Finland is a small and environmentally-conscious country, with a population of little over 5 million. To the chagrin of the anti-nuclear forces, it already has four operating nuclear reactors, on two sites, one with Western BWRs and the other with smaller Russian PWRs. All have operated very well, with commendable safety records and high capacity factors, which have given excellent economic returns to the owners. So why are many other countries not building new nuclear plants?
Let’s apply the Finnish experience to the remainder of the European Union (EU). The population of the enhanced 25-state EU will be in excess of 400 million, which is 80 times the Finnish level. So, multiplying, the EU should already be running 320 reactors and have the potential for 400 (80 x 4 = 320 and 80 x 5 = 400). Current reality, however, and potential numbers are below half of this with just 155 reactors now operating in the EU-25. And even this is taking an optimistic view of a renewed reactor building programme in the EU before 2025, when some countries (Belgium, Germany and Sweden) seem politically set on phasing out nuclear power.
There are some unusual features about the Finnish experience. It is certainly rather cold in those northern latitudes and their industry is energy-intensive. On the other hand, they have good hydro resources and sit next to Russia, with its abundant oil and gas reserves. Coal can be imported easily on the international market. So there are plenty of alternatives for the Finns in power generation. They don’t have to choose nuclear but have done so. Are they irrational when the rest of the world is sensible?
The answer is a strong ‘no’. The decision to go for a fifth Finnish reactor is a decision that has been subjected to the utmost scrutiny, by investors, the government and the general public. It contains an acute lesson for the world nuclear industry. This is that the main key to new nuclear build is economics. It has been proved, beyond reasonable doubt, that a new nuclear reactor is the cheapest option for Finland. I would argue that if you could make a strong economic case for new reactors in other countries, the battle would be won. Yet the industry has allowed itself to be diverted into trying to solve other perceived problems. So, a strong economic case for new build is still lacking today. We just cannot, in general, make it stand up to reasoned argument.
The nuclear industry is fond of making excuses for its failures. In particular, we claim that everybody is against us. We have a list of issues which the general public attacks us for, which we then make (I would say rather poor) efforts to deal with. There’s plant safety and the fear of discharges to the environment; potential weapons proliferation; waste management issues, often said to be our biggest hang-up; and the decommissioning of plants, particularly the costs. Then nuclear material transport, the sustainability (or lack) of uranium resources and above all, the alleged regulatory burden.
I will accept that there is a link from some of these to the economic dimension. Particularly through regulation – some safety and discharge requirement levels cannot be justified on any reasonable risk-based cost benefit analysis. But this is just something the industry has to learn to live with. Other industries have their burdens too – in truth, with strong public scrutiny today, no industry gets an easy ride and we in the nuclear industry are too fond of hiding away thinking we are special, when we’re not. The truth is that we’ve been forced onto the back foot too easily by our opponents and wasted millions of man-days in attempting to quell the opposition. In reality, all we had to do was to work harder on establishing an irrefutable economic case. Then the opposition would melt away.
So what is the economic problem and how have the Finns overcome it? From the point of view of currently operating nuclear plants, there is little concern as the existing stock of reactors could almost run forever. Life extensions will be the norm.
If you could make a strong economic case for new reactors, the battle would be won
Well-run nuclear plants throughout the world operate at high capacity factors and are also the safest. They have very low marginal costs (including operations, maintenance and fuel elements) which should guarantee excellent financial returns in liberalised power markets. I say “should guarantee” but note the adverse experiences of British Energy. The marginal costs are also remarkably predictable and stable, which is a real bonus in this uncertain world. Note that I’m ignoring the energy security and environmental benefits of nuclear, as these don’t yet have a clear economic dimension. So if you can get a good nuclear plant up and running, you could make a small fortune. But the problem is getting the plant going in the first place.
The economic problem with new nuclear plants is simple. They have high construction costs but low operating costs, whereas for combined cycle gas turbines (CCGTs), which are the competitors in most markets, the opposite is true. The economic assessment involves balancing these two cost elements. The situation today is that nuclear’s capital costs are believed to be, in most cases, too high to meet the market requirements. These are very short term in nature in liberalised electricity markets. The construction cost handicap faced by a nuclear plant will, in most cases, destroy its chances. With relatively high commercial interest rates, the benefit of low fuel and operating costs in the future, compared with competing technologies, will be lost.
The extent of this handicap is, however, uncertain. It is generally believed that new CCGT plants can be brought on at $500-600 per kWe of installed capacity. As the recent MIT study on the future of nuclear power makes clear, recent nuclear plants have had build costs in excess of $2000 per kWe. The fifth Finnish reactor, a European Pressurised Reactor (EPR) with advanced evolutionary features, is also being quoted at similar levels – r3 million for 1600 MWe, which the plummeting US dollar takes to well over $2000 per kWe. TVA in the USA is refurbishing Browns Ferry 1, while OPG in Canada is trying to restart reactors at Pickering A, both at capital costs in the $1500 per kWe range. Yet the nuclear reactor vendors claim that they can reach the $1000-1300 per kWe level for new build, although with a fair wind behind them.
This is an important question and a newly-established World Nuclear Association (WNA) working group is examining the matter. Nevertheless, the key is not only capital costs. The Finns can go ahead at over $2000 per kWe, but how? The answer involves the structure of liberalised electricity markets – another big topic the WNA group is tackling. The recent UK experience is an extreme case, where the level of prices and the acute short-term perspective means that no rational company would invest in any new generating capacity, whatever the technology. That is unless there are government subsidies, as the renewables currently receive. Even efficient, low marginal cost generators, such as British Energy with its nuclear plants, have lost money at recent electricity prices.
The Finnish situation is different as the plant investors will also be the main power customers and so can take a long-term view. The biggest challenge, other than minimising capital costs, is to find a way of allowing large capital investments to take place in liberalised power markets. Customers only want to pay the marginal cost for their electricity and not to finance new plants, either incremental or replacement capacity. It’s rather like the situation with airline tickets, where competition has driven prices down towards marginal operating costs, without making investment in new aircraft at all attractive.
Regarding lowering capital costs, there remains much to be done. Few countries could justify new build at the Finnish cost level. Pushing the aircraft industry example further, perhaps the industry needs to rationalise around a smaller number of vendors, each with a few standard designs, like Boeing and Airbus Industrie. These could be certified as safe in the USA, for example, then licensed quickly elsewhere. This would require a clean break with existing regulatory practice, but perhaps the industry needs to take the lead in pushing for this. We often say that nuclear is a mature industry, but perhaps it isn’t. There may be a lot of life in the old dog yet.
Steve Kidd is Head of Strategy & Research at the World Nuclear Association, where he has worked since 1995 (when it was the Uranium Institute). Any views expressed are not necessarily those of the World Nuclear Association and/or its members.