erry nuclear power plant Ohio (photo Skip Nyegaard)
Politically feasible carbon pricing is not likely to provide the long-term revenue needed to support existing or new nuclear power projects. Instead, project-specific activities should be undertaken to keep existing nuclear in operation and to drive investment in new nuclear power plants – with the cost of these activities recovered as a cost of controlling carbon, writes Edward Kee, CEO of Nuclear Economics Consulting Group. Courtesy of World Nuclear News.Â
Economic analyses of nuclear power projects reflect carbon price revenue, but only as a low-probability upside scenario for equity investors. The benefits, timing, level and certainty of carbon prices will need to change if nuclear power project investors and lenders are to consider carbon price revenue as a key part of project economics.
Carbon prices provide no direct benefit to nuclear power, but increase the cost of fossil fuel electricity in ways that may result in indirect benefits for nuclear power. Higher costs for combustion-based electricity due to carbon prices will make nuclear electricity appear more competitive for traditional electric utilities.
After more than a decade of discussion, there is no carbon tax in the USA and the proposed Clean Power Plan provides no benefits for existing nuclear plants
Carbon prices will increase system marginal prices in electricity markets that will increase electricity costs for consumers and increase revenue for nuclear power plants. Increased nuclear power revenue will not be associated with increased carbon tax revenue, complicating plans for a revenue-neutral carbon tax scheme and raising the potential of windfall profit taxes on nuclear (as, for example, in Finland). When electricity market prices are low or negative, carbon prices will provide no benefit to nuclear power plants.
Timing in doubt
The timing of carbon prices is in doubt. After more than a decade of discussion, there is no carbon tax in the USA and the proposed Clean Power Plan provides no benefits for existing nuclear plants. Despite COP21 “commitments” to reduce carbon, little real action to put meaningful prices on carbon has been taken.
The level of carbon taxes is also important. Carbon prices at the estimated social cost of global warming caused by carbon emissions would mean a carbon tax of $100 per tonne (or higher) today, increasing to about $1000 per tonne by mid-century. Carbon prices at these levels would likely have a negative impact on the economy. The typical approach to controlling carbon is to start small (a high cap in a cap & trade regime or a low carbon tax) to provide marginal incentives without a negative impact on the economy. A World Bank report (the 2015 update of State and Trends of Carbon Pricing) shows that carbon prices are mostly at or below $20 a tonne.
Carbon prices are likely to be too indirect, too late, too low, and too uncertain to provide real financial support for nuclear power projects
Carbon taxes are uncertain. Nuclear power plant investments require revenue adequacy and certainty for at least the initial 30 years of project operation after the ten-year development and construction period. There is doubt that carbon prices at the level needed for a nuclear power project will be in place for 40 years (or more) into the future. Carbon price regimes are driven by governments. Governments change and government positions change (for example, in Australia), adding uncertainty for any carbon pricing regime over the time frames needed for a nuclear power plant.
Carbon prices are likely to be too indirect, too late, too low, and too uncertain to provide real financial support for nuclear power projects. Providing direct benefits to existing and new nuclear power plants would be much more effective than economy-wide, technology-neutral, and politically feasible carbon pricing regimes. The nuclear power industry requires project-specific actions to provide the sufficient and certain revenue needed to keep existing nuclear power plants in operation and to support the development of new nuclear power plants.
This approach would involve project-level actions to keep nuclear power plants operating or to build new nuclear power plants with costs of these actions recovered as a cost of reducing carbon.
UK example
The UK is an example of this approach. It has a legally-binding requirement to lower carbon emissions. Existing carbon control measures, including a carbon price floor and the emissions trading scheme, do not provide the revenue sufficiency and certainty needed for new nuclear power investment in the UK. To get new nuclear power projects built there, the Electricity Market Reform program provided focused incentives for new nuclear power. The cost of Hinkley Point C or other new nuclear project incentives (such as, the difference between the Contract for Difference strike price and the market price of power) is a cost to control carbon that will be recovered from retail utilities in the UK.
Another example is US states taking action to save threatened merchant nuclear plants. This includes the proposed Illinois low carbon portfolio standard, the proposed New York clean energy standard, an Iowa PPA extension for the Duane Arnold nuclear plant, and an Ohio power contract for the Davis Besse nuclear plant. These state programs are focused on avoiding the loss of the zero-carbon electricity from economically-threatened merchant nuclear plants. The cost of these programs, if they are implemented, should be considered as a cost of controlling carbon emissions.
