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CO2 abatement cost with electricity generation options in Australia

Guest Post by Peter Lang. Peter is a retired geologist and engineer with 40 years experience on a wide range of energy projects throughout the world, including managing energy R&D and providing policy advice for government and opposition. His experience includes: coal, oil, gas, hydro, geothermal, nuclear power plants, nuclear waste disposal, and a wide range of energy end use management projects.

A 10-page printable PDF version of this post can be downloaded here.

An Excel worksheet showing the calculations (allowing you to change inputs/assumptions) is also available.

Introduction

What is the cost of carbon dioxide (CO2) emissions abatement with the various electricity generation technologies being considered for Australia?

The abatement cost of a technology depends on many factors such as the engineering characteristics of the electricity grid to which the new technology will be connected, the geographic location and many others.  One important factor often not mentioned is the reference case against which the abatement cost is calculated.  The abatement cost for a new technology is only meaningful when compared with another new technology or with an existing generator it would ‘displace’; e.g. nuclear compared with a new coal power station or nuclear compared with an existing power station.

The Electric Power Research Institute (EPRI, 2010) report http://www.ret.gov.au/energy/Documents/AEGTC%202010.pdf for the Australian Department of Resources, Energy and Tourism provides data that allows CO2 abatement costs to be estimated for a range of new technologies. Unfortunately, the report is complex and opaque in parts.

The purpose of this paper is twofold:

  1. to summarise in tabular form the relevant information from the EPRI report so others can access it easily and produce levelised cost of electricity (LCOE) figures under differing assumptions, particularly using the NREL LCOE calculator http://www.nrel.gov/analysis/tech_lcoe.html .
  1. to calculate and compare the CO2 abatement costs for a range of new technologies for each of three ‘displaced’ technologies.

This paper does not attempt to calculate the effects of carbon price on the LCOE or CO2 abatement costs, because:

1)     the EPRI report does not include the effects of carbon price — nor feed in tariffs, renewable energy certificates and other subsidies — so incorporating the effect of CO2 pricing, and other incentives and disincentives in the analysis would require many additional assumptions, and

2)     the purpose of this paper is to show the abatement costs for the various technologies so options can be compared and so the cost of incentives and disincentives (including carbon pricing), which would be needed to make each technology viable, can be made visible.

Methodology

The CO2 abatement cost is calculated for seven new electricity generation technologies, selected from the EPRI report.  The seven new technologies are:

  1. Coal (black, without CCS).
  1. Coal (black, with CCS)
  1. Nuclear
  1. CCGT (Combined Cycle Gas Turbine)
  1. OCGT (Open Cycle Gas Turbine)
  1. Wind (wind class 5, 100 x 2 MW)
  1. Solar thermal (Central Receiver, 6h storage, DNI = 6)

The abatement cost for each is calculated by comparison with each of three ‘displaced’ technologies:

  1. Hazelwood, brown coal power station, Victoria (1,600 MW, commissioned 1964 to 1971)
  1. Liddell (see photo above), black coal power station, NSW (2,000 MW, commissioned 1971 to 1973)
  1. A new black coal plant, withoutCCS; (this is same as #1 in the list of new technologies).

Most input data are taken from EPRI (2010) http://www.ret.gov.au/energy/Documents/AEGTC%202010.pdf ; these are summarised in Appendix 1.  To bring the figures up to date and to aid in international comparisons, costs presented in Table 1 have been converted from 2009 A$ to 2011 US$; these are in Appendix 2.  Details of the costings, including the exchange rates and inflation rates used, are included. The calculation steps and results are presented.

CO2 Abatement Cost is the difference in LCOE divided by the difference in CO2 emission intensity (EI):

CO2 abatement Cost = (LCOEnew – LCOEdisplaced) / (EIdisplaced – EInew)

The data needed for calculating LCOE for each technology, using the NREL simplified LCOE calculator http://www.nrel.gov/analysis/tech_lcoe.html, are provided in the Appendices.

The capital cost is one of the inputs needed for the LCOE calculation.  The capital cost figure needed is the Total Capital Required (TCR). But theTCRfigure is not given in the EPRI report.  As such, the method of estimating it, including the inputs and intermediate calculation results, are presented in Appendix 1.

The CO2 emissions intensity (EI) presented in the EPRI report includes only the emissions from burning the fuel in the generator. Fugitive emissions are not included.  Nor do the emissions intensities include the higher emissions intensities produced when load-following; e.g. when cycling power up and down to back-up for intermittent renewable energy generators.

The emissions intensities (EI) for Liddell and Hazelwood power stations are 1.08 t/MWh and 1.53 t/MWh (sent out) respectively (ACIL-Tasman (2009), Table 18 http://www.aemo.com.au/planning/419-0035.pdf ).  These EIs include fugitive emissions (whereas the EPRI EIs do not). This causes an error in the calculated abatement costs. In the ACIL Tasman report, fugitive emissions comprise 10% to 27% of EI for gas, 2% to 9% for black coal and 0.3% for brown coal.

The LCOE for Liddell and Hazelwood are ‘Commercial in Confidence’, so I’ve used $30 and $28 respectively, which are figures I’ve seen stated for the ‘equivalent LCOE’ for the remaining plant life.

Results

The CO2 abatement costs are summarised in Figure 1.

Figure 1: CO2 abatement cost for seven selected new technologies (named on the horizontal axis) compared with each of three ‘displaced’ technologies (named in the legend).   Abatement costs are in US$/tonne CO2 (constant, 2011US$).

The inputs and intermediate calculation results are in Appendix 1 (in 2009 A$) and Appendix 2 (in 2011 US$). The data in Figure 1 is from Table A2-5.

Table A1-2 and A2-2 show the proportion of “Capital” (i.e. TCR) that EPRI apparently assumed for ‘Owners Costs’, including ‘Allowance for Funds Used During Construction’ (AFUDC).

The ratio TCR/TPC is given in Tables A1-3 and A2-3.  This ratio shows how much higher the TCR is than TPC for each technology.  For example, for nuclear the TCR is 1.93, or 93% greater than TPC.

Discussion

This report uses the EPRI (2010) figures for LCOE and emissions intensity.  These are the figures being used in Australian government reports such as ABARE (2010) and for the Treasury modelling of the carbon tax and ETS.  Some discussion of the figures and assumptions is warranted.

The Total Plant Cost figure in the EPRI report is confusing because it is not the full capital cost used to calculate LCOE.  The capital cost figure needed for calculating LCOE is the Total Capital Required, which includes Owner’s Costs.  Back-calculating from the figures provided reveals the amount of Owner’s Costs EPRI used in their LCOE analyses. This cost is significant. It is 93% higher than the Total Plant Cost for nuclear, 88% higher for CCGT, 45% higher for coal, and 41% higher for solar thermal. The EPRI report does not make clear the basis of the Owner’s Costs or the assumptions. For example, the construction period is not stated?

EPRI uses 85% for the average lifetime capacity factor for mature technologies such as coal, gas and nuclear. However it also uses 85% for immature technologies such as carbon capture and storage, and assumes capacity factors for Wind (36.6%) and Solar Thermal (31.6% with 6 hours storage) that appear to be based on the best possible figures, rather than the average achievable over a plant’s life. It is difficult to understand how these capacity factors could be realized in practice over the plant life.

The emissions intensities do not include fugitive emissions and appear to be for the technology running at optimum efficiency, rather than average efficiency. The abatement costs for Wind and Solar are probably understated, because the capacity factors assumed seem to be unreasonably high.

The reason the OCGT abatement costs are high is because EPRI used a capacity factor of 10% for the calculation of LCOE.  This is because OCGT is economic at capacity factors up to about 14% due to its high fuel costs (IPART, 2004, Exhibits 1-2 and 1-3 http://www.ipart.nsw.gov.au/documents/Pubvers_Rev_Reg_Ret_IES010304.pdf )

If we assume wind or solar are backed up with OCGT, it is clear, without needing to do detailed calculations, that wind and solar with back-up are a high-cost way to avoid emissions.

