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Power Generation |
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With the nuclear share of electricity worldwide averaging 16%, there are wide variations from country to country. In France, almost 80% of electricity is provided by 58 nuclear reactors owned by EDF, but in rapidly developing countries like China and India, the nuclear share is currently only 1-2%. Between these extremes are a large number of countries where nuclear is a substantial part of electricity generation, in many cases 20-30%, with the balance made up by a mixture of hydro, coal, gas and oil.
In the past, the decision to “go nuclear” was in many cases taken at a national level, with central governments either owning a nationalised electricity provider or encouraging local companies to invest in nuclear. In the United States, however, regional power companies took the decision on economic grounds, although with the backstop of controlled electricity markets. This has left many utilities in both the United States and elsewhere with significant nuclear shares in their generation portfolios, a trend that has been increased by substantial consolidation of ownership in the sector. With these plants operating at high capacity factors at a time when rival generation modes have been experiencing significant cost escalation, existing nuclear plants have been earning superb profits for their owners.
With general liberalization of electricity markets throughout the world, the decision to invest in new nuclear plants will be taken largely on economic grounds, without recourse to any public subsidies or the ability to pass cost over-runs onto captive power customers. With fossil fuel prices having moved up sharply in recent years, the stable fuel and operating costs of existing nuclear plants have highlighted the attractions of nuclear generation and many studies have shown that nuclear can be economically competitive against gas and coal plants. This will be reinforced if fossil fuel plants receive a cost penalty in the form of a carbon tax or an emissions trading regime, as nuclear’s low carbon credentials are now well-recognised.
The main barrier to investing in a new nuclear plant is overcoming the significant hurdle of the relatively high capital cost of nuclear facilities and the attendant time delay before the plant starts generating electricity and earning money. Investors need to be able to take a long term perspective and be convinced that new reactors can be delivered on time and on budget. Renewable energy alternatives, such as wind and solar, are of much smaller scale but share the characteristic of relatively high capital cost per kilowatt installed. The opposite case is gas plants, which are cheap to build but have economics almost completely grounded in the subsequent gas price. Coal plants have many attractions in terms of capital cost and reasonable fuel and operating costs, but suffer from their adverse environmental characteristics in today’s carbon-conscious world.
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