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Levelized cost of energy dooms nuclear.

Sandy Lawrence's picture
retired MD write + lecture on energy, climate, grid, epidemiology

I post almost daily on science topics, dealing with energy systems, the climate system, the electric grid or epidemiology. Background is in academic medicine, but I have also been teaching in...

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  • Jan 10, 2022
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This is the most recent [annual iteration #15 I believe] of Lazard's LCOE or levelized cost of energy analysis. Levelized in the title represents best effort to strip out all the federal, state + local subsidies, to create a level playing field.

 

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Matt Chester's picture
Matt Chester on Jan 10, 2022

It's always interesting to look at these charts, but also compelling is how they change from one year to the next. Has anything stood out to you when comparing this iteration with recent previous versions of it? 

Tiago Figueiró's picture
Tiago Figueiró on Jan 10, 2022

Nothing seems to have changed regarding the relative position of nuclear.

 

Cheers

Bob Meinetz's picture
Bob Meinetz on Jan 10, 2022

Wonderful! More fake news from Lazard, Deutsche Bank and other investment banks, whose clients have $billions invested in "renewable" energy, can only mean the Nuclear Renaissance is proceeding apace.
No peer-reviewed studies, only slick, glossy cost-of-electricity estimates, "levelized" to assure customers' hard-earned electricity dollars will continue to slide into investors' pockets. I guess if you tilt your head in the right direction, any cost estimate can appear to be levelized...

Sandy Lawrence's picture
Sandy Lawrence on Jan 12, 2022

Bob, thanks for your reply. I had anticipated my post might prompt some good discussion. Oct2021 data from the EIA listed the mean U.S residential retail rate as 14.11¢ [https://www.eia.gov/electricity/monthly/epm_table_grapher.php?t=epmt_5_6_a]. Would you be able to provide me any references that contradict the Lazardian estimate of nuclear cost estimate as something different than 13.1¢ - 20.4¢ per kWh? Would much appreciate some help in understanding this topic better. Thanks in advance.

Bob Meinetz's picture
Bob Meinetz on Jan 12, 2022

"Would you be able to provide me any references that contradict the Lazardian estimate of nuclear cost estimate as something different than 13.1¢ - 20.4¢ per kWh? Would much appreciate some help in understanding this topic better. Thanks in advance."

Sandy, levelized cost estimates for energy are like assessments for the health externalities of carbon emissions - depending on initial assumptions, we enter into a vague arena where it's difficult to rebuke even the most tenuous claims. Safest is not putting too much stock in any estimate with such a blatant conflict of interest.

For example: As Tiago notes below,  Lazard implicitly assumes electricity generated by intermittent sources of energy is of equal value to electricity generated by dispatchable ones - despite the inability of solar or wind to meet customer demand without necessary (and substantial) assistance from natural gas peaker plants. Gas peakers are needed not only for backup energy, but providing ancillary services - frequency and voltage stability - and their generation is typically purchased at expensive, real-time rates.

Though Lazard ignores these marginal costs, the impartial U.S. Energy Information Administration (EIA) does not. Its Average Power Plant Operating Expenses for Major U.S. Investor-Owned Electric Utilities, 2010 through 2020 combines Gas Turbine and Small-Scale (renewable) plants together in one category, with starkly higher estimates for renewables than those of Lazard.

Also, Lazard's capital costs for nuclear are based on a 40-year depreciation schedule. That nuclear plants are limited to a 40-year lifetime is a remnant of the 1950s, when regulators had no idea how long they would last, and came up with 40 years as a conservative guess. Today, nuclear plants are being licensed for additional terms of 40 years, and most experts believe they could be operable for 100 years or more. Nuclear's capital costs would obviously be lower if Lazard depreciated plants over 80-100 years.

Utility PG&E shows operating expenses for Diablo Canyon (nuclear) Power Plant of 1.7¢/kWh on its 2020 FERC Form 1 filing. Even with capital costs, Lazard's LCOE is an order of magnitude higher - hardly justified, but typical for investment banks specializing in renewables.