Of the options considered, CCGT is clearly the least cost way to abate CO2 emissions.  For example, if we are making a decision about new baseload capacity we might compare between a new baseload coal plant withoutCCSand other options.  From Figure 1, the CO2 abatement cost, compared with new black coal, is $44/t CO2 for CCGT and $107/t CO2 for nuclear.

Based on the EPRI figures, nuclear cannot be justified inAustraliaat this time because it is too expensive.   For nuclear to be an economically viable option, the impediments that are causing the EPRI estimates for the cost of nuclear in Australia to be several times higher than in Korea need to be removed.

Conclusions

Of the options considered, CCGT is clearly the least cost way to abate CO2 emissions, given the EPRI assumptions.

The abatement cost with CCGT is about 40% of the abatement cost with nuclear.

Based on EPRI’s estimates, nuclear is not economically viable in Australia because it is too expensive.  This situation will remain while the impediments to low-cost nuclear remain in place.

Glossary

OCGT – Open Cycle Gas Turbine

CCGT – Combined Cycle Gas Turbine

CCS – Carbon Capture and Sequestration

CST – Concentrating Solar Thermal

EPRI – Electric Power Research Institute

NREL – National Renewable Energy Laboratory

LCOE – Levelised Cost of Electricity

TCR – Total Capital Required

TPC – Total Plant Cost

AFUDC – Accumulated [or Allowance for] Funds Used During Construction (Capitalised Interest)

References

ABARE (2010), Australian Energy Projections to 2029-30: http://adl.brs.gov.au/data/warehouse/pe_abarebrs99014434/energy_proj.pdf

ACIL-Tasman (2009), Fuel resource, new entry and generation costs in the NEM: http://www.aemo.com.au/planning/419-0035.pdf

EPRI (2010), Australian Electricity Generation Technology Costs – Reference Case 2010: http://www.ret.gov.au/energy/Documents/AEGTC%202010.pdf

Independent Pricing and Regulatory Tribunal (2004) The long run marginal cost of electricity generation in NSW: http://www.ipart.nsw.gov.au/documents/Pubvers_Rev_Reg_Ret_IES010304.pdf

NREL (2011), Levelized Cost of Energy Calculator: http://www.nrel.gov/analysis/tech_lcoe.html

South CarolinaElectric & Gas Company (2011), VC Summers Nuclear Station Units 2 and 3 (June 30, 2011): http://www.scana.com/NR/rdonlyres/A830A131-9425-46F1-B948-C8424530EE49/0/2011Q2BLRAReport.pdf

Appendix 1 – Input data and intermediate calculation results with costs in ‘constant 2009 A$’

Appendix 1 summarises the significant data from the EPRI (2010) report for the seven technologies selected for this study.  Costs are in ‘constant, mid-2009 A$’.

Table A1-1 lists the values needed for input to the NREL LCOE Calculator, http://www.nrel.gov/analysis/tech_lcoe.html .

The Capital Cost figure listed in Table A1-1, needed for calculating LCOE, is ‘Total Capital Required’ (TCR). But the TCR figure is not given in the EPRI report.  So it must be back-calculated from the other data available in the report. The EPRI report provides the breakdown of LCOE by Capital, O&M and Fuel (Tables A1-2 and A2-2). This data was used to calculate the value EPRI used for TCR. The results are in Tables A1-3 and A2-3.  These tables also give the ratio TCR/TPC. This shows how much higher the TCR is than TPC for each technology.  For example, for nuclear the TCR is 1.93, or 93% greater than TPC, whereas for coal it is 48%.

Appendix 2 – Input data and intermediate calculation results with costs in ‘constant 2011 US$’

The cost figures in Appendix 1 are in ‘constant, mid-2009 A$’.  In Appendix 2 they have been converted to ‘constant, mid-2011 U$’.  The conversion factors are in Table A2-6.

Table A2-1 lists the values needed for input to the NREL LCOE Calculator.

By Barry Brook

Barry Brook is an ARC Laureate Fellow and Chair of Environmental Sustainability at the University of Tasmania. He researches global change, ecology and energy.

262 replies on “CO2 abatement cost with electricity generation options in Australia”

These studies are meaningless because CCS fails a simple legal test. Utilities do not want to be held responsible for causing water table damage through litigation or even just the threat of litigation could bankrupt a power company. Recently President Obama (being a lawyer) was advised that the US should not provide guarantees holding owners of CCS not responsible for environmental damage by their projects. Therefore CCS fails an important test right off the bat. The above cost comparisons are meaningless because the technology cannot move forward legally. That leaves only the nuclear option which has its own set of risks that may be viewed as too risky or may be viewed as being managable depending on who you talk to. I personally think the risks can be minimized and are managable. The risk of our extinction by not developing nuclear power is huge and far outweighs the nuclear accident risk. Taking these points into account shows that coal is dead and nuclear has a necessary future. Solar is a toy we can play with – if you can afford it. Wind is too erratic to be the major source of energy in our overall power supply.

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1)This is interesting and I agree that it would be desirable to understand what adds to the cost of nuclear in many countries. Regulatory regimes are certainly very different and looking at NRC, for example, you get the feeling that they see their primary duty to be an obstacle for the construction of new NPPs in US rather than as a facilitator of (more) safe nuclear power.

2)The assumed gas prices seemed rather conservative and in a world where half the planet thinks gas is a cheap and easy way to lower CO2 emissions and where oil production might be peaking, I think the assumed prices can be reasonably questioned.

3)Finally, while I think this type of estimates have their own uses they also have serious shortcomings since they fail to ask whether to choosen alternative actually gets the job done. Emissions reductions we get from using gas (even when ignoring methane leakage) are too small by far. Also, CCS doesn’t capture all the CO2 and what is left can quite easily be intolerable if we are to reach the kind of reductions IPCC talks about (…let alone more aggressive 350ppm goals). In the end the cost comparisons that are most meaningful with climate change in mind, are those between alternative energy infrastructures that do get the job done rather than between those getting us, for example, 30% closer to the target but leaving the underlying problem unsolved.

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Jani, you said “let alone more aggressive 350ppm goals”. 350 ppm is history. We are nearly at 400 ppm and going up. Stopping all CO2 release doesn’t get us back to a lower CO2 level since the total is cumulative. I sometimes wonder if a lot of people (350.org and our political leaders) think that dropping the CO2 production level also drops the total ppm level. If they think this, they just dont understand the cumulative nature of the total CO2 level. Because of this cumulative effect, all forms of CO2 production need to be eliminated as soon as possible. This concept is not yet in the mental psyche of people around the world. By the way I agree with all your points Jani.

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Jani, on your point 3, I think this is key.

If you are concerned with mitigating climate change rather than just CO2, then gas-fired power stations are not the right technology. This is because the difference between the reduced positive CO2 forcing [from fossil gas combustion and methane leakage] and the diminished negative aerosol forcing is roughly zero [see Wigley analysis], whereas for nuclear there is also the diminished aerosol forcing (like gas), but NOT a positive CO2 or methane forcing, hence the net effect is still a substantial negative forcing. Looking to the bottom line, it is the negative forcing that matters for climate change.

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Also, on CCS, we state in our Energy paper (Nicholson et al 2011):

For comparison with existing baseload technologies, coal plants without CCS have EIs between 762 and 1070 kg CO2eq/MWh and gas plants without CCS have EIs between 367 and 577 kg CO2eq/MWh (see Table 5). These results show that CCS can, in principle, reduce coal emissions per unit of energy delivered by approximately 80% and gas emissions by approximately 60%.

All EIs for low-carbon baseload plants are less than 250 kg CO2eq/MWh. However only nuclear power was able to deliver the 2050 average target EI of less than 70 kg CO2eq/MWh (see Section 1.2 for explanation). Of the FFS technologies, nuclear has the lowest EI by a factor of about six.
…
The use of carbon capture and storage (CCS) cannot currently address the 2050 EI target with existing capture and sequestration efficiencies. It can address the 2030 target (see Section 1.1), so could provide a transition solution, but it is unlikely to be the major baseload source by 2050 without significant technological breakthroughs.

