Business Financial View
Activities of nuclear industry lobbyists have so amended law to provide for profit of Utility Corporations as a calculated percentage. Conflict of interest results when electricity utilities opt for the most costly (nuclear) venture having excessive fiscal costs which create returns to shareholders, bondholders and executives offset by raising unit costs of electricity charged to consumers.
An egregious iniquity has modified the Law (allowed by a late line item added to a Florida law) permitting utilities to levy consumers with added charges to repair existing nuclear facilities and recover capital expense of new nuclear plants before they are built or even licensed. These consumer on-costs are delegated taxation by a corporation. This together with passing on "rising fuel costs" cost Progress Energy customers a 37% increase in monthly electricity charges in 2009. Notwithstanding that the expected much higher cost of electricity from nuclear power will likely hinder sales into wholesale markets.
New nuclear plants cannot attract private capital as they are inherently too risky and attract inadequate insurance against catastrophic loss. A reason for energy corporations to offer nuclear generation is to preserve their monopoly supply and resist putting the means of generating electricity into the hands of their customers with, for example, domestic photo voltaic solar panels.
Economic issues.
(October 28th, 2008. The Earth Policy Institute comments upon The Flawed Economics of Nuclear Power.)
Since 1990, about half of our increased energy demand worldwide has been met with increased efficiency, not new generation.
Each 1,100MW Westinghouse AP1000 nuclear reactor proposed by Duke Power and Progress Energy will cost $7 billion ($6.36 per watt) to build. In March 2008 Progress Energy announced that its two new Westinghouse AP1000 units on a greenfield site in Florida would cost it about $14 billion, including land, plant components, cooling towers, financing costs, license application, regulatory fees, initial fuel for two units, owner's costs, insurance and taxes, escalation and contingencies. If built within 18 months of each other, the cost for the first would be $5144 per kilowatt and the second $3376 per kW, say $9.6 billion. Interest adds about one third to the combined figure – $3.2 billion, and infrastructure – notably 320 km of transmission lines – about another $3 billion. A grand total of $15.8 billion. All being well, the units would be expected to be online in 2016 and 2017. (Since originally written the timescale has been extended by at least two years due to the necessary rectification of design flaws). Moreover, since then costs of the Levy Nuclear installations has risen to $22.5billion according to DOE EIA figures.
The U.S. atomic 'renaissance' also referred to as a "relapse" has no tangible approved reactor design (not even the AP 1000 unit), and no firm construction or operating costs to present.
A 2007 EU study suggested that all–in–all cost for nuclear generated electricity would be between US c/kWh 5.4 to 7.4. In a 2009 report the true cost per kWh has been assessed at US c/kWh 30 rising to $0.36 per kWh reflecting the capital cost rise to $22.5billion.
The $26 billion US used fuel program is funded by a 0.1 c/kWh levy. The current practice of storing spent fuel in on site ponds exposes it to untenable longer term security risks. For nuclear power plants any "cost" figures should include "spent" (meaning used and enriched) fuel rod management, plant decommissioning and ultimate waste disposal. These costs, while usually external for other technologies, are internal for nuclear power (ie by law they have to be paid or set aside securely by the utility corporation generating the power, and the cost passed on to the customer in the tariff). Decommissioning costs are about 9–15% of the initial capital cost of a nuclear power plant. But when discounted to current value, they contribute only a few percent to the investment cost and even less to the generation cost. In the USA they account for 0.1–0.2 c/kWh, which is no more than 5% of the cost of the electricity produced. The back–end of the fuel cycle, including used fuel storage or disposal in a waste repository, would contribute up to another 10% to the overall costs per kWh.
A report from the McKinsey Global Institute stated that the installation of highly efficient light bulbs and appliances nation–wide could displace the equivalent output of more than 60 large nuclear plants. Clearly, there's room for such efficiency improvements. especially when supply side economies resulting from RE storage are put into effect.
The primary argument made for the necessity of increased energy demand is to fuel economic growth, albeit forecasting economic growth is an uncertain science. However, we can still achieve much economic growth without building new power plants except to replace ones that retire.
The principal drawbacks of nuclear power includes the costs and time to build each plant measured in billions of dollars and a decade or more to build. Coupled with costs of disposal of the toxic waste, which remains active for millennia.
