The Economics of Nuclear Power: Is Nuclear Power a Cost-Effective Way to Tackle Climate Change

The role nuclear power can play in combating climate change is limited by the fact that nuclear can have little role in the transport sector, one of the two major emitters of greenhouse gases. However, nuclear power is often portrayed as the most important potential measure to reduce emissions in the other major emitter of greenhouse gases, the power generation sector. For nearly a decade, there has been talk of a 'nuclear renaissance'. Under this, a new generation of nuclear power plants, so called generation III+ designs, would revitalize ordering in markets, especially Europe and North America, that had seen no orders since the 1980s or earlier. This renaissance and the potential role of nuclear power in combating climate change raise a number of issues, including: 1) Is nuclear power the most cost-effective way to replace fossil fuel power generation? 2) Can the issues that nuclear power brings with it, including environmental impact, safety, waste disposal and weapons proliferation be dealt with effectively enough that they will not be a barrier to the use of nuclear power? 3) Are uranium resources sufficient to allow deployment of nuclear power on the scale necessary to have a significant impact on greenhouse gas emissions with existing technologies or would unproven and even more controversial technologies that use natural uranium more sparingly, such as fast reactors, be required? This paper focuses on the first question and in particular, it examines whether economic factors are behind the failure of the long-forecast 'nuclear renaissance' to materialize in Europe and North America. It examines factors such as the construction cost escalation, difficulties of finance and the cost of capital, the financial crisis of 2008/09, the delays in getting regulatory approval for the new designs, and skills and equipment shortages. It concludes that the main factors behind the delays in new orders are: 1) Poor construction experience with the only two new orders placed in Europe or North America; 2) The difficulty of getting affordable finance without prohibitively expensive public subsidies and guarantees; 3) Rapidly escalating construction costs; and 4) Serious technical issues that must be overcome before regulators are prepared to give the new designs generic approval.(author).