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By Post Author

Gene, I haven’t followed 350ppm movement very closely, but my understading has been that they want to eventually see forest cover increasing again. This would tie down co2 from the atmosphere.

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This is from WAAAYYY out in left field but…you know….if we returned the entire state of Nebraska and Iowa back to Prairie (the Prairie of the American Great Plains were super rich, dense forms of vegetation. Grasses with extensive root systems, where the carbon is deposited) we could drain the atmosphere of CO2 back to 1900 levels. Just say’n :)

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I have attempted to find the average lifespan of Natural Gas fired turbines. My research, and i by no means maintain that it is comprehensive, suggests that it falls from 50,000 to 65,000 operational hours. Or at maximum, after about 8 years of continuous use the turbine must be replaced. 9 years if we assume a 90% capacity factor of nuclear power plants.

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The cost distortions that have been omitted are not trivial. CO2 will cost $23/t from next July rising to about $29 in 2015. After that the auctioned price could go higher or lower but with a floor of $15 if I recall. The Renewable Energy Certificate subsidy will average $39 per Mwh this year and should be added as a cost to wind and solar.

Other cost factors can go either way such as the exchange rate. Since nobody knows if CCS is viable cost estimates would gave to be suspect. Note that some favoured projects such as the ‘solar flagships’ will get 45% of their capital costs paid by the Federal govt with no interest or dividend payments required. Of particular importance to southern Australia will be the gas price. If nearby gas sources have to be replaced by distant sources current prices paid could double.

Cost of CO2 avoided may be a short term and not a long term decision criterion. US power company Exelon claims that gas is cheaper than new nuclear and even in carbon taxed Australia TRU Energy appears to favour gas for new projects. Is this gas lock-in a wise move for the future?

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The analysis is obviously nonsense because you are mitigating coal CO2 with coal. The cost of mitigating with nuclear cannot be as high as mitigating with coal because burning coal is not mitigating at all.

What we have to do to mitigate is to shut down coal and natural gas, not switch from coal to coal. Switching from coal to coal should show an infinite cost of mitigation.

There is an obvious misrepresentation in the cost of nuclear because nuclear is the cheapest and only way to actually mitigate.

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Gene Preston @ 2 November 2011 at 10:41 PM

I agree with your comments about CCS. However, this is just one of the seven new technologies considered, so I don’t understand how you can dismiss the other six comparisons as your first sentence says:

These studies are meaningless because CCS fails a simple legal test.

By the way, I added the “Black Coal with CCS” technology as an after-thought. I added it because of comments a few days ago which argued that any comparison with coal should be for coal with CCS.

Jani Martikainen, @ 3 November 2011 at 12:48 AM:

1) This is interesting and I agree that it would be desirable to understand what adds to the cost of nuclear in many countries. Regulatory regimes are certainly very different and looking at NRC, for example, you get the feeling that they see their primary duty to be an obstacle for the construction of new NPPs in US rather than as a facilitator of (more) safe nuclear power.

Thank you. This is the only comment so far that seems to have made an attempt to understand the paper and to get to grips with the reality – nuclear is too expensive to be viable at the moment.

2) The assumed gas prices seemed rather conservative

The fuel price assumptions are directly from the EPRI report. The EPRI report explains that is a large difference between west coast (high) and east coast (low) gas prices. They explain that it is not valid to average them, but since this is a study for Australia responding to the Australian Government’s terms of reference, that is what they did. I’d urge anyone who wants to argue about the EPRI assumptions to read the EPRI report first.

3) Finally, while I think this type of estimates have their own uses they also have serious shortcomings since they fail to ask whether to choosen alternative actually gets the job done.

That is a different issue. This paper is intended to compare some selected technologies, being advocated for Australia, on the basis of their cost of electricity and the cost of emissions abatement. We need to do this as a first step, before we apply incentives and disincentives, so we can see how large the incentives and disincentives would have to be to make each technology viable. This analysis shows that CCGT is the least cost way to reduce emissions at this point in time. If we want nuclear, we’d better start looking into what is making it too expensive.

Charles Barton @ 3 November 2011 at 4:09 AM

I have attempted to find the average lifespan of Natural Gas fired turbines.

The ‘book life’ for LCOE is usually taken to be 30 years in most of the studies I’ve seen. It is the period over which the capital cost is depreciated.

Please read the EPRI report to understand the EPRI assumptions.

John Newlands @ 3 November 2011 at 5:51 AM

The cost distortions that have been omitted are not trivial. CO2 will cost $23/t from next July rising to about $29 in 2015.

The CO2 tax and ETS legislation will most likely be repealed (in the opinion of many). It cannot survive in a world that is not heading to implement an international ETS, which it is not. But the CO2 tax and ETS is OT for this thread.

Asteroid Miner @ 3 November 2011 at 7:32 AM

The analysis is obviously nonsense because you are mitigating coal CO2 with coal.

You comment suggests you did not read the paper very carefully.

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Asteroid Miner, on 3 November 2011 at 7:32 AM said:

The analysis is obviously nonsense because you are mitigating coal CO2 with coal

You are mitigating a 1970’s sub critical coal fired plant with a 2010 super or ultra super critical coal fired plant. 25-28% efficiency vs 38% or 45% efficiency. It might not be as much a reduction in emissions as some would like but it would still represent a reduction.

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Let’s revisit the nuclear cost question again. I checked the EPRI report and found no mention of the Korean APR1400. Since the UAE deal for four reactors was signed in 2009, I wonder why the APR1400 was not included. The UAE deal was for four 1,400 MWe reactors at $20 billion (mostly fixed cost!). That gives 5.6 GWe divided by 20 billion US dollars for a cost per kW of $3570 or 25% less than used by EPRI.

Can someone verify that I am comparing apples to apples?

Are there cultural reasons Australians can not buy from Asians?

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Thanks for pulling this information together Peter.

The costs calculated in the analysis should be understood as the cost to remove the first tonne of CO2 emissions from the system. Lets not lose sight of our goal though: what is the cost of removing the last tonne of CO2 emissions from the system?

This cost is infinite for CCGT, OCGT, and black coal, because these technologies are simply not capable. It converges (perhaps diverges) towards a very large number for wind & solar, much larger than the EPRI cost used here.

Likewise coal + CCS appears to approach an arbitrarily large number as soon as we try to implement it – witness the closure of the UK’s last CCS scheme at Longannet in the same week as the closure of the only serious Australian CCS venture, Zerogen in QLD.

So for removal of the last tonne of emissions, rather than currently being more expensive, nuclear power is already the cheapest way to abate emissions from existing plant.

The ultimate value of any piece of analysis is, how does it inform or change any decision that we can make today? We could be making a decision today to build nuclear power. But we can only choose today to be building nuclear power in, say, 2020, because of the engineering and policy lead times. The choice between displacing Hazelwood with either nuclear or CCGT at today’s gas prices does not lie within our possible futures. The only choice that we get to make today is between displacing Hazelwood with either nuclear, or CCGT at 2020 fuel prices. And similarly for the other displacement options. And I’m prepared to accept John Newlands argument that gas will be much more expensive in 2020 than today.

(Call it the Special Theory of Political Relativity if you like – we can only make choices between events that could occur beyond a political implementation horizon that recedes from us at the speed of decision making.)

So even for removal of the first tonne of emissions, Peter’s analysis shows that it is highly likely that nuclear power is already the cheapest displacement choice we can make today.

We don’t need to make nuclear power cheaper, its already the cheapest available choice, today, for displacement of both the first and the last tonne of CO2 emissions.

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Solid analysis, the justifications behind inputs and assumptions look fair, after a quick gloss over them.

I have to agree with points by Jani Martikainen, Barry Brook and John Morgain, i.e. the need to mitigate climate change, not just the cost of removing the first tonne of CO2. It does seem a little pointless estimating the abatement cost of replacing coal without ccs with more efficient coal without ccs (why bother?).

I note that the EPRI report states “Overall EPRI anticipates the capital cost of a nuclear power plant deployed in 2030 will be 15% less than one built in 2015.” (I can’t find their justification for this figure?)

