Monetary correction model of economic analyses applied to nuclear power costs

In the past, the electric utility companies have been able to ignore inflation rates of ∼1.6%/yr in their planning because technological improvements managed to maintain a gap of ∼1% between the rates of increase of the consumer price index and the cost of electricity. This stability in the price of electricity is not likely to continue; for the years 1968 through 1971 the inflation rate averaged 5.0%/yr, the cost of petroleum rose 3.2%/yr, and the cost of coal increased by 16.0%/yr, causing large increases in utility costs. Drawing from conventional economics and the experience of other countries with a long history of inflation, the present paper shows the effect of expected fuel, operation, and maintenance cost escalation on the price of electricity and on the relative competitiveness of nuclear and fossil-fuel plants. A self-consistent mode of cost computation using a "monetary correction" to account for inflation shows that, in relation to fossil-fuel electric power, nuclear power is ∼15% more economical than most conventional comparisons indicate. The implications are important for the establishment of a national energy policy and have repercussions in other capital-intensive schemes.