The Economics of Nuclear Energy

this episode of real engineering is brought to you by brilliant a problem solving website that teaches you to think like an engineer in our quest for clean and cheap energy massive solar and wind firms have sprung up across the world investment in these renewable resources reached two hundred and seventy three billion dollars in 2018 included the eight previous years and that figure reaches two point three trillion dollars this is positive news for most but money have been left asking why not nuclear after a quick examination of country's carbon dioxide output per kilowatt hour of energy produced it becomes clear that countries like France are currently doing better than countries like Germany in the quest to produce low-carbon energy France with 61% of its electricity generation from nuclear is producing just 32 grams of carbon dioxide for every kilowatt hour produced where Germany a country that has invested billions into wind and is gradually closing down all its nuclear power plants and replacing them with natural gas plants and wind energy is producing 318 grams of carbon dioxide for every kilowatt hour it's perfectly understandable why many advocate for nuclear energy over renewables wind itself releases less carbon dioxide for every kilowatt hour of energy it produces at about 11 grams just under nucleus 12 grams per kilowatt hour both because wind is intermittent it needs to be propped up by some form of power production that can quickly ramp up and produce electricity when the wind falls a natural gas is the perfect solution for that at a reasonable price so in reality wind isn't competing against nuclear energy at least not directly it's competing with larger baseload power stations like natural gas and to see why it's losing that battle we need to dive into the world of economics to see why countries and investors are showing nuclear energy when choosing where to invest money in infrastructure there are several factors you need to consider risk potential gain and the time it will take to get a return on investment are the most important this is an extremely simplified example of a return on investment calculation for two power plants a 1,000 megawatt nuclear power plant and a 1,000 megawatt natural gas power plant this calculation is based on the wonderful video on the illinois energy professor youtube channel which i will link in the description below when making this kind of calculation we have a few variables we need to consider the cost of construction the fuel cost and the construction time are the biggest variables that differ between the two energy sources the average cost of construction for a nuclear power plant is a difficult number to pin down the number varies widely from project to project ranging from five thousand five hundred per kilowatt to eight thousand one hundred per kilowatt we will assume a lower price of six thousand per kilowatt resulting in a price tag of six billion for a 1,000 megawatt nuclear power plant natural gas on the other hand is one of the cheapest types of power plants to construct with a cost of about nine hundred and twenty dollars per kilowatt so a 1,000 megawatt power plant would cost 0.92 billion but let's just run that up to 1 billion for simplicity sake now I know you already see the problem natural gas is just cheaper and it's going to take the nuclear power plant longer to recoup that cost this becomes even more of a hare and tortoise race as a result of the construction time of each the average nuclear power plant takes six years to construct whereas your typical natural gas power plant takes about two years to construct this becomes a particular issue when borrowing and interest rates are involved we are going to assume an interest rate of 3% and a repayment term of 25 years for both plants and both will borrow in 1 billion dollar increments one billion dollars on a twenty five year repayment plan at a three percent interest rate equates to a fifty six point seven million dollar payment every year here we will borrow an idea from the Illinois energy professor and illustrate profit and loss with it's below the x-axis these blocks represent debt above the line they represent profits we will place nuclear's profit and loss on the left side of the graph and natural gases on the rice each full block unit like this represents fifty six point seven million dollars these blocks can be partially filled to represent smaller fractions we are using this to bring the vast quantities of money involved into a more human scale let's begin in the first year of construction both plants will generate one unit of loss as both borrowed 1 billion in the second year the nuclear power plant borrows another billion so it now owes the bank double the repayment so it now has a total of 3 units of loss natural gas does not borrow another billion so it just needs to pay off the current one unit of dead Oh dearly for a total of two the natural gas plant is now complete it took two years it can now begin to generate revenue to turn that loss into a profit now we need to calculate revenue both our 1,000 megawatt facilities meaning if they both run for an hour they will both generate 1,000 megawatt hours of energy calculating revenue from this number is not straightforward as the energy marketplace is complex grid operators may buy a large percentage of nuclear's base load out in advance for a set price as it can turn itself off easily it needs to continually run an electricity prices drop in the middle of the night as demand Falls energy prices constantly fluctuate so it makes sense for nuclear power plants and the grid operators to agree on a bulk price whereas the natural gas plants can operate as peaking plants shutting down during the night and only operating during the evening when electricity demand and prices are at their peak allowing them to fetch a better price for their electricity thereby losing less money on operation and maintenance of their plant and getting the maximum profit out of their fuel spent factor in transmission costs as energy is lost to power lines taxes and all the other messy factors and it becomes even more difficult to calculate earning figures this calculation will be inaccurate we will make a massive assumption and assume they will both earn the same amount at 525 million a year after all these deductions are made so in its third year the natural gas plant will have a revenue of nine and a quarter of these blocks after our loan repayment that will be eight and a quarter blocks of profit but there is another large deduction we need to consider that differs greatly between these power plants fuel costs here nuclear has one big leg up its fuel is relatively cheap just by virtue of only needing a very small amount in comparison to natural gas a single uranium fuel palace with a diameter of an AAA battery has the potential to release the same amount of energy as one tonne of coal or half a tonne of natural gas a little goes a long way to run the 1,000 megawatt facility for an entire year you would need about 64 million dollars worth of fuel or 1.1 currency blocks to produce the same amount of electricity the natural gas facility would need about 450 million dollars worth of fuel or 7.9 currency blocks these prices will also fluctuate but again this calculation is simply for illustrative purposes so once up and running the nuclear power plant can produce more electricity for less money factoring that in the natural gas plant will make five hundred and twenty five million dollars of revenue deduct both loan payments and fuel costs and we are