If you play around with the excel inputs to accomodate for this assumed decrease in capital cost (85% of $US114 = $US97), it changes the resulting LCOE from US$143 to US$126, which changes the CO2 abatement cost at Liddell (where abatement cost is highest) from US$105/t to US$89/t. I wonder if this is a fair estimate for the cost of (what John Morgan referred to as) removing the last tonne of CO2 from the system?

By the looks of these results, Hazelwood is certainly a first contender to be replaced (and rightfully so).

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Martin Burkle,

Thank you for your comments and questions.

I checked the EPRI report and found no mention of the Korean APR1400.

The EPRI report explains how they have estimated the cost for nuclear power in Australia. I’d urge BNCers to read and comprehend that if there aregument is with the EPRI estimates. However, I’d remide all that the EPRI figures are the ones htat have been commissioned by the Australian government and are being used in their modelling and analyses. So it is unlikely we will find a major flaw in them Therefore, I’d suggest it is best to work with the numbers currently available. Anyone wants to test different assumptions can download the Excel spreadsheet, vary the assumptions and see the effect.

Can someone verify that I am comparing apples to apples?

I believe the figure for capital cost of the UAE project and the EPRI ‘Total Capital Required” are equivalent figures. So yes, you are comparing apples with apples on that basis. But there appears to be many factors which would make nuclear far more expensive than in UAE, and more expensive than in USA. One of them is that Australian labour productivity is lower and labour rates are higher than in USA. According to EPRI the uplift factor is 1.73, so the labour costs for the Australian component would be 73% higher in Australia than in USA. See the EPRI report for the details and the breakdown.

Are there cultural reasons Australians can not buy from Asians?

There are no legislated “cultural reasons Australians can not buy from Asia”. But I suspect, there is a strong view at present Australia should align its nuclear regulation with the USA nuclear regulatory regime. I believe doing so would cause Australia to commit to high cost nuclear for many decades.

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Peter, Thanks for this analysis – at least it gives me a reason why the Govt keeps saying nuclear is too expensive, but I do admit that I don’t understand why “owner’s cost” for a nuclear plant should be 93% greater than the establishment cost in Aus which is several times higher than in Korea. Is this due to insurance? I would like to see how the Northern Power Station at Port Augusta in my home state compares. I have heard it is even dirtier than Hazelwood. It has a power output of 520-544MW and emits 3.6 million tonnes of greenhouse gas a year. I have been expecting that Alinta will replace it with an Open Cycle natural gas turbine plant using Moomba gas. Of course it is not a bad location for our first nuclear plant, producing desal water for the Roxby mine.

Re solar, I have always been skeptical of it as a large scale power source since I experienced first hand the White Cliffs 50kW Solar Power station in the late 1980s. It was more often down and using diesel backup than operating. Maybe solar is more reliable these days.
John Patterson

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Peter Lang: WRONG: “nuclear is too expensive to be viable at the moment”
“Power to Save the World; The Truth About Nuclear Energy” by Gwyneth Cravens, 2007:
Page 211: “In 2005, the production cost of electricity from nuclear power on average cost 1.72 cents per kilowatt-hour; from coal-fired plants 2.21; from natural gas 7.5, and from oil 8.09. American nuclear power reactors operated that year around the clock at about 90 percent capacity, whereas coal-fired plants operated at about 73 percent, hydroelectric plants at 29 percent, natural gas from 16 to 38 percent, wind at 27 percent, solar at 19 percent, and geothermal at 75 percent.” The costs per kilowatt hour for solar and wind are 600 or more times the cost for coal, and that is in sunny and windy places, respectively.

Asteroid Miner @ 3 November 2011 at 7:32 AM
The analysis is obviously nonsense because you are mitigating coal CO2 with coal.
You comment suggests you did not read the paper very carefully.

So you would cure morphine addiction with heroin? It is as obvoius as the emperor’s new clothes that you can’t eliminate CO2 production by burning coal. Also from Cravens:

Page 13 has a chart of greenhouse gas emissions from electricity production. Nuclear power produces less greenhouse gas [CO2] than any other source, including coal, natural gas, hydro, solar and wind. Building wind turbines and towers also involve industrial processes such as concrete and steel making.

Wind turbines produce a total of 58 grams of CO2 per kilowatt hour.

Nuclear power plants produce a total of 30 grams of CO2 per kilowatt hour, the lowest.

Coal plants produce the most, between 966 and 1306 grams of CO2 per kilowatt hour.

Solar power produces between 100 and 280 grams of CO2 per kilowatt hour.

Hydro power produces 240 grams of CO2 per kilowatt hour.

Natural gas produces between 439 and 688 grams of CO2 per kilowatt hour.
(Deleted inflammatory remark.)

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harrywr2, on 3 November 2011 at 8:11 AM: “25-28% efficiency vs 38% or 45% efficiency. It might not be as much a reduction in emissions as some would like but it would still represent a reduction.”

That much reduction would be irrelevant. We are already into dangerous territory. We are above 350 ppm and above 450 ppm equivalent, with CH4 bubbling out of the Arctic ocean and CH4 bubbling out of the peat bogs thawing in the tundra.

If we don’t act immediately and take draconian action, we humans could be extinct by 2060.   This is not a joke.

Please read:  http://onlinelibrary.wiley.com/doi/10.1002/wcc.81/full
“Drought Under Global Warming: a Review”

See the maps of drought in the 2060s on page 15.

http://www.realclimate.org/index.php/archives/2011/10/the-moscow-warming-hole/
http://thinkprogress.org/romm/2011/10/26/353997/nature-dust-bowlification-food-insecurity
http://www.pnas.org/content/early/2011/10/18/1101766108.abstract
http://www.sciencemag.org/content/early/2011/03/16/science.1201224

Click to access statistics.pdf

http://climateprogress.org/2010/10/20/ncar-daidrought-under-global-warming-a-review/
http://climateprogress.org/2010/12/14/southwest-drought-global-warmin/
http://climateprogress.org/2011/01/20/lester-brown-extreme-weather-climate-change-record-food-prices/

“Preliminary Analysis of a Global Drought Time Series”  by Barton Paul Levenson, not yet published. Under BAU [Business As Usual], agriculture and civilization will collapse some time between 2050 and 2055 due to drought caused by GW [Global Warming].

See:
“Ecological Footprints and Bio-Capacity: Essential Elements in Sustainability Assessment”  by William E. Rees, PhD, University of British Columbia and “Living Planet Report 2008” also by Rees.

We went past the Earth’s permanent carrying capacity for humans some time in the 1980s.   We are 20%+ over our limit already.   And the US no longer has excess biocapacity.   We are feeding on imports. 4 Billion people will die because we are 2 Billion over the carrying capacity. An overshoot must be followed by an undershoot.

Reference: “The Long Summer” by Brian Fagan and “Collapse” by Jared Diamond.   When agriculture collapses, civilization collapses.   Fagan and Diamond told the stories of something like 2 dozen previous very small civilizations.   Most of the collapses were caused by fraction of a degree climate changes.   In some cases, all of that group died.   On the average, 1 out of 10,000 survived.    We humans could go EXTINCT in 2051.   The 1 out of 10,000 survived because he wandered in the direction of food.   If the collapse is global, there is no right direction.

1. We must take extreme action now.   Cut CO2 production 40% by the end of 2015.   [How to do this:  Replace all coal fired power plants with factory built nuclear and renewables.]   Continuing to make CO2 is the greatest imaginable GENOCIDE.   We have to act NOW.   Acting in 2049 will not work.   Nature just doesn’t work that way.   All fossil fuel fired power plants must be shut down and replaced with nuclear and renewables.   Target date: 2015.

2. Expect at least 4 Billion people to die because of the population overshoot. Attempt to maintain some form of civilization while this happens.

How are we feeding 7 billion now? On “mined” water. Aquifers are running dry. When the aquifers are dry, the food is gone.

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For small factory built nuclear power reactors see:
http://www.world-nuclear.org/info/inf33.html
Notice that several are made in the USA.

