Poland, Slovakia, the Czech Republic and Hungary are all planning to build new nuclear power plants. But according to a new study by Energy Brainpool, commissioned by Greenpeace Energy, they could also opt for controllable renewable power plants. These are cost-competitive with nuclear, at least as reliable, and also allow for energy independence, write Philipp Heidinger, Fabian Huneke and Simon Göß from Energy Brainpool.

As a result of the decommissioning of coal-fired and nuclear power plants resulting from either political reasons or end of lifetime considerations, European power markets are in need for capacity replacement. Especially during the next decade, the need for controllable yet flexible, power generation will grow.

The Visegrád countries of Eastern Europe have ambitious plans for the construction of new nuclear power plants in order to replace older generators. In Hungary, two reactors with a total net capacity of 2.4 GW are to be installed at the Paks site by 2026. The Czech Republic is also planning the construction of two new reactors, also 1,200 MW each, at the existing Temelin and Dukovany sites. Slovakia wants to replace its Bohunice reactor (1,200 MW) in the mid-2020s and is already building two small new reactors, Mochovce 3 and 4 (total 900 MW), which are supposed to come online this year and the next.

In order to meet the demand for electricity at all times, a cRE power plant system not only consists of wind and solar plants, but also of electrolysers and methanisation facilities connected to gas power plants

Slovakia is also planning a new plant at Kecerovce (1,200 MW). Poland has plans for a 3 GW nuclear power plant to go online by 2029 and another 3 GW by the mid-2030s, though no location has been selected yet. In total the four countries aim to install 15.6 GW of nuclear power plant capacity in the coming decades.

Figure 1 depicts existing and planned nuclear power plants in the four countries, where the circular area indicates net capacity of planned reactors.

Figure 1: Status of nuclear power plant projects in the Visegrád countries [1]

The alternative: controllable renewable energy power plants

Could the capacity needs also be met through renewable energy at comparable costs? In our study, we designed a cost-optimized system of controllable renewable energy (cRE) power plants that have at least the same security of supply and energy independence levels as the proposed nuclear power stations.

As intermittent renewables can only meet the demand for power at times when there is enough solar radiation or wind speeds, they alone cannot reliably cover immediate electricity needs. In order to meet the demand for electricity at all times, a cRE power plant system not only consists of wind and solar plants, but also of electrolysers and methanisation facilities connected to gas power plants. Figure 2 depicts the concept of such a cRE power plant in comparison to a nuclear power plant.

Figure 2: The concept of the cRE power plant compared to a nuclear power plant

How do the two solutions compare in cost?

Our cost analysis shows a range between 87 and 126 EUR/MWh (all costs are based on 2016 values) for current European nuclear power projects. The actual levelised cost of electricity of the nuclear power plant Flamanville III in France is evaluated at 126 EUR/MWh and the state subsidy for Hinkley Point C in the UK stands at 119 EUR/MWh. Note that these costs are considerably higher than usually given in the literature or in project plans, where figures vary between 55 and 80 EUR/MWh.

Total cost includes capital costs (CAPEX) and the significantly lower operating and maintenance costs. The range of capital costs shown in Figure 3 is largely driven by the planned/actual CAPEX and the financing structure. This includes expected returns and risk premiums for construction. With values between 38 and 100 EUR/MWh, these represent a wide range of fixed costs for the initial investment.

Once built, the nuclear power plant is one of the cheapest generating technologies. However, capital costs from the initial investment can result in high total and levelised cost of electricity generation.

This is due to the range of weighted average cost of capital (WACC)[2] between 7 and 10 per cent on the one hand and the high divergence of investment costs in the literature and current planned and actual values of European nuclear power projects on the other hand. While the inflation-adjusted maximum value of CAPEX from the literature examined leads to a maximum cost of 54 EUR/MWh, the current actual CAPEX value from the French new construction project Flamanville III with a WACC of 10 per cent results in a base for capital costs of 100 EUR/MWh already. In addition, the operation and maintenance costs range from 17 to 25 EUR/MWh.

In other words: once built, the nuclear power plant is one of the cheapest generating technologies. However, capital costs from the initial investment can result in high total and levelised cost of electricity generation. Costs incurred during dismantling or risk premiums during operation are often borne by states and thus considered external costs. They are not taken into account in the numbers below.

Figure 3: The range of cost components for nuclear power plants in current European projects, derived from the relevant literature based on 6,500 hours of full load hours and a lifetime of 50 years

How does a controllable renewable energies power plant work?

A cRE power plant uses surpluses from the generation of variable renewable energy sources (vRES) in the electrolysis process. Subsequent enrichment of the separated hydrogen with carbon dioxide yields synthetic gas. This can be fed into the existing gas grid or stored in gas storage facilities, or it can be used to generate electricity with various gas-fired power plant technologies.

Figure 4 shows the hourly residual load (renewable generation subtracted from electricity demand) over the period of one year. The different components of a cRE power plant can be dimensioned based on a country’s potential in wind and solar resources. In the exemplary case in Figure 4, the cRE is expected to provide a constant generation of 1 GW due to the possibility of shifting electricity generated in negative residual load situations via electrolysis to situations where a positive residual load occurs.

Figure 4: The hourly residual load of base load power demand when supplied by intermittent renewable energies and visualisation of options for dimensioning cRE power plant components

So what are the total costs of the cRE power plant?

