Nuclear Myths and Facts #2: New nuclear plants are too expensive to build

The Nuclear Energy Institute (NEI) has published a document called ‘Myths & Facts About Nuclear Energy’. The NEI – ‘the policy organization of the nuclear energy and technologies industry and participates in both the national and global policy-making process’ – describes the document as a collection of ‘Synopses of Common Myths About Nuclear Energy and Corresponding Facts That Refute Them’.

This post is the second in a series offering Corresponding Facts That Examine The Corresponding Facts That Refute Them.

The ‘Myth’: New nuclear plants are too expensive to build.

NEI’s ‘Fact’: While nuclear plants are capital-intensive projects, with construction costs estimated at $6 billion to $10 billion for a large reactor, their production costs are the lowest among major electricity sources, with the exception of hydroelectric power plants. The production cost of nuclear energy, which includes fuel operating and maintenance expenses, averaged 2.03 cents per kilowatt-hour throughout the industry in 2009—compared to 5 cents per kilowatt-hour for natural gas. Nuclear power plants are considered 60-year investments; most other carbon-free energy technologies have a far shorter design life. Recent independent studies by the Massachusetts Institute of Technology, U.S. Energy Information Administration and National Research Council found that new nuclear plants are competitive in the current market and will be even more competitive if carbon controls are increased.

How much does a nuclear reactor cost? The truth is nobody really knows. So many uncertainties are involved, the honest and only answer to that question is ‘I’ll tell you when it’s finished’. If new nuclear plants aren’t too expensive to build, why has not one been ordered in the US since 1973?

In 2007, major U.S. Banking institutions including Citigroup, Credit Suisse, Lehman Brothers, Goldman Sachs, Merrill Lynch & Morgan Stanley said ‘we believe… higher capital costs and longer construction schedules of nuclear plants as compared to other generation facilities, will make lenders unwilling at present to extend long-term credit to such projects in a form that would be commercially viable’. The World Bank says nuclear power is ‘not the least-cost option’ and has not financed a nuclear reactor project since 1959, the first and only time it has done so.

If new nuclear plants are competitive in the current market, why aren’t we seeing many more being built? If they aren’t too expensive why, according to the Financial Times, did CEO of EdF Energy Vincent de Rivaz say, ‘new nuclear power stations will not be built in Britain unless the government provides financial support for the industry’. In 2009, International financial conglomerate Citigroup released a report saying that the risks involved in building nuclear reactors were ‘Corporate Killers’. It went on to say that there is ‘very little prospect of construction costs falling and every likelihood of them rising further’.

One of the only two new nuclear reactors being built in Europe – Olkiluoto-3 in Finland – last year single-handedly wiped out the profits of the company, AREVA, building it. The UK government’s Stern Review on the Economics of Climate Change said the costs of energy production have ‘fallen systematically’ since the 1970s - except for those of nuclear power.

The nuclear industry has had 60 years to get its financial model right. That’s long enough.

(For more information, read Greenpeace’s briefing ‘The Economics of Nuclear Power’. Nuclear Myths and Facts #1 can be found here.)