I was at a conference recently where a senior executive from the Russian nuclear company Rosatom gave a presentation on their two new 1.2GW third generation nuclear reactors in Kallingrad, the Russian enclave on the Baltic Coast situated in between Lithuania and Poland. The presentation was about how the build out of an Eastern European grid would help energy security in the region as well as how the nuclear power plants could help the Baltic States meet their EU climate goals. And the whole presentation was done in the present tense with massive confidence around the economics of nuclear power so that I was left with the feeling that this power plant was a done deal. That was until the CEO of one of the Baltic utilities got up. He made the point that they had looked at the Rosatom technology as well as other nuclear technologies across the world and had decided that it made no economic sense to build a new nuclear plant. He went on to add that neighbouring countries had already made the decision not to buy any power from the Kallingrad nuclear power station based on energy security concerns before ending with a stark opinion that the only way that Rosatom could make nuclear economic is by making short cuts which will in turn impact safety.
Then you have the US based nuclear powerhouse Westinghouse, whose technology forms the basis of nearly half the world’s atomic power units, filing for bankruptcy last week, with its owner Toshiba in severe financial difficulties. This follows on the back of financial difficulties at Europe’s leading nuclear technology supplier Areva which is also subject to a widening investigation in relation to potentially faulty nuclear reactor components which have caused multiple nuclear power plant closures in France. Anyhow it all got me thinking about nuclear and whether the dream of “energy too cheap to meter” is over or not.
Let’s be clear, we actually need safe and cost effective nuclear going forward. Safety however is obviously a massive issue if and when an accident happens. Thankfully that is not very often but when it does as in the case of Fukushima or Chernobyl the costs, both environmental and financial are huge. As to cost, what we are seeing is build costs for new nuclear power stations spiralling upwards, the result of which is that any nuclear newbuild in Europe needs a government supported power purchase agreement, as the UK has done, which needs be to be set at levels over 2.5x the current wholesale power price. Bottom line, there are now cheaper alternatives to traditional nuclear.
To make things worse for nuclear, decommissioning costs for old nuclear power stations are spiralling out of control and let’s be clear we are only at the start of that decommissioning process. The UK government and their tax payers have already taken much of the burden away from the nuclear generators and and the UK Nuclear Decommissioning Authority estimates that clean-up of UK’s 29 nuclear sites will cost between €109‒250 billion over the next century.
Meanwhile, in Germany, the government is currently setting up a fund for decommissioning which would involve them capping utility liabilities at €23bn for the decommissioning of Germany’s 17 nuclear plants with the state taking the rest of the burden. EDF in France, on the other hand, has only set aside €23bn for what is the biggest fleet of nuclear plants in the world, some 58 reactors. What France is actually saying is that it can clean up its nuclear fleet for a fraction of what Germany and the UK can achieve….now that seems a bit unrealistic and herein lies the problem, we actually do not know how high those costs will be as we are only starting to decommission nuclear power plants across the world. But what we do know is that it will be expensive and this is one reason why the costs of new nuclear are so expensive.
Does this mean that nuclear is dead?
Of course not. What nuclear needs to do is to bring costs down and that is what companies like ThorCon are attempting with their highly promising next generation Thorium plants. What’s interesting about this technology and many other next generation nuclear technologies is that they are small scale reactors. And maybe that is one of the main lessons from the renewables success. If you produce at scale, you can put in place a manufacturing learning process that enable substantial cost reductions per units as both solar and wind have shown us.
In addition, I am clear that nuclear fusion, if commercialised, could be a game changer. Not alone would we have an energy source which has 10m times the energy density of coal but we would also have very little radioactive waste. But we are not there yet and we should keep investing money into companies like General Fusion and research institutes that are working in this area. As to first generation nuclear technologies the market has already made it’s decision, they are a thing of the past.
