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The Economics of Nuclear Power

The Economics of Nuclear Power

When considering various sources of power, it is important to note that the analysis of power generation costs is a complex process that is highly dependent upon the location of interest. As confirmed by an OECD/NEA (Organization for Economic Cooperation and Development/ Nuclear Energy Agency) Study, Coal, for example, will likely remain economically attractive in countries such as China, the US and Australia in which such a resource is abundant and accessible and in which carbon emissions are cost-free. Natural gas is also competitive for base-load power in many places, particularly using combined-cycle plants, though rising gas prices have removed much of this advantage. As stated in “The Economics of the Nuclear Fuel Cycle”, a joint publication of the OECD/NEA, due to numerous industry advances and cost savings in operation, nuclear energy is, in many places, competitive with fossil fuels for electricity generation. Furthermore, despite its relatively high upfront capital costs, waste disposal and plant decommissioning costs, the uncertainties surrounding fossil fuels still allow for the economics of nuclear power to remain quite favorable for most applications.

From the beginning, the basic attraction of nuclear energy has always been its low fuel costs compared with those for coal, oil and gas-fired plants. Unlike other sources, Uranium must be processed, enriched and fabricated into fuel elements, with roughly half of the cost associated with enrichment and fabrication, according to NEI Data. Allowances must also be made for the management of radioactive used fuel and the ultimate disposal of this used fuel or the wastes separated from it. However, as reported by similar data from a Finnish Study, even with these additional costs included, the total fuel costs of a nuclear power plant are typically about a third of those for a coal-fired plant, and between a quarter and a fifth of those for a gas combined-cycle plant.

It is also important to distinguish between the economics of Nuclear Plants already in operation and those at the planning stage. As confirmed by a 2004 publication by the University of Chicago, “The Economic Future of Nuclear Power”, once capital investment costs are effectively “sunk”, existing plants have relatively low operating costs and are effectively “cash-producing machines”. This finding is also confirmed by NEI Data which places the operations and maintenance (O&M) and fuel costs (including used fuel management) of Nuclear Plants, along with Hydropower Plants, at the lower end of the spectrum, thus making them very suitable as base-load power suppliers. This advantage is irrespective of whether the investment costs are amortized or depreciated; assuming the marginal costs of operation are below the power price, the plant will continue to operate economically.

US figures for 2008 published by NEI show the general picture, with nuclear generating power at 1.87 c/kW compared with roughly 3.1 c/KW for coal, 8.1c/KW for Gas and 17.5c/KW for Oil.

Electricity production costs
The above data refer to fuel plus operation and maintenance costs only, they exclude capital, since this varies greatly among utilities and states, as well as with the age of the plant.

In assessing the impact of fuel costs, a Finnish study published in 2000 reports that a doubling of fuel prices would result in the electricity cost for nuclear power rising about 9 percent, for coal 31 percent and for gas 66 percent, illustrating that nuclear power has a significant economic advantage in its sensitivity to fuel costs. This underscores the importance of the price stability benefits that can be realized through the use of nuclear energy.

Fuel costs
This chart shows the percentage change in fuel costs due to electricity generation costs.

In summary, Nuclear power has long been economically characterized by its higher upfront  costs when compared with fossil energy. However if its lower fuel costs (including resistance to price sensitivity), as well its savings in operations costs, are considered, Nuclear Power has a significant long-term advantage over fossil and gas forms of power generation. As confirmed by the World Nuclear Association’s Report, which summarizes intergovernmental analysis published by the International Energy Agency, the value of nuclear power in providing price stability, security of energy supply, and low-emission base load electricity at a reasonable cost is finally being recognized. This, in addition to on-going developments and advancements in technology, makes the “new economics” of nuclear power much more competitive and ultimately less expensive than other forms of electricity generation.


1. OECD/ IEA NEA 2010, Projected Costs of Generating Electricity.
2. OECD/IEA, 1994, The Economics of the Nuclear Fuel Cycle.
3. NEI: US generating cost data.
4. Tarjanne, R & Rissanen, S, 2000, Nuclear Power: Lest-cost option for baseload electricity in Finland; in Proceedings 25th International Symposium, Uranium Institute.
Gutierrez, J 2003, Nuclear Fuel – key for the competitiveness of nuclear energy in Spain, WNA Symposium.
5. University of Chicago, August 2004, The Economic Future of Nuclear Power.
6. Nuclear Energy Institute, August 2008, The cost of new generating capacity in perspective.

Written by Perrin Quarshie of NAC International

Article provided by The Daily Energy Report

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Leave a comment
  • Anonymous on June 09 2011 said:
    I've spent a lot of time trying to explain to people the cost of nuclear as compared to other things, but they still dont get it.Nuclear is the optimal source of base load electricity, and the others are distincting sub-optimal. A chapter in my new energy economics book takes this up, though sometimes I think that I made it more complicated than necessary. The problem of course is that even PhD students in economics are unable to understand the simple algebra needed to calculate the cost of producing electricity. One of these is a full professor of power engineering who sent me a screwy mail saying that wind, PV and natural gas are superior to nuclear for the generation of electric power.
  • Anonymous on June 09 2011 said:
    Fred, you should see letters written to Mechanical Engineering magazine over the years. They say engineers as a group are conservative, yet I've seen many letters that are left-of-center in their perspective on issues like cars, nuclear power, et cetera. I'm sure though, that there are other full professors of power engineering who support nuclear power.
  • Anonymous on June 09 2011 said:
    The highest energy bureaucrat in Sweden belongs to the anti-nuclear booster club. He is a PhD in physics.Explanation: the people in his social circle are nostly anti-nuclear, and he feels that his job prospects outside Sweden are improved if he is anti nuclear.How do I know this? "Well, Mam," as Sergeamt Warden told the Captain's wife, "I was born smart."

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