A detailed cost comparison of nuclear versus wind energy shows that nuclear energy will soon no longer be cost competitive with wind energy if present trends continue.
While nuclear energy is regarded as one of the cheapest sources of power available -- given the enormous amount of energy released from the splitting of atoms -- and wind is considered relatively expensive, analysis of a number of current projects using publicly available data indicates that wind energy has closed the gap in price per kilowatt.
Furthermore, price trends are much less favorable for nuclear projects -- cost estimates of new nuclear plants have doubled and tripled in some instances in just one or two years. Prices for wind power are also rising, but at more pedestrian rates closer to 10% annually.
This is something well worth considering before welcoming a nuclear renaissance -- as ratepayers may be saddled with unaffordable bills and the nation may also end up with a large, unanticipated bill for the hidden cost of nuclear waste disposal.
I've reached this conclusion by crunching the numbers on one recent contract to build a nuclear plant in South Carolina, two proposed nuclear plants in Florida and new vendor estimates of the cost of nuclear construction going forward. I compared that data with a wind farm that would produce a comparable output of energy, relying on cost data from a Department of Energy report published this year.
The prevailing mantra on America's energy future is "let's keep all options on the table." I put two of them on the table and here's what I found. Put your wonk hat on as I take you through the numbers.
Nameplate Capacity v. Actual Capacity
When we read about energy deals for nuclear, wind or any other type of fuel source, we always read about the number of megawatts or gigawatts the new facility will produce. Unfortunately, that's not really an accurate number. The number quoted is what is called the "nameplate capacity," but that is different from the amount of energy the plant is actually going to produce. The nameplate capacity tells you only what the plant produces when it runs at the maximum possible rate. No plant, no matter the power source, runs at the maximum rate all the time. Sometimes it is running at full speed, sometimes it is shut down and quite often it is somewhere in between. In order to estimate the true cost of power generated from a facility, you have to make a calculation to find out how much power the facility can actually produce.
You do that by multiplying the nameplate capacity by something called the "capacity factor." The capacity factor tells you how well the plant does at turning the potential nameplate capacity into actual kilowatt hours. The factor varies widely among different plant types, and the differences are not trivial.
I was able to calculate the capacity factor for US nuclear plants for 2006, by combining data from two reports from the Department of Energy's Energy Information Administration (EIA). The first report covered existing generating capacity and the second reported actual generation. Although I've seen a 90% capacity factor published widely for nuclear power plants, the data in the reports I examined show that the capacity factor was actually 85%. That's still pretty good. As you will see, wind farms don't even come close in this regard.
Nuclear Cost Data
The data for the following discussion on nuclear plants comes from the economics page of the World Nuclear Association.
Let's start with the price to actually design and build the reactor and electrical generation: vendors call that the 'overnight cost' of a plant. The odd adjective, 'overnight' refers to the theoretical cost of building the nuclear plant <span style="font-size: x-small"><span style="font-size: x-small">at today's prices, in one night -- leaving out </span></span>any inflation and financing expense over the course of the 5 or 10 years it actually takes to build the plant.
To the overnight cost, you then have to add what are called "owner's costs": land, lawyers and cooling towers among other things.
Then, you have to add what is surprisingly the single largest cost in nuclear construction: financing. It takes so long to construct a plant that interest on the borrowed money can easily be as much as 50% of the total cost.
All of these numbers may be reported in different contexts, sometimes even without identifying what is included. To understand the prices and do fair comparisons, it is particularly important to know if the quote for a nuclear proposal includes financing. That can as much as double the price.
I looked at the prices for three plants. The first was from a $9.8 billion deal made in May 2008 by South Carolina Electric and Gas for two 1.117 GW plants. The price included financing and owner's cost. They're scheduled to start operations in 2016 for the first plant and 2019 for the twin. To calculate the cost before financing, I conservatively assumed that financing would be 50% of the total, giving $4.9 billion.
In February of this year, Florida Power and Light (FPL) filed a proposal for twin plants to produce 2.2 GW total. The projected price was between $6.8 billion and $10 billion without financing. In March 2008, Progress Energy announced a plan, also for twin plants, to produce a total of 2.2 GW. Their price was $10.4 billion before financing costs.
Using these figures, I arrived at an average cost for a nuclear plant: $8 billion for 2.21 GW -- without financing costs included. The 2.21 GW rating refers, of course, to the nameplate capacity. So to know the actual production capacity, we'll need to multiply the 2.21 GW by the 85% capacity factor, which equals 1.88 GW.
