Economics of new nuclear power plants

The economics of new nuclear power plants is a controversial subject, since there are diverging views on this topic (particularly around risk externalities involving disaster, cleanup, proliferation, disposal and resource conflict), and multibillion-dollar investments ride on the choice of an energy source.

New nuclear power plants typically have high capital costs for building the first several plants, after which costs tend to fall for each additional plant built as the supply chains develop and the regulatory processes settle down. Fuel, operational, and maintenance costs are relatively small components of the total cost. The long service life and high productivity of nuclear power plants allow sufficient funds for ultimate plant decommissioning and waste storage and management to be accumulated, with little impact on the price per unit of electricity generated. Additionally, measures to mitigate climate change such as a carbon tax or carbon emissions trading, would favor the economics of nuclear power over fossil fuel power.

Nuclear power construction costs have varied significantly across the world and in time. Massive and rapid increases in cost occurred in the 1970s, especially in the US, but these trends were much milder in other countries. There were no construction starts of nuclear power reactors between 1979 and 2012 in the US, and recent cost trends in countries such as Japan and Korea have been very different, including periods of stability and decline in cost.

In more economically developed countries, a slowdown in electricity demand growth in recent years has made large-scale power infrastructure investments difficult. Very large upfront costs and long project cycles carry large risks, including political decision making and intervention such as regulatory ratcheting. In Eastern Europe, a number of long-established projects are struggling to find finance, notably Belene in Bulgaria and the additional reactors at Cernavoda in Romania, and some potential backers have pulled out. Where cheap gas is available and its future supply relatively secure, this also poses a major problem for clean energy projects. Former Exelon CEO John Rowe said in 2012 that new nuclear plants in the US "don’t make any sense right now" and won’t be economic as long as gas prices remain low.

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