On the cost of generating electricity from nuclear power

Based on technical data recently published by the IEA-NEA report "Projected Costs of Generating Electricity" (2010), this work provides a theoretical and an empirical cost analysis of generating electricity from nuclear and fossil sources (coal and natural gas). The aim is to determine the "Levelised Cost of Electricity" (LCOE) in a merchant financing context. To complete the reference framework, we also discuss an empirical analysis of the cost of generating electricity performed on the U.S.A. technical data reported in the MIT study "Update on the Cost of Nuclear Power" (2009). In fact, MIT results seem to underestimate electricity generating costs especially if they are compared with those contained in the previous report "The Future of Nuclear power" (2003). The obtained results show that in a policy framework characterized by uncertainty on energy development programs, nuclear power does not seem to be competitive with respect to fossil sources even in presence of emission credits. The paper also provides a sensitivity analysis of LCOE with respect to the cost of capital, accounting for the level of risk perceived by investors, and with respect to the initial debt-ratio of the investment, in order to put in evidence the main factors affecting the economic viability of nuclear power in a merchant financing context. A section on the "social" costs of generating electricity concludes the work.

Keywords: Nuclear power, levelised cost of electricity

Jel codes: L94, G31, Q40, M2

Carlo Mari, Sui costi di generazione dell’energia elettrica da fonte nucleare in "ECONOMICS AND POLICY OF ENERGY AND THE ENVIRONMENT" 3/2010, pp 141-65, DOI: 10.3280/EFE2010-003008