Q&A: The costs of nuclear energy

The nuclear question is one of the biggest facing global economies. The British government has announced plans to construct a new generation of nuclear power stations, a move which is likely to revive the long-standing debate over the cost and safety of nuclear energy.

It will also add to the gathering momentum behind nuclear power, driven by the global need to reduce carbon emissions, as well as the rising cost of gas and oil.

Here is a look at the economics of the debate.

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How much does it cost to build a nuclear power station?

There are few recent examples to draw on, but a new plant being built in Finland gives some indications.

The Olkiluoto project is Western Europe’s first new reactor in a decade and is expected to cost about £2.25bn ($4.5bn), but there have been serious delays there.

Other analysts put the cost of a plant at £1.5bn.

How does that compare with other types of power station?

Gas and coal-fired power stations are much cheaper to build.

RWE Npower is planning a gas-fired power station in the UK for £800m.
The controversial scheme for a coal-fired power station in Kent is expected to cost about £1bn.

So is nuclear power good value for money?

Nuclear power stations are extremely expensive to build.

But if several stations are commissioned at once, then the cost should go down because of economies of scale – a sort of bulk discount.

But they will still be more expensive to build than conventional power stations. And there are fears that investment in nuclear will detract from other sources of energy – such as renewable.

So how does nuclear power compete?

Once built, nuclear power plants have advantages.

In a gas-fired plant, the gas alone makes up 80% of the cost of electricity. So firms and consumers are very exposed to the wholesale price of gas.

But at a nuclear power plant, the fuel is processed uranium, accounting for just 10% of the cost of production.

One argument given in favour of nuclear is that consumers are less likely to see huge variations in their energy bills, which have been rising in recent months.

Nuclear power also produces much lower levels of greenhouse gases and the nuclear industry wants incentives to reflect that.

What are the cost implications of nuclear power?

Germany’s E.On, France’s EDF, and British Gas parent company Centrica have all showed eagerness to be involved in the operation of the new nuclear sites, while French-owned Areva, the world’s largest nuclear power group, said it also wanted to build up to six new plants.

Energy companies running the new nuclear power plants will have to pay the costs for decommissioning existing sites, and pay their share of waste management costs, the government has said.

The Nuclear Decommissioning Authority has said the cost will be £72bn over 20 years – up from an estimate two years ago of £56bn.

Critics, such as Greenpeace, say that the bill for building new waste dumps will be a further £21bn and then £30bn to build the new nuclear power stations.

According to its figures, this equates to just under £250 per household.

It is unclear how much of this will be passed on to consumers through, for example, higher energy bills.

But firms keen to invest in this area have strongly rejected this argument, saying they will not need any sort of extra funding.

EDF, for example, has said it is willing to invest in new nuclear power stations in the UK “without subsidy”, to include all the costs of construction, operation, decommissioning and waste disposal.

But it, like other firms, has said this can only happen if the right framework is in place. Ultimately, firms will only invest if it is competitive with other forms of energy.

Some analysts say public opposition might make some investors reluctant to fund schemes that are viewed as unpopular. –BBC News