Small Nuclear Power Reactors
Name Capacity Type Developer
KLT-40S 35 MWe PWR OKBM, Russia
VK-300 300 MWe BWR Atomenergoproekt, Russia
CAREM 27 MWe PWR CNEA & INVAP, Argentina
IRIS 100-335 MWe PWR Westinghouse-led, international
Westinghouse SMR 200 MWe PWR Westinghouse, USA
mPower 125 MWe PWR Babcock & Wilcox, USA
SMART 100 MWe PWR KAERI, South Korea
NuScale 45 MWe PWR NuScale Power, USA
HTR-PM 2×105 MWe HTR INET & Huaneng, China
PBMR 80 MWe HTR Eskom, South Africa
GT-MHR 285 MWe HTR General Atomics (USA), Rosatom (Russia)
BREST 300 MWe FNR RDIPE, Russia
SVBR-100 100 MWe FNR Rosatom/En+, Russia
Hyperion PM 25 MWe FNR Hyperion, USA
Prism 311 MWe FNR GE-Hitachi, USA
FUJI 100 MWe MSR ITHMSO, Japan-Russia-USA

Hyperion from Arizona, USA has quoted me a retail cost of 5.5 cents per kilowatt hour. http://www.hyperionpowergeneration.com/
================

For Advanced Nuclear Power Reactors see:
http://www.world-nuclear.org/info/inf08.html

Third-generation reactors have:
a standardised design for each type to expedite licensing, reduce capital cost and reduce construction time,
The US Nuclear Regulatory Commission (NRC) gave final design certification for both in May 1997, noting that they exceeded NRC \”safety goals by several orders of magnitude\”.
The Westinghouse AP600 gained NRC final design certification in 1999 (AP = Advanced Passive).
These NRC approvals were the first such generic certifications to be issued and are valid for 15 years. As a result of an exhaustive public process, safety issues within the scope of the certified designs have been fully resolved and hence will not be open to legal challenge during licensing for particular plants. US utilities will be able to obtain a single NRC licence to both construct and operate a reactor before construction begins. etc.

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John Morgan, 3 November 2011 at 10:10 AM

Thank you for your comment. This response has got a bit long and convoluted, but I’ll post it anyway. I know you will get to the substance of it. :)

The costs calculated in the analysis should be understood as the cost to remove the first tonne of CO2 emissions from the system. Lets not lose sight of our goal though: what is the cost of removing the last tonne of CO2 emissions from the system?

I disagree with your statement of the goal. The goal of this paper is to compare the abatement costs of different technologies. That is the sort of decision being made about CCGT to replace Hazelwood and new coal or CCGT for NSW. The analysis uses the best currently available information, which was provided by EPRI and which is the basis for the government’s analyses.

You have stated a system wide goal. That is not what this paper focuses on. However, as an aside, I think your statement of the system goal is not correct. The system goal is “what is the discounted cost of removing, not the last tonne but the <average tonne, of CO2 emissions from the system”. On a discounted cost basis the cost of removing the first tonnes is the most important.

Removing the last tonne is at least 40 years away. At that time the inputs to the analysis will be different. Right now, we must make the decision between options on the basis of which option will give the least LCOE and least abatement cost for the life of the next plant to be built.

So for removal of the last tonne of emissions, rather than currently being more expensive, nuclear power is already the cheapest way to abate emissions from existing plant.

I disagree. Consider the process for making a decision at some time in the future. The process will be the same as now. The decision will be which plant to build. If existing plants such as Hazelwood or Liddell still exist, the analysis will be the same. If we are making a decision about adding new capacity, the abatement cost analysis will still be the same analysis.

I agree that purchase decisions must be made now on the best estimate of LCOE (and therefore of fuel prices) for the life of the plant. Most analyses take into account the forecast cost of fuel over the projection period, as does the ACIL-Tasman report (see Section 4.2 and Tables 44 and 48: http://www.aemo.com.au/planning/419-0035.pdf ). Also remember there has been a significant decline in US gas prices over the past few years (due to coal seam gas), and similar may happen in Australia. So gas price forecasts are uncertain. Debating that assumption is another issue.

The ultimate value of any piece of analysis is, how does it inform or change any decision that we can make today?

I agree.

It is clear nuclear is not economically viable in Australia at the moment, and will not be by 2020 unless we remove the impediments to low-cost nuclear. Most people doing the calculation are concluding just that. So if we want nuclear to be a realistic option, we need to investigate what needs to be done to allow it to be economic.

We could be making a decision today to build nuclear power. But we can only choose today to be building nuclear power in, say, 2020, because of the engineering and policy lead times. The choice between displacing Hazelwood with either nuclear or CCGT at today’s gas prices does not lie within our possible futures. The only choice that we get to make today is between displacing Hazelwood with either nuclear, or CCGT at 2020 fuel prices.

This is basically an argument about the projected gas price assumptions for 2020 and for the plant life. I agree that if we change EPRI’s assumptions it will change the results. EPRI conducted sensitivity analyses on capital, O&M, and Fuel costs for all technologies. They are presented in Section 10 http://www.ret.gov.au/energy/Documents/AEGTC%202010.pdf . I will run an analysis with different inputs and report later.

So even for removal of the first tonne of emissions, Peter’s analysis shows that it is highly likely that nuclear power is already the cheapest displacement choice we can make today.

We don’t need to make nuclear power cheaper, its already the cheapest available choice, today, for displacement of both the first and the last tonne of CO2 emissions.

John, I am surprised by that statement. I cannot see evidence to support it. I am open to be persuaded so I hope you will present the case.

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Asteroid Miner, you are preaching to the converted when it comes to SMRs. However, you might want to dampen your enthusiasm for them at this stage until there are some prototypes and commercial units built.
The only solid buyers that I’ve heard of recently are TVA, who are building some B&W mPower units. Hyperion hasn’t built a prototype yet and has no solid customers or NRC design approval.
There’s also the Akademik Lomonosov floating plant, but that’s up in the air at the moment.
The AP600 had no buyers and based on feedback from existing nuclear power customers they increased the output to 1150MW.
All of this reflects the current trends in nuclear power: China is driving development in high output (1GW+), evolved LWR designs and on the other hand there is a focus on SMRs in terms of R&D effort.

We’ll need both but if the climate threat is as serious as you suggest then we will need to build off-the-shelf Gen III reactor designs right now and get to building fast breeder prototypes to consume their spent fuel fast, perhaps as SMRs. France did a decent build-out of large nuclear power plants and if the climate problem was treated with the urgency it deserves then full electricity-sector decarbonisation could be achieved within <15 years in countries with existing nuclear regulatory frameworks.

LFTRs will be irrelevant for 5+ years unless there is a Manhattan Project-style crash program to develop and mass-produce them. This isn'tr to say that it's impossible (I'm watching Flibe Energy's work with the US Army as close as I can) but unless there a tectonic shift in politics then it probably won't happen very fast at all.

As for:
"So you would cure morphine addiction with heroin? It is as obvoius as the emperor’s new clothes that you can’t eliminate CO2 production by burning coal."
It's pretty obvious that you still haven't read the paper. Emissions reduction can be done by using more efficient coal-powered generators – however, the deep cuts in emissions intensity for baseload power supply will require nuclear power in order to keep CO2 levels at current levels.

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John Morgan @ 3 November 2011 at 10:10 AM

The only choice that we get to make today is between displacing Hazelwood with either nuclear, or CCGT at 2020 fuel prices.

The EPRI report gives the projected costs in 2015 and 2030. the costs are in ‘Constant, 2009 A$’. Therefore, referring to 2020 prices could be confusing. What I understand you and John Newlands to mean is that you expect a real cost increase in gas prices – that is an increase above inflation. I am not sure what figure you have in mind for the price in 2020 (given in 2009 A$). I have run an analysis with gas at $12/GJ (constant, 2009 A$), which is the upper end of the range used in the EPRI sensitivity analyses for 2015. At this gas price and with no other changes CCGT still has the lowest CO2 abatement cost of the low emission technologies.

