The Uncertain Business of Building New Nuclear

The Uncertain Business of Building New Nuclear BNET industries By Chris Morrison | January 7th, 2009

A new study on Climate Progress has some surprising conclusions for nuclear power. Final costs for generating power at new plants, the study says, will be 25 to 30 cents per kilowatt-hour, which is some three times the cost of today’s energy.

Nuclear is a major part of some plans to move away from fossil fuels like coal and gas, so numbers like this should be extremely worrying to advocates of atomic power……………..
…………….. Historical costs have exceeded initial estimates, and current costs are rising

Severance points to a Cambridge Energy Research Associates report that shows a 131 percent increase in the cost of power plants from 2000 – 2008. That’s is a particular problem for nuclear, because plants can take 10 years or more to build, meaning initial estimates have to factor in future cost increases (or be wrong).

This is a vicious circle, because the long time frame involved increases the business risks of the project, risk that in turn increases expenses. Furthermore, the length of time it takes to build plants means that utilities must pay interest on any debt they took out for construction (usually running in the the billions of dollars) for years before seeing any income.

These might appear to be problems that can be overcome with good planning. Unfortunately, most current designs for nuclear plants haven’t been proven in the field, meaning there’s an element of learn-as-you-go for the people who are building. On a $10 billion project, that’s not a good thing………………..For any cost overruns that do occur, it will likely be the utility or ratepayers that foot the bill, as nuclear plant construction firms are wising up and adding contract provisions that mandate profits for them……………………………One potential side-affect of cost-overruns and delays is outright abandonment of projects. That happened with the Washington Public Power Supply System, which defaulted on $2.25 billion in loans when it walked away from a nuclear project.

Utilities constructing nuclear plants may find their credit ratings dropping……………………..

Higher electricity rates from nuclear may destroy demand for the energy

If the above issues come to a head and ratepayers end up eating the costs, they may simply choose to use less power, or tap into sources like home solar and wind, which may well become cheaper than energy from the utility.

The Uncertain Business of Building New Nuclear | BNET Energy Blog | BNET

Tags: nuclear, antinuclear, uranium, radioactive

January 9, 2009 Posted by Christina Macpherson | business and costs | Leave a comment

Arbitration over delays in nuclear build

Arbitration over delays in nuclear build
World Nuclear News 05 January 2009The row over delays at the Olkiluoto 3 new-build project has grown more serious after constructing consortium Areva-Siemens took their customer Teollisuuden Voima Oyj (TVO) to arbitration…………………
……In the first half of last year, TVO submitted a claim to Areva-Siemens for compensation for “losses and costs incurred due to the delay” in completing the construction project. TVO has also rejected a claim presented to it by Areva-Siemens, and it is this claim for which the consortium has filed a request for arbitration with the International Chamber of Commerce. Areva said that it initiated the proceedings on 5 December 2008; TVO announced that it had received notification on 30 December 2008.

 

Arbitration over delays in nuclear build

January 7, 2009 Posted by Christina Macpherson | business and costs | Leave a comment

The Credit Crisis and Nuclear Markets

The Credit Crisis and Nuclear Markets
UX Weekly 7 Jan 09 The news that is currently gripping the United States and the world at large is the credit crisis in the U.S. Financial institutions have failed in the U.S. and Europe, and there is concern that more will fail. Things will likely get worse before getting better now that the U.S. House of Representatives voted 228-205 against the financial bailout plan. However, even if this legislation were passed and signed into law, it is not seen as a panacea for the crisis, the effects of which will likely be felt for some time. Pretty much all parts of the world economy have been or will be impacted by it, even the uranium market and nuclear power.
Below we look at both the near-term and the long-term implications for the nuclear industry.

Recently, the uranium market has experienced a great amount of activity as sellers have adopted a more aggressive posture to the market. These sellers have included hedge funds and companies owned by funds or financial interests, and companies facing cash flow issues. One of the major changes in the spot uranium market over the past several years has been a greater involvement of hedge funds and other financial entities in the market. This makes the market more subject to the vicissitudes of the financial sector……………………………. The credit crisis has longer-term effects as well, as it certainly does not bode well for the future of nuclear power. Nuclear power plants are extremely capital intensive and thus require a great deal of financing, which will now be even more expensive and difficult to obtain. The other aspect of the crisis is that economic growth will likely be much slower in the future, and thus there will be less need for new electricity generating capacity, including that based on nuclear power………………………………….

Similar to financing new nuclear power plants, it will be more difficult and more expensive to finance new mines, if they are financed at all. Uranium mining costs, as is the case with all mining costs, have greatly exceeded the general inflation rate even before the recent crisis, and this relationship will likely be maintained or exacerbated in the aftermath of the credit crisis.

The rate of uranium production expansion will be cut back due to both the recent fall in price and higher production costs. Because of this, many prospective projects which were questionable at recent price levels are even more problematic now. Further, the dimmer prospect for a nuclear renaissance in the wake of the credit crisis makes it that much less likely that investments in uranium production infrastructure will be made…………………………….

Finally, the credit crisis reminds us of the very real possibility that markets can fail. We have discussed the concept of market failure as it pertains to the uranium market a number of times in this publication. It is revealing, if certainly not heartening, to see a market failure scenario being played out on such a grand scale, with the government again right in the middle of things.

UxC: UxW – The Credit Crisis and Nuclear Markets

Tags: nuclear, antinuclear, radioactive, uranium

January 7, 2009 Posted by Christina Macpherson | business and costs | Leave a comment