Finnish Nuclear Plant
Dear Kaisa,
Thank you for the comments, and the comments to some of the numbers I have been using.
First of all: I agree that the questions on safety, liability, and waste are the most essential for the public, and should be in the front of our argumentation. On then other hand, I think economy is another line of argumentation that we should not leave to the nuclear promoters.
As an example: In the Danish debate, the questions on safety and waste turned the public opinion against nuclear power; but when the nuclear economy turned bad (in the 80's), the power companies also turned away from the option.
With the assumptions that you quote from the nuclear promoters (I include Technical University of
Lappeenrantaa in this group) and TVO, I also get 2.3 Eur-cent/kWh, if I include a waste handling cost of 0.3 Eur-cent/kWh. This does not mean that they are right, just that we use similar formulas to come from assumptions to results.
I still think the promoters'¨economic assumptions are questionnable to the extend where it questions the economy of the project:
-lifetime of 60 years is very long; no power reactor has been running for so long, technical problems after 30 years are not well known, and it is questionnable (to say it mildly) to base investment economies on such a long timeframe, assuming no major renovation costs (other than the O&M costs of 0.72 Eur-cent/kWh). Even 40 year is a long time to base economic calculations and investments on.
-decommissioning costs of less than 1 bill. Eur, for the largest reactor ever build? Given the large costs we see for decommissioning of much smaller reactors, this also seems a quite optimistic assumption.
-capacity factor of 95% for the first one of a new reactor type? Even though existing well-run reactors have realised such figures, I will questions it for a new reactor type, at least for the first decade. Maybe my 85% is pessimistic for the lifetime-average; but not necessarily longer from the truth than the 95%.
- fuel costs of 0.27 Eur-cent/kWh? Did they include the large increases in uranium prices in the last half year? Well, I am not an expert in this fields myself; but I have tried to use the WISE-Uranium cost calculator with present uranium prices to get a fair price, and having a more realistic price than nuclear promoter usually use for this, including waste costs.
-interest rate of 2.8% p.a? Either this is with variable interest rate, in which case it is likely to be higher over the project as we have historic low interest rates currently, or it is subsidised loans (I am involved in a project where we get a loan with 3.3% interest for 5-year fixed period, the 20-year fixed rate is about 4%, both for loans to entities with credit rating aaa. Anything better than that are subsidies - and have already been the reason for a complaint from EREF on the project)
I agree that the 6% interest I use is above the current interest rate paid for entities with high credit ratings and interest fixation not exceeding 30 years; but the 2.8% is very low. Anyway, the 2 bill. loan only cover a bit more than half the investment requirements. If the rest is TVO's own money, will they accept a rate of return around 2.8% of their internal investments?
Beside this, If we could get loans with 2.8% p.a. fixed interests, we could make a lot of cheap renewable energy and energy efficency.
All in all, I think there are good reasons to keep most of my assumptions, maybe except of the O&M of 0.9 Eur-cent/kWh (that could be reduced to 0.72Eur-cent/kWh). This gives a power price of 3.5 - 4.1 Eur-cent/kWh, with realistic interest rates of 4-6% for these long-term investments. This is well above the 2.3 Eur-cent/kWh expected by TVO, and also above historic Nordpool prices.
Another issue is that the expected power production will be 12 TWh/year (or more if you use 95% capacity factor), which is - as far as I understand - well above the Finnish power import, and therefore above the actual demand for new capacities in Finland, an issue that will reduce the value of the production compared with smaller capacity additions of e.g. renewable energy that might produce more expensive power/kWh, but will still be better for the system economy as they can better meet demand over time.
For these reasons, I think TVO might not have done such a good deal that they think they have, even if they manage to deposit their waste and avoid nuclear catastrophies. And it would certainly not be the first time a nuclear investor has made that mistake.
Comments are very welcome.
Best wishes,
Gunnar, INFORSE-Europe
Thank you for the comments, and the comments to some of the numbers I have been using.
First of all: I agree that the questions on safety, liability, and waste are the most essential for the public, and should be in the front of our argumentation. On then other hand, I think economy is another line of argumentation that we should not leave to the nuclear promoters.
As an example: In the Danish debate, the questions on safety and waste turned the public opinion against nuclear power; but when the nuclear economy turned bad (in the 80's), the power companies also turned away from the option.
With the assumptions that you quote from the nuclear promoters (I include Technical University of
Lappeenrantaa in this group) and TVO, I also get 2.3 Eur-cent/kWh, if I include a waste handling cost of 0.3 Eur-cent/kWh. This does not mean that they are right, just that we use similar formulas to come from assumptions to results.
I still think the promoters'¨economic assumptions are questionnable to the extend where it questions the economy of the project:
-lifetime of 60 years is very long; no power reactor has been running for so long, technical problems after 30 years are not well known, and it is questionnable (to say it mildly) to base investment economies on such a long timeframe, assuming no major renovation costs (other than the O&M costs of 0.72 Eur-cent/kWh). Even 40 year is a long time to base economic calculations and investments on.
-decommissioning costs of less than 1 bill. Eur, for the largest reactor ever build? Given the large costs we see for decommissioning of much smaller reactors, this also seems a quite optimistic assumption.
-capacity factor of 95% for the first one of a new reactor type? Even though existing well-run reactors have realised such figures, I will questions it for a new reactor type, at least for the first decade. Maybe my 85% is pessimistic for the lifetime-average; but not necessarily longer from the truth than the 95%.
- fuel costs of 0.27 Eur-cent/kWh? Did they include the large increases in uranium prices in the last half year? Well, I am not an expert in this fields myself; but I have tried to use the WISE-Uranium cost calculator with present uranium prices to get a fair price, and having a more realistic price than nuclear promoter usually use for this, including waste costs.
-interest rate of 2.8% p.a? Either this is with variable interest rate, in which case it is likely to be higher over the project as we have historic low interest rates currently, or it is subsidised loans (I am involved in a project where we get a loan with 3.3% interest for 5-year fixed period, the 20-year fixed rate is about 4%, both for loans to entities with credit rating aaa. Anything better than that are subsidies - and have already been the reason for a complaint from EREF on the project)
I agree that the 6% interest I use is above the current interest rate paid for entities with high credit ratings and interest fixation not exceeding 30 years; but the 2.8% is very low. Anyway, the 2 bill. loan only cover a bit more than half the investment requirements. If the rest is TVO's own money, will they accept a rate of return around 2.8% of their internal investments?
Beside this, If we could get loans with 2.8% p.a. fixed interests, we could make a lot of cheap renewable energy and energy efficency.
All in all, I think there are good reasons to keep most of my assumptions, maybe except of the O&M of 0.9 Eur-cent/kWh (that could be reduced to 0.72Eur-cent/kWh). This gives a power price of 3.5 - 4.1 Eur-cent/kWh, with realistic interest rates of 4-6% for these long-term investments. This is well above the 2.3 Eur-cent/kWh expected by TVO, and also above historic Nordpool prices.
Another issue is that the expected power production will be 12 TWh/year (or more if you use 95% capacity factor), which is - as far as I understand - well above the Finnish power import, and therefore above the actual demand for new capacities in Finland, an issue that will reduce the value of the production compared with smaller capacity additions of e.g. renewable energy that might produce more expensive power/kWh, but will still be better for the system economy as they can better meet demand over time.
For these reasons, I think TVO might not have done such a good deal that they think they have, even if they manage to deposit their waste and avoid nuclear catastrophies. And it would certainly not be the first time a nuclear investor has made that mistake.
Comments are very welcome.
Best wishes,
Gunnar, INFORSE-Europe
posted by Marcel at 7:12 AM
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