An Economic Framework for Choosing Between Energy OptionsJohn Freebairn

Melbourne Institute of Applied Economic and Social Research

Framework or Principles

Choose option(s) with lowest social cost per unit output

If a completely defined market, leave decisions to private sector investors who have the information

But, Australian energy markets are not complete Consumers should pay a price equal to marginal

social cost as a part of the answer

Social Costs

Construction costs expressed as annual fixed costs

Operating costs, including fuel Costs to society of wastes (external costs) Costs of plant closure

Note: Areas of uncertainty include technology, input costs, government policies

A Case Study Example

New base load electricity generation plant, say a 500 MW capacity unit

OptionsQueensland conventional black coal units built over

last few years. (Data from Paul Simshauser, Australian Economic Review, Sept. 2004, and June 2006)

A prospective nuclear plant. (Data from nuclearinfo.net)

Conventional Black Coal

Cost item (and assumptions) (Construction cost of $1.3 m

per MWh) Fixed capital cost (30 year,

.85 use, 5% and 10% capital return)

Fixed operating cost Operating cost External cost (0.8

CO2/MWh, carbon tax of $0, $20 or $?)

Cost in $/MWh

$11.4 or $18.5

$3$10

$0 , $16 or $?

Nuclear Energy

Cost item (and assumptions) (Construction cost of $1.3 m

or $6.7 m per MWh) Fixed capital cost (30

year, .85 use, 10% capital return)

Fixed operating cost Operating cost External cost (≈ 0

CO2/MWh, nuclear waste with US fee of $2.7, Sweden $6.7, and ?)

Cost in $/MWh

$ 18.5 or $95.3 $?

$0.7

$2.7, $6.7 or $?

Some Conclusions

Relative social costs of black coal and nuclear base load electricity in Australia uncertain Comparative social cost of GHG versus disposal of

nuclear waste. Both demand a clear policy scenario. Nuclear higher capital cost and lower operating cost Nuclear construction cost, and RRR uncertain

Need to get external costs into consumer prices

Uranium Information Centre

Nuclear Power - a topical option?

Ian Hore-Lacy

Uranium Information Centre &Head of Communications, World Nuclear Association

August 2006

www.uic.com.auwww.world-nuclear.org

Total 441 operating nuclear power reactors, 25 under construction, late 200516% of world electricity, total 368 GWe.

Locations approximate

Drivers overseas:

• Basic economics today, including increased fossil fuel prices

• Prospect of carbon emission costs

• Insurance against future fuel price increases

• Energy security - geopolitical

Most demand is for continuous, reliable supply on a large scale= base-load

Wind energy production during a fine summer week- each line a day

From 650 MWe of wind turbines in western Denmark

MWe

Danish Wind Energy Assn.

Diablo Canyon nuclear power plant, USA

0

100

200

300

400

500 TWh

1950 1960 1970 1980 1990 2000

541TWh

Hydro

Nuclear

Fossil

12%

78%

10%

French electrical mix evolution

Oil crisis 1973

Unit 1 (Fessenheim 1) 1977

Unit 58 (Civaux 2) 1999

58 units in operation on 19 sites

FESSENHEIM

GRAVELINESS

FLAMANVILLE

PALUEL

ST-ALBAN

NOGENT/SEINE

CHOOZ

CATTENOM

ST-LAURENT

CHINON

CIVAUX

DAMPIERRE

BLAYAIS

BELLEVILLEBUGEY

GOLFECH

CRUAS

TRICASTIN

PENLY

PALUEL

900 MWe (34 Units)1300 MWe (20 Units)1500 MWe (4 Units)

80% of electricity 80% of electricity from nuclear from nuclear

powerpower

The nuclear reactor fleet in France

The cheapest The cheapest KWh in EuropeKWh in Europe

Electricity generation costs, with emission trading case: Finland

13,8

5,3 7,6 10,2 13,0

40,17,2

3,5

7,46,5

8,2

10,0

2,723,4 13,1

23,17,0

44,3

50,1

17,9

19,6

16,2

14,9

22,8

27,3

42,4

23,7

54,2

44,3

39,2

0

10

20

30

40

50

60

Elspot2000

Elspot2001

Elspot2002

Elspot1-5 2003

Nuclear Gas Coal Peat Wood Wind

euro/MWh Emission trade20 €/t CO2Fuel costs

O&M costs

Capital costs

Generation costs without investment subsidy and the return of electricity tax (wood

and wind)

