Nuclear Energy: Coming or Going?

1. Nuclear Energy: Coming or Going? Peter Schwarz Professor of Economics, Belk College of Business and Associate, Energy Production and Infrastructure Center (EPIC) UNC Charlotte of 15

2. Outline • Introduction • A Brief Economic History • Regulation • Private Cost • Social Cost of 15

3. Private Cost (1) • Levelized Cost • $0.10/kWh • Considerably above natural gas. • Also above wind, solar, hydro, geothermal • Very high capital costs • Multiple reactors at single site to spread out common capital costs. • Low operating and maintenance costs • Fuel costs about 1ȼ/kWh • Fund towards permanent waste repository • 0.1ȼ/kWh /kWh • Insurance fund • 0.1ȼ/kWh-0.2ȼ/kWh • Decommissioning • 0.1ȼ/kWh of 15

4. Private Cost(2) • Capital Costs • Construction cost can exceed $10 billion • Watts Bar 2 (1150 MW) initially estimated by TVA at 2.5 billion • Final cost $4.7 billion • Half of cost of new reactors • Vogtle units 3 and 4 (1100 MW each) • Westinghouse AP1000s • Estimated cost by Southern Company of Georgia was $7b per plant. • Now closer to $9b and perhaps $12b per reactor. • Three years behind schedule and possibly more. • Summer units 3 and 4 (1100 MW each) • Also AP1000s. • Estimated cost by consortium of South Carolina utilities was $4.9b per plant. • As of September 2016, regulators put the cost at $14b ($7b per plant). of 15

5. Private Cost(3) • Capital Costs • Other countries • Lovering, et al. (2016) examined seven countries. • U.S. costs rose most sharply after Three Mile Island. • Mild cost escalation before TMI. • Costs tripled after TMI • Construction time increased by two years. • France • Initially falling costs, followed by rising costs 1971-1991. • Slower rate of increase than in U.S. • Rising labor costs • More complex reactors • New safety regulations after Chernobyl. of 15

6. Private Cost(4) • Japan, India, South Korea • More recent experiences • Stable or even falling costs • China, Russia • New plants • So far, China’s costs are not coming down. • Capital Costs • Other countries • Canada CANDU (Canada Deuterium Uranium Reactor) • Deuterium oxide (heavy water) as moderator and coolant • Natural, unenriched uranium as fuel. • Costs declined rapidly at first • 1971-1986 • Built larger plants • Costs increased modestly at 4% per year. • Germany • Cost decreases at first • 1973-1983 12% annual increases. Learning-by-doing possible justification for subsidies. Not borne out. Potential savings more likely due to lower O & M costs. of 15

7. Private Cost(5) • O & M • Fuel cost (uranium) peaked in 2013, has since declined. • Operating costs peaked in 2011, have since declined. • Operating costs lower than for NG. • So if you’ve got a nuclear plant, use it. • Keep using at least until planned retirement • Usually 40 years. • Consider applying to regulator for permission to extend life another 20 years. of 15

8. Private Cost(6) • Additional costs due to Fukushima • NRC mandated safety improvements • Backup source of electrical power to operate pumps for cooling water. • House in new building designed to withstand earthquake. • Instrumentation to show water levels inside spent fuel storage facilities. • New vent requirement for BWRs to prevent or lessen damage to reactor core in event of serious accident. • Two national response centers with extra set of backup equipment that can be sent to any plant within 24 hours. • Estimated cost $4b, about $40m per reactor. of 15

9. Private Cost(7) • Additional costs due to Fukushima • How to estimate (Schwarz and Cochran 2013) • Fukushima 4.7 GW (6 BWRs; 80% capacity; average 3.76 GW power production). • Relocate plant 10 km (6 mi.) inland • $30m • Build a 15 meter (50 feet) tsunami wall • $30m • Lead-acid backup system • $1m • Relocate diesel generators to higher site. • $1m • Overnight cost calculation • $62m, $2.36/MWh., 0.2₵/kWh • Not a game-changer Damage estimate $300b 1/1000 year event E(damage) = $300m Net benefit = $238m of 15

10. Loan guarantee • 3% subsidy on interest rate • Saves $150 million per MW • 1000MW plant costs $5b. • Saves 2₵/kWh. Private Cost(7) • Private Cost Revisited • Levelized cost $0.10. • Adjustments • Safety improvements post-Fukushima (0.2₵/kWh) • Eliminate limited liability subsidy • Eliminate low-cost loan guarantees. • Limited liability subsidy • Damage from Fukushima • $300b. • Limited liability $12.6b. • Probability of accident in U.S. 1/100. • Expected damage $3b. • Removing subsidy adds (0.2₵/kWh-2₵/kWh) • Revised cost $0.12-$0.14/kWh • Makes nuclear energy even less competitive. of 15

11. Social Cost(1) • To compare energy sources, need to include all relevant externalities. • Costs of nuclear wastes. • Terrorism risks. • Weapons • Attacks on nuclear plants • On other hand, avoids external costs of fossil fuels • Most prominently carbon emissions. • Unpriced in the U.S. • SO2, NOx • Monetized and internalized. of 15

12. Social Cost(2) • Nuclear waste • Costs of nuclear wastes. • Can’t agree on a permanent site • Alternatives • Consent-based approach • Proposed by then World Bank chief economist Larry Summers for toxic wastes. • http://www.nytimes.com/1992/02/07/business/furor-on-memo-at-world-bank.html • Private companies in TX and NM have expressed an interest in providing interim storage. • Reconsider reprocessing • Reduces spent fuel waste. of 15

13. Social Cost(3) • Terrorist threats • Enriched uranium • U235 • 0.7% by nature • 3% after enrichment for nuclear energy • 20% for crude weapons • >90% for weapons like Hiroshima • Plutonium (Pu239) • Generates enormous energy when it undergoes fission. • Pu from spent fuel 60-70% Pu239 • Need > 93% for weapons-grade. • Very dangerous to weapons builder. • Reconsider reprocessing • Reduces spent fuel waste. • Fast breeder reactor • Breeds U238 intoPu239. • Burns it along with uranium. • MOX fuel –U/Pu blend. • Can burn in ordinary reactors. • France, Japan, use. • U.S. Savannah River Site under construction. • No go-ahead: fears of proliferation. of 15

14. Social Cost(4) • Terrorist threats • Attack nuclear facility • NRC has taken measures to strengthen plants from attacks. • Costs of storing spent fuel and nuclear waste • Costs of protecting against nuclear terrorism • Energy Security is the focus of Chapter 16. • Hard to measure • But need to be included. • Otherwise they may be treated as infinite • Leading to conclusion that we should not build any more nuclear plants. • Or if we ignore the cost, we implicitly treat it as zero • Leading to conclusion that more nuclear energy is a no-brainer. of 15

15. Social Cost(5) • Carbon emissions avoided • But not monetized • If priced, will narrow gap between cost of nuclear energy and fossil fuels. • Achieves parity at CO2 price of $80/ton • In EU and other markets, trades for < $20 • Academic studies find $40/ton and rising over time. • One study of U.S. found people willing to pay extra for renewables to reduce GHGs, but would actually need to be compensated to increase use of nuclear energy. of 15