There are costs associated with enterprises that may or may not be brought into the calculation of benefit versus cost.
So what about nuclear energy? Is it profitable if the costs of decommissioning are brought into the equation?
Regarding the most modern proven design of nuclear power plants, what is the cost of construction, including sourcing the fissionable materials, the cost of running the plant during its useful life, the cost of decommissioning and storing radioactive materials, and the estimated income from the total energy produced over the lifetime of the plant?
The cost and economics of modern nuclear power plants are highly complex, influenced by factors such as location, reactor type, regulations, and financing. I’ll break down each of the main cost components and income estimates for a typical modern nuclear power plant, such as an advanced pressurized water reactor (PWR) or a Generation III+ reactor like the European Pressurized Reactor (EPR).
- Cost of Construction (Capital Expenditure CapEx):
Total cost: Modern nuclear power plant construction typically ranges from $6 billion to $12 billion per gigawatt (GW) of electric capacity. Larger plants may cost more.
Factors influencing cost: These include site preparation, safety measures, design complexity, labor, and supply chain constraints. The licensing and regulatory approval process also adds to the cost.
Timeline: Construction usually takes 5 to 10 years.
Fissionable material sourcing: Initial fuel load costs approximately $50 million to $100 million for enriched uranium, depending on the size of the plant and market prices. - Operating Costs (Ongoing Expenditure OpEx):
Fuel costs: Nuclear fuel is relatively inexpensive once procured. Refueling occurs approximately every 18-24 months, and costs around $40 million to $60 million per refueling cycle.
Operations and maintenance (O&M): Annual operating and maintenance costs are generally around $100 million to $150 million per GW.
Lifetime: Modern nuclear power plants are typically designed for an operating life of around 40 to 60 years. Many plants undergo refurbishments to extend this lifespan. - Decommissioning and Waste Storage Costs:
Decommissioning cost: Decommissioning costs range from $500 million to $1.2 billion depending on the size of the plant and local regulations. The process typically takes 10 to 20 years.
Radioactive waste storage: Storage of spent fuel can vary. Dry cask storage on-site is a common method and costs around $1-2 million per year, depending on the volume. Long-term geological disposal (still in development in many countries) will significantly increase these costs.
Waste disposal funds: Operators usually pay into waste disposal funds during the plant’s operational life. - Revenue from Energy Production:
Electricity output: A typical 1 GW nuclear power plant produces around 7-9 terawatt-hours (TWh) per year.
Lifetime energy output: Over a 60-year lifetime, the plant could produce 420-540 TWh.
Electricity price: The price of electricity varies by region. A reasonable estimate for wholesale prices is around $40-$70 per megawatt-hour (MWh). This equates to a revenue of:
$16.8 billion to $37.8 billion over the plant’s lifetime, assuming $40/MWh.
$25.2 billion to $37.8 billion, assuming $60/MWh. - Summary of Costs and Revenue:
| Component | Estimated Cost (Per GW) |
|---|---|
| Construction (CapEx) | $6 billion to $12 billion |
| Fuel Costs (over 60 years) | $2.5 billion to $3.5 billion |
| Operations & Maintenance | $6 billion to $9 billion |
| Decommissioning | $500 million to $1.2 billion |
| Waste Storage | $1-2 million per year |
| Total Estimated Costs | $15 billion to $25 billion (over 60 years) |
Revenue (over 60 years) $16.8 billion to $37.8 billion
- Profitability:
At the lower end, nuclear power may be a break-even or slightly profitable investment, with major costs being upfront.
At the higher end, nuclear plants can yield substantial profits over their lifetime, especially if electricity prices remain favorable. Additional Considerations:
Financing costs: Interest and other financial costs can add significantly to the total cost, especially if construction delays occur.
Government support: In many cases, governments subsidize or provide loan guarantees, improving profitability.
Carbon pricing and incentives: Nuclear energy’s low carbon emissions may benefit from carbon pricing schemes or incentives for clean energy production.
While nuclear power plants require substantial initial investment and have long payback periods, they can provide reliable and consistent energy for many decades, offering long-term financial benefits and contributing to energy security and climate goals.
And If An Accident Occurs?
Acceptable risk?
What happens to this profit versus cost breakdown if there is an accident such as at Fukushima Daiichi?
An accident similar to the Fukushima Daiichi disaster drastically changes the financial outlook for a nuclear power plant. The consequences of such an event introduce enormous additional costs, which can far exceed the plant’s original construction, operating, and decommissioning costs. Let’s look at how an accident impacts each cost and revenue category.
- Accident-Related Costs: Emergency Response and Cleanup:
Immediate costs: Following an accident, immediate actions such as evacuation, emergency cooling, and containment are required. This can cost hundreds of millions to billions of dollars depending on the severity.
Fukushima example: In Fukushima, the initial emergency response, including cooling the reactors and dealing with hydrogen explosions, was incredibly costly. Early estimates for cleanup were around $10 billion, but costs have risen substantially over time. Long-Term Cleanup and Decommissioning:
Decommissioning: After a catastrophic accident, decommissioning the damaged reactor can be extremely expensive and take decades.
Fukushima: The estimated cost to decommission the plant over a 30-40 year period is projected to be around $75 billion to $100 billion.
