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An Economic Framework for Choosing Between Energy Options

An Economic Framework for Choosing Between Energy Options. John Freebairn Melbourne Institute of Applied Economic and Social Research. Framework or Principles. Choose option(s) with lowest social cost per unit output

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An Economic Framework for Choosing Between Energy Options

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  1. An Economic Framework for Choosing Between Energy Options John Freebairn Melbourne Institute of Applied Economic and Social Research

  2. Framework or Principles • Choose option(s) with lowest social cost per unit output • If a completely defined market, leave decisions to private sector investors who have the information • But, Australian energy markets are not complete • Consumers should pay a price equal to marginal social cost as a part of the answer

  3. Social Costs • Construction costs expressed as annual fixed costs • Operating costs, including fuel • Costs to society of wastes (external costs) • Costs of plant closure • Note: Areas of uncertainty include technology, input costs, government policies

  4. A Case Study Example • New base load electricity generation plant, say a 500 MW capacity unit • Options • Queensland conventional black coal units built over last few years. (Data from Paul Simshauser, Australian Economic Review, Sept. 2004, and June 2006) • A prospective nuclear plant. (Data from nuclearinfo.net)

  5. Cost item (and assumptions) (Construction cost of $1.3 m per MWh) Fixed capital cost (30 year, .85 use, 5% and 10% capital return) Fixed operating cost Operating cost External cost (0.8 CO2/MWh, carbon tax of $0, $20 or $?) Cost in $/MWh $11.4 or $18.5 $3 $10 $0 , $16 or $? Conventional Black Coal

  6. Cost item (and assumptions) (Construction cost of $1.3 m or $6.7 m per MWh) Fixed capital cost (30 year, .85 use, 10% capital return) Fixed operating cost Operating cost External cost (≈ 0 CO2/MWh, nuclear waste with US fee of $2.7, Sweden $6.7, and ?) Cost in $/MWh $ 18.5 or $95.3 $? $0.7 $2.7, $6.7 or $? Nuclear Energy

  7. Some Conclusions • Relative social costs of black coal and nuclear base load electricity in Australia uncertain • Comparative social cost of GHG versus disposal of nuclear waste. Both demand a clear policy scenario. • Nuclear higher capital cost and lower operating cost • Nuclear construction cost, and RRR uncertain • Need to get external costs into consumer prices

  8. Uranium Information Centre Nuclear Power - a topical option? Ian Hore-Lacy Uranium Information Centre & Head of Communications, World Nuclear Association August 2006 www.world-nuclear.org www.uic.com.au

  9. Total 441 operating nuclear power reactors, 25 under construction, late 2005 16% of world electricity, total 368 GWe. Locations approximate

  10. Drivers overseas: • Basic economics today, including increased fossil fuel prices • Prospect of carbon emission costs • Insurance against future fuel price increases • Energy security - geopolitical

  11. Most demand is for continuous, reliable supply on a large scale= base-load

  12. Wind energy production during a fine summer week- each line a day MWe From 650 MWe of wind turbines in western Denmark Danish Wind Energy Assn.

  13. Diablo Canyon nuclear power plant, USA

  14. 541TWh 10% TWh 500 400 78% 300 200 Nuclear Fossil 100 Hydro 12% 0 1950 1960 1970 1980 1990 2000 French electrical mix evolution Unit 58 (Civaux 2) 1999 Unit 1 (Fessenheim 1) 1977 Oil crisis 1973

  15. The nuclear reactor fleet in France 58 units in operation on 19 sites GRAVELINESS 900 MWe (34 Units) CHOOZ PENLY CATTENOM PALUEL 1300 MWe (20 Units) FLAMANVILLE 1500 MWe (4 Units) FESSENHEIM PALUEL NOGENT/SEINE ST-LAURENT 80% of electricity from nuclear power CHINON DAMPIERRE CIVAUX BUGEY BELLEVILLE ST-ALBAN The cheapest KWh in Europe BLAYAIS CRUAS TRICASTIN GOLFECH

  16. 60 54,2 Emission trade euro/MWh 50,1 20 €/t CO2 50 Fuel costs 44,3 44,3 42,4 10,0 19,6 O&M costs 39,2 40 Capital costs 16,2 7,0 23,1 30 27,3 23,7 17,9 22,8 2,7 13,1 23,4 20 40,1 14,9 7,2 8,2 6,5 7,4 10 3,5 13,8 13,0 10,2 7,6 5,3 0 Elspot Elspot Elspot Elspot Nuclear Gas Coal Peat Wood Wind 2000 2001 2002 1-5 2003 Operating hours 2200 hours/year Real interest rate 5,0% Operating hours 8000 hours/year Generation costs without March 2003 prices investment subsidy and the R.Tarjanne&K.Luostarinen 03.07.2003 Lappeenranta University of Technology return of electricity tax (wood and wind) Electricity generation costs, with emission trading case: Finland