The market fails to provide support for nuclear power, so nuclear power subsidy programs should be supported by the same market failure logic used to justify current support for renewable energy
In US states with a traditional utility structure (that is, without electricity reform), new nuclear power projects (such as, the Vogtle and Summer units now under construction) may not be the lowest electricity cost option, but provide benefits including zero-carbon electricity. Some of the premium paid for these new nuclear projects should be considered as the cost of controlling carbon emissions.
Subsidies
Taking this approach even further would be to provide nuclear power with subsidies similar to those provided for renewable generation. These would be focused on preventing early retirement of nuclear power plants and on supporting new ones as a part of moving toward a zero-carbon electricity sector. The market fails to provide support for nuclear power, so nuclear power subsidy programs should be supported by the same market failure logic used to justify current support for renewable energy. Subsidies for nuclear power (such as power contracts and tax credits) should be recovered as a cost of reducing carbon emissions from the electricity sector.
The current carbon pricing approaches are not likely to do much for the nuclear power industry. These approaches should be replaced by project-specific actions to keep existing nuclear power plants in operation and to get new nuclear power plants built. The cost of this nuclear power project support should be recovered as a cost of controlling carbon. We might even call this a carbon tax.
Editor’s Note
Edward Kee is the CEO of Nuclear Economics Consulting Group. Kee gave a presentation titled The Impact of Carbon Pricing at the IFNEC Financing Nuclear Power Plant session in Paris on 12 May. This article was first published on World Nuclear News and is republished here with permission.
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Does it means that no market-based solution will help nuclear plants to survive? That is sad.
Considèring all the future costs associated with nuclear power station dismantling and future treatment or secure storage for centuries, the business case is rather complex. Not to mention the sécurity risk and the potential risk on local population (Fukushima type) which will trigger untenable spending by any private company and ultimately Help by the government.
@Jan,
Yes.
Despite the major subsidies nuclear power already got during the past half century and still get. Subsidies which deliver a cost price decrease of >5cnt/KWh.
Calculating the widely expected further price decreases for wind, solar, storage (incl. P2G2P),
the Vogtle and Summer NPP’s under construction will be closed long before their normal end-of-live date (~2070).
I expect in ~2040.
As it seems Nuclear is simply too expensive to survive in the competition of CO2 free generation possiblilities. MAybe it is time to accept this, and to start thinking how new interconectors – inclunding intercontinental interconnectors could be supported to deal with the only real disadvantage of wind and solar, the intermittency.
It is too often forgottten that e.g. thre variability of solar power, when taking the whole planet into account is about zero.
“It is too often forgottten that e.g. thre variability of solar power, when taking the whole planet into account is about zero.”
That may be something well worth forgetting. In the absence of a globe-spanning electrical grid — which neither exists nor has any prospect of being created — it has no practical significance.
In reality, the intermittency and unreliability of solar power place stringent limits on its effective use. In practice, it requires either storage, which remains too costly in most instances, or supplementation by reliable, dispatchable power of the kind provided by fossil fuel, nuclear, or hydroelectric generation.
It is not global spanning yet, there are two mayor grids – one on the american continent, one Eurasia+Africa, which are intelinked, in Afrika not in in all parts, but projects ar under way which link all countries together, and several island grids like Australa od Japan.
NAturally this grid is not strong enough today to balanc all intermittencies, and the mayor grid blocks would need to be interconnected, but the costs of such a system would be far lower than a nuclear powered system.
And storage in a big grid are usually existing hydroelectric storages, which do not include pumping (which often can be added) but which can relase power at any time of year – or keep it. I do not know the numbers for the American grid, but in europe alone thsis exceeds 150.000GWh useable storage capacity, which is already enough to balance a europe- only grid when additional turbines are added at existing dams.
It is always so easy to say ” this is worth forgetting” whan someting does not fit to personal preferences, without going in the detailed numbers. Grids are cheap compared to the generation costs. Even if they strach over long distances. they scale very well.
You do realize that what you just proposed is MUCH MORE expensive & resource intensive than supporting nuclear as Kees suggests?
I am very aware that what Other peole propose needs much less resources than what Kees proposal requires.
It is always forgotten that a grid services the whole area where it comes along, and can be used in any direction. Local power generation just services locally. Which would mean some tenthousand nuclear power stations worldwide each costing some billions.