Peter Farley's picture
Peter Farley on Jan 13, 2022

Even if some nuclear plants last 100 years just like some cars do, the average age of plants retired last year was 42 years and the oldest so far is about 50 years. Any CFO financing such an investment has to take this into account, regardless of future promise. To reach a 100 year life the plants have major refurbishments including new turbines and rewound generators as well as replacing almost all the steam system. Many of these refits have cost 1/4 to a third of the original cost of the plant. That does not mean they weren't a good idea because 1/3 the original price might be 1/8 of the replacement cost. However, that refit cost plus lost sales during the period must be added to the original cost to work out the total capital cost

In any case if you go to your spreadsheet and feed in a weighted cost of capital 5.5%, which Plant Vogtle used, and spread the cost over 40 years it works out at $7.10/h per thousand dollars. If you stretch it to 60 years the cost only goes down to $6.54. Now if you reduce the lifetime capacity factor from 90% to 85% and still neglect major refurbishment cost, the capital cost per MWh is only 6% lower. As the operating, fuel and other overheads, grid fees, local taxes, insurance and admin don't change extending the life by 20 year at best reduces lifetimes cost of power by 3~4% 

In summary extending life makes little difference to the initial investment decision and many people would argue it increases the investment risk because there is more chance of market, technology changes or environmental changes, impacting the out years and reducing the value of power. 

For example, 5 years ago average power prices across the Australian grid were almost US$90/h and even higher in Victoria state which relied on old lignite plants. All the experts suggested prices would only go higher as world prices for coal and gas jumped. lignite provided 38 TWh to Victoria. The Latrobe Valley Region, where the lignite plants are, or the nearby coast were touted as ideal locations for nuclear power plants

An optimistic nuclear developer might have said they could make money at that price. Let's say they lined up permits and finance within a year to build a couple of Korean AP 1400's on the coast, with an all-in guaranteed price from Kepco of US$85/MWh, lower than the Emirates cost with a target of supplying 22 TWh/y at 90% utilisation.

Now fast forward 4 years. For the last 18 months wholesale power prices have averaged less than US$33/MWh, the state which had a few wobbles in reliability in 18/19 has reduced lignite generation by 15% and yet over the last year has exported an average of 9% of generation. Meanwhile minimum demand has dropped to about 3,000 MW and falling by about 100 MW/y, so in the interests of power security both reactors would have to throttle back to less than 50% at times and over a year would be extremely lucky to average 70% CF regardless of price.  

Our plucky nuclear developer would have found themselves in a Plant Summer situation very quickly. Fortunately, he would probably have only blown $1~2 billion not $9bn     

Bob Meinetz's picture
Bob Meinetz on Jan 13, 2022

Peter, there's no question large-scale nuclear is unjustifiable on a 5-year investment horizon. That's why it needs to be underwritten by state loan guarantees.- no investor wants an investment that will provide great returns after he/she's dead. It's why businesses like GM-Hitachi, Rolls Royce, and Fluor (NuScale) are building fast-food reactors for mass consumption: so they can compete with the cheap, inefficient renewables crap that's flooding the market.

Countries with a longer view (Russia, China) are realizing investment in large nuclear will have long-term benefits for their countries; that in the long term, it's the most cost-effective way to generate clean electricity.

Tiago Figueiró's picture
Tiago Figueiró on Jan 10, 2022

It seems meaningless to compare LCOE of renewables and nuclear without accounting for dispatchability. Solar and Wind LCOE should be combined with state of the art LCOS to simulate load requirements if it really is to replace CCGTs and coal.

Also state of the art SMR present LCOE values under 70$/MWh.

 

When site independent thermo-mechanical utility scale storage solutions (liquid "air", a-caes, laughlin-brayton, GridScale, etc.) actually take off in 8 or 10 years and start their learning curve starts to show, renewables+LCOS may compete with nuclear, assuming nuclear stagnates, which is not really fair. For now nuclear still seems to be the indispensable dispatchable source for a carbon free grid. If we want to start building carbon free grids now and not in 10 or 20 years, that is.

 

Kind regards.

Sandy Lawrence's picture
Sandy Lawrence on Jan 12, 2022

Thanks, Tiago, for your reply. Just a couple of minor points for now. 
In just over a decade, from 2007 to 2020, the wholesale price of land-based wind dropped an astounding 70 percent, exceeded only by solar with a jaw-dropping 90 percent. These virtuous cost curves are unmatchable drops in price outpacing all the legacy generators such as coal and nuclear. And there’s still more running room for innovation and cost improvements in these sustainable energy sources.

Dispatchability is clearly an important advantage of some generator types. But even more beneficial are efficient utilization of energy + demand flexiblity [faster, easier, cheaper]
. Geothermal + hydro are eminently dispatchable, as are peaking gas turbines. Almost instantaneous are energy storage of various types. But nuclear? Not on the list of dispatchable components.