  17. Impact of a carbon value on levelised generation costs at 7,5% discount rate Institute of Energy Economics and the Rational Use of Energy (IER) University of Stuttgart 2006

  18. Fuel Assembly for Nuclear Reactor

  19. A safety record unmatched by any major technology! 12,000+ reactor-years civil, similar for naval

  20. Kashiwazaki Kariwa 6 & 7, Japan

  21. Main 3rd generation nuclear reactors: • Areva NP EPR - 1600 MWe • Westinghouse AP1000 - 1100 MWe • General Electric ESBWR - 1400 MWe • Korea HNP APR - 1400 MWe • Mitsubishi et al APWR - 1500 MWe • AECL ACR-1000 - 1000 MWe • OKBM VVER-V448 - 1500 MWe • Eskom/INET PBMR - 165/195 MWe

  22. Generation IV Reactors

  23. Transport & Hydrogen Economy • Plug-in Hybrid Electric Vehicles • Then hydrogen in fuel cells • Now: 50 million tonnes per year hydrogen, future: 1000 Mt/yr + • Now: steam reforming of natural gas • High temperature electrolysis of water • Thermochemical production from water using nuclear heat - needs 950ºC

  24. www.uic.com.au

  25. WHAT SHOULD WE DO WITH OUR NUCLEAR WASTE? • Peter Scales • Department of Chemical and Biomolecular Engineering • University of Melbourne Particulate Fluids Processing Centre A Special Research Centre of the Australian Research Council

  26. Some Nuclear Waste Questions If we go down the nuclear route, will we also develop nuclear re-processing facilities? Will we process and encapsulate our waste away from the biosphere in a sophisticated manner or will we leave the last step or critical steps to our children? We have the engineering and scientific know how, but: • do we have the political will to achieve an acceptable solution? • will we pay the cost up-front? Particulate Fluids Processing Centre A Special Research Centre of the Australian Research Council

  27. U, Pu 2% Reprocessing Cycle Particulate Fluids Processing Centre A Special Research Centre of the Australian Research Council

  28. Waste From Fuel Reprocessing Intermediate Level Not self heating Steps envisaged: slurry dewatering stabilization in grout disposal (encasement) High Level 2% volume, 90% radioactivity Self Heating Steps envisaged: dewatering calcination vitrification storage (50 years) disposal (encasement) Particulate Fluids Processing Centre A Special Research Centre of the Australian Research Council

  29. HLW Sellafield, UK Dewatered, calcined, immobilised in glass (vitrified), poured into stainless steel container and welded lid HLW vitrification flask Particulate Fluids Processing Centre A Special Research Centre of the Australian Research Council

  30. HLW Air convection Heat exchanger HLW HLW Storage Facility Sellafield, UK Particulate Fluids Processing Centre A Special Research Centre of the Australian Research Council

  31. ILW Encapsulated in a highly fluid grout Minimal voidage Typically stored above ground Sellafield, UK Particulate Fluids Processing Centre A Special Research Centre of the Australian Research Council

  32. My View A comprehensive and timely solution to waste handling is essential to the viability and sustainability of nuclear power. No waste solution = No nuclear power Hanford’s 177 Waste Tanks Particulate Fluids Processing Centre A Special Research Centre of the Australian Research Council

  33. 1960+, M5+ quake prone Plate boundary zones seismically ‘quiet’ intraplate setting we record 800-900 quakes a year in Oz, including 1-2 M5+

  34. 1960+, M5+ large parts of northern Europe, Africa and Canada have not had a M5+ quake in the last 50 years

  35. less stable more stable from a seismological point of view Oz does not seem to be “the most stable”! (the proviso is that these calculations have very large uncertainties)

  36. 1960 -1985, M>3 seismologically optimum

  37. 1960 -1988, M>3 1988,M6.7 Tennant Ck

  38. cold water injection, steam recovery radioactive heating to 230°C due to elevated Uranium concentrations the ‘geothermal’ option: Nature’s safe nuclear solution?

  39. Deans Lecture series 2006.2 http://nuclearinfo.net • Martin Sevior • Associate Professor • School of Physics • University of Melbourne

  40. Extent of the Challenge http://nuclearinfo.net

  41. Nuclear Power world wide Nuclear Power is used in many countries around the world. It’s use is highest in France (77%), Belgium(60%), Sweden (50%). Many Countries see an expanded role, a few have announced a phase-out, only one, Italy has completed a phase-out. Sweden and Germany have official phase-out policies but both are controversial. http://nuclearinfo.net

  42. US experience • No new orders since the 1970’s. • Over 19 “expressions of interest” since 2005. • All proposals have significant local support. • Industry invited communities to bid for the opportunity. • No NIMBY effect as yet. http://nuclearinfo.net

  43. Intellectual Infrastructure • US Nuclear plants had poor (60%) availability before 1990. • Not helped by fractured industry. • Each plant was different and independently operated. • Since then a variety specialist companies have operated the fleet. • Also development of experience and “best practice” techniques. http://nuclearinfo.net

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