But doing the calculations seems to be a big problem for many.
As costs are today, a worlddwide grid would add much less than 15% to the LCOE costs of solar and wind, and balance out all relevant Ăntermittencies. And naturally existing hydropower storages and their ability to deliver power when it is welcome during the year would still be operated, reducing the need of the grid to deliver the last W at many places.
So if LCOE of wind and solar sinks significant below strike prices for nuclear, choosing big grids is simply cheaper.
Maybe for people from the US with are used to the weak US grid this is a unfamiliar thought.
A simple comment to all the above eX changes: as a matter of fact, the ‘only’ problem left with solar and wind energy are financing, grid and intermittency. Finance is getting in. Intermittence is as we speak becoming cheaper and cheaper by the day. Grid is also being de dĂ©velopĂ©d and interconnexion between countries is rising. In conclusion, everything is happening in thĂ© right direction. The gĂ©nĂ©ral consensus is clearly Ă©merging. We can no longer leave issues to be solved by our grand grand children since climat change is happening now and correct actions need to be implĂ©mented accordingly.
What you seem not to understand is that the bigger an electric grid gets, the greater become both the risk and costs of failure. And the both risk and cost increase not linearly but exponentially. See: http://j.mp/29sZB4Y.
Your estimate of relative costs is also off base: “Which would mean some ten thousand nuclear power stations worldwide each costing some billions.” China has proposed building a global power grid at a cost it estimates at $50 trillion.
That is almost certainly an under-estimate. For example:
“American Electric Power’s Hobart-Roosevelt Tap-Snyder renovation in Oklahoma, which is a rebuild of a 10-mile, 69-kV line from Hobart to Roosevelt and of an 18.7-mile, 69-kV line from Roosevelt to Snyder, was estimated by a third-party engineer at $14.3 million but now is expected to cost $36 million, a 152% estimate inaccuracy.” One key reason expanding electric grids (or pipelines, other networks) gets increasingly costly is the difficulty of securing right-of-way.
In contrast, nuclear plants have relatively modest land requirements. There may be social opposition to siting nuclear plants, but because power lines consume far more area, they conflict with many more local interests and thus face much greater social resistance overall.
The cost of a global power grid would likely be at least two or more times greater than $50 trillion. The latter would be enough to pay for 50k nuclear plants at a cost of $10 billion each. But China is now building nuclear plants for less than $4 billion and is on track to lowering costs to $2 billion.
Not only would a global power grid be exorbitantly costly and risky. The political requirements for its construction are virtually impossible to satisfy. An article in IEEE Spectrum (http://j.mp/29o0rhl) arguing in favor of a global grid includes this:
“For the countries of the world to organize and fund a global supergrid, a strong international consensus for renewable (and perhaps nuclear) energy will need to form. This could be accelerated if a worldwide agreement could be reached on taxing greenhouse-gas emissions so as to create a financial incentive for shifting to carbon–free energy. Government funding will likely be needed to support the first segments of the global supergrid, but once those are in place, a carbon tax would help catalyze private-sector funding.
“Beyond just the financing, governments and grid operators will need to agree on the rules for free trade in electricity. Electricity trading through a wholesale market, perhaps broken up into regions, would enable the kind of efficient power flows a global supergrid would offer.
“A major collaborative planning effort will also be needed to bring together the existing grids and the planned regional supergrids…. ”
Global regulation, globalized trade agreements, global financing, global planning — as the Brexit shows, these are exactly the kinds of elite regimes that nationalist movements in the UK and many other countries are rebelling against. Over two decades of COP negotiations have failed consistently to approach anything like the degree of global commitment required. The same goes for the stagnant Doha round of free trade negotiations.
Again, the global grid does not exist, has no prospect of being created, and has no practical significance.
Wel, the problem for the grid, if you read the article you reference is running the power lines at maximum capacity most of times.
If you would come here to study at universitys here you would learn about n-1 and n-2 criterias for power lines and whole crridors, and why larger grids can handle failures more easily if designed right. I don’t like to repeat whole lessons here.
(Well maybe considering such thing are the cause why german / european grid is much more stable than US grid as far as average power outages are concerned. I have no detailed view how US utilitys design their grids)
Abot costs, if you are in the business of planning, you know the standard costs of things in usual terrain. A exaple of a special local power line does not change anything to these costs.
