Does sticker shock matter?
How expensive are new reactors? Very expensive. The Southern Company (NYSE:SO) is building two new reactors — the first approved in the United States since 1978 — at its Vogtle nuclear facility in Georgia for a cost of about $15.1 billion. The company received an $8.3 billion loan from the Department of Energy in 2010, which leaves ratepayers with the remaining $6.8 billion.
There has been some debate over how those funds are collected. Regulators weren’t very happy last week when Southern announced that costs would be about $737 million higher than initial estimates (included in the cost I mentioned). That’s not nearly as bad as Progress Energy, now owned by Duke Energy Corp (NYSE:DUK) , which has poached $819 million from customers in recent years for two nuclear projects. One was cancelled, and the other has yet to receive the green light from the Nuclear Regulatory Commission.
Now, that is certainly a lot of money, and I don’t agree with charging customers for facilities that have yet to be approved, but investors and consumers should know that construction costs represent the overwhelming majority of the price of a nuclear facility over its lifetime. Consider the comparison of fuels:
| Fuel | Price Per kg | Uranium Energy Density Factor | Adjusted Fuel Cost Per Energy Factor |
|---|---|---|---|
| Enriched uranium (4%) | $680 | 1.00 | $680 |
| Appalachian Coal | $0.065 | 20,000 | $1,300 |
| Natural gas | $125.36 (per thousand cu. m) | 13.2 (per thousand cu. m) | $1,654 |
Sources: World Nuclear Association, Department of Energy.
These numbers don’t account for transportation costs, which are a much bigger expense for coal than for natural gas or uranium. Nonetheless, they show that the cost of fueling a nuclear reactor is far cheaper, and less volatile, than running a fleet of natural gas turbines or coal-powered thermal reactors. Take this snip from Exelon Corporation (NYSE:EXC)’s 2012 Annual Report:
The fuel costs for nuclear generation are less than for fossil-fuel generation. Consequently, nuclear generation is generally the most cost-effective way for (our generation business) to meet its wholesale and retail load servicing requirements. The cycle of production and utilization of nuclear fuel includes the mining and milling of uranium ore into uranium concentrates, the conversion of uranium concentrates to uranium hexafluoride, the enrichment of the uranium hexafluoride, and the fabrication of fuel assemblies.
The company’s estimated capital expenditures for 2013 also highlight the operating disparities. Nuclear plants will require just $7,150 per GWh, while renewable and fossil-fuel generation will require $141,000 per GWh and $36,000 per GWh, respectively.
Foolish bottom line
Is electricity produced from nuclear power really more expensive than other sources? It depends on how you look at it. The Organization for Economic Cooperation and Development, or OECD, released a study in 2010 comparing worldwide electricity rates for the lifetime of various energy sources. It concluded that nuclear power plants provide the cheapest energy across the board, except for specialized cases of large-scale hydroelectric power.
Think about it like this: Would the Nuclear Regulatory Commission have 28 pending applications for new reactors on its desk if nuclear posed such a disadvantage? Over the long term, nuclear is a cheaper, more efficient, and more dependable generation source than any other energy source at our disposal. In fact, a nuclear reactor’s ability to provide steady base load power during peak usage times actually helps stabilize the grid for customers. Remember that the next time you turn on a light.
The article Is Nuclear Power Really More Expensive? originally appeared on Fool.com and is written by Maxx Chatsko.
Fool contributor Maxx Chatsko has no position in any stocks mentioned. Check out his personal portfolio, his CAPS page, or follow him on Twitter, @BlacknGoldFool, to keep up with his writing on energy, bioprocessing, and emerging technologies.The Motley Fool recommends Exelon and Southern.
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