Impact of capital cost and cost recovery options on nuclear economics

Nuclear power plants require substantial front end investment in plant construction. On the other hand annual fuel costs over the operating lifetime are relatively small and less subject to real escalation. Thus nuclear generation costs are dominated by a capital cost recovery fraction, which account for 70-78 percent of the total. Several examples of the relative contribution of capital cost recovery to total nuclear generation costs are discussed in this paper. These examples relate to both 'passive' (600 MWe class) advanced light water reactors (ALWRs) and to evolutionary (1200 MWe Class) ALWRs, to be built in East Asia by the turn of this century. Examples include capital cost range for both passive and evolutionary ALWRs, under utility as well as independent power producer (LPP financing). The effects of the plant nuclear annual capital recovery requirements are reviewed. Independent project financing allows greater debt leverage (reduced equity fraction) thus reducing the financial burden on the plant owners. On the other hand the cost of financing nuclear IPP plants is higher as the initial investment is secured only by the expected revenues of the project itself. The interplay between reduced equity fraction and higher return on equity requirements results in higher annual capital cost recovery charges to a nuclear IPP plant as compared with a utility owned plant. Several examples of total generation cost computations for utility vs. IPP financing and for passive as well as evolutionary ALWR projects in East Asia are reviewed in this paper. The breakdown of total generation costs into capital recovery, operating and fuel expenses under utility or IPP financing for both evolutionary and passive East Asia ALWRs is reviewed here. Finally, as a cautionary example, the issue of U.S. nuclear plants stranded investments is discussed in this paper. A method of computing plant by plant stranded or unrecoverable investment is presented. Some numerical examples of these issues as they relate to existing U.S. nuclear plants are reviewed in this paper. (author)