Right of way for a long distance power line is less of a topic, becuase it cpuld be moved a hundret kilometes this or that way without disturbing the functionality of the grid,
With sea cables there is no real problem with right of way at all.
Costs for 2x 3,2 GW overhead line are about 2 Mio € per km all in in high labour costs countries, and lower where labor is cheaper.
The 50 trillion figure includes the new generation capacity also, not just the grid part, as far as I know the details of this number.
About planning and collaboration:
The interesting thing with grids is that there is no central planing nexccesary to get grids up and running.
There was never a global railrad planing office and still you can run trains from Lisabon to Saigon. There was no central planning comitee, for the internet, and still we can discuss here. There was also no international agreement how to build the worldwide telephone entwork and still it exists.
It’s the same with the power grid. While we discuss here it’s already forming, power line by power line, inerconnector by interconnector.
Iclink for example seems on the way, and in fact this is spanning the first third on the way from europe to canada. I would not wonder if someone in the next step would want to tap into the extremely good hydro and wind power ressources in greenland, if stronger grid connections come closer in Iceland and Newfoundland.
As soon as intermittency will create frice fluctuations big enough (ct/kWh area) there is a business model for interconnecors, and link by link the will be built and extended.
“Cooperation. Although international transportation mostly involves competition, common interests obviously favor agreements over different aspects involving access to infrastructures or setting standards. By 1792, most countries along the Rhine agreed to free navigation. Canada and the United States started from 1871 a long process of negotiation and common management of the St. Lawrence river that would eventually lead to the development of the St. Lawrence Seaway in 1954. International trade within Europe was enhanced by the adoption of a standard over rail gauges (1.435 meters). International air transportation is subject to regulations over security, access to specific gateways (air freedoms) and prices. Furthermore, the emergence of economic blocs such as the European Union and the North American Free Trade Agreement leans on common rules about transport standards and prices. The emergence of continental landbridges, such as the Eurasian Landbridge represents a new and complex form of collaboration.” https://people.hofstra.edu/geotrans/eng/ch5en/conc5en/ch5c1en.html
And to learn how it works: there was never a international treaty about 1435mm Railroad gauge. It was just inconvenient to have a different gauge everywhere – so it is mainy 1435, with some exceptions (wide gauge, Kap gauge, which have the tendency to vanish in “smaller” countries like e.g. Spain.
“For a century and a half since 1865, the International Telecommunication Union (ITU) has been at the centre of advances in communications – from telegraphy through to the modern world of satellites, mobile phones and the Internet.
The story of ITU is one of international cooperation, among governments, private companies and other stakeholders. The continuing mission is to achieve the best practical solutions for integrating new technologies as they develop, and to spread their benefits to all.”
http://www.itu.int/en/history/Pages/ITUsHistory.aspx
And again no central planning about the grid ever happened. It was just convenient to ghave the interfaces of equipment fit together, a topic already solved for electric grids, there are 50 Hz ad 60Hz, voltage levels do not matter with transformers available, and the different frequencies do not matter where DC-transport is used for the grid at the borders between different frequencies.
“Our results on real, realistic and synthetic networks indicate that increasing the system size causes breakdowns to become more abrupt; in fact, mapping the system to a solvable statistical-physics model indicates the occurrence of a first order transition in the large size limit. Such an enhancement for the systemic risk failures (black-outs) with increasing network size is an effect that should be considered in the current projects aiming to integrate national power-grids into “super-grids”.”
http://www.ncbi.nlm.nih.gov/pmc/articles/PMC3892437/
“Ukraine’s electric power grid is once again under cyberattack, just one month after a similar incident successfully brought down portions of the system and left millions in the dark.
“Worse, researchers studying the attacks say the malware believed responsible – a new version of the so-called BlackEnergy bug – has likely spread to numerous European power grids and is poised to infect many more.”
http://www.voanews.com/content/national-power-grids-increasingly-targeted-in-cyber-attacks/3171551.html
“According to a McAfee report earlier this year, power grids are a “prime target” for cyber-attack because they depend on a myriad of embedded systems, all communicating with each other via a pot pourri of wired, wireless, cellular and dial-up modems, that use a combination of TCP/IP and proprietary protocols. “This has expanded the attack surface, making it vulnerable to cyber threats,” the report says. “Open systems invite hacking.””
http://www.euractiv.com/section/energy/news/european-renewable-power-grid-rocked-by-cyber-attack/
@Lewis,
Two problems with your point of view:
1. You refer a grid study with primarily AC power lines. However intercontinental power lines will be DC lines…
2. The study doesn’t take into account the great flexibility / extreme fast responsive down (and partial up) switching of power generation that solar (<1 second) and wind (<1 minute) allow; a.o. German grid management does that.