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@Peter Lang “You have stated a system wide goal. That is not what this paper focuses on. However, as an aside, I think your statement of the system goal is not correct. The system goal is “what is the discounted cost of removing, not the last tonne but the <average tonne, of CO2 emissions from the system”. On a discounted cost basis the cost of removing the first tonnes is the most important.

Removing the last tonne is at least 40 years away. At that time the inputs to the analysis will be different. Right now, we must make the decision between options on the basis of which option will give the least LCOE and least abatement cost for the life of the next plant to be built."

I see your point, but the trouble I have with this is that it seems to assume that you find the decarbonized solution by always, at each moment of time, picking the lowest abatement cost alternative. The picture I have in mind is "energy landscape" with different technologies on different axis and the CO2 emission along the last axis..i..e CO2(tech1, tech2, tech3…). I see the danger that by following locally optimal steps, we end up in a local minimum of CO2 (with too high emissions) and not the global one that we must reach. Then making a jump from that one to the final solution could end up costlier than it should be. I am not being very clear right now, but I hope you see what I am trying to grasp.

Also, decisions we make today influence future costs. For example, first of a kind nuclear costs are higher and sooner we start learning faster the costs are lowered. Considering that in the case of nuclear costs that you quote are already fairly close to fossil alternatives it is not unreasonable to expect modest cost reduction which will make it the cheapest alternative. Paying a bit extra now, could get us moving into the direction of the global minimum. So as a picture, think we are on a mountain top. One side has a steep slope right away, but end ups only into a valley half way down hill. The other side starts with somewhat less steep slope, but the slope gets steeper and the route actually ends up all the way downhill. If we pick the first choice, there is the danger (danger not certainty) that we must eventually climb back up again to get where we wanted to get.

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Thanks for your comments Peter. I understand where you’ve drawn the scope of your analysis. When I say our goal is to remove the last tonne of carbon emissions, I realize thats beyond the scope you’ve set yourself, but offer it to set what I think is the broader context in which these discussions reside. Let me expand on the comments of mine you disagree with.

So for removal of the last tonne of emissions, rather than currently being more expensive, nuclear power is already the cheapest way to abate emissions from existing plant.

We can’t remove the last tonne by replacement with OCGT or CCGT. I don’t believe it can be done with coal + CCS, since we don’t seem capable of removing a first tonne with this tech. I don’t believe it can be done with wind or solar, because the diminishing return as those technologies increase penetration will hit an integration wall long before the last tonne drops. That leaves nuclear as the only capable technology for final decarbonization, and so by exhaustion the cheapest.

So even for removal of the first tonne of emissions, Peter’s analysis shows that it is highly likely that nuclear power is already the cheapest displacement choice we can make today.

I make the assumption here that gas prices will be significantly more expensive in a decade. That can be questioned, but it is the basis for my statement. My assumption is that the cost increase will offset the difference that separates nuclear from OCGT at current fuel prices. Since the choice we can make today is between a nuclear plant in, say, a decade, with a sixty year plant life, and OCGT in, say, a year with a thirty year plant life (I’ve no idea what typical life is), we need to consider gas cost 10, 20, 30 years out. I think gas will be much more expensive then even if it is still cheap in 2020.

So for today’s choice, even for the first tonne of carbon, I still think nuclear is likely to prove the cheapest available abatement technology.

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Jani Martikainen, @ 3 November 2011 at 7:29 PM

Thank you for your comment

I see the danger that by following locally optimal steps, we end up in a local minimum of CO2 (with too high emissions) and not the global one that we must reach. Then making a jump from that one to the final solution could end up costlier than it should be.

I think I understand what you are getting at. I agree with what I think you saying.

If I’ve understood you correctly, our agendas have similarities. In short this is mine:

To cut world emissions most of the effort has to be in the developing countries because they are the ones that will ramp up energy use as Japan did after WWII, followed by China, India, Indonesia and others. The rest of the developing world will go through this development cycle too. So what the developed world does in cutting its emissions is less important than providing low emission, electricity generation technologies for the developing world at a cost less than fossil fuel technologies. Therefore, our role should be focused on developing the technology. In the short term it means implementing Gen II and Gen III at the lowest possible cost. Australia should be aiming for an LCOE as near to Korea’s as is achievable. To achieve that means removing the impediments to low-cost nuclear.

The main aim of the lead article was to try to encourage BNC regulars to recognise and accept that nuclear is too expensive to be viable in Australia at the moment. We need to focus our attention on how to overcome that.

We also need to get over the idea that the CO2 tax and ETS is any sort of solution at all. It will not survive and even if it did it is not a solution because it does not help to get low cost nuclear. It protects it from the full magnitude of the cost reduction that is needed. That will not help to get it cheaper than coal, quickly.

I agree that the faster we get rolling out nuclear the faster costs will come down. We need to address the politics and educate the population. We also need to stop “kicking own goals” like the CO2 tax. That legislation has set back progress in Australia by at least 5 years IMO.

Regarding your last paragraph, I wonder if you have seen the section in this comment titled Nuclear cheaper than coal in Australia. How?

Carbon tax in Australia in 2011


I believe this is saying similar to what you are advocating in your last paragraph. It suggests what needs to be done to get to n’th of a kind cheaper than call. It provides rough costs and the total public funding needed for the first 10 GW.

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John Morgan,

Thank you again. I’ll ponder on your comment overnight. Here is my initial reaction:

We can’t remove the last tonne by replacement with OCGT or CCGT. I don’t believe it can be done with coal + CCS, since we don’t seem capable of removing a first tonne with this tech. I don’t believe it can be done with wind or solar, because the diminishing return as those technologies increase penetration will hit an integration wall long before the last tonne drops. That leaves nuclear as the only capable technology for final decarbonisation, and so by exhaustion the cheapest.

I agree with all of that up until the last four words: “ so by exhaustion the cheapest.”. The least cost solution will be the one that gives the least total cost on a discounted cash flow basis over the entire period. The least cost solution will be to build the plants that abate emissions at least cost first. Being pragmatic, we will need fossil fuel generation for a long time, much longer than the life of the initial plants. From another perspective, the political reality is either we go the least cost route or don’t do anything. The population is not likely to support nuclear if there is a lower cost solution available. Therefore, it seems clear to me, the choices are:

1. keep using coal until nuclear is cheaper

2. go gas, or

3. face up to the facts: nuclear is priced to high because of the impediments we (society) has caused our governments to place on it. Therefore, we can remove those impediments. The first step needs to be to identify the impediments.

Regarding your second point and the assumption about gas prices, most LCOE analyses are based on projected fuel prices for the plant life. I don’t recall what the EPRI report assumed, and they may not have made it explicit, but the assumptions are explicit, detailed, and based on specific Australian east coast information in the ACIL Tasman (2009) report, Section 4.2 http://www.aemo.com.au/planning/419-0035.pdf

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From the EPRI report, “An overall weighted Crew Rate Factor was calculated to be approximately 1.71, which is higher
than anticipated. ”

I’m in the United States and worry that the United States can not build nuclear due to the millions of hours required and the labor cost. To think that the labor component would be 1.71 times more than in the US is really hard for me to believe. Can someone explain whether this difference is due mainly to higher wages or being less skilled in the use of construction tools?

Is there anyplace to read about how labor is managed and paid in Korea or China as compared to the US or France?

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@Peter: Thanks for you comment and I agree with what you say. At some moral level I would like to see carbon taxes, but I don’t see anyway for that to happen without the system leaking massively so that it doesn’t actually achieve anything other than higher energy costs and weakening public interest in emission reductions. Only convincing long term solution is zero carbon energy source that really is cheaper than fossil fuels. It is possible with nuclear, but it requires appropriate regulatory and political superstructure. There certainly can be (and are) systems where nuclear is not the cheapest choice. Investors on NPPs must be certain that their investment is welcome and regulations should be such that they encourage the evolution of reactor designs towards breeders.

