Recent events, especially concerning the proposed European
Pressurised reactors at Hinkley Point C and the proposed AP1000s programmed for
construction at Moorside, adjacent to Sellafield, in Cumbria and at Wylfa in
Anglesey have given a misleading impression as to the costs of nuclear
generated electricity.
These aforementioned stations represent a compelling
reason why nuclear reactors cannot be built economically in the private sector,
which being the enormous costs of capital often encountered in the private
finance arena. Almost all the costs of nuclear generation are related to the
expense of building a nuclear power plant in the first place, costs of running
one you already have are less than a penny per kilowatt hour as was
demonstrated in last week’s blog post.
The rates of return demanded by the consortium
constructing Hinkley Point C are something approaching 9% - this being the
primary factor driving the enormous £95/MWh strike price that has recently been
agreed with the government. This is indeed the most important factor, driving
even the selection of the disaster that is the EPR into the background.
Hanbit Nuclear Power Plant in South Korea |
A Recent OECD/International Energy Agency report into the
costs of nuclear and other forms of energy across a variety of market places
this into sharp relief. The costs for nuclear range from $29-$64/MWh with
capital discount rates of 3% per annum up to $51-136/MWh with capital discount
rates of 10%. With electricity rates on the wholesale market in the UK tending
to average around the £45/MWh (~$68) mark it is clear that electricity from
nuclear generation could be competitive for a large fraction of the total
energy supply if capital rates of around 3% or so can be obtained.
Unfortunately, once the 3% figures are further examined
it appears that the UK is the most expensive market analysed with a cost of
~$64/MWh, as opposed to South Korea’s achievement of the $29/MWh – this could
be put down to the presence of an ongoing and continuous nuclear programme in
South Korea spanning at least two decades of continuous improvement and construction
as well as the fact that they have selected a different reactor design than the
reactors projected in the United Kingdom.
It could be expected that a large scale build out, such
as that associated with a near total decarbonisation of the economy, would
produce a figure that would tend to approach the $29/MWh mentioned above, so I
will take $30/MWh as the achievable cost of generation if the hurdles of good
reactor design and low capital costs can be overcome.
A question of capital
So the question becomes – can very large sums of capital
be obtained at a discount rate of only 3%?
Well the answer, at least in the current economic
climate, is emphatically yes – if you are willing to go against one of the
primary taboos of the post 1979 economic consensus and simply use government
capital to purchase reactor plants outright. Current discount rates on 30 year
gilts are roughly 2.54% - providing a large window of opportunity before the 3%
barrier is breached.
With the relatively poor economic outlook and many tens
of billions of pounds of new government debt being issued each year it is
unlikely that the required expenditure of ~£200-300bn pounds over five to ten
years would cause catastrophic escalations in bond rates. However if the
markets are unwilling to provide the required capital at the market rates we
can tolerate it might be possible to make use of some sort of public campaign
to persuade the public to purchase ‘Green bonds’ that would go towards paying
for the construction of reactors in the same way that the public purchased
enormous quantities of war bonds during the World Wars.
Selecting a reactor design
Whilst the capital cost problem has become the primary
factor in the problems associated with nuclear power production in the UK,
another has been the insistence on selecting the EPR as the primary reactor for
construction here.
This is largely due to the domination of Electricité de
France in the current nuclear generation market in the UK which has led to them
adopting the reactor that is currently being built from them at Flamanvillle –
despite the fact that the reactor is several times over budget and six years
late.
Additionally the only other reactor considered for
construction in any serious manner in the UK is the AP1000, which, whilst it is
doing considerably better in the construction stakes than the EPR, is dogged by
questions as to the reliability of its critical primary circulation pumps that
have repeatedly suffered from blade failures and cannot be replaced during the
life of a reactor.
The reactor design to be selected for a large scale
buildout should be the simplest reactor possible that has completed design development
and has the greatest selection of passive safety features available to help
allay public concerns as to the safety of nuclear power.
Whilst the APWR-1000 currently under construction in
South Korea and the United Arab Emirates has a record of progressing through
construction on time and budget (Barakah-1 in Dubai is currently 75% complete
and has not slipped a single month on its schedule) the reactor is a relatively
primitive two loop PWR that relies on active safety measures that are expensive
to operate and maintain and are vulnerable to common mode failures, as
demonstrated at Fukushima-Daiichi during the aftermath of the 2011 Earthquake
and Tsunami.
On that basis I have decided to base the remainder of my
calculations on the assumption that the ESBWR would be the primary reactor
selected for construction in the United Kingdom.
The ESBWR has the advantage of reusing mostly proven
components from the predecessor ABWR design, that has several units built in
Japan, the first two of which were actually completed on time and under budget,
a rarity in modern nuclear power plant construction.
Meanwhile it develops the design to improve safety by
removing the reactor circulation pumps entirely and relying simply on natural
circulation to move water through the reactor vessel – removing the need for
diesel generators to operate the pumps in an emergency. This results in a plant
that can operate in a post-scram condition for several days without operator activity,
operating generators or a supply of cooling water as the reactor is cooled by
the evaporation of water in tanks mounted at the top of the containment
building.
ESBWR block diagram |
After 3-7 days the tanks must be refuelled which can be
accomplished using a single portable pump of the type that can be carried by
two people – as this make up water will not at any time come into contact with
the reactor vessel the quality is relatively unimportant and even seawater
could be used in an emergency without causing significant core damage from
corrosion or scaling.
The probabilistic accident analysis of the ESBWR
indicates it has a core damage frequency far lower than any other available
reactor design and thanks to its simple design and absence of active control
and safety systems it promises to be buildable at a reasonable cost and in a
reasonable time.
Conclusion
Nuclear buildout remains feasible and can generate huge
quantities of electricity at prices as low as $30/MWh, which is less than half
the current average market price in the UK – but only if built with government
capital as part of a large scale and concerted build out.
Although government construction and ownership of power
generating plant is an anathema to the current economic consensus I believe
this the only way to deliver the energy our civilisation needs without huge
environmental impacts and without condemning the poorest in society to a
miserable existence in which they struggle to heat and light their homes – let alone
take part in a modern society with all its electrically powered conveniences.
In future blogs I will examine the effects of such cheap
electricity on the costs of energy distribution and on the home before moving
on, eventually, to the effects on industry and wider social and economic
changes.