Nuclear Power Costs Billions More Than Promised
Since the mid-1990s nuclear power has been staging a comeback. The Fukushima reactor disaster in 2011 may have given a moment of pause, but today 14 countries are building new reactors.
The United States generates most of the world’s nuclear energy, over 30 percent, but there has been little interest in building new reactors here since the 1980s. Following a 30-year hiatus, new U.S. plants are now under construction. Six are expected to come on line by 2020.
This renewed interest in nuclear power is fueled by energy policies sensitive to a changing climate. Nuclear power—generated from splitting a uranium 235 nucleus—leaves a light carbon footprint compared to the dirty business of burning fossil fuels. This feature has encouraged construction of many new plants worldwide, 27 in China alone.
But despite nuclear’s green reputation experts say it’s a bad deal.
It requires a comparatively tiny amount of uranium to generate electricity, so most of the cost consumers pay for nuclear power comes from building the reactor. But the construction of new facilities often proves much more expensive than promised.
New reports find that at least three quarters of all nuclear reactor projects worldwide are officially delayed. According to Mycle Schneider, International consultant on nuclear policy, and lead author of the World Nuclear Industry Status Report (WNISR) 2014, construction delays can run projects billions over budget.
In a conference call on Sept. 19, Schneider pointed reporters to the European pressurized water reactors under construction in Finland and France. These projects are now estimated at $11 billion each, totaling about $7 billion over budget and over four times as much as the original estimates 10 years ago.
The 66 units under construction worldwide have a huge range in terms of delays. Eight units have been under construction for over 20 years, but others have a setback of only three years.
The longest delay is the Watts Bar project in Tennessee where construction began in 1972. The Tennessee Valley Authority currently predicts that the reactor will be online by December 2015 and cost as much as $4.5 billion—$2 billion more than projected in 2012.
Schneider mentioned several reasons for the delays: poor time management, communication problems, quality control, and engineering obstacles that emerge during project development.
“All this adds up,” he said.
According to Peter Bradford—adjunct professor on Nuclear Power and public policy at Vermont Law School, former member of the U.S. Nuclear Regulatory Commission and former chair of the New York and Maine state utility regulatory commissions—time and budgetary discrepancies have always plagued the nuclear industry.
“This is an industry with a history of a terribly optimistic vender forecast,” he said.
Construction delays and cost overruns are the primary reasons the United States stopped building new reactors in the 1980s. In the past, the industry blamed regulatory scrutiny for preventing timely builds, but a new licensing strategy has since taken the wrinkles out of this process.
“If anything the contribution of public policy has been to enable these projects,” Bradford said.
Consumers Shoulder the Risks
According to Schneider, commercial banks no longer back reactor project financing, because it’s too risky. It is for this reason that the Asian Development Bank has never financed a nuclear facility.
“Without upfront customer financing no one in the U.S. will build a new reactor,” he said.
In South Carolina and Georgia where new reactor construction is underway, the legislature arranged for electricity customers to be charged for the facilities before they even come into service. Bradford said that while such laws do produce lower final reactor costs, they shift the risk of a reactor project cancellation to consumers, who, unlike investors, don’t charge for bearing those risks.
Costly consequences can be seen in Florida, where Duke Energy scrapped their Levy County reactor project in Feb. 2014, after customers had paid over $1 billion for it under laws similar to those now in Georgia and South Carolina.
“There aren’t going to be any refunds of that money, even though the plants aren’t going to be built,” Bradford said. “If such risks were properly accounted for in Georgia and South Carolina, societal costs of those reactors would be even further above the budgeted price.”
Worldwide, about 250 reactor projects have been abandoned before completion. Over half have been in the United States. Two Bulgarian plants were under construction for 25 years until they were recently removed from the list of building projects. Another pair of reactors in Taiwan were abandoned after 10 years of construction.
In 2008 and 2009, the United States saw several proposals for new reactors, ushering in a so-called nuclear renaissance. Most of these have since been cancelled. Experts say more are likely to follow.
Other types of power plants are at risk of time and cost overruns as well, but experts say nuclear plants are particularly vulnerable to this problem. They require an enormous investment upfront and take longer to bring on line.
For the past 50 years, the nuclear industry has pushed for bigger units in an effort to spread costs over a larger number of kilowatt hours. But some are calling to shrink the scale with small modular reactors: compact, factory-fabricated designs that require less initial investment, and are easier to assemble than conventional units.
The United States has approved small reactor designs, but Bradford is not impressed.
“There really is no basis for optimism,” he said. “The only cost studies—they hardly even deserve the name studies. They’re provided by the vendors.”
Schneider said these smaller reactors might be a better fit for the changing electricity market, which increasingly favors a horizontally integrated system and a more eclectic approach to energy generation.
“It’s hard to imagine a huge plant whatever the source, but especially nuclear in such a new environment,” he said. “But it’s very clear the biggest problem the nuclear industry has besides cost is the time factor. Small modular reactors will not be available for a long time—for decades. We need solutions in the short term—the next 20 years.”
“It’s very interesting to see the Financial Times reporting about the U.S. market saying that wind and solar can now compete without subsidies with gas. Where is nuclear in that comparison? And that is now, not something that we have to develop over decades.”