One of our commenters, David Bradish, has asked how wind is more cost effective than nuclear to replace coal. The short answer is: It is cheaper to build, cheaper to operate, and it is a lower risk to investors, which means that the cost of financing for wind is lower on private capital markets.
To make this case I use figures from two sources: "The Projected Costs of Generating Electricity" produced by the International Energy Agency/Nuclear Energy Agency, and "The Future of Nuclear Power" produced by MIT.
First, and most important, the cost of capital. Unlike in previous decades, much of the regulatory risk shield for utilities has been taken down by deregulation. Now new power plant projects must compete for capital on private capital markets, i.e., investors. Investors attach a cost to the money invested in terms of a return on capital. This is often expressed as a "discount rate" in financial calculations. Higher risk projects are expected to have a higher return, and thus the cost of the capital is assessed at a higher discount rate.
David had quoted a figure of $21-$31/MWh for the levelized cost of electricity from nuclear power, citing the "Projected Cost" study mentioned earlier. This does not show the whole picture, however. If you look at the cost of nuclear power in the US cited in the study, there are actually two figures. One is $30.1/MWh at a 5% discount rate. The other is $46.5/MWh at a 10% discount rate. This range shows the effect of the cost of capital on the overall cost of electricity.
The MIT study uses a cost model that includes the cost of capital, taxes and inflation. It projects cost using two capacity factors, 75% and 85%. This study cites a figure of $67/MWh as the most optimistic (40 year period, 85% capacity factor) and $79/MWh (25 year period, 75% capacity factor). It justifies the capacity factor by saying that the 90% CF cited by David has only recently been achieved by US plants, and represents a peak. 75%-85% is more in line with actual plants over their operating lifetime.
The MIT study does not include wind power in the analysis. However, the "Projected Costs" study cites the levelized cost of wind generated power as $31.1/MWh at the 5% discount rate and $47.8/MWh at the 10% discount rate.
This shows us the cost of wind generated electricity and the cost of nuclear generated electricity are roughly equivalent at the two discount rates. However, the question is, given an equal, unsubsidized playing field, where nuclear and wind were going head-to-head in private capital markets, how would investors be likely to assess the risks of the two technologies? What return on investment would they expect. In other words, what would be the discount rates associated with wind and nuclear? Would they be the same?
The MIT study says the following: "In deregulated markets, nuclear power is not now cost competitive with coal and natural gas." In order to become competitive, the nuclear power industry must deal with four critical areas: 1) Cost (including operational cost and construction time); 2) Safety (including the overall nuclear fuel cycle; 3) Waste (demonstrating workability of long term geologic disposal; 4) Proliferation (current safeguards inadequate).
The "Projected Costs" study qualitatively evaluates the regulatory risk of nuclear to be "High", whereas wind is "Medium". The operating costs of nuclear are "Medium" where wind is "Very Low". Fuel costs of nuclear are "Low", where wind is, of course, "Nil."
Given all these factors, I argue that in equal, unsubsidized competition in private capital markets, the cost of capital for wind would be closer to the 5% discount rate ($31.1/MWh) whereas the cost of capital for nuclear would be closer to, or exceed the 10% discount rate ($46.5/MWh-$79/MWh).
The other three areas involved in calculating levelized cost are construction cost ("Overnight cost") Operations and Maintenance cost (O&M) and Fuel cost. In the "Projected Costs" study, overnight cost for nuclear is $1894/kW vs $1024/kW for onshore wind. O&M cost for nuclear is $63/kW vs $27/kW for wind. Fuel cost for nuclear is $4.60/MWh vs 0 for wind. It is not clear from the study if this fuel cost is subsidized or actual.
Other costs, so-called "externalities", are associated with nuclear, but not with wind. These are environmental costs not borne by the nuclear power providers, but are transferred, usually to the government. These include the cost of mitigating the effects of open pit uranium mining on groundwater, the effects of improper disposal of toxic wastes associated with uranium refining and enriching, and the environmental effects on recycling warm water used for cooling reactors back into the environment.
In summary, then, nuclear plants are more costly to build, take longer to build, cost more to operate and maintain than wind installations. Nuclear power plants are more costly to finance. In fact, there are currently no new nuclear power plants being planned in the US, in spite of so-called "incentives" built into the 2005 EPACT. I argue that nuclear power is completely unnecessary and uneconomical, given the alternatives of aggressive energy efficiency and large-scale wind.
