Summary

The existing literature on the construction cost of nuclear power reactors has focused almost exclusively on trends in construction costs in only two countries, the United States and France, and during two decades, the 1970s and 1980s. Such restrictions account for only 26% of reactors built globally between 1960 and 2010, providing an incomplete picture of the economic evolution of nuclear power construction.

Expanding the cohort to cover the full cost history for 349 reactors in the US, France, Canada, West Germany, Japan, India, and South Korea, encompassing 58% of all reactors built globally, Lovering, Yip and Nordhaus found that trends in costs have varied significantly in magnitude and in structure by era, country, and experience. In contrast to the rapid cost escalation that characterised nuclear construction in the United States, there is evidence of much milder cost escalation in many countries, including absolute cost declines in some countries and specific eras.

Whilst costs in the US and Europe have continued to escalate, those in Asia have pushed against this trend. Evidence indicates that there is no inherent cost escalation trend associated with nuclear technology but that non-standardisation rather than reactor size, utility structure or regulatory regime is the key variable.

Introduction

Today, nuclear energy makes up one-third of global low-carbon electricity, and countries with the lowest carbon intensities depend heavily on low-carbon sources of baseload power: nuclear and hydroelectric. Yet the high cost of nuclear power in developed countries has slowed its deployment, as low-carbon nuclear power cannot compete with cheaper fossil fuels, especially in deregulated power markets.

Several analyses of historical nuclear cost trends have pointed to escalating costs for nuclear power plants over time, raising doubts about whether nuclear can become cost competitive. However, past studies have been limited in their scope, focusing primarily on cost trends in the 1970s and 1980s for the US and France. However, the US and France may not be representative of broad cost trends, as they suffered first-mover disadvantages of deploying an evolving technology. More importantly, the US and France built most of their reactors over 30 years ago.

In addition to the US and France, the UK, Germany, Japan, Canada, and the USSR were all building nuclear reactors during this time period. When the US and Western European countries stopped building nuclear power in the 1990s, several other countries continued to build out their nuclear fleets in East and South Asia and Eastern Europe. In particular, large fleets of standardised reactors were built in Japan, South Korea, India, and more recently in China.

Drivers of Construction Costs

Since nuclear power plants are complex infrastructure projects – not a product that rolls off an assembly line – a range of factors go into the final cost. To isolate learning effects for a specific reactor developer, many studies have used regression models to isolate for a theoretical learning-by-doing based on a manufacturer or architect-engineer firm’s progress.

Cantor and Hewlett (1988) summarised four such regression studies that attempt to isolate the effects of learning, economies of scale, and regulatory changes on Capital Costs of US reactors. They found that individual firms experience learning, but that the increased size of plants and increased regulation led to longer lead times and higher costs, thus offsetting any learning-by-doing effect. Kahouli (2011) also derived learning rates for nuclear construction costs for the OECD and EU and found that learning-by-searching, ie, improvement through R&D, can have an important effect.

Standardisation of reactor designs is key for decreasing lead times and costs – innovation can actually lead to higher capital costs and longer lead times.

The phenomenon of cost escalation has been interpreted as a lack of learning in the traditional sense of firm-level production, but the studies have deployed a broader use of the term to describe a theoretical country-level, industry-wide learning.

Of particular note, Grubler (2010) analysed the historical costs of nuclear power for France and the US, and concluded that nuclear power construction costs “invariably exhibited negative learning” and “forgetting by doing” citing an increase in system complexity for nuclear power construction.

Regardless of the methods used to analyse cost trends, the existing literature mainly ignores cost data in several dominant and emerging nuclear countries. Lovering, Yip and Nordhaus (LYN) expanded the scope of analyses in 2015 to include not only the costs of 32 US and eight French reactors built prior to 1970. But beyond the US and France, they collected a complete cost histories for Japan, South Korea, West Germany, Canada, and India (153 reactors in total and 58% of all power reactors ever built globally).

Construction costs from US and France

Note : The OCC or “overnight construction cost” refers to the construction cost of a nuclear reactor as if the reactor construction process were completed instantaneously, without incurring the financing charges accrued before commercial operation. The OCC metric is meant to isolate the cost invariant to construction duration and interest rate, in order to capture the cost intrinsic to the reactor technology

US Construction

Between 1954 and 1968, starting with the first reactor at Shippingport, 18 demonstration reactors were ordered and completed. In this first phase, construction costs decline sharply, from a high of $6800/kW to a low of $1300/kW, an 81% drop, or an average annualised rate of decline of 14%. In this period, reactor size increases from under 80MW to 620MW, suggesting economies of scale were important. The second phase, from 1964 to 1967, represents the era of turnkey contracts. The OCC of these 14 reactors are in the range of $1000-1500/kW, a 33% drop, or an average annualised rate of decline of 13%. In this period, reactor sizes increase to a range of 800–1100MW.

