Chapter 78: Economics of Nuclear Energy

While cost is an important factor, perhaps the reliability of electricity is a crucial characteristic to take into consideration as there are no specific standards but several factors arrayed by the industry to ensure that electricity is there when you need it.  The United States has numerous options for generating and supplying electricity on a constant basis which includes nuclear energy, fossil fuels, hydro, wind, solar, geothermal and biomass.   A diverse electricity supply helps avoid the pitfalls and the three largest sources of electricity in the United States are coal, natural gas and nuclear energy.  The following graph illustrates reliability factor:


Another important factor in a reliable grid is a power plant’s ability to produce large amounts of “dispatchable” power—that is, a facility that can generate electricity on demand.  Facilities that can do this are called baseload plants, and they are the workhorses of the electricity system.  Most baseload plants are nuclear or coal-fired.

A third factor is the reliability of the various electric generating sources themselves.  Nuclear power plants are the most reliable source of electricity, operating 24/7 for 18 to 24 months before shutting down briefly to refuel.

The US nuclear fleet has a proven, decades-long record of providing reliable power during extreme natural challenges. Review the timeline cataloguing these events.  Here is a graph:Slide5

A recent report, Meeting Carbon Budgets – 2014 Progress Report to the UK Parliament, published on July 15, 2014 cited: “Nuclear power remains, prospectively, one of the cheapest low-carbon technologies and can play an important role as part of a cost-effective portfolio of technologies to decarbonize the power sector.”

Speaking of cost, the costs for nuclear and conventional power investment and electricity generation are important for decisions on fuel choices for future electricity supply, not least for baseload power projects.  Energy is the actual amount of electricity generated by a power plant during a time period, measured in watt-hours.  The units are usually expressed in thousands (kilowatts and kilowatt-hours) or millions (megawatts and megawatt-hours).

A cursory review of available information indicates that the investment costs of recently completed nuclear power plants range from about USD 1,300 to over USD 6,000 per kilowatt-Electric (kWe).

Relevant reasons for this wide variation include:

  • Differences in Project Management;
  • Regulatory Approaches;
  • Site-Related Factors:
    • Multi-Unit Sitting;
    • Seismicity; and
    • Infrastructure.
  • Plant Design (Including extent of standardization);
  • Unit Prices:
    • Locally available Materials and Labour.


  • Inclusion or Exclusion of interest during construction;
  • Inventories of Fuel and Heavy Water;
  • Cost Reference Date; and
  • Currency Exchange Rates.

Most prominent for projects with high costs were difficulties with construction management and regulatory procedures. These factors also led to extended construction schedules up to about 14 years. On the other hand, important features of low-cost projects with construction periods of 5-6 years (One Unit) include Efficient Project Management; Strong Feedback of Experience; and the detailed design is largely completed and regulatory issues are resolved before start of construction.

Taking into consideration the oft-quoted Olkiluoto nuclear new build in Finland (oft-quoted because it is suffering major cost and time over-runs), it appears that the new European Pressurized Reactor (EPR) design, with 1600 MWe of generation capacity, looks to be coming in at a cost of EU6.4 billion. That normalizes to $6.0 bn per GWe when capacity factors are accounted for.

A large (600 MWe peak) planned wind farm in South Australia, with a proposed 120 MWe biomass generation as back-up, will cost $1.2 billion, plus and extra $0.2 billion for the connecting infrastructure.  That’s about $6.9 billion per GWe.  When consider the sun, costs jump.  Based on the proposed Moree Solar Farm, this large solar PV facility with no storage or back-up (i.e. not a true baseload solution) comes in at $19.6 billion per GWe.  A concentrating solar thermal plant (based on the Spanish Gemasolar plant) with molten salt storage back-up can be had at a cost of $25.1 billion per GWe.

It becomes obvious that costs, like any other number, mean nothing sitting on their own.  This is a question choosing the best option.  Even using a notoriously expensive ‘first-of-a-kind’ nuclear example, new nuclear is still the best value for zero-carbon generation.

Looking at some of the other 60 new reactors under construction or more than 200 currently proposed, the picture becomes even clearer.  South Korea is undertaking a substantial program of new nuclear build.  Indeed, the South Koreans have sold their technology and expertise to the currently non-nuclear United Arab Emirates at a contracted price of $3.5 billion per GWe with 6 GWe to be delivered by 2018.  Meanwhile the Chinese are delivering new nuclear based on the Westinghouse AP 1000 design for reported domestic cost of as low as $1.7 billion per GWe.  So, if considering zero-carbon generation at scale, it would be foolish in the extreme to reject nuclear from consideration on capital cost grounds.

