Published on Date August 23rd, 2010
A very interesting and controversial study
emerged recently, comparing nuclear and solar costs no less.
The study, "Solar and Nuclear Costs – The
Historic Crossover", was prepared by John O. Blackburn and Sam Cunningham
for NC Warn, a climate change nonprofit watchdog. The paper, focused on
the costs of electricity in North Carolina (US), describes the solar photovoltaic
(PV) business, summarizing its history of sharply declining prices, along
with the very different path taken in recent years by nuclear power, whose
costs have been steadily rising.
is that as of 2010, North Carolina is witnessing a historic crossover between
the price of nuclear power and that of solar PV. The crossover is said
to be happening at 0.16 $/kWh. It is important to note that these costs
are calculated as net figures after subsidies. Where do the numbers come
from? The study collected figures from local solar industry sources, to
come up with a "capital cost" for solar PV electricity, and relied on a
study on nuclear price trends by Mark Cooper's, "The Economics of Nuclear
Reactors: Renaissance or Relapse?" for a comparison with nuclear power.
The "net prices" are then obtained by deducting from those "capital costs"
whatever forms of subsidies, rebates and tax credits are available in the
US. This means the conclusions of such study are not about a Levelized
Cost Of Electricity (LCOE) comparison, but rather about the final cost
to consumers, given the existing incentives. A lot of discussion could
be triggered by this method alone, as its results are heavily dependent
on the local level of support to either technology. Nonetheless, there
is much more interesting data from this paper than just its controversial
conclusions. Capital costs of both sources of energy (before subsidies,
a sort of levelized cost) are indeed discussed, but what is even more interesting
(and as yet most unnoticed by the media) is the scale of the comparison.
We'll see why.
The figures shown for solar energy are explained
in the report's appendix, and calculated for a very small 3kW (peak) PV
system with the following parameters: $6,000/kW installed cost, 6% borrowing
rate, 25-year amortization period, 18% capacity factor (meaning 1,560 kWh/kWp
per year), and a 15% derating factor to account for system losses. From
these values, a capital cost of 35˘/kWh results as the current electricity
price of a residential PV installation. Then, by taking into account the
30% and 35% Federal and state tax credits (yielding a net system cost of
$8,190 from the original $18.000), the authors calculate a net production
cost of 15.9˘/kWh.
On the other side, nuclear power costs from
new projects under construction or planning around the world are estimated
in the region of 12–20$˘/kWh at the plant site, before any transmission
charges. Transmission and distribution costs – the authors argue – would
raise the delivered costs of new nuclear plants to residential customers
to 22˘/kWh. According to the authors, plant cost escalations announced
by utilities since Cooper's paper was published suggest an even higher
figure, but 16˘/kWh is eventually considered as a mid-range value,
also net of available subsidies, for comparison to the calculated costs
of a small residential PV plant. That's the crossover point.
A Critical Review
This study, and its conclusions, have caused
reactions of all kinds, and weighing in subsidies hasn't helped finding
common ground between advocates of the two different technologies. One
response that really drew my attention thou, is that from the Italian Nuclear
Association (AIN), member of the European Atomic Forum (FORATOM), the American
Nuclear Society (ANS) and the European Nuclear Society (ENS). In an official
note through the Italian media, they point at the use of subsidies as a
deceiving means to get to a wrong conclusion in favor of PV. Not happy
with this, AIN also suggests that the real capital cost of a 3kW PV system
would be around 63˘/kWh! As an end to the official response, the nuclear
association clarifies what the real costs are for modern nuclear plants
under construction: 10 to 15˘/kWh. I find their response even more
intriguing than the study itself.
Now, I won't go in further detail on the issue
of subsidies, as I believe that a proper apple-to-apple comparison should
be that of levelized costs. This said, I think the study's results are
indeed a bit deceiving, but actually not so much to PV's advantage. The
nuclear association's official response only adds an amusing note to this
clash of the numbers. Why do I suggest that? well, let's go back to the
start. A small residential PV system with a peak output of 3kW is being
compared to the figures of a huge centralized nuclear plant (new designs
like the EPR reactor have a 1.600MW output), some 500,000 times (!) greater
in terms of power output (and even more in terms of annual generation,
given the different load factors). This is David Vs Goliath.
While I can understand the reasons behind
this choice by the authors (aiming at final electricity customers of North
Carolina), if a proper comparison were to be made that should be between
levelized costs (LCOE) of utility-scale plants on both sides. In this scenario,
we find that bigger solar plants, even just at a 100kW rating, already
achieve levelized costs below 20˘/kWh in sunny regions (like southern
Europe or a good part of the US), with system prices already below €3,000/kW
as of Q2 2010 (as witnessed by the German Solar Energy Association BSW).
The influential website Solarbuzz posts regularly updated figures on electricity
costs for 100kW roof-mounted plants: August surveys show a figure of 19.14˘/kWh.
Multi-MW plants, clearly benefiting from some economies of scale with installation
costs now around €2,500/kW, are already in the 15˘/kWh ballpark
without the aid of any incentives.
So what about the Italian Nuclear Association's
claims? Their 63˘/kWh figure for a residential PV plant is based on
a load factor of 10%, something achievable even under the skies of London
and hardly comparable with North Carolina or any sun-friendly region on
Earth. Spain and southern Italy can easily achieve 16-18% load factors,
sunny States in the US go even higher. Obviously, AIN dare not suggest
a comparison with utility-scale PV projects. But they do end giving us
an outstanding piece of information. New nuclear appears to have costs
up to 15˘/kWh. I don't recall any ufficial nuclear body admitting
such high figures before, but it's good to finally get some clear numbers
after the worrying reports published by the likes of Moody's and Citi Group
in their recent due-diligence on nuclear power. Granted, it may well be
that costs for those badly over-running construction sites like the European
EPR plants in Finland and France will be even higher, which helps explaining
the increasing requests of late for subsidies, incentives and loan guarantees
made by nuclear utilities.
Gone are the days when claimed levelized costs
for nuclear power were about 3-4˘/kWh; it now seems nuclear projects
in the developed world will not be completed without a big helping hand
from governments and taxpayers.
In a business where quick-to-install, modular
renewables like PV are outpacing all economic projections and show costs
decreasing by the month (triggered by plummeting incentives and ever higher
production volumes), the economic outlook for the once proudly cheap nuclear
energy has never been as bleak.
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