A break in construction starts is visible around 1971 and 1972, which is likely attributable to a confluence of events affecting nuclear power construction in the late 1960s and early 1970s. These include the establishment of the Environmental Protection Agency in 1971, and the AEC’s gradual loss in public trust and its eventual replacement by the Nuclear Regulatory Commission in 1975.

Finally, the last 51 completed reactors represent a set that be-gan their construction between 1968 and 1978 and were under construction at the time of the Three Mile Island accident in 1979. For these reactors, OCC varies from $1800/kW to $11,000/kW. Thirty-eight of these reactors fall within a mid-range of $3000/kW to $6000/kW, with 11 between $1800 and $3000/kW and 10 between $6000 and $11,000/kW.

US Nuclear Construction Costs
US Nuclear Construction Costs

When the full cost experience of US nuclear power is shown with construction duration experience, we can observe distinctive trends that change after the Three Mile Island accident in 1979. As shown above in blue, reactors that received their operating licenses before the TMI accident experience mild cost escalation. But for reactors that were under construction during Three Mile Island and eventually completed afterwards, shown in red, median costs are 2.8 times higher than pre-TMI costs and median durations are 2.2 times higher than pre-TMI durations. Post-TMI, overnight costs rise with construction duration, even though OCC excludes the costs of interest during construction. This suggests that other duration-related issues such as licensing, regulatory delays, or back-fit requirements are a significant contributor to the rising OCC trend. Phung (1985) observed retrofit costs due to new safety requirements before and after TMI. Rust and Rothwell (1995) argued this rise was due to unprecedented regulatory flux and uncertainty post-accident. Hultman and Koomey (2013) disputed the economic impact of the Three Mile Island accident on the US nuclear industry, but failed to observe its distinctive effects on overnight construction costs. These results suggest that the Three Mile Island accident in 1979 did uniquely affect the nuclear industry in the US.

French Construction

The cost history of the first era of French nuclear power has not been discussed in previous studies of French construction costs. Prior to the second-generation PWRs, France built a series of indigenously designed gas-cooled reactors (GCRs). These reactors fall in cost from €6500/kW to €1200/kW between 1957 and 1966, a decline of 82%, or 17% annualised. These GCRs scale from a size of 68MW to 540MW.

Cost of French Nuclear Reactors by Construction
Cost of French Nuclear Reactors by Construction

From 1971 to 1991, when the French began rapidly expanding their domestic nuclear industry, OCC rises slowly from €1000/kW to €1500/kW–2000/kW, representing a 50% to 100% increase, or a 2% to 4% annualised rate of escalation. Within this second phase, the CP series of reactors increase in cost, while the costs of the reactors in the P4 series are remarkably stable. The last two pairs of reactors at Chooz-B and Civaux were the result of the N4 program, which was intended to indigenise the reactor design and move away from designs based on the Westinghouse license.

While the cost escalation in France is trivial compared to the US experience, it does require some explanation. Lévêque (2015) concludes that rising labour costs (faster than inflation), technological change due to increased regulation, and increased complexity due to larger reactors led to higher costs. Escobar-Rangel and Lévêque (2015) credited the vertical integration of the utility and reactor developer, standardisation of reactor designs, and multi-siting of reactors, for keeping costs low.

An analysis of French nuclear construction costs and construction durations shows that the Chernobyl accident in 1986 resulted in a small but observable increase in costs and a steady increase in construction duration. In contrast to the US experience with the Three Mile Island accident, the French nuclear power construction cost and duration trends were much less affected by the accident at Chernobyl.

Global nuclear construction cost trends

The cost experience of the US and France is important for analysis because they have the first and second largest fleets of nuclear reactors and were leaders in the early commercial nuclear power industry. The cost histories of Canada and Germany provide additional context as to the experience of other nuclear pioneers in the Western world. However, these four countries share similar first-mover disadvantages, obstacles, and setbacks that come with deploying an emerging, immature technology.

A broader look at nuclear cost history allows us to analyse a new set of country-level experience curves for nuclear power. Rather than look at a trend in a single country, LYN presented complete cost histories for seven countries (see below).

