The economics of nuclear power

This section addresses two important questions:

• is nuclear power financially viable?
• can nuclear power help to reduce greenhouse gas emissions in an economically efficient manner?

Is nuclear power economically viable?

In the 1970s nuclear power cost half as much as electricity from coal burning: by 1990 nuclear power cost twice as much as electricity from coal burning (Slingerland et al, 2004). Today the costs of nuclear power are estimated to be, on average, between 2 and 4 times more expensive than electricity generated by burning fossil fuels, about $0.05-0.07/kWh.

Compared with some modern renewable energy sources, nuclear power has mixed fortunes: for example it is more expensive than wind, about the same price as hydroelectric power and cogeneration with gasified wood, and cheaper than solar energy using photovoltaic (PV) cells (Öko Institute, 1997).

However, whilst the costs of nuclear power are rising, those associated with renewable energy sources are falling rapidly as they are relatively new and rapid progress is currently being made in reducing costs and increasing efficiency. In the case of nuclear power the costs are rising and are likely to continue rising for the foreseeable future. This is partly because the nuclear industry has been heavily subsidised by governments in the past meaning that some of the costs have been excluded from the price, but have been paid for by the taxpayer. We all pay for the costs of nuclear energy. Examples include:

• Decommissioning: so far very few nuclear installations have been decommissioned but in the coming years many plants will reach the end of their lifetimes and will be shut down. Experience in the USA and elsewhere has shown that decommissioning is an extremely expensive process. For example, the decommissioning of the Yankee Rowe nuclear reactor in Massachusetts was expected to cost $120 million but actually cost about $450 million. The cost of decommissioning all of the reactors in the US could be as high as $33 billion (GAO, 2003). Costs are this high because a large part of the building is radioactive and can only be demolished by robots. These radioactive materials must also be removed and stored under secured circumstances.
• Liability: the Price-Anderson Act in the USA limits the nuclear industry's liability in the case of an accident to $9.1 billion, less than 2% of the $560 billion that could be caused in damages by a serious nuclear disaster, according to American federal research into the consequences of the Three Mile Island accident in 1979. The other 98% of the costs will have to be paid for by the government. If the nuclear industry itself had to take full financial responsibility for potential nuclear disasters, the costs of insurance would be huge and the cost of nuclear power would also be much higher (Mechtenberg-Berrigan, 2003). The Paris Convention on Third Party Liability sets the maximum economic liability of nuclear operators in 15 European countries. Although the maximum operator liability was revised upwards in 2004 to €700 million (NEA, 2004), this amount would be truly insignificant in the event of a nuclear disaster.

The market itself provides evidence of nuclear power's lack of financially viability. Since the liberalisation and privatisation of the energy markets in the UK, the full costs of nuclear power have been more exposed. Companies have not been eager to invest in this energy source as it cannot exist in a competitive market without government subsidies (FOE, 1998). Even in France, where nuclear power accounts for 75% of total electricity production, it has been admitted that nuclear power is far more expensive than electricity from efficient fossil fuel burning power plants (Makhijani, 2002).

Reducing greenhouse gas emissions in an economically efficient manner

With regards to climate change it is also important to know the cost of reducing greenhouse gas emissions associated with various options, e.g. different energy sources, different levels of end-user efficiency etc. These costs are commonly referred to as the CO2 abatement costs. These are the costs of reducing greenhouse gas emissions by a given amount (e.g. 1 tonne) in comparison to a given reference option, usually coal.

The Öko Institute has calculated the abatement costs per tonne of CO2 reduction in relation to a coal-fired power station in Germany. The results are shown in the graph below.

CO2 abatement costs for various electricity systems (adapted from Öko Institute, 1997)

As can be seen, CO2 reductions can be made at negative costs by employing combined cycle gas turbine cogeneration, wind, cogeneration with gasified wood and simple energy efficiency. Nuclear power has positive abatement costs, in about the same order of magnitude as new hydropower, gas cogeneration, advanced energy efficiency, and biogas cogeneration. Hence, a variety of renewable and fossil fuel efficient alternatives are available which are economically more viable than nuclear power in terms of greenhouse gas abatement.