Without being too tendentious, nuclear is not carbon-free as so often stated, because many of the components of the nuclear fuel cycle release carbon, including uranium exploration, mining, milling, fuel fabrication, plant construction, decommissioning + so forth. Low carbon then, though not quite as much so as wind + solar.

But I am most interested in your statement about state-of-the-art SMR. Could you please give a source of information for your LCOE estimate for SMRs? I thought their design wass as yet unproven. Here is a good discussion from last month:
https://thehill.com/opinion/energy-environment/586848-nuclear-power-has-no-business-case-and-will-make-climate-change  Appreciate any help you could offer me in this area. Thanks.

 

Tiago Figueiró's picture
Tiago Figueiró on Jan 13, 2022

I took devlopers' figures. As Peter Farley says that's what there is.

Bob Meinetz's picture
Bob Meinetz on Jan 13, 2022

Sandy, yes: nuclear is carbon-free electricity generation. Anyone can create a laundry list of production externalities : mining, transportation, exploration, and plant construction, the gasoline needed to transport workers to the construction site, etc. etc. etc., to defend their preferred energy source.

Does Lazard's LCOE include the environmental cost of exploration, mining, and milling the neodymium necessary for the huge magnets in wind turbines? What about the emissions of the freighters, which must haul that rare earth metal from China to Europe, or the hundreds of ships which must cart offshore wind turbines from Europe to the U.S., then install them? Does anyone know how much it will cost to decommission a 180-turbine offshore wind farm - or are we assuming they'll last forever?

"But nuclear? Not on the list of dispatchable components."

Nuclear plants, though not as variable as natural gas plants, are indeed dispatchable sources of electricity:

"A dispatchable source of electricity refers to an electrical power system, such as a power plant, that can be turned on or off; in other words they can adjust their power output supplied to the electrical grid on demand. Most conventional power sources such as coal or nuclear power plants are dispatchable in order to meet the always changing electricity demands of the population. In contrast, many renewable energy sources are intermittent and non-dispatchable, such as wind power or solar power which can only generate electricity while their primary energy flow is input on them."

Peter Farley's picture
Peter Farley on Jan 13, 2022

While SMR developers quote US$70/MWh there is little evidence to support it. Even then they assume 90% CF. It took light water technology 40 years to reach that level of reliability so it is quite unlikely that they will achieve that initially. So, the cost/MWh will rise even in the supremely optimistic assumption that capital prices don't.

Then in many areas of the country as is already happening in California and Texas, generation is being curtailed on low demand windy sunny days. SMRs will also be curtailed because they are never as cheap as the marginal cost of behind the meter solar. Thus, allowing for a mere 15% cost overrun and 72% utilization, breakeven power price is $110 with about 95% availability. Comparing a 2 x 100 MW SMR plant at optimistic cost of $1bn with three hybrid plants each with 75 MW wind, 125 MW solar, 70 MW 6-hour battery plants will give at least as good availability with no single point of failure for a cost of $900m available now, not in 15 years. 

Why wait   

Tiago Figueiró's picture
Tiago Figueiró on Jan 13, 2022

I don't think we should wait at all. I'm all for renewables and think they should be everywhere, but they're subject to geographical constraints and a LOT of variability.
Then I tried to estimate the cost of your system, and with 100% onshore wind (which I figure is half the price of offshore) at 1500 Eur/kWp, solar at 450 Eur/kWp and batteries at 600 Eur/kWh, I end up with 1.260 MEur or around 1.500 MUSD, not 900.

Regardless, if it was just a matter of price I'd rather pay this difference and be nuclear free.

I live in a country where onshore wind is pretty much saturated. 420 MWh is short if you are counting on onshore wind.

This is my country's profile on Jan. 2nd, a random day I picked without looking around much. We have 5,5 GW wind (light green) installed from north to south plus a bit over 1 GW solar (yellow).

Now Jan 3rd:


You see how your system would leave a country without power in the morning here?


I think adopting lithium batteries for grid storage at that scale is anti-ecological, will drive prices up and will unnecessarily create scarcity of a precious material. Thermo-mechanical solutions should be more interesting than lithium even today (e.g. CSP w/ thermal storage, pumped hydro, and possibly different CAES architectures if all the hype comes to something).

King regards.

