Economics of Nuclear Reactor

you throughout this entire course we have often talked about economics because in the end that's what actually makes things work there may be small aberrations when people go counter to their pocketbook but generally if something is cheaper people buy it so if you are a utility company and you're deciding what type of electrical generation should we do economics will certainly be one of your major considerations so how expensive is nuclear power that's a difficult question to answer because you have such a very different types of costs compared to its competitor and competitor these days is natural gas so let me compare a nuclear plant to a natural gas but now the first thing we're gonna look at is the capital cost how much does it cost to actually build a nuclear reactor these numbers go up and up many times it's the first reactor that's built of a given type that new advanced generation three reactors the first ones are more than the newer ones so the number all right here which is five billion dollars some people will say is too small some people say yeah we may be the second third one we can do that for that price we'll see that's certainly close to that and a natural gas power plant of the same size and by the way I'm talking about one thousand megawatt electric or at least approximately this is the size of the nuclear reactors we have today someone comes up with cheaper modular ones fantastic but this is generally your large size power plant a natural gas power plant of that same size much less capital cost maybe 1 million they're not free all right that's the still the number with nine zeros right a billion dollars we need boilers and a lot of them you still need your generator all that other type of stuff you see if you just thought of capital cost ah that's great clearly natural gas is cheaper making the same amount electricity but you've got to consider fuel uranium is not all that expensive yeah sure it's a lot more expensive pound per pound than natural gas or or many metals it's cheaper than silver it's cheaper than gold and you have to enrich it up to that three percent but even so because of the intense energy content in a nuclear fuel you don't need very much 1 ton of u-235 last year for three years so our fuel cost approximately is gonna be around sixty four million dollars a year whereas the natural gas plant I looked up the most recent numbers and the wholesale price of natural gas goes up and down mm-hmm but this number is closer to four hundred and fifty million dollars per year don't half the cost of the power plant where this is something like one-hundredth of the cost of the power plant so the fuel costs so this is why I'm asking a simple question is so difficult capital cost is so huge but your fuel cost is so low how do we figure out what the cost is well we need one other piece of information we need the time to construct you see utilities least in the United States are not allowed to charge for their electricity until the plants actually operating you can't say oh I want to add to all your rates because we're building a new power plant that's not allowed so you're gonna have to carry the interest rates the cost the the six billion dollars that you had a borrow your and that's carry all that until you're actually producing electricity so the time to construct for a natural gas power plant of this magnitude it's pretty short two years the time to construct a nuclear power plant well that's again a guess like this capital cost we're not making all that many of them the French had a very good system in place I made the same plant with small improvements time after time by the same workers they could get it down even to the order of four years so let's say six years for our example Chinese seem to be on that track to be able to do things at about that time and at about this cost of the new ap1000 advanced generation three passively safe reactors still to get an overall thing we need to know what is the interest rate because nobody just has a billion dollars or six billion in their pocket and says oh here's the money give me a power plant in fact even if they had that much cash they should compare it to what kind of interest they could get putting it in bonds a bank something safe compared to actually spending it so one way or another you're gonna borrow the money and you need to know at the interest rate that you can do so today these interest rates are very low and in some large utility type project let's guess that this would be three percent and what you have to look at each year is how much money do you have to pay what's your mortgage and also over what length of time let's use the example a 25 year mortgage at 3% interest each year you pay some back its interest plus principal and at the end of 25 years you've paid back your entire loan so what is the interest payment you would make in these cases I call up a bank said hey yeah like tomorrow 5 billion dollars that where they were done laughing I actually asked them to run their calculator and my interest payment each year here would be two hundred and eighty five million dollars a year and of course for one fifth of that it's only fifty seven million a year now with this set of numbers which might be correct for now or next year we can do an interesting economic calculation you see each year you're gonna have to pay your interest rate you're gonna have to pay your fuel cost and for the first six years you're not gonna make any money this 1,000 megawatts of electricity at going rates right now this is going to give you an income of five hundred and twenty five million dollars per year running a power plant people buying your electricity this big of a plant that's good that's good and clearly that number is bigger than these added together maybe not that much but you know this is at the cheapest of electric rates and maybe you sell wholesale and you sell having better deals and you can make more or maybe your fuel cost will actually go down these are all things that will turn and make this calculation difficult but let's just use this for an example now let's simplify this let's have a unit whatever that's gonna be be about Oh sixty million all right so I'm gonna say this is about one unit and this is about seven this interest rate this is about one unit and this of course is five times as much so this is five units and how much I can sell it for let's say that's nine units now we can do something where we can look at what is the amount that you're in debt or the amount of money you've made versus time for both of these situations so let's compare nuclear and gas this way right here is the bottom line well actually it's the profit-loss line all right this is in the plus in the black this is in the red and we want to put two things here we'll put the nuclear power plant and we will put the gas power plant then we have to do our year counter your number one both plants are under construction now you don't have to barrel the entire six billion dollars all at once so you're first gonna borrow just one billion and then pay the interest on it so here is the interest for the nuclear power plant and here's the interest for the aspect each of these little boxes Oh sixty million dollars that's your one-year number two gas plant still isn't built still under construction they've got to pay off their interest alright got two units nuclear power plant yeah we had a pharaoh another billion dollars so our interest isn't one unit anymore now it's two units