The Price of Nuclear Generated Electricity

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.

 

WWI War Bonds Poster

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.

The Morality of Energy Efficiency

 In the ongoing debate on the future of the UK’s energy supplies the idea of energy efficiency and its implementation is often framed in moral, as well as economic, terms. The idea being that since there are inherent externalities in energy consumption, such as land use and various types of pollution, that result from the production of energy and its consumption that energy should be used far more sparingly than simple economic analysis should allow.

This argument holds well for most fossil fuels that tend to produce large quantities of pollutants in the form of carbon dioxide, nitrogen oxides and particulates; It even holds relatively well for renewable energy sources such as solar power and wind turbines that have a large aesthetic and land use impact even if they do not produce large quantities of greenhouse gases directly.

However there is a form of energy production that has far lower externalities than almost any other – that being nuclear fission.

The externalities of nuclear power

A nuclear power station is a surprisingly compact machine – it uses relatively little concrete and steel in its manufacture considering its enormous energy production, is physically small compared to other generation systems such as wind turbines and consumes relatively little land compared to systems such as biomass generators and solar panels.

Waste

Waste that is produced can be stored extremely compactly for long periods in various dry storage systems such as the Modular Vault Dry Store concept – an operational unit at the Pacs pressurised water reactor plant in Hungary is pictured. Other, similar, units have also experienced decades of service at the Wylfa Magnox plant in Wales and at the Torness AGR plant in Scotland - the former actually being loaded with fuel directly from the reactor.

MVDS store at Pacs NPS in Hungary

Despite numerous attempts it seems unlikely that reprocessing of relatively young spent fuel will ever be economic, the cheapest solution simply being to store the fuel for at least one hundred years before making any attempt to permanently dispose of it by any of the available methods. The drastically lower heat generation [~75% cut between 10 years and 100 years of aging] of such aged fuel significantly reduces the cost of either reprocessing or deep geological disposal due to higher allowable fuel densities in the final repository.

Storage in a dry facility has been estimated based on previous experience in Japan to be as low as $0.80/kgHM per year.[1]

Whilst people may remark that long term storage is simply transferring the cost of dealing with the waste into the future it could be argued that if an investment fund is established to cover the ongoing costs of storage and of final disposal then there is no real externality – the cost has been internalised.

It seems likely that $800/kgHM is sufficient, even if reprocessing century old waste is not significantly cheaper than decade old waste the storage could continue for an entire millennium – assuming the management of the fund kept pace with inflation, which is historically conservative. After 1000 years the fuel would have a surface radiation dose below those known to cause health effects even with prolonged contact with the assembly.[2]

Considering that an ESBWR might expect to produce nearly 420MWh of electricity from a single kilogramme of fuel. [3] It is also the case that advances in technology over the next century or more could drastically change the economics of reprocessing and as such it would be beneficial to ensure the fuel is easily accessible.

Land use

A nuclear power station is an incredibly compact machine – for example the Gravelines nuclear power station in France covers an area of less than one square kilometre and produced nearly 35TWh in 2014 [4]. That is 35 times more than the total insolation [assuming every joule that reached the ground was collected] of a typical square kilometre of the United Kingdom, and it could be expected that this power intensity would improve with the development of newer, more compact reactors such as the ESBWR. Indeed using a more reasonable set of assumptions for the solar option would increase the factor of advantage to something approaching 200.

Waste storage does however consume land, however it does so in very small quantities – it could be estimated that if the entire current energy supply in the UK was provided in the form of nuclear generated electricity that it would take a hundred years for dry storage casks to fill one of the runway aprons at Heathrow.

If the average Briton was to use electricity as prodigiously as the average Quebecois (the highest use region in the world by some margin]) and consume 20MWh per year [5] then the entire population of the UK [using 1.2 Petawatt hours per year] could be supported by nuclear plants covering less than 35km² – less than three times the area of Heathrow Airport and negligible in comparison with the size of other energy infrastructure.

Uranium mining

The other great externality associated with modern nuclear power technology is that of uranium mining – which certainly generates the greatest ecological impacts of the entire fuel cycle. However the amount of material removed from mines is relatively small and new emergent technologies such as ‘In-situ Leach’ and the fabled uranium extraction from seawater seem likely to further reduce this.

Utilising fairly conservative assumptions and optimising in an attempt to conserve uranium the kilogramme of fuel mentioned above (producing 420MWh-electric) would require enrichment to 4.2% ²³⁵U and consume roughly seven kilogrammes of natural uranium in its production.