Comparison of Construction Cost Trends by Country Over Time
Comparison of Construction Cost Trends by Country Over Time

The most surprising feature is the large diversity in trends, with the US and South Korea at the two extremes. Countries building reactors more recently, particularly those with construction starts after 1980, have different trend shapes than the early nuclear pioneers. Rather than an “invariable exhibition of negative learning” and “inevitable” increases in complexity intrinsic to nuclear technology that lead to cost escalation (Grubler, 2010), it is clear that there is not a singular cost trend for nuclear technology, but a plurality of different country-specific experiences. A consistent “rhythm” of cost escalation suggested by Grubler (2010) does not match the historical record.

The truncated cost history of the US can be seen as a global outlier. Reactors in the US that began construction between 1971 and 1978 and were mid-construction during the Three Mile Island accident experience a rapid increase in cost. No new reactors started construction after 1978. This is in contrast to the reactors in France that experience lower and stable costs. The cost experience of Canada and Germany follows patterns that are in between the US and France, with mild cost escalation for reactors that began construction around 1970, and then atypically high costs for the last few reactors beginning construction in the early 1980s.

The experiences of Japan, India, and Korea help fill in the picture past 1980. In Japan, costs also fall and escalate in a pattern similar to Western countries, but with a lag of about five years. The costs of Japanese reactors beginning construction in the 1980s rise above those in the 1970s, and become less consistent between reactors, but do not appear to follow an escalation trend.In India, costs increase from a low level and stabilize at the $2000/kW level. Finally, in Korea, where nuclear power was adopted much later than all six other countries, construction costs follow a steady decline.

While recent work has focused on presenting cost histories and not analysing potential drivers of cost trends, several possible explanations are observable. In addition to the lower costs seen by the later adopters of nuclear power, countries that emphasised design standardisation, such as in France and Korea, see more stable costs. Countries that consistently built reactors in pairs, or larger sets at the same site, such as France, Canada, and Korea, see lower costs than in the USA, Japan, and Germany.

Is there something unique about Nuclear?

Other energy technologies have experienced similarly dramatic rises and falls in cost. There is a large difference in learning curves between small-scale modular energy technologies like solar panels and wind turbines and large energy infrastructure projects like nuclear reactors and hydroelectric dams.
The construction cost history of nuclear power is significantly more varied than that of solar photovoltaics.

While it is clear the construction cost of nuclear power has experienced periods of rapid escalation in several countries, there are also two periods in nuclear power construction history where costs declined sharply and at steep exponential rates comparable to those experienced by solar photovoltaics: the
early development of nuclear power up to 100 GW, and the recent experience of Korea.

The massive declines in nuclear construction costs in their early development suggest the critical role of cost drivers other than learning-by-doing for nuclear power, such as R&D, economies of unit scale, and economies of production scale. The latest experience in South Korea, with its standardised design and stable regulatory regime, suggests the possibility of learning-by-doing in nuclear power.The cost experiences of Japan and Korea at the latter end of nuclear power construction history raise the possibility of spillover and learning from the earlier experiences in other countries such as the US and France.

Conclusion

While several countries show increasing costs over time – with the US as the most extreme case – other countries show more stable costs in the longer term and cost declines over specific periods in their technological history. Moreover, one country, South Korea, experiences sustained construction cost reductions throughout its nuclear power experience. The variations in trends show that the pioneering experiences of the US or even France are not necessarily the best or most relevant examples of nuclear cost history.

These results show that there is no single or intrinsic learning rate that we should expect for nuclear power technology, nor an expected cost trend. How costs evolve over time appears to be dependent on different regional, historical, and institutional factors at play. The large variance we see in cost trends over time and across different countries – even with similar nuclear reactor technologies – suggests that cost drivers other than learning-by-doing have dominated the cost experience of nuclear power construction. Factors such as utility structure, reactor size, regulatory regime, and international collaboration may play a larger effect. Therefore, drawing any strong conclusions about future nuclear power costs based on one country’s experience – especially the US experience in the 1970s and 1980s – would be ill-advised and while construction cost is the largest component of the cost of nuclear power, other trends in factors such as operational and maintenance costs, fuel, operational efficiency, and capacity factor have significant influence on costs.

References
  1. Historical construction costs of global nuclear power reactors – Jessica R. Lovering a,n, Arthur Yip a,b, Ted Nordhaus, Energy Policy (2015)
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