Economics of nuclear power plants

This chapter starts by explaining the difference between commonly used terminology associated with cost, price, and value. Cost is a key nonfunctional requirement for a Nuclear Power Plant (NPP) project and should be considered as part of the decision-making process across all lifecycle phases. Lifecycle cost estimating is commonly used to compare the commercial case of the proposed project with other projects that are competing for the same resources. The Levelized Cost of Electricity (LCOE) is the most commonly applied metric to lifecycle cost assessment for power generation, especially from a policy perspective. This approach to comparing the investment criteria for different power generation technologies is under scrutiny for its applicability in different market conditions. The system LCOE is introduced as a way of incorporating external factors beyond the project level that may influence the investment decision making of key stakeholders. The cost drivers based on the experience of constructing large NPPs are a key consideration that has led to the value proposition of Small Modular Reactors (SMRs). Manageable construction cost, schedule certainty and reduction, and the lower upfront cost expected for SMRs are key attributes. There are several commercial challenges, which SMRs will have to overcome before governments, owners, and operators will invest in the technology. They will have to prove to the market that modularization will lead to reductions in First of a Kind (FOAK) costs, such that learning will lower the cost of Nth of a Kind (NOAK) SMRs. In addition, the reduced capacity of SMRs is likely to lead to a shift in cost drivers away from the Capital to Operations and Maintenance costs. The fixed costs for operating an SMR do not scale down with capacity size, and so the margin between operating cost and revenue for an SMR is less than that of a large NPP. SMRs will, therefore, need to prove that the reduction in construction risks associated with NPPs (related to time and cost overruns) will mitigate the loss in operating revenue, thereby making the SMR attractive to investors. Both the estimator and the customer for the estimate must have a common understanding of the expected quality of the estimate in order to make the right commercial decisions for the organization. The challenges associated with producing a good quality estimate are interrelated. The availability of data will influence the estimating method used and the ability to validate estimates. The purpose of the estimate, presentation of cost information, and cost uncertainty analysis are key elements that influence how the estimate is interpreted by the decision maker. Ultimately cost estimates form a key element of a decision-support system. A good quality estimate is required to support investors in NPP projects to make the right decision.