This is significantly higher than the usual $500 million to $1.2 billion for a regular decommissioning without an accident. Radiation Containment and Waste Management:
Contaminated water and soil: Contaminated water, soil, and other materials must be stored and treated over many years. Fukushima has generated over 1 million tons of radioactive water, requiring costly storage solutions.
Waste storage costs: Handling and storing radioactive waste in such cases can add billions in additional expenses over time, especially if long-term storage facilities must be built or new containment measures developed. Environmental Remediation:
Extensive efforts are required to clean up the environment, including decontaminating land, forests, and water sources. The cost of such remediation efforts can be tens of billions of dollars, as seen in Fukushima. Compensation to Affected Populations:
Compensation payouts: Governments and plant operators are typically required to compensate people affected by radiation exposure, loss of property, health issues, and disruption of livelihoods.
Fukushima: TEPCO, the plant’s operator, has paid out tens of billions of dollars in compensation to evacuees, businesses, and municipalities.
As of 2020, total compensation was estimated at around $90 billion. - Impact on Operating Revenue:
Shutdown of the plant: A plant experiencing a catastrophic accident will likely be permanently shut down, immediately halting any revenue generation from electricity production.
The Fukushima Daiichi plant ceased operation following the accident, and the planned energy generation from it over its lifetime was completely lost.
Impact on nearby plants: In the case of Fukushima, not only were the damaged reactors shut down, but the entire Fukushima Daini plant nearby was also eventually decommissioned. Other nuclear plants in Japan were also temporarily closed for safety assessments, drastically reducing the country’s nuclear-generated electricity supply.
Loss of future income: For a modern nuclear plant producing 7-9 TWh per year, the lost revenue could total $1.5 billion to $2.7 billion per decade, depending on electricity prices.
- Insurance and Liability:
Limited insurance: While nuclear plants are required to carry insurance, the coverage typically only extends to a certain amount. In the U.S., for example, nuclear operators participate in the Price-Anderson Act, which pools insurance funds, but this may not cover the full costs of a major disaster.
Fukushima: In Japan, TEPCO faced costs far beyond its insured coverage, resulting in government intervention and nationalization to cover additional costs. Governments often step in to cover expenses beyond what operators can afford.
Government intervention: In cases like Fukushima, governments may bear a large share of the financial burden, which ultimately falls on taxpayers. This can reduce the financial hit to the operator but significantly impacts public finances.
- Legal and Regulatory Consequences:
Lawsuits: Legal battles related to health claims, environmental damage, and property losses can stretch for years or decades. The legal costs alone can be substantial.
Stricter regulations: A major accident can lead to heightened safety regulations globally, increasing the costs of both current operations and future nuclear plant construction. This can affect profitability across the entire nuclear industry.
Delayed or canceled projects: Following Fukushima, many countries delayed or canceled plans for new nuclear reactors, hurting future revenue potential for nuclear energy companies.
- Reputational and Market Impact:
Loss of public trust: A nuclear accident can cause a major decline in public support for nuclear energy, making it politically difficult to continue operating other plants or build new ones.
Stock market impact: In the case of Fukushima, TEPCO’s stock value plummeted following the disaster, wiping out billions in shareholder value.
Shutdown of nuclear programs: In some cases, accidents like Fukushima prompt entire countries to reconsider their nuclear strategies. For example, Germany accelerated its nuclear phase-out after Fukushima, foregoing future revenue from nuclear power.
- Overall Financial Impact:
Total cost of Fukushima: Estimates for the total cost of the Fukushima Daiichi disaster are $188 billion to over $300 billion, depending on how long cleanup takes and the future costs of compensating affected individuals.
Cost comparison: Before the accident, the projected cost of the Fukushima Daiichi plant was in line with a typical nuclear power project—around $6 billion for construction. The accident inflated that cost by a factor of 30 to 50 times, illustrating how severe the financial consequences can be.
- Impact on Profitability:
Complete financial loss: In cases like Fukushima, the nuclear power plant operator suffers a total loss of any projected profit. All prior investments in construction and operations are essentially written off, and the costs of handling the aftermath significantly exceed any potential revenue the plant would have generated over its lifetime.
Negative return on investment: After accounting for the accident costs, including compensation, cleanup, and lost revenue, the plant may generate negative returns of tens of billions or more. Fukushima’s costs dwarfed any profit it might have earned during its operational life.
Conclusion:
An accident on the scale of Fukushima Daiichi devastates the financial balance of a nuclear power plant. Instead of earning revenue and profit, the plant operator, local economy, and often national government are left with hundreds of billions of dollars in cleanup, decommissioning, compensation, and long-term storage costs. It turns what might have been a profitable venture into one of the most financially destructive events in modern history, highlighting the enormous risks inherent in nuclear energy production.
Relevance
According to a study by Goldman Sachs, one query on AI search queries need almost ten times as much electricity as a Google search query. And because the tech giants are keen on AI, a consortium of Amazon, Google, and Microsoft are working to design and build small to medium modular nuclear reactors to feed their energy demands.
Amazon is quoted as saying that an advantage of SMR reactors is that they can be built closer to the grid, so reducing energy drain of between two and five percent of the power generated as power travels along the power lines.