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Subsidies to Nuclear Power in the Inflation Reduction Act still won’t save the poor economics of nuclear power – Cato Institute

Subsidies to Nuclear Power in the Inflation Reduction Act, Cato Institute By David Kemp and Peter Van Doren, 28 SEpt 22, Last month, the United States enacted the Inflation Reduction Act (IRA),……… The act includes many provisions to subsidize clean power plants, including nuclear generators.

Many believe that nuclear is the perfect solution to climate change…….. Our recent working paper examines the economics of nuclear power and concludes that it is very high‐​cost relative to natural gas generators. Most importantly in the context of climate change, we also determine that the potential climate benefits of nuclear are insufficient to offset its costs.

From the 1960s to 1980s, many nuclear power plants were built, but nuclear construction costs rose dramatically resulting in a severe decline in new construction. Very few plants have been built in the United States and Western Europe in the past several decades. In fact, the most recent projects in the West (the United States, France, the United Kingdom, and Finland) have experienced numerous issues with quality control, supply chains, and labor force management, leading to a more than doubling of construction schedules and costs. The fact that nuclear construction costs increased dramatically in countries with different regulatory regimes suggests that the problem is not simply overly cautious regulators.[1]………………..

Nuclear power is capital intensive. Thus, its  levelized cost of electricity (LCOE) depends mostly on its construction cost. To model different scenarios, our calculations use three levels of construction costs for nuclear. The highest level (a cost of $9,000 per kilowatt of capacity constructed) represents the average construction costs of the West’s most recent projects. The middle and low levels ($6,700 and $4,000 per kilowatt, respectively) envision substantial reductions in nuclear construction costs through some combination of regulatory reform, improvements to construction management, or innovation. The low level, which is nearly 65 percent lower than the most recent nuclear project in the United States (the Vogtle plant in Georgia where ongoing construction has reached costs of about $11,000 per kilowatt), is particularly optimistic. Whether such a reduction is achievable is not known, but historically US nuclear construction costs have increased as new capacity has been built………………………………………………………..

The IRA expands subsidies to new nuclear plants through two options for tax credits, a production tax credit (PTC) and an investment tax credit (ITC)……………………………………………………………………………………..

The IRA subsidies are not sufficient to change the economics of nuclear power. ………..https://www.cato.org/blog/subsidies-nuclear-power-inflation-reduction-act

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September 27, 2022 - Posted by | business and costs, USA

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