I have little sympathy towards those who seem happy to let the energy prices go through the roof. I do not think they actually know how much industrialized countries spend on energy and that this spending pretty much makes everything else possible. If they would know this, they would also very quickly notice how crazy priorities they are making. I think here in Finland goverment spends less on health care (as a fraction of GDP) than we pay for energy. We pay somewhat more on pensions, and by 2030 that share is set to rise by about 3% to about 15% of GDP. This is widely considered a huge societal challenge, but the kind of energy cost increases some greens nonchalantly have in mind imply massively larger challenges. By the time people actually have to prioritize they will (and of course they should) choose the issues of direct relevance to their well being rather than ideologically kosher voltage differences.

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I am wondering how yet another calculator exists with CCGT at an 85% capacity factor. I attempted to use the spreadsheet as a calculator, and after some of the posts here (particularly Jani Martikainen’s at 7:29 on the 3rd), I feel I should try this again.
What CCGT plant operates anywhere near 85% capacity factors (CF)?. The US EIA data shows they operate at closer to 40% levels there – http://www.eia.gov/cneaf/electricity/epa/epat5p2.html. Yet the same US EIA provides estimated levelized costs based on on 87% CFs, and that gets copied around the world. I find it ludicrous.
Adjusting only the CF for CCGT, by changing the LCOE’s capital component by 85/40, nuclear and CCGT become essentially the same costs as solutions for abating CO2 emissions, while CCGT remains a more attractive option in terms of $/MWh.
That covers the reasons it is getting built. It is more flexible than baseload and utilized primarily as the intermediate supply that comes on to match the day’s demand and goes away for the night’s low demand.
I couldn’t work out how the capital component of LCOE was being populated in the spreadsheet, and need to move on the more pressing matters now, but I’ll return to reality in the hopes more talented folks than I can model it.
There is a system supply requirement that comes from peak demand. If a portion of that supply (coal) is being removed, you need to measure how to replace it. Wind has a capacity value of under 10% many places (I saw 3% reference on this site for an Australian location) — so if you choose wind as the replacement you must also choose a source with the capacity value to actually replace the coal. If the CF of wind is 36.6%, then the CF of it’s complementary peaking source cannot be above 63.4%. Right?
So the calculator needs to be a matrix, where one change impacts another, both for level of supply, and CF.
I suspect the cheapest option for an entire system (that lacks hydro) is nuclear set at the level of minimum demand, and CCGT set to match the remainder of winter peak. Simplifying some figures from my Canadian province, 10GW of nuclear and 10GW of CCGT would be in the right ballpark. Average demand is about 16GW, so even in this scenario CCGT would only have a 60% CF. In fact in my area summer peak is higher, and I assume that could be met with solar – but that would reduce the overall CF of CCGT once again.
The ideal matrix here would then recognize the reality Germany has experienced. If you add wind, on a must take all output basis (which you’d have to for a high CF), that must reduce either the nuclear CF or, more likely, nuclear supply – meaning more CCGT.
The CO2 abatement cost is negative in that case.
Which we know is true.
I suspect the best way to get the cost of nuclear down is to get the motivation for expanding nuclear up. A more realistic evaluation of supposed alternatives might be helpful.

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Martin Burkle, on 4 November 2011 at 2:51 AM said:

Can someone explain whether this difference is due mainly to higher wages or being less skilled in the use of construction tools?

Workplace compensation rules…Australian’s have rules like if you aren’t given lunch break between noon and 1 pm then you are paid double-time until you get your lunch-break. They also get allowances for traveling to the job site, tools etc etc etc.

Click to access BuildingTradesConstructionAward.pdf

Building nuclear power plants involve lots of concrete. Stopping a continuous pour between noon and 1 pm everyday so everyone can go have lunch isn’t practical.

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US Iron workers rates from http://www.bls.gov/oco/ocos215.htm

“In May 2008, median hourly wages of structural iron and steel workers were $20.68. The middle 50 percent earned between $15.18 and $29.15. The lowest 10 percent earned less than $12.25, and the highest 10 percent earned more than $37.04.

In May 2008, median hourly wages of reinforcing iron and rebar workers were $19.18. The middle 50 percent earned between $14.35 and $27.29. The lowest 10 percent earned less than $11.78, and the highest 10 percent earned more than $35.26.”

These hourly rates are about the same as the Australian hourly rates. My currency converter says $20 US is the same as 19.60 Ausy. So I conclude that the basic labor rates are the same in the US and in Australia.

Do you really think that Australian work rules add 70% to the cost of labor? That would be $20 an hour for work and $14 an hour for rules over and above the work rules in the US. If that’s the way it works, how do you expect to build any kind of serious energy infrastructure?

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Martin Burkle, on 4 November 2011 at 6:04 AM said:

Do you really think that Australian work rules add 70% to the cost of labor?

Table 4-1 list productivity factors for steel work.

Click to access AEGTC%202010.pdf

The Australian’s are better then Americans in terms of productivity on ‘fabricated steel’ as you get into lighter steel pieces Australian productivity drops to half.

I would speculate some sort of ‘lifting rule’ must be the explanation as the ‘fabricated heavy’ steel would be all crane work and the lighter pieces would involve people lifting something.

Since Australian’s are better at setting prefabricated pieces into place then a design that will be cost efficient for them has to have a higher prefabrication percentage.

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(Deleted OT comments)
The conversion from coal to nuclear is the easiest conversion to make because we already have the technology. From coal to nuclear is also the biggest single wedge. The only problem is that the public has been propagandized by the coal industry into fearing all things nuclear. That can be cured with education.
MODERATOR
Some of your comment has been deleted as it is off topic on this thread.It is also a violation of BNC Comments Policy to make personal remarks or attribute motives to another commenter. BNC accepts the scientific consensus for AGW/CC
and no longer discusses or posts climate denialism. It is, therefore, not necessary for you to repeat the accepted BNC premise and is unfair to other commenters who, due to the new policy, have no right of reply.

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Jani Martikainen, @ 3 November 2011 at 10:26 PM

Thank you for your comment.

At some moral level I would like to see carbon taxes, but I don’t see anyway for that to happen without the system leaking massively so that it doesn’t actually achieve anything other than higher energy costs and weakening public interest in emission reductions.

We agree that the CO2 tax and ETS is no solution. In fact it will have the opposite of the desired effect.

I recognise that some people argue for a CO2e price on moral grounds. However, I’d argue it is highly immoral. There is no benefit but it would damage economies and, therefore, human wellbeing. So it is immoral.

Why there is no benefit: It won’t reduce world emissions, can’t work, and won’t be implemented https://bravenewclimate.com/2011/07/06/carbon-tax-australia-2011/#comment-140631 . It can’t work internationally. We can’t even measure CO2 emissions well enough to trade it in USA, EU or Australia. So what chance is there of measuring the emissions in Eretria or Ethiopia or anywhere? Therefore, there will be no international trading scheme. Most people have realised this by now e.g. A few are still hanging on.

Only convincing long term solution is zero carbon energy source that really is cheaper than fossil fuels. It is possible with nuclear, but it requires appropriate regulatory and political superstructure.

I agree. Therefore, that is where we should be focusing our attention. We will not get nuclear seriously considered, let alone implemented, in Australia while LCOE of nuclear is far higher than with CCGT and the abatement cost per tonne is far higher than with CCGT.

If we want to seriously consider nuclear in Australia we need to:

• Identify all the impediments to low-cost nuclear in Australia, and all the energy market distortions

• Identify which could be removed

• Prioritise them for removal

• Define policy options for removing them

• Define what else would be needed to get nuclear through to the “settled down costs” (in Australia) stage

But before we can begin to tackle this,we need to get acceptance, especially from nuclear proponents, that nuclear is not an ecomically viable option for Australia at the moment. Therefore, it will not be given serious consideration. Worse still, IMO the CO2 tax and ETS legislation has delayed nuclear being put back on the political agenda for at least 5 years (unless the Labor dumps its anti-nuke policy at National Convention in December).

I agree totally with your last paragraph. I would add that the reason nuclear in Australia would be such high cost is because of 50 years of accumulated government interventions in the energy market (here and in other western democracies). We need to look afresh at all of this. Start looking at it from the perspective of a clean sheet of paper.

