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Estimating the costs of nuclear power: benchmarks and uncertainties

May 2013

Working Paper

The debate on this topic is fairly confusing. Some present electricity production using nuclear power as an affordable solution, others maintain it is too expensive. These widely divergent views prompt fears among consumers and voters that they are being manipulated: each side is just defending its own interests and the true cost of nuclear power is being concealed. Companies and non-government organizations certainly adopt whatever position suits them best.

But at the same time, the notion of just one ‘true’ cost is misleading. As we shall see in this paper there is no such thing as the cost of nuclear power: we must reason in terms of costs and draw a distinction between a private cost and a social cost. The private cost is what an operator examines before deciding whether it is opportune to build a new nuclear power station. This cost varies between different investors, particularly as a function of their attitude to risks. On the other hand the social cost weighs on society, which may take into account the risk of proliferation, or the benefits of avoiding carbon-dioxide emissions, among others. The cost of actually building new plant differs from one country to the next. So deciding whether nuclear power is profitable or not, a benefit for society or not, does not involve determining the real cost, but rather compiling data, developing methods and formulating hypotheses. It is not as easy as inundating the general public with contradictory figures, but it is a more effective way of casting light on economic decisions by industry and government.

Without evaluating the costs it is impossible to establish the cost price, required to compare electricity production using nuclear power and rival technologies. Would it be preferable to build a gas-powered plant, a nuclear reactor or a wind farm? Which technology yields the lowest cost per KWh? Under what conditions – financial terms, regulatory framework, carbon pricing – will private investors see an adequate return on nuclear power? In terms of the general interest, how does taking account of the cost of decommissioning and storing waste affect the competitiveness of nuclear power?

This paperanswers these questions in three stages. We shall start by taking a close look at the various items of cost associated with nuclear power. We shall look at how sensitive they are to various factors (among others the discount rate and price of fuel) in order to understand the substantial variations they display. We shall then review changes in the cost dynamic. From a historical perspective nuclear technology has been characterized by rising
costs and it seems most likely that this trend will continue, being largely related to concerns about safety. Finally we shall analyse the poor cost-competitiveness of nuclear power, which provides critics of this technology with a compelling argument.

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