left with about one third of our currency units of profit on to year three the nuclear power plant borrows another billion and so now owes three units of loan payments for a total of six in loss the natural gas plant however makes one-third of a unit which is removed from our loss year for the nuclear power plant borrows another billion and adds four units of loss the natural gas plant removes another one-third of a block ear five nuclear borrows another billion and adds five units of loss the natural gas plant removes another one-third of a block year six nuclear borrows its final billion and adds six units of loss the natural gas plant removes another one-third of a unit mainly the nuclear power plant is finished and will begin generating revenue in year 7 deducting the loan payments and fuel costs leaves us with two point two units of profits even with the huge loan repayments which will be paid off completely in 24 years the nuclear power plant is making fare more profit per year but it has a long way to go in reversing this loss year 7 year ace the natural gas plant has now broken even your 9 year 10 year 11 year 12 year 13 here 14 year 15 years 16 the nuclear power plant has now broken even and even made a profit you're 17 you're 18 you're 19 you're 20 okay you get the picture over the long term the nuclear power plant is insanely profitable but the risk involved in reaching the profit is huge politicians and investors alike are hesitant to put their money on the line when six years in there is 1.2 billion dollars of loan repayments made with no revenue on the books with the first six years of loan repayments alone you could have built another natural gas plant that's insane did the company take out another loan to pay for the loan payments financing these things is difficult getting that money from politicians is hard too because most politicians aren't going to think about long-term energy strategy because something that won't start producing electricity for six years and won't turn a profit for 16 is not in their interest they will need to be voted back into office before then factor in that nuclear power plants have a terrible track record for running not only over budget but over time resulting in an even larger run into negative before revenue begins a nuclear energy just becomes a really difficult investment to justify that's why they are falling out of favor before even discussing the safety issues looking at these numbers you would never expect a nuclear power plant operator to decide to shut an operational plant down yes that's exactly what's happening in many places take the Diablo Canyon power plant in California this power plant is run by Pacific Gas and Electric a company with a diverse portfolio of energy generation hydroelectric nuclear natural gas and renewables they are an investor owned and publicly traded company maximizing profit is their prerogative yes they have decided to close down the Diablo Canyon nuclear power plant in 2024 when its 40-year license expires why would they do that well that's complicated first in order to renew their license they needed to modernize the entire facility at a cost they deemed too high they needed to change their cooling system from a once through system where sea water is pumped through the facility for cooling and dumped back into the sea to a closed cycle evaporative cooling system which used the same volume of water continually and thus reduced environmental impact one particularly large cost was the cost of integrating appropriate earthquake protection after lessons learned from the Fukushima disaster where tsunami flood water destroyed emergency generators and caused three separate meltdowns and three hydrogen explosions as much as nuclear advocates want to say nuclear is safe which it can be making it safe is expensive PG and E themselves said the retrofit was too expensive and instead decided to shut the entire plant down they decided it would make more economic sense to close this facility and replace it with renewables this says a lot about nuclear energy economics when even an existing plant can't compete it's not just nuclear energy that is facing competition three hours north of Diablo Canyon natural gas turbines were retired and replaced by battery storage that's because California is producing so much excess solar energy that buying it and storing it in batteries to sell later makes economic sense the energy America place is a complex machine and no one-size-fits-all approach can be used we can get a clearer picture of these costs with an analysis method called levelized cost of electricity or LCOE the levelized cost of electricity attempts to give a simple comparable number that represents the cost a power plant will need to charge for a unit of energy in order to recoup its cost over the course of its lifetime the equation looks like this but putting it simply it's the of costs over the lifetime of the plant divided by the total quantity of electricity that plant will generate and sell in its lifetime here we can see that onshore wind photovoltaic solar power and combined cycle natural gas are by far the cheapest forms of electricity and this is the real reason they are gaining larger market shares for nuclear to rise to prominence once again it needs to evolve it needs to compete with the role natural gas is filling it needs to be smaller cheaper and safer ideally the reactor should be dispatchable meaning it can turn itself on and off so it can fit neatly into modern grids with high percentages of renewables that's a difficult problem to solve but people are working on potential solutions that could make nuclear energy competitive once again we will discuss some of these solutions in future videos every 45 minutes as much energy falls on Earth's surface as all of mankind uses in a year we now have a way to capture that energy efficiently now we just need a way to fulfill our energy needs at night ensuring those in power make the right decisions requires voters who understand the energy market and solar technology platforms a good place to start is brilliant excellent course on solar energy it teaches you how much energy is available to extract from sunlight based on where you are and the composition of the atmosphere then you'll learn the thermodynamics and semiconductor concepts that enable the two main kinds of solar energy platforms solar thermal power and photovoltaic cells by the end of the course you'll have a solid grasp on the relevant physics and a clear picture of how light beaming from the Sun ends up as an electrical current streaming in your device this is just one of many courses on brilliant that will improve your ability to understand the world around you you can set a goal to improve yourself and then work on that goal a little bit every day brilliant makes that easy with interactive explorations and a mobile app that you can take with you wherever you are if you are naturally curious want to build your problem-solving skills or need to develop confidence in your analyst abilities then get brilliant premium to learn something new every day brilliant thought-provoking math science and computer science content helps guide you to mastery by taking complex concepts and breaking them up into bite-sized understandable chunks you'll start by having fun with their interactive explorations and over time you'll be amazed at what you can accomplish as always thanks for watching and thank you to all my patreon supporters if you'd like to see more from me the links to my Twitter Instagram discord server and subreddit Ereb below [Music] you