Even with the expensive financing conditions for renewable energies that currently prevail and without a joint optimisation of the Visegrád countries among themselves, the costs are comparable to those of nuclear power plants as Table 1 shows.

In Poland levelised cost of electricity of cRE power plants are around 112 EUR/MWh, in the Czech Republic 119 EUR/MWh and in Hungary 129 EUR/MWh. In Slovakia, the potential is still unclear. Since there is still little experience with wind power, initial analyses show high costs of 167 EUR/MWh due to poor wind conditions.

The average levelised costs of electricity for such a power plant system converting excess electricity into electrolysis gas are significantly lower when the electrolysis gas is distributed across all Visegrád countries. The distribution can be enabled on the basis of joint market and balancing group agreements, i.e. via the existing European gas grid. In this case the costs are assumed to be 120 EUR/MWh in 2027 and 100 EUR/MWh in 2035 on the assumption of uniformly declining financing conditions in the four countries.

Table 1: Cost-optimised dimensioning of the cRE power plants in the Visegrád countries for two selected years. Costs in 2016 EUR value. [Source: own calculation in April 2018]
*) Due to very limited experience with wind power in Slovakia, actual wind potential has not been sufficiently studied and a very low level of potential has been assumed in these calculations.

Which factors determine the total costs of a cRE power plant?

In order for a cRE power plant to be economically optimized, the individual components must be dimensioned to optimize overall costs. The national wind and solar potential, but also the investment conditions and technical parameters influence this dimensioning. The total costs in EUR/MWh of the cRE power plant, therefore, consist of two parts, which is also depicted in Table 1.

Firstly, the minimum electricity generation costs in EUR/MWh of the vRES are calculated by varying the ratio of installed PV and wind power. This takes into account the national hourly wind and solar potential as well as the respective technology costs. The modelling shows that an optimal share of 70 to 80 per cent for wind onshore minimises overall costs. This is not due to particularly low wind power generation costs, because those of PV are about the same or even lower. Rather, the modelled ratio of wind and PV leads to cost-optimized direct electricity consumption without the need for efficiency-reducing intermediate storage in electrolysis gas.

While value creation in case of nuclear power plants could include domestic processing and thus a highly qualified and skilled workforce over decades, in the case of cRE power plants other new opportunities arise

The levelised cost of electricity of the vRES ranges between 73 and 90 EUR/MWh. For comparison: according to the current tender results, new wind and PV electricity in Germany is only remunerated with 40 to 50 EUR/MWh. Electricity from these renewables could thus already be significantly cheaper. The higher values in the V4-states can be explained by the prevailing poor financing conditions and thus high capital costs there.

Secondly, the additional costs for controllability in EUR/MWh are calculated by varying the optimum capacity of electrolysers in MW and by determining a cost-optimal composition of the gas-fired power plant capacity. These additional costs are strongly dependent on the cost degression of electrolysers and the efficiency rate assumed at 70 per cent including methanisation. In the analysis, the specific costs for electrolysis including methanisation in EUR/MW per year are expected to decline by 55 per cent from 2027 to 2035.

What are concrete steps to implement the cRE power plant politically?

Successful implementation of the cRE power plant concept can be achieved by adapting the regulatory framework for the expansion of vRES and by continuous investment in electrolysis technology. The latter must be transferred to industrial series production to reach the assumed cost degression along with further technological development.

Up to now, the expansion of vRES in South-East Europe is not economical for project planners due to high capital costs (WACC). In a paper, Agora Energiewende proposes a concept based on contractual agreements between the EU Commission, member states and project planners in order to create planning security for investments in vRES. In addition, the European Commission has announced that it will step up support for storage research, which includes the production of synthetic gas by electrolysers.

Furthermore, the existing grid connections and the available area of nuclear power plant sites can be used for the expansion of vRES, the gas grids should be maintained and, if necessary, modernised. An example of the continued use of existing grid connections is France, where a tender of 300 MW for PV will be launched at the Fessenheim nuclear power plant site by the end of 2018.

Clearly, the V4 states will experience a structural transformation of its economies in a scenario including substantial amounts of vRES and cRE power plants. While value creation in case of nuclear power plants could include domestic processing and thus a highly qualified and skilled workforce over decades, in the case of cRE power plants other new opportunities arise. These include the generation and storage of synthetic gas, the manufacturing of key components of the cRE power plants, along with a beneficial economic development of rural areas due to the decentralised character of the plants.

Notes

[1] The reactor blocks at Mochovce, already advanced in construction, are categorized as operational.

[2] Weighted average cost of capital WACC (real) depict weighted interest rates, which are calculated from interest rates for debt, interest rates for equity depending on the expected return and the inflation rate. With their help, long-term investments with future cash flows are converted to annual values and thus become comparable.

Editor’s Note

Philipp Heidinger (philipp.heidinger@energybrainpool.com), Fabian Huneke (fabian.huneke@energybrainpool.com) and Simon Göß (simon.goess@energybrainpool.com) are experts at Energy Brainpool, a Berlin-based consultancy offering independent energy market expertise with a focus on market design, price development and trade in Germany and Europe.

In 2003, Tobias Federico founded the company with one of the first spot price forecasts on the market. Today, the offer includes fundamental modeling of the electricity prices with the software Power2Sim as well as diverse analyses, forecasts and scientific studies. Energy Brainpool advises on strategic and operational issues and offers expert training since 2008.

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