How Nuclear Energy Unlocks The Cheapest Electricity
Over a century, the average electricity price needed to cover all nuclear power plant costs is roughly €33 per MWh.
Nuclear power plants are characterized by high initial construction costs but boast relatively low operational expenses. This cost-efficiency extends even to waste disposal and decommissioning, making nuclear energy an economically attractive option.
So why does nuclear energy often carry the misconception of being expensive? The answer lies in the time horizon considered. Short-term evaluations fail to account for the period after the nuclear power plant's construction costs have been fully amortized.
Figure 1, presented below, offers an illustrative example. Imagine a nuclear power plant built in 2035 with an interest rate of 5 percent. Remarkably, it pays off its capital expenditure (CAPEX) in just 15 years, requiring an average electricity price of €76/MWh during this period.
Starting in 2050, the cost of electricity drops significantly to €23/MWh. However, taking into account a higher captured electricity price than the average electricity price, the necessary price would be approximately €21/MWh. For most of the power plant's lifespan, expenses would mainly cover operational costs (OPEX). Nevertheless, there is a need to allocate additional CAPEX for two anticipated lifetime extensions, considering a 5 percent discount rate.
As illustrated in Figure 1, the average electricity price required to encompass all costs associated with nuclear power plants, including CAPEX, OPEX, and lifetime extensions, amounts to approximately €33 per MWh. However, when factoring in the "social cost of capital" at a 3 percent discount rate, even the levelized cost of electricity (LCOE) stands at just €44 per MWh. This figure is notably low, especially considering that LCOE was originally designed as a principal tool for comparing unit costs of various baseload technologies throughout their operational lifetimes. Consequently, a straightforward apples-to-apples comparison between the LCOE of nuclear power plants and variable renewable energy resources (RES) is not feasible, even though €44 per MWh is very competitive with RES.
Encouraging long-term, high-capital investments in deregulated markets, which are often influenced by short-term price signals, poses a challenge in establishing a diversified and dependable electricity supply system. Nuclear power plants offer essential power system support services, often underappreciated, encompassing short-circuit and black-start capabilities, inertial response and fast power reserves, as well as voltage regulation and reactive power dispatch. Coupled with their capacity to deliver a firm and dispatchable power output, nuclear energy exhibits significantly lower system costs when compared to other low-carbon alternatives.
All assumptions to calculate the needed electricity price over the 100-year timespan is provided in Table 1 below.