Thread by @EnergyJvd

As interest in #nuclear is gaining a boost due to the fossil gas price shock, talking heads are repeating the claim that nuclear is 'too expensive' based on Hinkley Point C.

(I've written about that in the past:
medium.com/generation-ato…)

Here's a new #thread on nuclear cost. 👇

Energy experts will tell you that Hinkley Point C (which is the first new nuclear construction project in the UK for decades) is either "quite economical" or "very expensive" depending on whether they like or dislike nuclear energy.

As I explained in my article above, the economics of HPC are great (which explains why the UK government embarked on the project) but the financing of the project can make it seem(!) expensive.

This table shows how the price of power from HPC depends on construction time and cost of capital.

You can see that a cost of 111 €/MWh (which corresponds to the HPC strike price) arises at a WACC of 10% and build time of 10 years.

It's a bit of a busy chart, so this slide contains annotation.

Note in particular that if HPC had been built under ownership of the British Government, the price would only be about €43/MWh (3% WACC, 10 year build), which means that HPC would not have needed a CfD.

The color coding denotes competitiveness of nuclear with "100% renewables" (typically reported at ~€100/MWh) in red, and the price needed to enable competitive hydrogen electrolysis (~€30/MWh) in green.

Today's commercial WACC is ~7% - not 10% - thanks to low interest rates.

In the practice of societal cost benefit analysis (which means accounting for costs and benefits of an investment to society as a whole) a 3% discount rate is used instead of commercial WACC.

Hence, the table reveals HPC to have a low societal cost of €43/MWh.

IOW it's cheap!

Today, the French government is considering a 'light" version of the EPR.

It has an integral containment roof instead of a separate protective roof and it has three independent cooling systems rather than four.

Apart from that it perform the same as the EPRs at HPC.

It's overnight construction cost is expected to be ~€3800/kW rather than the ~€4500/kW of the EPR's at HPC.

This leads to the following version of table for the six new EPR's planned for France.

Finally, the third version of the table applies to nuclear in non-US/European countries where industry is mature and construction cost is around €2500/kW.

In those countries, nuclear electricity is now so cheap that it can be used to power competitive hydrogen production.

One thing that each of the tables reveals is that construction time has less impact on nuclear electricity price than cost of capital (WACC), especially when the WACC is low.

This underlines the importance of cheap finance, which is a function of investment risk.

Another thing is that at today's commercial WACC of 7%, even the "old, expensive" HPC project turns out to be cheaper than today's ~€100/MWh cost of generating 100% renewable (i.e. fully firmed and free of fossil fuels) energy.

When investors are confident that nuclear plants are allowed to be built and operated in a predictable manner on a level playing field without political interference, they will consider the investment risk to be low, and hence cost of capital and thus price will be low too.

Hopefully, deepening concern about climate and fossil fuel depletion will help politicians spur the deployment of nuclear energy technology.

"The best time to build a nuclear plant is 20 years ago. The next best time is today."
😃👍
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Data & sources
docs.google.com/spreadsheets/d…