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This week, I bring back Professor Giorgio Locatelli, Professor of project and business strategy at University of Leeds (link to the episode here). We go in-depth about power plant economics, the cost drivers that mean Small Modular Nuclear Reactors (SMRs) are a viable option to meet sustainable development goals, the challenge of nuclear waste and why we need to consider nuclear power plant projects as 100 year contracts rather than short term build projects.
Why are nuclear power plants expensive?
The lifecycle of power station includes the cost to design, build, operate, dismantle and decommission. Over the lifecycle nuclear is cost competitive with other power generation technology. The design and construction phase is substantially more expensive than other types of power plant. Standard or large units cost in region of $10 billion.
The unitary cost per MW is very expensive. Nuclear power plants are also a factor larger than other types of power generation. You also need to borrow a lot of money for a long time, and financing can cause cost escalation – so investment in large nuclear power is considered risky (construction projects can be 10 years).
If Nuclear financing is risky, why not just invest in renewables?
You have to balance the demand with the supply of electricity. If the amount of electricity in the system is not balanced, then we will have blackouts. So the production of electricity is independent of demand when we have variable renewable electricity (VRE). You need a baseload generator that you can turn on and off. This can be done with gas, coal, or nuclear power.
To decarbonise the electricity sector you can use two technologies – hydropower and nuclear. In countries like the UK you have limited capability to build hydropower. Energy storage isn’t efficient yet, produces a lot of waste and isn’t ready.
What are the differences between large reactor and small modular reactor costs and economics?
SMRs are reactors are designed to make construction faster and cheaper. Most current large reactors are based on light water technology, which we have a lot of experience and is well known. SMRs as a basic technology can be built in the short term.
Reactors are smaller, require less capital, so there is less risk in the investment. When you are building something new, the 1st or 2nd one, you are learning how to build it. With a large reactor you are learning on a $10 billion investment. If you are building two SMRs you might be learning on a $4 billion investment.
Then with SMRs, you can add capacity when you need it – so when reactors are retiring, you can build new ones with capacity when you need it. SMRs have smaller components which are easier to find suppliers, whereas with larger reactors, specialist components might only have 1 or 2 suppliers in the world. SMRs can lead to components being almost off the shelf.
How do you see Circular Economy principals adding value to SMR design?
We need to rethink how we look at energy generation infrastructure. Nuclear plants are complex, with lots of subsystems, which each have different lifecycles – some last 10 years, other 40, etc. Initially licenses to operate reactors in the US was 40 years. After 40 years, we know that changing some components allow reactors to last more than 40 years (even up to 80 years).
The opportunity to introduce Circular Economy principles to the design and planning of all kinds of products we consume could also be a global game changer. CE tries to decouple the life of the system from the life of the components. Systems that are designed to be replaced and switched between stations.
How do we account for closing and decommissioning a power plant
Nuclear reactors produce waste – a relatively small amount compared with fossil fuel based power generation. The amount and type of waste is known, we know how to make it safe, and look after it for a long time. The biggest problem is nuclear waste for sites which were used for other purposes, e.g. Sellafield which is unique and had military applications. These sites have very little to do with electricity production.
Let’s talk about the waste and decommissioning costs. These costs are usually included in the annual electricity cost for nuclear power. The cost of decommissioning is included in that cost. This, over the life of the plant accounts for about 5% of the total cost. If we produce less electricity, the cost per MW goes up. So the cost of decommissioning for a longer life power plant costs much less (extending the life of the plant reduces the cost of waste).
How can estimators or designers account for externalities in the future?
When we design the power station we need to extract all the possible value from it. For 3 units of energy generated through nuclear, just 1 is used. What about if we could use these other units for something else e.g. district heating, or desalination? With a relatively small incrememental capital cost we can produce not just electricity, but another valuable resource that makes the station cost competitive. But we need to think a bit more about what the station should be for.
We should not build the power plant for profit – the energy station provides basic needs for consumers. A nuclear project is a 100 year contract – this should not be considered for short term profit and gain. This is a long term view that a country has e.g. for health care or education. We need to have a long term view of the energy sector.
Find out more about Giorgio’s Work
You can follow Giorgio on LinkedIn and Twitter, links in the description. You can see all his papers on Researchgate, and if you can’t access them you can contact him directly and he’ll share them with you.