ON THE ECONOMICS OF NUCLEAR BETWEEN PROMISES AND FULLFILMENTS

1. ON THE ECONOMICS OF NUCLEAR BETWEEN PROMISES AND FULLFILMENTS Reinhard HAAS Vienna University of Technology Washington, 10th October 2011

2. CONTENT: 1. Introduction: some History 2. Some recent European examples 3. Costs of Nuclear vs. Market prices 4. Nuclear vs energy conservation 5. Conclusions

3. 1. INTRODUCTION • In the past: Nuclear is VERY cheap!

5. 1. INTRODUCTION • In the past: Nuclear is VERY cheap! • Today: Nuclear is cheaper than the alternatives  Objective of this presentation: …provide some explanations of the economic dynamics of nuclear powerin Europe

6. HOW DID INVESTMENT COST DEVELOP OVER TIME? Construction costs 1965 1995 Commercial start of operation Source: Jim Harding: Seven Myths of the Nuclear Renaissance (2007)

7. COST DEVELOPMENTS BEFORE 2000 Source: Grübler 2010

8. Technological Uncertainties: Learning rates (push) Source: Nakicenovic, Schrattenholzer, Grübler various papers

9. Technological learning: why not for nuclear? Real costs Public subsidies Financial subsidies (by banks by means of low interest rates…2.6%!!!!) Industry subsidies = Dumping Perceived costs MW cumulative For further discussion of industry subsidies: Steve Thomas: The economics of nuclear power (2005)

10. 2. SOME RECENT EUROPEAN EXAMPLES • Olkiluoto-3 (Finland): Construction started in 2004, now expected to be completed 2013; 1600 MW • Flamanville-3 (France): Construction started in 2006, now expected to be completed 2015; 1600 MW

11. SPECIFIC ASSUMPTIONS • Interest rate: 8%, depreciation time 25 years; • fuel costs: 9 EUR/MWh up to 2007, slightly increasing afterwards • other O&M costs: 9 EUR/MWh • decomissioning costs: 1.5 EUR/MWh all cost figures are of 2010!

12. Impact of construction time on investment costs: Example Olkiluoto Initial interest rates: 5%; Initial interest costs: < 20%

13. Impact of construction time on investment costs: Example Olkiluoto Major problem of delays: Increasing interest costs!

14. 7 UScent/kWh 10 UScent/kWh Cost increase so far: > 40%

15. Cost development Flamanville-3 11 UScent/kWh 7 UScent/kWh Total costs Investment costs  France: cheapest nuclear plants in Western world!

16. 3. TOTAL COSTS VS MARKET PRICES FROM 2000 Total costs Flamanville Total costs Olkiluoto Price NORDPOOL Price GERMANY Variable costs Olkiluoto  Lower short-term costs lead to lower (spot) market prices for electricity!

17. 4. NUCLEAR VS ENERGY CONSERVATION

18. Cost of nuclear: Announced and actual Actual development EUR/MW Announced by the nuclear apologetes time Argument by nuclear apologetes: „If more reactors are constructed costs will go down!“ (see also „Learning“)

19. NUCLEAR VS ENERGY CONSERVATION THE DYNAMICS OF THE COSTS OF NUCLEAR IN COMPARISON TO THE COSTS OF ENERGY CONSERVATION Actual after finished Costs of energy conservation Costs of nuclear announced in advance time  Announcement in advance: Nuclear leads to cheaper electricity making energy conservation economically unattractive;  After completion: Nuclear leads to higher electricity prices which in the aftermath would have made made energy conservation economically attractive;

20. 5. CONCLUSIONS

21. CONCLUSIONS Europe and USA: • No reliabilty regarding construction times. • With respect to economics nuclear has NEVER in history after 1980 in Western countries fullfilled ist promises • Actual investment costs were always higher than costs announced • Are China and Korea different ?