It contributes to the much higher reliability of German grid compared to e.g. US grid.
Yes and softwareattecs can bring down grids independent of size. So it is a topic but outside the topic to be discussed here.
It is interesting that you do not post on toipic, but try to escape to other topics.
The break down of large units is especially a topic which usually can not be handeled, or just at high costs – keeping high amounts of fast reacting idle capacity in the grid – while big strong grids are handling this situationwithout significant problems.
This is why the European Grid and the GUS-Grid are interconnected with several strong interconnectors, although not running synchronus. (Synchronus operation is still a target, but simulation show a tendency of swinging in the grid, for which no easy compensation was found yet, so connection is done by back to cback DC-converters), so the whole electricity grid from Wladivostock to Lissabon reacts on a failing large Unit. If 3 GW fail somewhere in the grid, the european grid miust ramp up by 2GW (of usually 400-500GW demand most of day) , GUS Grid ramps up about 1GW, with usually about half of demand.
Loosing e.g. the planned HinkleyPoint C power station running at full throttle (3,6GW) in a isolated Grid in UK would practically not possible to handle, causing a countrywide blackout.
Loosing the same powerstation with enough interconnection to the european grid backed up by the GUS grid, and today further the chinese Grid, just needs the power stations to ramp up 0,5% of capacity. this is always possible.
Such cables need a long depreciation period to become viable. And the costs of Power-to-Storage-to-Power is decreasing fast (incl. seasonal storage via P2G2P).
So I’m not sure whether lines around the globe are viable in the future.
Have you studies / calculations that support your 15% figure?
For a start e.g what about a 4GW sea cable US-EU via Iceland and Greenland which have lots of renewable?
Yes, they are based on the standard costs used for planning of high volatge lines here in germany, scales according to the rules of electric and civil engineering to the coltages, currents and length neccesary for such a grid, calculated to the worst case, so a extremely uneven distribution of power generation. There are also other studys available on the net, but they are not so frequent, since usually calculation starts locally, and then takes bigger regions into account – with the result that things become cheaper when using larger regions and stronger grids.
Storages and grids substitute and support each other. Storages are cost efficient to comensate short time fluctuations to make grids more efficient, at the moment this is reasonable for fluctuations in the area of minutes in mid-voltage lines, when used with additional grid services storages can provide.
Grids have the advantage that they can transport power for a infinite time in one direction, which would make storages infinite expensive.
So the longer lasting the variability of generation is, the more economig grids are.
About power to Gas/Liquid: this is working in theory, but on the economic side it looses out to stong and large grids. Power generation in large Areas, so with TW generation capacity, and also Electrolysis-equipment in the TW area cost more than a grid which can move power from areas of oversupply to areas of undersupply, especially since the grid works from everywhere to everywhere, making better use of existing ressources. And losses of grids can be kept much lower than PtG or PtL.
As a simple “Thumb rule” storage becomes cheaper than grids for balancing wind power at a region of around 1€/kWh. For solar the limit is higher, due to higher numbers of cycles and longer distance to sunny areas in the missle of the night, but also here grids contribute by smoothening out suppy and demand in east – west direction. This is why russian grid does not have peak demand, and also practically no peaker plants – a strong east-west backbone emoves the need for this, stretching demand peaks due to the big east – west extension of the country by many hours.
A Start via Greenland could happen, and as with other grids the first target might not even be a transcontinental connection, but just to attach to a low cost ressource, as at the moment Icelink is heading towards construction. It is like always when grids of any kind grow:
With falling prices of sea cables due to rising demand fo sea cables (economy of scale) it now becomes reasonable to build a link from Iceland to europe, selling power, balancing grids. It most likely will become a economical success, attracting others with higher risk aversion but acceting lower return of investment, since it was already proven that it works. With a stronger connection to europe, power prices in Iceland rise, making it maybe then economical to build the link to greenland to sell to europe, which in a single big jump would have been a too big economic risk. Same from the other direction, where intersts rises to build stonger connections to Newfoundland. From there to Greenland is about as far as from scottland to Iceland. Grids usually grow incremental.