Peter Farley's picture
Peter Farley on Jan 13, 2022

Thanks for your reply, in a small country, things are different.  But US electricity consumption is only about 510 MWh/sq km vs say 1,400 MWh/sq km in Germany and the larger geographic spread means that variation in renewable output is smaller. The smaller the area the more variable wind and solar become, so the more backup you need. However, I would be very surprised if wind is anywhere near saturated. Many of the early wind farms operate at 18% CF.  They can be replaced with fewer taller turbines with larger rotors which in the same environment can get to 35~40% CF. For example the ninety turbines of the 30 MW El Cabrito wind farm were replace d with 12 turbines in 2018 with 27 MW capacity yet annual output will be increased about 30%. The important point is not peak output but output at low winds and therefore the amount of storage required. The new turbines will supply 4 times as much power at wind speed of say 6~7m/s so over the years a renewed wind turbine fleet could supply 30~50% more energy and require less than half the backup 

I am not advocating lithium batteries or in fact batteries at all for most of the storage, much of it can be ice or hot water, altering the peak capacity of hydro and a big one eventually will be smart charging of EVs. Solar thermal is also a possibility. That can be supplemented by resistance heating or heatpumps powered with excess wind and solar and using a low temperature organic Rankine cycle for generation as well as conventional steam generators. There are dozens of possibilities

Lithium batteries do have a role in replacing spinning reserves so for example a 50 MW/1/2 hour battery can be paired with a 100 MW hydro or gas plant to provide the instant response for fault current so the hydro or gas generator is still providing grid services without using fuel /water, but if there is a loss of supply the battery allows the rotary generator to spool up. 

Then for longer term stationary storage batteries, where they are necessary, and where weight and energy density is not an issue, sodium, aluminium, and even iron are suitable battery metals as well as all the redox flow battery chemistries.   

 

Peter Farley's picture
Peter Farley on Jan 13, 2022

The problem is that demand varies and the larger the plant the more backup you need because the chance of 40 of 200 being offline together is larger than the chance of 2,000 out of 5,000. This is compounded by the slow ramp rates of nuclear.  So, a nuclear based system needs more reserve capacity than most people expect. if you build a grid where nuclear supplies an average of 80% of US electricity, it needs about 650 GW of nuclear to meet peak demand with an adequate reserve margin and allowing for normal maintenance outages. Due to grid limitations, it is closer to 700 GW. (As a check the US currently has 850GW of non-hydro dispatchable power)

If you built unlimited storage you could get away with about 450 GW of nuclear but you would need at least 200 GW of widely distributed storage for the peak day. If you only have 450 GW of nuclear plus existing hydro and geothermal, in a really good week they will supply about 80,000 GWh. To supply the highest demand week when demand averaged 580 GW you would need about 17,000 GWh of storage. Now leaving aside the cost of storage, assuming you can get nuclear costs to average 35% less than Plant Vogtle, to maintain 450 GW by 2040 you need to replace half the existing fleet that is a $3trn investment in generation over the next 20 years.

 

As it turns out if you put wind, solar and a little bit of hydro and perhaps geothermal and biomass spread widely across the grid they are much more reliable than people expect. For example, on the Australian NEM which is about 70% of the size of Southwest Power Pool, over the last 12 months the worst renewable day was 60% of the average and the worst renewable week 75%. Some significant rule changes were made in October and November but since then renewable share has been even more consistent, worst week in the last 13 was 94% of average.

Putting the annual story a different way, if Australia had sufficient wind and solar to generate 1/0.75 or 133% of annual demand, on the worst week there still would have been enough energy. There were certainly times within that week where even that much wind and solar plus existing hydro would have delivered perhaps less than half the power required but at the end of the week the storage would have been in the same state it started. 

 

In the US total demand varies from 8,000 to roughly 14,000 GWh/day.  The highest demand days are very sunny. For the next twelve years at least, nuclear will continue to supply about 2,100 GWh/day and hydro from 200 to 1.800 GWh. biomass, geothermal, landfill gas etc will supply another 300~500 GWh so the gap will be between 6,000 and 10,000 GWh 

 Just as a check on capacity, by the end of 2030 Germany expects to have about 60~70 GW of onshore wind, 40 GW offshore, about 100 GW each of behind the meter and utility solar. The US has forty times more open space than Germany and 6~7 times the unshaded roofspace.  If the US installs only 600 GW of behind the meter solar, 600 GW of utility solar, 600 GW of onshore wind, 80 GW offshore that will have the capacity to generate an average of 14,100 GWh per day.  At current costs that would be a $2.5 trn investment but following the same cost down trajectory it has been following it would be about $1.6 trn, a little over half the nuclear investment.

