February 04, 2010
Loan Guarantees For 7 More Nuclear Reactors

More loan guarantees mean more nuclear power plants.

President Obama's proposed 2011 budget could provide a significant boost to the U.S. nuclear power industry, which has been stalled for decades. If approved by Congress, the budget would provide $36 billion in loan guarantees for nuclear power plants, opening the way for around seven new nuclear power plants, depending on the final cost of each. The new guarantees are in addition to $18.5 billion in guarantees provided for in a 2005 energy bill.

That's about $5.2 billion per nuke. What I'd like to know: What size of nukes? 1.6 GW each? The US currently has 104 nukes operating and they deliver 20% of the electric power used in the United States. Coal delivers about half the electric power. So we'd need two and a half times the amount of nuclear power added in order to displace dirtier coal electric power.

Nuclear power plants are the most capital intensive way to generate electricity. But they have the lowest fuel costs. Without loan guarantees bond interest rates make nuclear power too expensive to compete with coal and natural for electric power generation.

According to one recent analysis, the cost of building nuclear power plants has approximately doubled in the last seven years (due to things such as increasing materials costs). As it stands, this means that the cost of electricity from new plants would be around 8.4 cents per kilowatt hour, compared to about 6 cents per kilowatt hour for conventional fossil fuel plants.

A 2.4 cent per kwh price gap isn't large. If we had to pay 2.4 cents per kwh more for electricity the effects on our living standards would be pretty small. The existing differences in electricity prices between states are several times larger than that. The people in Connecticut pay about 10 cents more kwh than the people in Minnesota for example. At current prices the people in Connecticut would pay less if all their base load electric power came from nukes. Ditto for the rest of the US northeast.

A major reason for the higher interest rates is that even today new nuclear power plant construction projects in other countries are experiencing unexpected delays. Delays push up total costs because a partially completed plant has a lot of embedded costs without revenue flowing in to pay the interest on bonds.

Loan guarantees are effectively a way for the political system to support nukes without raising prices on nuclear power's dirtier competitors. For nuclear power to grow into a much higher percentage of total electric power generation one or more of of several things need to happen:

  • The next round of power plant construction has to go so well that the perceived risk for new nuke construction goes down and therefore interest rates on nuke bonds goes down.
  • Manufacture of small nukes on assembly lines substantially lowers the cost of 3rd generation nuclear designs.
  • 4th generation nuclear power plants substantially lower the risks and capital requirements for new nuclear power plants.
  • Carbon taxes raise the costs of coal and natural gas electricity high enough to make nukes more competitive.
  • Regulations on conventional pollutants (e.g. soot and oxides of nitrogen) become much stricter and raise the costs especially of coal electric power.

To put it another way, to make nukes competitive either nuclear power costs need to come down or fossil fuel power costs need to go up. Will either of these developments happen?

Share |      Randall Parker, 2010 February 04 11:40 PM  Energy Nuclear


Comments
LarryD said at February 5, 2010 1:54 PM:

Building a power facility using modular, factory built (or at least factory build standard component) reactors, not only cuts costs and time, but has another advantage.

For instance, if you're building a 1.25 Gw facility using 250Mw standard reactors, then the facility can be partially up and running before all the capacity is finished. This reduces the risk by enabling a revenue stream to start paying on the bonds, which can increase in increments as more reactors are installed and come on line.

Fat Man said at February 5, 2010 2:36 PM:

The good thing about having the Feds guarantee the loan is that it gives them incentive to make sure the project gets done on time and gets licensed.

Brett Bellmore said at February 5, 2010 2:58 PM:

Or it would, if the government spent it's own money, rather than everybody else's. As it is, they're perfectly capable of guaranteeing the loans to make one constituency happy, and then committing regulatory sabotage to please another, and won't care a bit about the cost, because it's all coming out of somebody else's pocket.

Jake said at February 5, 2010 8:35 PM:

This will be Obama's only lasting legacy.

Nick G said at February 6, 2010 12:55 PM:

Randall,

I think we should distinguish between coal and natural gas plants. As far as I can tell, new coal plants (with sulfur etc scrubbing, but without CO2 sequestration) are almost as expensive as nuclear plants.

People confuse old, dirty coal plants, which produce cheap power, with new, very expensive coal plants. I don't think either nuclear or wind will have a hard time competing with new coal plants.

Have you seen recent data for new coal plant construction costs? I've got this:

"Construction cost estimates for new coal-fired power plants are very uncertain and have
increased significantly in recent years. The industry is using terms like “soaring,”
“skyrocketing,” and “staggering” to describe the cost increases being experienced by
coal plant construction projects. In fact, the estimated costs of building new coal plants
have reached $3,500 per kW, without financing costs, and are still expected to increase
further."

http://www.synapse-energy.com/Downloads/SynapsePaper.2008-07.0.Coal-Plant-Construction-Costs.A0021.pdf

th said at February 6, 2010 4:12 PM:

nickg, does this assessment of yours with respect to wind include the necessity to construct 4 wind generators for every one in order to assume nameplate capacity will with hope and a prayer ever happen? In Wise County VA Dominion power is constructing a 585mw coal plant under $2 billion in financing and construction costs, about $3000/kw and the list of leftist organizations yapping incessantly about it all the way to the bitter end is amazing, kinda like the same hysterics over nuclear for the past 30 years. The teleprompter as president has again acted again in blatant partisan interest only as in helping Reid on Yucca Mt, anyone who thinks the community organizer will turn his back on wind is sadly mistaken, this bumbling dunce will never disappoint the extreme left, feel better?

Nick G said at February 7, 2010 5:37 PM:

th,

You sound angry.

Plans to Prosper said at February 8, 2010 1:56 PM:

This makes me wonder why Connecticut, etc. pay so much more for their electricity than other states. There's almost a 5-cent difference between CT and RI for example. And I don't believe the true cost of delivering electricity to CT is that much higher than RI, since they're right next to each other and neither is very large. That leads me to think most of the difference in prices is likely the result of different government policies, whatever they may be. In that case, we can't say that CT consumers would pay less with nuclear, since their government may ensure they pay more anyway.

Randall Parker said at February 8, 2010 2:36 PM:

Plans to Prosper,

Yes, that is one of my curiosity questions too.

I suspect regulations must be involved. Given that some states pay so much more for electricity why aren't electric generator companies building nukes that can compete with their high prices? I would think so many ways to generate electricity cost a lot less than 20 cents per kwh that CT's electric rates should not stay so high.

Engineer-Poet said at February 8, 2010 8:27 PM:

The anti-nuclear groups are out again.  The tritium releases from Vermont Yankee are the latest issue.  Yes, tritium isn't something you want to ingest, but with a half-life of a decade or so, it's hardly persistent and isn't going to migrate far even in groundwater.  Once released into rivers or oceans it is diluted beyond any ability to cause harm.  If I had a choice between living next to a reactor which leaked tritium or an ash dump for a coal plant, I'd take the nuke in a heartbeat.  The tritium will be diluted and decayed by orders of magnitude within a century; the lead and arsenic in coal ash will never go away.

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