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On October 22nd, the New York Times published a fascinating story detailing the astonishing cost declines in Chinese nuclear reactors. These cost declines prompted us to wonder: Are these nuclear power plants cheaper than U.S. wind and solar?
The answer is yes, even when the costs of delivering reliable power to the grid are not accounted for.
Hidden in the success of cost declines for Chinese nuclear reactors is the path forward for America, which will need to replicate China’s success in quickly and affordably building new reactors if it hopes to restart its nuclear industry and make nuclear competitive with other forms of electricity generation.
What’s Behind the Low Cost of Chinese Nuclear Facilities?
Principally, we don’t favor subsidization or government mandates for any energy source and would prefer a free market landscape. However, we also understand that, practically, energy subsidies are currently the name of the game, and the subsidization of intermittent, unreliable generators has resulted in heavily distorted energy markets that are struggling to supply the country’s growing energy needs. If we’re going to subsidize anything, it might as well be energy sources that can reliably serve the grid, actually lower costs in the future, and repair the damage done from decades of favoring unreliable energy sources—and not wind and solar, which have received the majority of direct subsidies from the federal government over the past years.
Additionally, the Times reports China’s nuclear companies build only a handful of reactor types, and they do it repeatedly to establish economies of scale, streamlining the regulatory process and simplifying the supply chain. The results have been impressive.
Construction costs for new nuclear reactors in China have remained low for three decades relative to those in the United States. Projects set for completion before 2030 have expected overnight capital costs between $1,600 per kilowatt (kW) and $2,580 per kW.
For context, new solar projects in the U.S. often have overnight capital costs ranging from $1,300 per kW to $1,600 per kW, putting them on par with some Chinese nuclear plants. These competitive capital costs mean Chinese nuclear plants are producing power at a lower cost than many U.S. wind and solar facilities.
The graph below shows the cost of Chinese nuclear power at various capital costs compared to new wind and solar in Texas, where Chinese nuclear produces power between $50 and $60 per megawatt hour (MWh), which is lower than solar ($68/MWh) and lower cost than wind ($60/MWh) if we assume the state-wide capacity factor of 34 percent.
For those of you interested in our assumptions, our inputs for capital cost and operations and maintenance (O&M) cost data for wind and solar were obtained from the U.S. EIA’s Assumptions to the Annual Energy Outlook.
We also use EIA’s Fixed O&M assumptions for Chinese nuclear plants, as we were unable to locate reliable estimates for these costs in China. However, using the U.S. fixed O&M assumptions almost certainly increased the cost of generating power from the Chinese nuclear plants. If any of our readers have more insight on these costs, we’d be grateful if you’d mention it in the comments section.
U.S. Nuclear Revival?
The U.S. is attempting to resuscitate its nuclear industry, and for the moment, it appears there is reason for optimism.
Heatmap News described the current state of affairs as a nuclear dealmaking boom. Retired reactors are being resurrected in Michigan, Iowa, and Pennsylvania, utilities are including new large light-water reactors in their resource plans, and the U.S. Government recently announced $80 billion for new nuclear reactors funded through trade agreements with Japan.
These announcements represent positive steps forward for an industry that has atrophied due to decades of near inaction stemming from a thicket of regulatory red tape and fierce lobbying by anti-nuclear activists like Paul Ehrlich, Amory Lovins, and by groups like the Sierra Club.
However, the industry’s recent struggles, exemplified by the years of delays and massive $17 billion cost overruns incurred during the construction of Plant Vogtle units 3 and 4—the first two large-scale nuclear power plants in roughly 30 years—will weigh heavily on the minds of utility resource planners and investors.
Grinding nuclear capital costs downward to around $2,500 per kW, compared to Vogtle’s $15,000 per kW, will be absolutely essential if the industry hopes to compete in terms of dollars per MWh with unsubsidized wind and solar or natural gas.
How can this be done? By replicating the success of other countries—not just China, but other countries like South Korea have been able to contain or lower the cost of nuclear facilities using a similar process. The template has been provided, we simply need to start today.
Everyone agrees that building units 3 and 4 at Vogtle was too expensive. It appears the federal government understands some of the challenges that led to cost overruns at these projects and is taking steps to streamline the permitting process, provide outside financing, and incentivize companies to invest in and build up the nuclear supply chain.
Creating economies of scale, a nuclear supply chain, and a workforce that is adept at building new nuclear plants will be a daunting and expensive challenge. Accepting this premise means understanding that shoehorning nuclear into the resource mix will have the same kinds of inflationary effects as wind and solar—albeit for a more valuable resource—while consumers are voicing their dissatisfaction with rising power prices.
Conclusion
While the revival of the nuclear industry would receive a warm welcome from us, and most of the country, it’s important to remember that it isn’t the only reliable energy source we should be relying on to reliably and affordably serve our country’s growing energy needs.
For our money, we think the country should continue utilizing its existing coal and nuclear fleet, and adding new natural gas plants as necessary to meet rising demand. If new nuclear is going to be part of this equation, consumers should be well informed about the high up-front costs, but also the potential benefits if costs can be reduced to those of Chinese reactors—which, albeit, the U.S. likely has a long road ahead to achieve.
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