That would mean that on a good VRE day hydro would be barely tiking over and about half the wind and solar would be curtailed. On a very low wind and solar day they would still generate about 7,000 GWh with nuclear 2,100, hydro 2,000 requiring backup of 4,000 GWh. If you extend that to a week in August, total demand will be about 97,000 GWh. Solar will average 16% CF rooftop and 35% for tracking solar in summer, and wind dropping to 15% and hydro 55% then nuclear will provide 14,500 GWh, hydro 8,000, sundries 3,000, solar 50,000 and wind 15,000 GWh a total of 90,000 GWh requiring 7,000 GWh of new storage, 40% of the nuclear dominant system.

In summary a wind/solar/storage system requires about half the investment of a nuclear/backup system for the same reliability. 

As for 10 years time, in the short term most states can get to 40~60% renewables using existing hydro and power trading to balance the grid so there is plenty of time to optimise storage technology. After all any nuclear plant authorised today won't come on line before 2030 anyway.     

Tiago Figueiró's picture
Tiago Figueiró on Jan 14, 2022

Thanks for your insightful reply.

 

 

Jim Stack's picture
Jim Stack on Jan 11, 2022

This is a much needed study. By removing subsidies it can make the truth shine through. I would love to see them add the cost of clean up of any waste/pollution and the water used all in this chart. As water becomes a bigger problem that might be the biggest item to consider. 

Bob Meinetz's picture
Bob Meinetz on Jan 11, 2022

"By removing subsidies it can make the truth shine through."

Agree, Jim. The the Production Tax Credit for all renewables expired two weeks ago, but the Investment Tax Credit (ITC) for solar is permanent, and the lucrative 30% ITC for offshore wind continues through 2025. Removing these subsidies would certainly make the truth shine through!

Peter Farley's picture
Peter Farley on Jan 13, 2022

The $18/ MWh production credit, free water, construction finance guarantees and limitation of external costs due to accidents to $450,000, not to mention subsidised fuel supplied by the federal government are all subsidies to nuclear. In sum they are more than the current subsidies per MWh to wind and solar

France gets 70% of its electricity from nuclear yet other sources and imports frequently provide up to 50% of demand and at other times it exports, often at very low prices up to 20% of output to keep its reactors going. The government has built every nuclear plant in France and funds all nuclear R&D from the budget, further using its balance sheet to lower costs. 

Then it charges retailers and larger manufacturers higher prices than Germany 

Bob Meinetz's picture
Bob Meinetz on Jan 13, 2022

No nuclear plant gets free water, Peter, any more than you do when you go for a swim at the beach. And calling programs which have never paid out a dime "subsidies" (loan guarantees and Price-Anderson)? Please. You're grasping at straws. 

Sandy Lawrence's picture
Sandy Lawrence on Jan 18, 2022

Thanks, Bob. And I'm glad you don't like subsidies. Nor do I. But nuclear has had substantial subsidies for an industry that has been commercial for over 60 yrs. And fossil fuel industries have had subsidies for over a century. Would love to have all these subsidies phased out. But it shouldn't take a 100 yrs. If nuclear is so safe, why do we still have the Price-Anderson Act + its permutations over the years still in place, as Peter Farley commented several days ago. France may get 70% of its electricity from nuclear, but they are contemplating dropping that down to 60%. 

Bob Meinetz's picture
Bob Meinetz on Jan 18, 2022

"Why do we still have the Price-Anderson Act + its permutations over the years still in place..."

Because it hasn't cost taxpayers a dime?

"France may get 70% of its electricity from nuclear, but they are contemplating dropping that down to 60%."

They have changed their minds. Prime Minister Emanuel Macron, in November:

"'To guarantee France's energy independence, to guarantee our country's electricity supply and achieve our objectives, in particular carbon neutrality in 2050, we are going, for the first time in decades, to relaunch the construction of nuclear reactors in our country and continue to develop renewable energies.

'These investments will allow us to live up to our commitments. As we close COP26 in Glasgow, this is a strong message from France,' he added.

He said the European Union must work together 'to build a credible strategy for reducing our CO2 emissions, compatible with our industrial and technological sovereignty.'

Macron added: 'This new model of investment and growth in which I believe for France and for the European Union is the one that I will defend on your behalf from next January when taking the presidency of the Union.'"

Peter Farley's picture
Peter Farley on Jan 13, 2022

Nuclear also has the small matters of load following, that's why France has an import/export swing of 20 GW, 25% of peak demand plus gas, coal and hydro pumped hydro.

Then for inland plants water is an issue a typical 1.1 GW plant sends as much water up the cooling tower as the entire use of a town of 140,000 people 

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