Operating hours 2200 hours/year

R.Tarjanne&K.Luostarinen 03.07.2003Lappeenranta University of Technology

Operating hours 8000 hours/yearReal interest rate 5,0%

March 2003 prices

0

20

40

60

80

100

120

Hard Coal Lignite Gas Nuclear Wind A Wind B

Co

sts

of

gen

erat

ed e

lect

rici

ty [

€/M

Wh

]

Added costs forCO2-charge 40€/tCO2

Costs for CO2-charge 20 €/tCO2

Added costs ofmax. Back-up

Min. Back-up-Kosten

Variable O&M

Fuel costs

Fixed O&M

Capital Costs

Impact of a carbon value on levelised generation costs at 7,5% discount rate

Institute of Energy Economics and the Rational Use of Energy (IER) University of Stuttgart 2006

Fuel Assembly for Nuclear Reactor

A safety record unmatched by any major technology!12,000+ reactor-years civil, similar for naval

Kashiwazaki Kariwa 6 & 7, Japan

Main 3rd generation nuclear reactors:

Areva NP EPR - 1600 MWe Westinghouse AP1000 - 1100 MWe General Electric ESBWR - 1400 MWe Korea HNP APR - 1400 MWe Mitsubishi et al APWR - 1500 MWe AECL ACR-1000 - 1000 MWe OKBM VVER-V448 - 1500 MWe Eskom/INET PBMR - 165/195 MWe

Generation IV ReactorsNeutron spectrum

Coolant,

Temp

pressure Fuel Uses

Gas-cooled Fast Helium

850 C

High U-238+ Electricity & hydrogen

Lead-cooled Fast Lead

550-800 C

Low U-238+ Electricity & hydrogen

Molten salt Medium Fluoride,

700-800 C

Low Thorium, U-238+

Electricity & hydrogen

Sodium-cooled Fast Sodium

550 C

Low U-238 & MOX

electricity

Super-critical Fast or slow Water

550 C

Very High U-235 electricity

High-temp gas-cooled

Slow Helium

1000 C

High U-235 Hydrogen & electricity

Transport & Hydrogen Economy

Plug-in Hybrid Electric Vehicles Then hydrogen in fuel cells Now: 50 million tonnes per year

hydrogen, future: 1000 Mt/yr + Now: steam reforming of natural gas High temperature electrolysis of water Thermochemical production from water

using nuclear heat - needs 950ºC

www.uic.com.au

Particulate Fluids Processing CentreA Special Research Centre of the Australian Research Council

WHAT SHOULD WE DO WITH OUR NUCLEAR WASTE?

Peter Scales Department of Chemical and

Biomolecular Engineering University of Melbourne

Particulate Fluids Processing CentreA Special Research Centre of the Australian Research Council

Some Nuclear Waste Questions

If we go down the nuclear route, will we also develop nuclear re-processing facilities?

Will we process and encapsulate our waste away from the biosphere in a sophisticated manner or will we leave the last step or critical steps to our children?

We have the engineering and scientific know how, but: do we have the political will to achieve an acceptable

solution? will we pay the cost up-front?

