, just under the total nuclear power generated globally in 2001 and only 500 TWh more than in 1991. The number of operating reactors worldwide has seen the same stagnation, with an increase of only 31 since 1989, or an annual growth of only 0.23% compared to 12.9% from 1959 to 1989. Most reactors, especially in Europe and North America, where built before the 90s and the average age of reactors worldwide is just over 28 years. Large scale nuclear accidents such as Chernobyl in 1986 or, much more recently, Fukushima in 2011 have negatively impacted public support for nuclear power and helped cause this decline, but the weight of evidence has increasingly suggested that nuclear is safer than most other energy sources and has an incredibly low carbon footprint, causing the argument against nuclear to shift from concerns about safety and the environment to questions about the economic viability of nuclear power. The crucial question that remains is therefore about how well nuclear power can compete against renewables to produce the low carbon energy required to tackle global warming.

The costs of most renewable energy sources have been falling rapidly and increasingly able to outcompete nuclear power as a low carbon option and even fossil fuels in some places; photovoltaic panels, for example, have halved in price from 2008 to 2014. Worse still for nuclear power, it seems that while costs of renewable energy have been falling, plans for new nuclear plants have been plagued with delays and additional costs: in the UK, Hinkley Point C power station is set to cost £20.3bn, making it the world’s most expensive power station, and significant issues in the design have raised questions as to whether the plant will be completed by 2025, it’s current goal. In France, the Flamanville 3 reactor is now predicted to cost three times its original budget and several delays have pushed the start up date, originally set for 2012, to 2020. The story is the same in the US, where delays and extra costs have plagued the construction of the Vogtle 3 and 4 reactors which are now due to be complete by 2020-21, 4 years over their original target. Nuclear power seemingly cannot deliver the cheap, carbon free energy it promised and is being outperformed by renewable energy sources such as solar and wind.

The crucial and recurring issue with nuclear power is that it requires huge upfront costs, especially when plants are built individually, and can only provide revenue years after the start of construction. This means that investment into nuclear is risky, long term and cannot be done well on a small scale, though new technologies such as SMRs (Small Modular Reactors) may change this in the coming decades, making it a much bigger gamble. Improvements in other technologies over the period of time a nuclear plant is built means that is often better for private firms, who are less likely to be able to afford large scale programs enabling significant cost reductions or a lower debt to equity ration in their capital structure, to invest in more easily scalable and shorter term energy sources, especially with subsidies favouring renewables in many developed countries. All of this points to the fundamental flaw of nuclear: that it requires going all the way. Small scale nuclear programs that are funded mostly with debt, that have high discount rates and low capacity factors as they are switched off frequently will invariably have a very high Levelised Cost of Energy (LCOE) as nuclear is so capital intensive.

That said, the reverse is true as well. Nuclear plants have very low operating costs, almost no external costs and the cost of decommissioning a plant are only a small portion of the initial capital cost, even with a low discount rate such as 3%, due to the long lifespan of a nuclear plant and the fact that many can be extended. Operating costs include fuel costs, which are extremely low for nuclear, costing only 0.0049 USD per kWh, and non-fuel operation and maintenance costs which are barely higher at 0.0137 USD per kWh. This includes waste disposal, a frequently cited political issue that has no longer been relevant technically for decades as waste can be reused relatively well and stored on site safely at very low costs simply because the quantity of fuel used and therefore waste produced is so small. The fuel, uranium is abundant and technology enabling uranium to be extracted from sea water would give access to a 60,000 year supply at present rates of consumption so costs from ‘resource depletion’ are also small. Finally, external costs represent a very small proportion of running costs: the highest estimates for health costs and potential accident are at 5€/MWh and 4€/MWh respectively, though some estimates fall to only 0.3€/MWh for potential accidents when past records are adjusted to try and factor in improvements in safety standards; though these vary significantly due to the fact that the total number of reactors is very small.

Nuclear power therefore remains still one of the cheapest ways to produce electricity in the right circumstances and many LCOE (Levelised Cost of Energy) estimates, which are designed to factor in all costs over the life time of a unit to give a more accurate representation of the costs of different types of energy, though they usually omit system costs, point to nuclear as a cheaper energy source than almost all renewables and most fossil fuels at low discount rates.

LCOE costs taken from ‘Projected Costs of Generating Electricity 2015 Edition’ and system costs taken from ‘Nuclear Energy and Renewables (NEA, 2012)’ have been combined by the World Nuclear association to give LCOE for four countries to compare the costs of nuclear to other energy sources. A discount rate of 7% is used, the study applies a $30/t CO2 price on fossil fuel use and uses 2013 US$ values and exchange rates. It is important to bear in mind that LCOE estimates vary widely as many assume different circumstances and they are very difficult to calculate, but it is clear from the graph that nuclear power is more than still viable; being the cheapest source in three of the four countries and third cheapest in the fourth behind onshore wind and gas.

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