Nuclear Energy is Cost-Effective

A common metric to compare the cost of different energy systems is the Levelized Cost Of Electricity (LCOE). It is calculated as the sum of costs of the system’s lifetime divided by the sum of electrical energy produced by that system over its lifetime. In other words, it represents the net present price at which electricity should be sold for a given system to break even at the end of its lifetime.

Figure extracted from the IEA “Projected Costs of Generating Electricity 2020” report, published in December 2020. The LCOE value of nuclear energy is competitive, even with a 7% discount rate. With long-term operation (LTO), nuclear energy is the most attractive.

In its 2020 electricity cost projection, the International Energy Agency concluded in its projection for the cost of generating electricity that nuclear power was among the most competitive energy sources. [77] Assuming a discount rate of 7%, the median LCOE for nuclear energy was determined to be 69 $/MWh. The only cheaper options are onshore wind at 50 $/MWh, photovoltaic at 56 $/MWh, and hydro at 68 $/MWh—all considered only at utility scale. Reducing the discount rate is strongly in favour of nuclear energy. Moreover, the dispersion in LCOE is much lower for nuclear energy than for renewables. For example, the maximum on utility-scale onshore wind is in the order of 140 $/MWh while it is only around 100 $/MWh for nuclear. Other studies, such as for example the UNECE assessment, corroborate these results. [78]

We have seen earlier that long-term operations (LTO) are increasingly considered for the existing nuclear power plants fleet. Many reactors across the globe see their operational life extended from 40 to 50, 60, and even up to 90 years. Key experts, including the IAEA director Rafael Mariano Grossi, have suggested that nuclear plants could safely operate for 100 years. [79] This longevity allows the spreading of initial construction costs, which makes up the bulk of the final cost of nuclear energy, over a more extended period, resulting in a lower average cost of electricity production. Under LTO conditions, nuclear energy is the absolute cheapest of all energy sources, flirting with 30 $/MWh. [80]

As with any synthetic measure, the LCOE is convenient for a high-level assessment but has its own limitations. For example, it does not include the grid infrastructure and storage cost required to accommodate the intermittency of renewable energy. A recent paper introduced the notion of Levelized Full System Costs of Electricity (LFSCOE), which compared for a given market the cost of using only one technology plus storage. The paper went on to demonstrate that nuclear power was by a significant margin the cheapest of all low-carbon options for the two markets it examined, Germany and Texas. [81] Another example is that it does not include externalities such as the social cost of greenhouse gas emissions.

This concentration of the cost in the initial investment can be seen as a drawback, as it requires solid investment capabilities. However, the low marginal cost of nuclear energy also means that it is stable and predictable over the long term, making it an attractive option for investors and energy planners. The cost of operation and maintenance only represents 10% to 25% of the final cost profile. [82] Nuclear energy is thus relatively insensitive to price fluctuations in manpower and materials.

Even better: the cost of fuel only represents 7% to 15% of the final cost profile—much lower than fossil fuels, where prices can be volatile. [83] This should also answer sovereignty concerns, especially because uranium is available all across the globe and easy to store and transport. More generally, the United States and the European Union are both in the leadership pack for nuclear energy. Furthermore, they both have the know-how and industrial capabilities required for all operations across the value-chain, from fuel processing to facility dismantling.

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