Channel: undefined

Views: 1,212,174

Rating: 4.8403745 out of 5

Keywords: engineering, science, technology, education, history, real

Id: UC_BCz0pzMw

Length: 16min 10sec (970 seconds)

Published: Sat Jun 06 2020

Reddit Comments

[u/Srkuntz0946]

Real engineering videos in general are great

[u/worthnest]

Just glad he has diverged off his (almost) exclusively military path tbh. Loved his channel prior to it but military stuff was getting boring for me. Understand why he did it though since most other STEM channels I come across are space, EV or renewables related. His content is class!

[u/bob-the-dragon]

Read the first comment of the video, this one guy really puts it into perspective and fixes glaring mistakes in the video.

[u/uskilop]

The economics of energy markets (and nuclear in particular) are so complicated O.o

[u/dcviper]

We could also impose a cost on the negative externalities of carbon emissions. That'll start to make gas look a lot less attractive.

[u/[deleted]]

He fails to mention to huge toxic and carbon footprint of producing solar panels.

[u/Nemo222]

The important thing to remember about nuclear is that the technology exists today. We can build it now, and newer reactor designs have addressed many of the major concerns that have caused reactor failures. As better technologies continue to develop, they can in turn replace nuclear but we could be close to carbon neutral electrical generation in 20 years. That's not going to happen with solar or wind because of the intermittent nature of the source. Nuclear is a perfect example of an intermediary solution, a stopgap to improve things now, while further improvements continue to develop, itself to be replaced in time.

We do not have enough efficient energy storage, and will not for the foreseeable future to transition to completely renewable sources, and will always require a basal load source. Nuclear is a good option for this. Hydro is too, but that doesn't work everywhere. People who suggest batteries have no concept of the scale of energy that is produced by even a small power plant, the inefficiencies and costs of such a system, and just how many resources would need to go into that many batteries. Every single Tesla vehicle ever produced, could produce more power than every single nuclear power station in the US, for about an hour. Nuclear is only about 20% of the US power generation.

In the history of nuclear power, there have been 3 disasters, and 3 mile island doesn't REALLY count. The total fatalities is low compared to coal mining deaths, and deaths that can be reasonably attributed to pollution and that isn't even thinking about the effects of climate change.

Nuclear waste is a big deal, but it's realtivly easy to deal with, if expensive. you dig a big hole in the ground, and stick it in the hole. Job done. (obviously its more complicated than that) The stuff doesn't run away, doesn't jump out and bite you when you walk past and doesn't waft away into the atmosphere to affect everybody on the planet (when things are done properly). Currently all the nuclear waste ever made is stored at the plants that made them, and it's fine. No crisis has come about in their current storage schemes. If we improve this storage scheme by locating them in geological stable deep repositories, nothing will continue to happen. They will obviously need a lot of work and design and maintenance and monitoring to ensure that problems don't occur, but even if they do, a bunch of radioactive dirt a thousand ft under a mountain with no groundwater isn't really a problem.

Finally costs. Nuclear is expensive because it front loads all the external costs. The nuclear plant has to pay for storage, and treatment of waste. It has to pay for the reactor and safety systems to mitigate risks. It has to pay a ton for maintenance and staff that just aren't significant with other fuel sources. ALL the costs of nuclear power, are included in the cost of nuclear power. Meanwhile, fossil fuels don't pay for the carbon they produce, even with carbon tax schemes. They don't pay for remediation of mines or gas wells that are abandoned by the extraction companies. They don't pay for risks associated with air pollution. We have no idea how much climate change is going to cost, but we do know its going to be a very big number. If those externalities were included in the cost of fossil fuels, and had been included for the past 100 years then the cost difference between the two would be a lot smaller.

Nuclear is scary. Its a big boogyman to those uneducated and unable to understand and conceptualize risk. It has 2 big scary asterix that everybody knows about and everybody panics over, but nobody pays attention to similar issues with coal and gas power, smaller in significance for individual power plants but about equal, or maybe greater when you consider HOW MANY coal and gas plants there are around the world.