When it comes to nuclear energy, the key is to look at the product of the power plant, not the plant itself: that is, dependable electricity.  Here, nuclear excels, delivering electricity at an excellent price, with capacity factors now exceeding 90 percent in the US and South Korea.  Perhaps even more importantly, this price will be reliable.  Thanks to negligible fuel costs and no carbon emissions in the generation, nuclear power is almost completely insulated from two of the biggest incoming pressures on power prices:  carbon prices and fuel scarcity.  When building expensive infrastructure with long life, such considerations matter a great deal.

So where does that leave us? Real-world experience tells that nuclear can provide well-priced and reliable electricity.  In capital terms, nuclear is the best-value form of zero-carbon generation, with miles of daylight to the competition. That may be a surprise, but this industry has learned.  New designs are predominantly more standardized in design, and more reliant on passive, rather than engineered safety systems, and come in a range of sizes.  All of this brings cost down.

Sweden’s forestry, chemical, mining and steel production industries through their group SKGS, which stands for Skogen (Forest), Kemin (Chemicals), Gruvorna (Mines) and Stålet (Steel), asked Price Waterhouse Coopers (PWC) to conduct an indicative estimate of the cost of new investment in nuclear, hydro and wind power as an alternative to fossil fuel power plants.  Just to know, so as to be informed reliably on which way is best.

The PWC calculations were made exclusive of policy instruments in the form of taxes, rebates and grants.  For nuclear, however, the cost of waste management and decommissioning has been included in the calculation.

The report shows that when taxes, fees and contributions are excluded, both nuclear and hydropower are far more cost effective than investments in wind power.  Wind power, the study suggests, is some 65 percent more expensive than hydro and about 50 percent more expensive than nuclear.

The PWC study calculated a minimum price based on the prevailing market rate of return available in the energy sector, excluding taxes, fees and contributions.  The study uses an investment that meets the market rate of return, with a minimum price for electricity from:

  • Hydroelectric Power at SKr 390 ($58.5) per megawatt-hour (MWh);
  • Nuclear at SKr 421 ($63.1) and SKr 295 ($44.2) per MWh; and
  • Wind Power at SKr 645 ($96.7) per MWh.

Two models for nuclear were used in the study – one in which government loan guarantees are included and the other where they are not.  Excluding taxes, fees and contributions, this is SKr 60 ($9.0) per MWh for hydro power; SKr 100 ($15.0) per MWh for nuclear power; and SKr 1500 ($22.5) per MWh for wind power.  In other words, the wind power is 150 percent more expensive than nuclear.

Currently in Sweden the electrical generation industry is dominated by two forms of generation – hydropower at up to 50 percent and nuclear power at about 45 percent.  Expansion of both these low carbon forms was limited by legislation that protected undeveloped rivers and prohibited new reactors.  Under the new policy, restrictions on nationally protected rivers will stay, but new reactors will be allowed and a third ‘significant’ sector will be developed from ‘cogeneration, wind and other renewable power’.

Based on studies by the energy companies contemplating building new reactors and independent analyses, new nuclear power plants are expected to produce electricity at competitive prices.  In fact, new nuclear plants in some markets may be one of the most cost-effective ways of generating electricity in a carbon-constrained world.

The cost of electricity is based on more than the capital cost of the plant.  Fuel, operations and maintenance (O&M) costs are combined with the capital cost of the plant to determine the price of electricity from that facility to consumers.

Contrary to the study’s finding that “nuclear power cannot stand on its own two feet in the marketplace” nuclear energy is expected to be among the most economic sources of electricity.  To cite one example, an independent comparative study published in January 2008 by the Brattle Group for the state of Connecticut estimated that nuclear energy (at $4,038/kW) may have the highest capital cost, but still produces the least expensive electricity, except for combined cycle natural gas with no carbon controls.

New nuclear reactors have been affirmed as the least cost option for new generation by the Public Service Commission (PSC) in South Carolina, Florida, and Georgia.  The analyses supporting the PSC reviews found nuclear to be cost competitive with other forms of baseload generation in addition to helping to address climate change.

Various recently-released academic studies have also found the cost of nuclear energy to be competitive.  It’s useful to think of it like this:

  • The cost of building advanced reactors is about the same as advanced coal plants with carbon storage, but nuclear energy has the lowest fuel cost over decades of electricity production; and
  • By comparison, natural gas plants are relatively cheap to build, but the supply and price volatility is a major drawback. The fuel cost for natural gas plants makes up 90 percent of the power cost.