alright we're in the hole at minus three gas plants at minus two your number three nuclear power plant borrow another billion dollars pay interest on three billion dollars that's one two three of these units yes plant hey we're done so what are we gonna do we can pay our interest okay it's minus one but we get to sell electricity and that's going to cost us seven units of fuel and we're going to make nine units of profit this is a plus one well we get the plus one so we get to take one of these away you're for still building that nuclear power plant had to borrow another billion how to pay interest on all four billion we are at minus 10 right now gas power plant same formula it's making a billion or it's making a unit each year it's back to even four years into this the gas power plant is completed it's been selling electricity for two years and if we look at the accumulated assets well now in a break-even point let's go to year number five year number five take six years to build the plant so we're now have to probably borrowed all of our money at this point so our plant is going to have minus five of these things right here the gas power plant gets its first profit you're six still haven't quite finished this still have to pay off our interest here okay it's not accumulating we barreled the whole six billion gas power plant a little bit more profit finally our nuclear power plant has done there's a lot could go wrong people could protest the Cree construction delays we're still hoping that we're only at a 3% interest rate but now we are here at year seven the debt is a minus five units the fuel is only minus one unit and we sell the same amount of electricity this is plus three so on time we are here at year number seven we can get rid of three of these and over here in Gasland rip plus one your eight same thing applies get rid of three of these add one for gas your nine all right three more go away over in Gasland one more profit here ten three more one more profit year 11 here 12 almost out of debt finally finally on year 13 lookie here 1 2 3 the nuclear power plant has been operating now for six years they finally have turned the corner and are in the black the gas power plant has been making money fairly steadily over time now it's pretty interesting if things are still going well interest rates haven't happened we don't have any type of accident that's shut down the place we're at you're 14 this is adding whereas on the gas side we're adding one year 15 one you're sixteen on two three one you're 17 one two three one year eighteen one two three huh you know what we've just surpassed eighteen years later the people that said hey they're now making more money and then the people who made the gas plant took a lot more risk there's a lot here in the negative area but now things are looking rosier how far will this go what happens when the plants are paid off you're 19 and one over here we you're 20 you're 21 long just get this up to one our mortgage is paid off year 22 here 23 3 that was one two one two three and one year 24 one more year on the mortgage so year 25 the mortgage is paid off nuclear power plant what do we got six by six 36 in the plus gas power plant 21 and the plus looks like a better idea to have built nuclear under a lot of caveats what happens next is very interesting because of 25 years we've paid off part of the mortgage and I realize that part of that mortgage and barrel for a few more years so this isn't exactly what's going to happen in time this minus five is gonna go away on the side this could lead potentially to something like plus eight over here it's only the minus one that goes away this goes to plus two the potential in the long run for a nuclear power plant to make more money as astounding 25 years might have been the mortgage but these plants have been shown to have at least a 40-year lifetime now as a plant gets older it's not just the fuel cost you pay each year there's going to be operations are going to be me maintenance these things this number will be larger this profit is not going to be this huge but what I wanted to illustrate with this example is that if you look in the long run and if a lot of other things stay constant a nuclear power plant could be more economic very few governments look beyond the length of time where the officials are actually in power maybe there's some exceptions and let's hope our politicians have long for sites in front of them even fewer companies take a long view and that's why when you're looking at the landscape today of who is building what kind of power plants everyone almost there's a few exceptions but in generally people are building the gas plants they cost less there is a shorter time to actually complete construction of them and there's much much less uncertainty still though because the fuel costs are so low for a nuclear plant if you can have low interest rates like we have today if you really think you can build that power plant in six years and if your costs are only five billion you could end up with a real moneymaker so what happens if you level eyes the cost you take the entire costs profits fuel capital all of that and you average it over the entire lifetime of the plant well you can get a graph that looks something like this and you can see depending on the year because that would depend on what the cost of the fuel was and the interest rates that nuclear power does pretty good I didn't show you coal right but it has very similar cost and for a long time was always considered the cheapest and safest bet of course it also makes the most greenhouse gas gasps which had been a way to make power at a much more expensive level because today of the low gas prices you can see has also come down to this same range and even though oil is down to the $50 per barrel compared to $100 per barrel oil is still not the way you go to make electricity so economics is complicated and it's difficult because the assumptions you have to make about interest rates about the plants working about being completed in time about not having cost overruns all point to be able to make a modular nuclear reactor at smaller scale and that's what people are working on across the world today because if you didn't have to go into such a large negative territory if you didn't have to build such an expensive power plant up front and take so long before you got to actually make any electricity from it given the low fuel cost for nuclear power it could be a very smart bet that's what you need to know about nuclear economics [Music] you

Channel: Illinois EnergyProf

Views: 435,570

Rating: 4.8979578 out of 5

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Id: cbeJIwF1pVY

Length: 23min 10sec (1390 seconds)

Published: Tue May 14 2019

Reddit Comments

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[u/RicFlairsCape]

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[u/dingramunit4]

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[u/CodedElectrons]

That analysis leads me to think that the way to go is make a 1GWe NG plant. Then year by year put 200MWe SMRs ($1.5 billion each?) until you have displaced all of the NG. The generators dont care where the steam (heat) comes from. That way you never have more than 5 post it notes below the line. More over, when it come to replacing the SMRs (40 years later) you can do it in pieces, instead of all at once. And since you dont really care that the aging turbines are becoming less efficient you dont have to overhaul the turbines as often.