Kyrgyz Republic

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  • Date: 8/11/2011

Low nuclear contribution could send the price of electricity up by 60 per cent 

A mix of energy generation which has a low or no nuclear contribution could send the price of electricity generation in 2050 up from around £75/MW to as much as £120/MW, according to a report prepared by KPMG.

Post the Fukushima disaster in Japan the report highlights the economic impacts of electricity generation sources, which need to be considered together with the safety and technological aspects.

 

Directly comparing the costs of the various power generation options is a tendentious subject, and of course varies according to country specifics (particularly on carbon pricing), typically the relative differences are the same. Recent UK studies into the levelised cost of electricity (i.e. the total capital cost plus the total lifetime operating costs, including a waste and decommissioning fund, divided by the total power produced over the life of the asset, in present value terms) show that nuclear costs range from £55 to £100/ MWh, compared to £130 – £200/MWh for off-shore wind. (The range of values is due to cost efficiencies over time for each of the technologies).

 

Furthermore, the above costs do not tell the whole story. They only provide prices at the power station gates and do not account for additional network and distribution costs, nor the need for spinning reserve in the system.

 

KPMG and PB Power carried out an independent study of the impact of these on the UK’s electricity costs based on Department for Energy and Climate Change (DECC) scenarios for 2050:

 

• In the scenario in which the market is not directed to generate low carbon (i.e. electricity is generated by unabated gas or coal) the cost of electricity would be approximately £70/MWh. But this solution clearly does not address the low-carbon agenda.

 

• A “high nuclear” scenario (approximately 70%), supported by abated gas and coal (i.e. through the use of CCS) would increase this cost to £75/MWh.

 

• A third scenario, in which the percentage of nuclear power is reduced to 32%, replacing the difference with alternative low-carbon sources, of which 22% is off-shore wind, increases this price to £100/MWh.

 

• However, recognising that CCS may not be viable and replacing this component with alternative sources, principally off-shore wind (40%), increases the electricity cost further to £110/MWh.

 

• Finally, in a scenario where CCS is considered a viable alternative and is used to reduce the nuclear component to zero (off-shore wind remaining at 40%), the electricity cost rises to £120/MWh.

 

“Given that nuclear provides one of the cheapest sources of reliable, low-carbon, base-load generation, responsible governments must consider this as part of the future mix or put the relative economic prosperity of their countries at risk. And to achieve this, governments need to think through – dispassionately and critically – how they are going to facilitate the financing of new nuclear capacity through the structuring of regulatory systems and financial support,” says David Simpson, KPMG’s Head of Nuclear Advisory.

 

 

This paper discusses the recent events at the Fukushima Nuclear Power Plant, that have brought the safety record of nuclear power under intense public scrutiny. Nuclear power is already playing a substantial role in the decarbonization of the global economy and currently offers the sole cost-comparable, low-carbon alternative to fossil fuels. Despite the cancelation of some nuclear programmes in the wake of Fukushima (e.g. Germany) plans to develop nuclear capacity continue in many western and emerging economies, including the UK, the USA, China and the Middle East. Continuing the debate about the financing, technology, and management of nuclear power projects is therefore paramount if we wish to reduce CO2 emissions while simultaneously satisfying the burgeoning global demand for energy.