Particulate Fluids Processing CentreA Special Research Centre of the Australian Research Council

Reprocessing Cycle

U, Pu

2%

Particulate Fluids Processing CentreA Special Research Centre of the Australian Research Council

Waste From Fuel Reprocessing

Intermediate Level

Not self heating

Steps envisaged:

slurry dewatering

stabilization in grout

disposal (encasement)

High Level

2% volume, 90% radioactivity

Self Heating

Steps envisaged:

dewatering

calcination

vitrification

storage (50 years)

disposal (encasement)

Particulate Fluids Processing CentreA Special Research Centre of the Australian Research Council

HLW

Dewatered, calcined, immobilised in glass (vitrified), poured into stainless steel container and welded lid

HLW vitrification flask

Sellafield, UK

Particulate Fluids Processing CentreA Special Research Centre of the Australian Research Council

HLW Storage Facility

HLW

HLW

Air convectionHeat exchanger

Sellafield, UK

Particulate Fluids Processing CentreA Special Research Centre of the Australian Research Council

ILW

Encapsulated in a highly fluid grout

Minimal voidage

Typically stored above ground Sellafield, UK

Particulate Fluids Processing CentreA Special Research Centre of the Australian Research Council

My View

A comprehensive and timely solution to waste handling is essential to the viability and sustainability of nuclear

power.

No waste solution = No nuclear power

Hanford’s 177 Waste Tanks

quake prone Plate boundary

zones

seismically ‘quiet’ intraplate setting

1960+, M5+

we record 800-900 quakes a year in Oz, including 1-2 M5+

large parts of northern Europe, Africa and Canada have not had a M5+ quake in the last 50 years

1960+, M5+

Rank‘stable’ region

seismicmoment

relativeinstability

1 India 3.3 x 1023 3.7

2 China 1.2 x 1023 1.3

3 North America 1.0 x 1023 1.2

4 Australia 8.9 x 1022 1

5 Africa 4.0 x 1022 0.4

6 Europe 2.5 x 1022 0.3

7 South America 1.1 x 1022 0.1

8 Asia 8.1 x 1020 0.01

9 Antarctica 1.9 x 1020 0.00.

from a seismological point of view Oz does not seem to be “the most stable”!

(the proviso is that these calculations have very large uncertainties)

more stable

less stable

seismologicallyoptimum

1960 -1985, M>3

1988,M6.7Tennant Ck

1960 -1988, M>3

radioactive heating to 230°C due to elevated Uranium

concentrations

cold water injection, steam recovery

the ‘geothermal’ option:Nature’s safe nuclear solution?

Deans Lecture series 2006.2

Martin Sevior Associate Professor School of Physics University of Melbourne

http://nuclearinfo.net

http://nuclearinfo.net

Extent of the Challenge

Nuclear Power world wideNuclear Power is used in many countries around the world.

Many Countries see an expanded role, a few have announced a phase-out, only one, Italy has completed a phase-out.

It’s use is highest in France (77%), Belgium(60%), Sweden (50%).

Sweden and Germany have official phase-out policies but both are controversial.

http://nuclearinfo.net

US experience No new orders since the 1970’s. Over 19 “expressions of interest” since

2005. All proposals have significant local

support. Industry invited communities to bid for the

opportunity. No NIMBY effect as yet.

http://nuclearinfo.net

Intellectual Infrastructure US Nuclear plants had poor (60%)

availability before 1990. Not helped by fractured industry. Each plant was different and independently

operated. Since then a variety specialist companies

have operated the fleet. Also development of experience and “best

practice” techniques.http://nuclearinfo.net

Intellectual Infrastructure The US Nuclear Regulatory Commission

has a vital role in the US Industry. Operating a Commercial Nuclear Plant is a

challenging task. Critically evaluating design and operation

is an exacting task. (1000 page report on the Safety of new designs)

Developing procedures and guidelines is a detailed an exacting task.

http://nuclearinfo.net

Intellectual Infrastructure Plenty of smart people in Australia or who

would migrate (return) to Australia. But all this takes time. We won’t know how the next generation of

Plants stack up until they’re built anyway. Should closely watch international scene

while building up own expertise.

http://nuclearinfo.net