That implies that the Quebec style ‘electric economy’ mentioned above would consume roughly 20,000t of natural uranium per year. This is a large quantity – however its production does not have a large impact on the environment compared to other power generation arrangements.

MacArthur River Uranium mine in Sasketchewan

 For example, the MacArthur River Uranium mine in Sasketchewan, Canada produces 8500t of uranium per year and covers a very small area of land due to its use of subservice mining techniques. It also represents a form of uranium deposit that is exceedingly rich and was totally unknown prior to the discovery of the resource. This bodes well for future searches for uranium.

Additionally, ‘In-Situ Leach’ is a technology that uses scattered wellheads to inject fluids into a uranium deposit and extract a liquor containing a soluble uranium salt – this avoids the need to disturb the land at all beyond that necessary to dig the requisite boreholes. This technology is used extensively in Kazakhstan and Australia and is now responsible for a large fraction of world production.

Finally there is the often attempted process of extracting uranium from seawater – which promises negligible environmental impacts, even by the high standards of the relatively no invasive ISL production scheme. Whilst it is not currently economic it is believed feasible at a price of only $660/kgU [6], which would add less than a US cent to the price of a unit of electricity and this is almost certain to fall with further technological improvements.

Conclusion

In summary, nuclear power has no significant externalities that cannot be easily and affordably priced in to the cost of the generated electricity. Thefore there is little reason not to encourage as much electricity to be consumed as possible as long as it is sold at the price for which the electricity can be generated. There is no moral reason to restrict electricity consumption beyond the reasons offered by simple economics.

Of course the question becomes - just how cheaply can you generate nuclear electricity and what sort of things can you do with an unlimited supply of cheap electricity providing you can provide it? I will investigate this in another blog post(s) at a later date

References

[1] 'Interim storage of spent nuclear fuel' Harvard University Press, 2001. [$60/kgHM, estimate of 75-100 year lifespan and negligible operating costs].
[2] Canadian Nuclear Waste Management Organisation - document TR-2012-16
[3] 50 Gigawatt-days/tonne (thermal) @ 35% efficiency yields 420MWh-electric/kg
[4] IAEA Reactor database 'PRIS'
[5] "Fragmented Markets: Canadian Energy Sectors under performance" - Pierre-Olivier Pineau, 2013
[6] New Scientist, 22/08/12

Proportional Representation: No Longer the Enemy of the Establishment?

Proportional Representation has traditionally been a goal solely of smaller parties, ones which are unable to muster sufficient local support in single constituencies to win under FPTP - for example UKIP or the Greens. Large parties have traditionally been against it as the majoritorian nature of the current system favours them. It being possible to win huge majorities without a majority of votes.

Recent changes in the political landscape have thrown this into a tailspin - current projections show that Labour will win 42% (271) seats in the Commons with 33% of the vote. Likewise the Conservatives win a similar number of seats with a similar percentage. FPTP no longer provides them with a huge advantage.

The Conservatives would have the added benefit that it would gain UKIP something approaching 90 seats on current polling numbers, giving them a large block to form the basis of future coalitions (~305 seats, compared to 279 combined today) - which appear to be becoming the norm. They are likely to have far more in common than with other parties and would be natural allies.

Labour would likewise benefit in that it appears the collapse of its Scottish vote is permanent, and it would recapture a significant fraction of the lost seats as a result - after all the SNP would be reduced to half their projected seat count, almost all being transferred to Labour. It would be likely that the Greens and the Liberal Democrats (who would be driven from the Tory orbit by distaste for UKIP) would form a block with Labour, giving them a block of something around ~305 seats to work with, compared with 297 now.

In summary, the result of this reform would be the marginalisation of nationalist parties like the SNP and Plaid Cymru, which would lose a large number of seats to the fragmented unionist vote, whilst the other regional parties like the DUP or Sinn Fein, who do not compete against mainland parties, would be largely unaffected and thus more likely to support the reform.
Given that the large parties have considerably less to lose in the current climate  and the fat that the peculiarities of FPTP no longer guarantee majorities - perhaps the time is ripe for deployment of Proportional Representation?

An alternative member system could be introduced relatively cheaply by merging some constituencies (where they do not cover country or other social boundaries) to generate the space in the chamber for the Party List seats, as it would no longer be necessary to force constituencies to have completely equal sizes.