In other words, through the course of the year, the plant will produce 1.88 GW hours of electricity on average every hour. The reality is that at some times it will be zero, other times it will be 2.21 GW and at other times it will be in between, but if you average it all, you'll get 1.88 GW.
Divide the $8 billion by 1.88 GW and you get $4.25 per watt of average actual generating capacity. Industry capital costs are more often reported as the price per kilowatt, so $4,255 per kW if you prefer. And remember, this is before financing costs.
Wind Numbers
Now, let's look at wind power. I calculated the capital costs for a theoretical wind farm that could produce the same output as the 2.21 GW nuclear plant, and to do this I used the projected 2008 prices from a report written by researchers at Lawrence Berkeley National Laboratory for the EIA. Tha report says it costs $1,920 per kilowatt of capacity. The report is the Annual Report on US Wind Power 2007.
But, let's not forget, we have to use a capacity factor to determine actual output, and for the wind, the capacity factor is much different. The capacity factor for wind projects varies much more than nuclear plants - I've seen the range reported as 20 - 45%. The capacity factor is improving for several reasons as I explained here. The EIA report also said that 25% of new 2007 wind turbines had a capacity factor greater than 40%, so I used a slightly higher than middle of the road figure of 35% for the capacity factor.
Given an actual output of 1.88 GW and a capacity factor of 35%, I worked backwards to calculate that a wind farm with nameplate capcity of 5.37 GW would be needed to produce the same amount of power as a 2.21 GW nuclear plant. At $1,920/kW, the capital costs of the wind farm would be $10.31 billion -- or <span style="font-size: x-small"><span style="font-size: x-small"><span style="font-size: x-small">$5.49/watt or $5,486/kW. That's </span></span></span>37% higher than our average nuke.
Nuclear vs Wind Power
We've left out the financing costs so far to be able to make a fair comparison with the cost of wind power. Now let's consider the financing. The average financing costs of the nuclear plants above is 71% of the pre-financing price. Add that into the mix and the nuclear price per kW becomes $7,276.
Unfortunately, I don't have a way to directly calculate financing costs for wind. Since wind turbines can be installed much closer to 'overnight' than a nuclear plant, the financing cost is not usually discussed as a part of the capital costs. For the same reason, we know that financing is not going to be nearly as big a factor for wind farms.
Put all these numbers together and it shows that the capital costs of nuclear and wind power are reasonably close, at least for now.
DealBreakers Not Included
To keep the comparison simple, well, at least less complicated than it might have been, I left out a few things:
Costs of new transmission lines were omitted because they will be project specifc. Most people know that these costs could be considerable if large wind farms are built in remote windy places, but they can also be significant for new nuclear projects. For instance the Progress Energy proposal described above also includes plans for an additional $3 billion on transmission lines in Florida for the new nuclear plant.
I also left out the price of long-term disposal of nuclear waste because there's really no way to know when, where or how much it might turn out to be. Still, there is cause for concern. A recent article pointed out the estimates for Yucca Mountain disposal have gone up considerably -- to $96 billion. There is a fund that ratepayers have been contributing to for years that will go some distance in paying the cost of Yucca or its alternative, but the Yucca effort will only dispose of waste from our current 104 plants and the defense program.
If the nation builds 45 new plants as John McCain recommends, it is fair to assume conservatively that there will an incremental cost of close to a billion dollars per plant for waste disposal. That price might well go down if we decide to allow spent fuel to be reprocessed, which is currently illegal. Reprocessing produces new fuel and can reduce the mass and volume of waste by 65%.
Nuclear development prices have also shot up in the last few years. For example, the estimate above by Progress Energy was triple their previous estimate made only one year earlier. In the middle of 2006, reactor vendors estimated the overnight costs at $1,500 - $2,000 per kW. This year, only two years later, they now estimate $3,000/kW. That excludes the owner's costs and financing.
Of course, wind power construction uses steel and concrete too and is subject to some of the same construction inflation as nuclear plants. But the turbine is the biggest cost element and as manfacturers build more of these, they will learn how to do it better. Turbine prices are likely to benefit from the mass production learning curve. As I reported here, the cost increase for windpower was about 9% last year and are estimated to be 12% this year.
Bottom line: Nuclear and wind energy right now -- from a purely financial perspective -- seem to be about neck and neck, but increasing capital costs and unknown disposal and security costs are quickly going to put nuclear energy out of reach if present trends continue.
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