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Nuclear Energy

The Economics of Nuclear Power

Pro   Con

Nuclear power plants have saved consumers billions of dollars. The capital component of nuclear power plants generally is offset by savings in fuel costs, under positive economic conditions.1

Throughout the world, nuclear power has substantially helped reduce dependence on imported oil.2


The cost for nuclear electricity generated by light-water reactors is very wide, and even ignoring the uncertain but probably high costs of dismantling reactors and waste disposal, the economic viability of nuclear energy seems doubtful.3

Nuclear electricity makes no material contribution to solving the problem of oil dependency.4

AMA Commentary

At its inception, nuclear power was thought to have one indisputable advantage over other forms of energy: low cost. Today, however, even supporters of nuclear power are beginning to question its economic practicality.5 Between the mid-1970's and early 1980's, the economic competitiveness of nuclear power in the United States changed dramatically for the worse.6

Capital Costs

Capital cost trends for all energy sources are highly dependent on political decisions related to subsidies, safety, environmental issues,7 and overall energy demands.8 Because of these and many other variables, it is a difficult, debatable, and dubious task to predict the economic future of any energy technology.

In the United States, the capital costs of constructing new nuclear power plants have skyrocketed since the early 1970's. In 1971, a kilowatt hour of nuclear-generated electricity could be put into operation for $388 (as-spent dollars). In 1985, the same kilowatt hour cost $2,693 (as-spent dollars).9 With inflation factored out, the real increase is approximately sixfold.10 The average time for completion of a plant in the U.S. rose from 6.8 years in 1971 to 14.4 years in 1985.11

In 1971, financing and direct construction costs of coal and nuclear power plants coming on line were almost the same; both types of plants with equal generating capacity cost about $500 million. For a nuclear plant coming on line in 1985, the estimated costs had gone up to about $2.5 billion (1982 dollars), while estimates for coal plants completed in 1985 put their cost at a little over $1 billion (1982 dollars).12 Almost every nuclear plant in the U.S. scheduled to come on line between 1986 and 1989 has expected costs of between $3 billion and $5 billion.13

A critical issue for the future of nuclear power in the United States is whether this trend will continue, making other electricity-generating options more competitive. On average, since 1983, the annual generation cost of nuclear power has been higher than the power generated by coal plants. Because additional high cost nuclear units will soon be completed and brought into the rate base, this trend is likely to persist for several more years.14 (Click here for a discussion of energy source cost comparisons.)

Plant Capacity

While capital costs play a large role in determining the economic viability of nuclear power, so too does the number of hours a nuclear power plant operates.15

No type of power plant is expected to operate at 100 percent of its capacity, due to maintenance schedules, unscheduled repairs, and refueling in the case of nuclear plants. However, because of nuclear plants' high capital costs and their "base-load" status (meaning the utility plans to produce as much electricity with the plant as possible), their economic success requires that they operate at a relatively high capacity.16

Initially, nuclear power plant planners estimated that capacity factors as high as 80 percent would be reasonable to expect. More conservative analysts tended to view a 70 percent capacity factor as a realistic goal. Operating experience has not fulfilled these projections.17

Low capacity factors for nuclear power plants that went into operation before 1980 have contributed to the worsening overall economic performance of nuclear plants (relative to coal-fired plants).18 As an incentive for utilities to improve nuclear power plant capacity factors, public utility commissions in several states have conditioned capital cost recovery for recently commissioned high-cost units on the achievement of high capacity factors.19

In 1986, the average capacity factor for all U.S. reactors was 56.9 percent.20

Operation and Maintenance Costs

Although operation and maintenance (O&M) costs vary with region, regulatory requirements, and facility size and type,21 O&M expenses for nuclear plants have increased considerably since 1980. Reasons for this trend include backfit expenditures required by regulatory changes and an increase in the average number of plant workers.22

Fuel Costs

Opponents and proponents of nuclear power generally agree that nuclear power plants have a decisive advantage over coal-fired plants in the area of fuel costs, and this advantage should continue as long as uranium supplies remain abundant.23