The cost of power from coal and gas-fueled power plants would rise in a carbon-constrained world, further increasing their electricity costs.

A new licensing process, coupled with construction and project management experience from nuclear energy projects globally, will provide useful experience with new reactor designs in the United States.  Put simply, credible estimates of the total cost of new nuclear energy facilities show that electricity from nuclear energy will be competitive with other forms of baseload generation.

In 2013 the US Energy Information Administration published figures for the average levelized costs per unit of output for generating technologies to be brought on line in 2018, as modeled for its Annual Energy Outlook.  These show advanced nuclear, natural gas (advanced combustion turbine), and conventional coal in the bracket 10-11c/kWh. Combined cycle natural gas is 6.6 cents, advanced coal with Carbon Capture and Storage (CCS) 13.6 cents, and among the non-dispatchable technologies: wind onshore 8.7 cents, solar PV 14.4 cents, offshore wind 22.2 cents and solar thermal 26.2 c/kWh. The actual capital cost of nuclear is about the same coal, as and very much more than any gas option.

In 2010 the Organization for Economic Co-operation and Development (OECD) study Projected Costs of generating electricity set out some actual costs of electricity generation, from which the following figures are taken:


Here is a table which illustrates an estimated levelized cost for each selected source of electricity in 2016:Slide7

It is important to distinguish between the economics of nuclear plants already in operation and those at the planning stage.  Once capital investment costs are effectively “sunk”, existing plants operate at very low costs and are effectively “cash machines”.   Their O&M and fuel costs (including used fuel management) are, along with hydropower plants, at the low end of the spectrum and make them very suitable as base-load power suppliers.  This is irrespective of whether the investment costs are amortized or depreciated in corporate financial accounts – assuming the forward or marginal costs of operation are below the power price, the plant will operate.

US figures for 2012 published by Nuclear Energy Institute (NEI) show the general picture, with nuclear generating power at 2.40 c/kWh, compared with coal at 3.27 cents and gas at 3.40 cents.


A Finnish study in 2000 also quantified fuel price sensitivity to electricity costs:


Doubling the uranium price (say from $25 to $50 per lb U3O8) takes the fuel cost up from 0.50 to 0.62 US cents per kWh, an increase of one quarter, and the expected cost of generation of the best US plants from 1.3 US cents per kWh to 1.42 cents per kWh (an increase of almost 10 percent).  So while there is some impact, it is comparatively minor, especially by comparison with the impact of gas prices on the economics of gas generating plants.  In these, 90 percent of the marginal costs can be fuel.  Only if uranium prices rise to above $100 per lb U3O8 ($260 /kgU) and stay there for a prolonged period (which seems very unlikely) will the impact on nuclear generating costs be considerable.

Nevertheless, for nuclear power plants operating in competitive power markets where it is impossible to pass on any fuel price increases (ie the utility is a price-taker), higher uranium prices will cut corporate profitability.  Yet fuel costs have been relatively stable over time – the rise in the world uranium price between 2003 and 2007 added to generation costs, but conversion, enrichment and fuel fabrication costs did not followed the same trend.

In February 2014 the US NEI presented figures from the Electric Utility Cost Group on US generating costs comprising fuel, capital and operating costs for 61 nuclear sites in 2012.  The average came to $44/MWh, being $50.54 for single-unit plants and $39.44 for multi-unit plants (all two-unit except Browns Ferry, Oconee and Palo Verde).  The $44 represented a 58 percent increase in ten years, largely due to a threefold increase in capital expenditure on plants which were mostly old enough to be fully depreciated.  Over half of the capital expenditure (51 percent) in 2012 related to power up rates and licence renewals, while 26 percent was for equipment replacement.

For prospective new nuclear plants, the fuel component is even less significant.  The typical front end nuclear fuel cost is typically only 15-20 percent of the total, as opposed to 30-40 percent for operating nuclear plants.

Competitiveness in the context of increasing use of power from renewable sources, which are legally preferred, is a major issue today.  The most important renewable sources are intermittent by nature, which means that their supply to the electricity system does not necessarily match demand from customers.  In power grids where renewable sources of generation make a significant contribution, intermittency forces other generating sources to ramp up their supply or power down at short notice.  This volatility can have a large impact on non-intermittent generators’ profitability.  A variety of responses to the challenge of intermittent generation are possible.  Two options currently being implemented are increased conventional plant flexibility and increased grid capacity and coverage.  Flexibility is seen as most applicable to gas and coal fired generators, but nuclear reactors, normally regarded as base-load producers, also have the ability to load-follow, e.g, by the use of ‘grey rods’ to modulate the reaction speed.