The following is added from the Craig A. Severance, Business Risks and Costs of Nuclear Power, a most lucid and comprehensive analysis, released in January, 2009. Independent assessments place nuclear facilities among the costliest private projects ever undertaken and is not economically competitive, while utilities promoting them assert that it is their least costly option. Severance calculates that capital costs for nuclear facilities per kWh (not counting operation or fuel costs) range between 17 to 22 cents/kWh. Generation costs/kWh (including fuel and O&M but not distribution to customers) raises the costs to between 25 and 30 cents/kWh - a higher cost than any other power generating technology. Even higher costs to $0.36 per kWh result from reflecting current costs published by the DOE Electricity Information Administration. Extracts of interest from Business Risks and Costs of Nuclear Power are included below.
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From Page 8: "The availability of Federally guaranteed loans, and/or a guarantee of the ability to charge ratepayers (often during construction) for the costs of a new facility, are no substitute for prudent business judgment. Simply shifting the burden of risks from the utility's shareholders and executives, to the taxpayers and ratepayers does not make any risks go away. It simply sets up yet another situation where profits are privatized while risks are socialized, allowing those who make bad decisions to walk away from the effects of their own imprudence. After hundreds of billions of such outcomes this year alone, the public has no stomach for more of this."
From Page 15: "The prevalence of rapidly escalating costs to construct new power plants indicates the longer the construction lead time, the greater the Business Risk that a proposed facility will exceed its estimated cost. Technologies with very short lead times (e.g. solar, wind, gas turbines) are exposed to the risk of cost escalations far less than power plants with long (e.g. coal or nuclear) construction periods. This is therefore a very significant additional Business Risk of nuclear power compared to other options available to a utility."
From Page 20: "Nuclear power's greatest costs are its capital costs, which are highly sensitive to construction delays. The prospect that nuclear construction schedules will prove to be optimistic therefore poses a significant Business Risk. If delays or other reasons cause significant cost overruns, the cost to complete a nuclear project may materially exceed funds lined up to finance the project. Yet, an unfinished reactor produces zero kWh's. A utility may not be able to withstand the impact of such a failure and remain a viable business entity."
From Page 23: "Credit ratings are very important. The prospect that undertaking a single project could have such a major impact on a utility company's balance sheet and cash flow that company credit ratings would be downgraded, should give pause to any executive, or oversight regulator, contemplating the wisdom of undertaking such a project.
Attempting to "fix" this problem by levying billions of early charges on ratepayers during construction, with zero electricity delivered in return, simply shifts the cash flow and credit rating problems to the utility's customers. This is the worst possible time to do so, given the precarious state of the economy."
From page 30: "A nuclear power plant is built to serve a projected future increase in customers' demand for electricity. There is, however a "Catch-22", because of the high cost of the nuclear plant (capital costs of 17-22 cents/kWh, overall costs 25-30 cents/kWh): The very act of building the nuclear power plant and increasing electric rates to attempt to pay for it, is highly likely to destroy the increased customer demand the plant was built to serve."
From Page 31: "If a utility builds a nuclear plant, and then tries to recover costs in the range of 25-30 cents/kWh from its customers, what will these customers do? Will they still buy the electricity from the utility in the quantities projected? If the utility does not know the answer to this question with any certainty, then the proposal to build a new nuclear power plant carries with it a high level of Business Risk. As almost all of the nuclear plant's costs are fixed, the utility has to pay them regardless of how many kWh's are sold. If the utility cannot sell enough kWh's at high enough rates to raise the revenue needed, it may face reduced returns on investment or even insolvency. ... The competitiveness of the local economy in the nuclear utility's service area could suffer, compared to other regions of the U.S. which are developing lower cost electricity."
From Page 32: "Costs at the power plant (not including distribution & G&A costs) of new nuclear power are likely to be 25-30 cents/kWh in the first year of full operation of the facility: 17-22 cents/kWh for capital costs; 1 cent/kWh O&M; 2 cents/kWh property taxes; 2 cents/kWh to fund plant decommissioning & nuclear waste; and 3 cents/kWh for nuclear fuel."
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