In anticipation of the eventual depletion of worldwide uranium reserves sometime between 2000 and 2020, various countries are currently using or developing breeder reactor technology designed to extend the lifetime of uranium fuel. Breeder reactors have already shown scientific, technical, and practical operating feasibility.24

Nuclear Power and the Utility Industry

The U.S. utility industry entered the 1980's in a financially stressed condition. Because the industry borrows heavily, high interest rates were partially to blame. However, massive and escalating capital outlays for the construction of nuclear facilities played a major role in the overall deterioration of utilities' financial condition.25

Several nuclear utilities have come to the brink of filing for bankruptcy, and in the first financial default by a major investor-owned electrical utility since the Depression, the Public Service Company of New Hampshire announced in October 1987 that costs incurred by the Seabrook nuclear plant project had forced it to default on its bond payments.26

Estimates indicate that utilities will have to raise their rates by as much as 120 percent to recover the costs associated with the construction, and in many cases subsequent cancellation, of nuclear power plants.27

1 Atomic Industrial Forum, Inc., "Plant Cancellations and the Economics of Nuclear Power," Fact Sheet, December 1986.
2 Ibid.
3 Jan Willem Storm van Leeuwen, "Nuclear Uncertainties: Energy Loans for Fission Power," Energy Policy, June 1985, p. 266.
4 Vince Taylor, "Living Without Nuclear Energy," in Nuclear Power: Both Sides, Michio Kaku and Jennifer Trainer, eds. (New York: W.W. Norton and Co., 1982), p. 156.
5 Peirce, op. cit., 1986, p. 210.
6 U.S. Department of Energy, Energy Security: A Report to the President of the United States, op., cit. p. 190.
7 Scott Fenn, The Nuclear Power Debate, (New York: Prager Publishers, 1981), pp. 24-32.
8 Peirce, op. cit., pp. 202-206.
9 U.S. Department of Energy, Energy Security: A Report to the President of the United States, op. cit., p. 189.
10 Charles Komanoff, "The (Mal)practice of Nuclear Power Economics," New England Journal of Public Policy, 1985, p. 48.
11 U.S Department of Energy, Energy Security: A Report to the President of the United States, op. cit, p. 189.
12 Christopher Flavin, Nuclear Power: The Market Test (Washington, D.C.: Worldwatch Institute, December 1983), No. 57, p. 15.
13 James Cook, "Nuclear Follies," Forbes, February 11, 1985, pp. 85-87.
14 Chaim Braun, "Factors Affecting Economic Performance of Nuclear Power Projects in the U.S. and Abroad," Electric Power Research Institute, Palo Alto, CA. 1987, p. 3.
15 Peirce, op. cit., p. 219.
16 Ibid.
17 National Academy of Sciences, Committee on Nuclear and Alternative Energy Systems, Energy in Transition 1985-2010, Final Report National Research Council (Washington, D.C.: W.H. Freeman and Co., 1979), p. 266.
18 Braun, op. cit., p. 14.
19 Ibid., p. 6.
20 U.S. Department of Energy, Monthly Energy Review, December 1986, p. 91
21 Nuclear Energy Agency, "Projected Costs of Generating Electricity from Nuclear and Coal-Fired Stations for Commissioning in 1995," (Paris: Nuclear Energy Agency/Organization for Economic Cooperation and Development, 1986), p. 27.
22 Braun, op. cit., pp. 3-4.
23 Fenn, op. cit., p. 34.
24 F.L. Culler and E.L. Zebroski, "Electricity Supply Outlook and R&D Options for the U.S.," Guidelines for DOE Long-Term Civilian R&D, Vol. VI, Research Advisory Board, December 1985, DOE/S-0044, p. 11.
25 Peirce, op. cit., pp. 206-207.
26 Michael Hilzik, "Seabrook Costs Force N.H. Utility to Default on Bonds," Los Angeles Times, October 14, 1987, 1:1.
27 Cook, op. cit.