As the scale of intermittent generating capacity increases however, more significant measures will be required.  The establishment and extension of capacity mechanisms, which offer payments to generators prepared to guarantee supply for defined periods, are now under serious consideration within the EU.  Capacity mechanisms can in theory provide security of supply to desired levels but at a price which might be high, for example, Morgan Stanley has estimated that investors in an 800 MWe gas plant providing for intermittent generation would require payments of €80 million per year whilst Ecofys calculate that a 4 GWe reserve in Germany would cost €140-240/year.  Almost by definition, investors in conventional plant designed to operate intermittently will face low and uncertain load factors and will therefore demand significant capacity payments in return for the investment decision.  In practice, until the capacity mechanism has been reliably implemented, investors are likely to withhold investment.  Challenges for EU power market integration are expected to result from differences between member state capacity mechanisms.

As far as the future cost competitiveness is concerned, understanding the cost of new generating capacity and its output requires careful analysis of what is in any set of figures.  There are three broad components: capital, finance and operating costs. Capital and financing costs make up the project cost.

Calculations of relative generating costs are made using levelized costs, meaning average costs of producing electricity including capital, finance, owner’s costs on site, fuel and operation over a plant’s lifetime, with provision for decommissioning and waste disposal.

It is important to note that capital cost figures quoted by reactor vendors, or which are general and not site-specific, will usually just be for EPC costs.  This is because owner’s costs will vary hugely, most of all according to whether a plant is Greenfield or at an established site, perhaps replacing an old plant.

There are several possible sources of variation which preclude confident comparison of overnight or Engineering, Procurement & Construction (EPC) capital costs – eg whether initial core load of fuel is included.  Much more obvious is whether the price is for the nuclear island alone (Nuclear Steam Supply System) or the whole plant including turbines and generators – all the above figures include these.  Further differences relate to site works such as cooling towers as well as land and permitting – usually they are all owner’s costs.  Financing costs are additional, adding typically around 30 percent, and finally there is the question of whether cost figures are in current (or specified year) dollar values or in those of the year in which spending occurs.

Diverse energy sources enable the United States to balance the cost of electricity production, availability and environmental impacts to their best advantage.  Coal, natural gas and nuclear energy are the foundation of the nation’s electricity supply system.  Coal produces 37.4 percent of the country’s electricity, natural gas provides 30.4 percent and nuclear provides 19.0 percent.  The rest comes from hydroelectric dams and renewable energy.  Each source of electricity has unique advantages and disadvantages, and each has its place in a balanced electricity supply portfolio.

The nuclear energy industry plays an important role in job creation and economic growth, providing both near-term and lasting employment and economic benefits.  The 100 reactors in the United States generate substantial domestic economic value in electricity sales and revenue—$40 billion to $50 billion each year—with more than 100,000 workers contributing to that production.

NEI has conducted economic benefits studies analyzing more than half of the nuclear energy facilities in the country. The studies show that the typical nuclear plant generates approximately $470 million in sales of goods and services in the local community and nearly $40 million in total labor income.  These figures include both direct and secondary effects.  The direct effects reflect the plant’s expenditures for goods, services, labor and profit—approximately $453 million.  The secondary effects at the local level—approximately $17 million—include indirect and induced spending attributable to the presence of the plant and its employees as plant expenditures filter through the local economy (e.g., restaurants and shops buying goods and hiring employees).  Extended to the state and national economies, secondary impacts increase by $80 million and $393 million, respectively.

Every dollar spent by the industry at a nuclear plant results in the creation of $1.04 in the local community, $1.18 at the state level and $1.87 at the national level.  Each nuclear plant generates almost $16 million in state and local tax revenue annually. These tax dollars benefit schools, roads, and other state and local infrastructure.  The average nuclear plant generates federal tax payments of approximately $67 million annually.



  1. Why Nuclear Energy? Unmatched Reliability;
  2. Cost of Nuclear  and Conventional Baseload Electricity Generation;
  3. Meeting Carbon Budgets – 2014 Progress Report to Parliament;
  4. The Energy Collective – How much does nuclear power actually costs?
  5. Oil Price – Nuclear Energy: More Cost Effective Than Wind Energy;
  6. NEI – Rapid Response: New Study Overlooks Cost Competitive Nuclear Energy;
  7. World Nuclear Association – The Economics of Nuclear Power; and
  8. NEI – Cost & Benefit Analyses.


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