In summary,

Step one: recognise and accept the fact that nuclear is not a viable option for Australia at the moment.

Step two, identify the impediments to low cost nuclear in Australia.

It would also help if we could stop being distracted by advocating for the CO2 tax and ETS.
MODERATOR
Peter – your answer to JM is veering off topic and into the Carbon Tax discussion area. Please keep to the appropriate thread and do not use remarks on other threads to re-iterate your already widely espoused views on this matter. Further instances will be deleted.

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Scott Luft, @ 4 November 2011 at 12:56 AM

Thank you for your comment. You make some good points, however …

I am wondering how yet another calculator exists with CCGT at an 85% capacity factor.

Scott, and all readers, can I plead with you to read the EPRI report if you want to argue about the assumptions they used and their justification. Based on the reports I’ve seen over the past 30 years which compare LCOE of baseload technologies, nearly all use a common capacity factor to facilitate comparison. Then you can change inputs to see the effect of different assumptions.

The EPRI (2010) report applies a capacity factor of 10% for OCGT which is realistic because OCGT is used for peaking. However, the ACIL Tasman (2009) report uses a capacity factor of 85% for all technologies, including OCGT, to facilitate comparison despite the fact OCGT would not be dispatched to operate at 85% CF.

It is standard practice to apply consistent factors across the technologies to minimise the number of variables. If we did not do that, we would find nuclear has a higher LCOE because the discount rate would be higher for nuclear (higher financial risk therefore higher cost of money) than for CCGT.

I couldn’t work out how the capital component of LCOE was being populated in the spreadsheet,

OK. The spreadsheet is not well documented. You need to use the NREL LCOE calculator to calculate the LCOE. The spreadsheet is not doing that calculation. You must enter the LCOE in row 33.

Regarding the matrix you suggest, the answer is yes of course. But that requires sophisticated system wide modelling capability. We can’t do that on simple spreadsheets and post it in articles here. That is done by groups with huge resources, and a lot of consideration about boundary conditions and inputs. The key point of this paper is to try to get readers here to understand why it is generally accepted that nuclear is not economically viable in Australia at the moment. Once people accept that, we can move on to investigating what is making it too expensive and what would need to be done to allow it to be economically viable.

If the CF of wind is 36.6%, then the CF of it’s complementary peaking source cannot be above 63.4%.
Right?

Funny you should mention that. I knew some one would say something along the lines. So burried a little surprise in the spreadsheet. Unhide columns L, M N. (hide column K to avoid confusion). This calculates the LCOE and CO2 abatement cost for 30% wind and 55% OCGT (total 85% capacity factor so the results are comparable with the other baseload technologies). The LCOE for 30% wind and 55% OCGT is $109/MWh (in 2011 US$). The abatement cost is $132/tonne. (I think this is correct, but haven’t checked it carefully).

I suspect the cheapest option for an entire system (that lacks hydro) is nuclear set at the level of minimum demand, and CCGT set to match the remainder of winter peak.

No. That is not the case while nuclear is more expensive than coal. Our current system is the cheapest option. It will also be the cheapest option in the developing countries. So forcing high cost electricity on Australia will make no difference to world emissions. I’d agree with your statement if we can remove the impediments to low cost nuclear. Until we are prepared to do that, nuclear will remain a high cost way to generate electricity in Australia.

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Harrywr2,

Thank you for those excellent explanations about why labour costs more in Australia than in USA. Before I read your comments I’d written the response below, which I will post even though you have provided excellent explanations.

Martin Burkle, on 4 November 2011 at 2:51 AM

From the EPRI report, “An overall weighted Crew Rate Factor was calculated to be approximately 1.71, which is higher than anticipated. ”

I’m in the United States and worry that the United States can not build nuclear due to the millions of hours required and the labor cost. To think that the labor component would be 1.71 times more than in the US is really hard for me to believe. Can someone explain whether this difference is due mainly to higher wages or being less skilled in the use of construction tools?

Well done. You have zoomed in on one of the critical issues that are making nuclear much higher cost than it should be. There are other factors too, but let’s deal with this one here and hope others may find and point out the other impediments to low cost nuclear.

The EPRI report gives a breakdown of the labour rates and the productivity factors that combine to make the overall factor of 1.71. The method is not new. EPRI and others have been doing this for a long time. EPRI did similar for converting US costs to Australian costs for coal and nuclear for their 2006 report to the Uranium Mining, Processing and Nuclear Energy (UMPNE) report for the Howard Government. In that they explained how they calibrated the figures. http://pandora.nla.gov.au/pan/66043/20061201-0000/www.dpmc.gov.au/umpner/docs/commissioned/EPRI_report.pdf

Can someone explain whether this difference is due mainly to higher wages or being less skilled in the use of construction tools?

The reason is not quite as simple as that. It has more to do with our industrial relations environment. (Deleted un-supported personal/political opinion)
In short, Australia’s labour component of the NPP would cost some 1.71 times more than in the USA, and the USA’s labour component would cost more than in Korea or UAE. If the local labour component is 50% of the total capital required, and if local labour cost is say three times Korea’s, then the capital component of an NPP in Australia would be double the cost of the same plant in Korea.

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Peter Lang,

That is not the case while nuclear is more expensive than coal. Our current system is the cheapest option. It will also be the cheapest option in the developing countries.

http://www.bbc.co.uk/news/world-asia-15552687
Bangladesh has agreed to build two new nuclear power plants with Russian help as the country looks to close a yawning power deficit.

The developing world has impediments other then cost to adopting nuclear. The EPRI price comparisons if one put in Bangladesh labor rates and coal extraction costs would look completely different.

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Harrywr2, or any one else, can you provide a link to a breakdown of the capital cost of a new NPP (such as an AP1000 or CANDU 6) into its component parts such as (or how ever else it is presented that allows us to differentiate the loacl costs from the procured costs):

components procured internationally
local industry (called Australian Industry Involvement here)
local labour
Owners costs
AFUDC

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@Peter
Thanks for more detail on labor costs. I have been looking at this site http://www.bls.gov/fls/ which compares manufacturing labor productivity (and other stuff). This report also shows huge differences between countries. There is much difference between countries in the EU. There is much difference between countries in Asia.

So your question about AP1000 labor costs broken down by what must me done locally and what labor can be done in another country is a very important question. Of course the reactor vessel, the steam generators, the pressurizer, the turbine, the containment vessel, the valves, and the large pumps will be made off shore. (most of these are not made in the United States either) But there are 200 piping, and wall modules that could be made off shore also. If you made everything overseas and assembled locally, how much local labor is involved?

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As long as we are thinking about labor, has anyone thought about operations labor? The AP1000 advertising talked about only 400 people needing to run a plant, but I think another 100 got added for security after 9/11. So if 500 people are needed to run a plant in the US, do you think a lot more would be needed in Australia? (Deleted unsubstantiated industrial relations figures)
Is it reasonable to think maintenance and operations would be the same in Australia as in the US? Maybe quite a bit higher (like 1.7 times?) This also would make nuclear less attractive.
MODERATOR
Please support your contentions with references.

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Small modular reactors (SMRs): First oof, TVA is interested in the B&W mPower but the type does not yet have NRC approval. The first SMR to obtain type approval from the NRC will be the Nuscale 45 MWe unit, in 2018–2019. It is to be built in a factory and shipped to the site, just as will the other components.

The local construction includes the civil component, foundations, concrete walls, enclosures for the so-called nuclear island and the turbine island. The remainder of the construction invovles some extremely careful pipe-fitting; more so than for a coal or natgas fired unit at least in the USA with the NRC inspectors popping in all the time.

Using figures in the NREL sLCOE calculator which work well for the USA, to achieve an LCOE of US$0.055/kWh reires that the total capialt costs, everything included (such as finace changes during construction), to be but US$2070/kW. I find that so low as to be not credible, even for a SMR. Doubling to US$4140/kW gives an LCOE of US$0.083 over the 30 year life of the loan; this is a credible figure for the USA provided the site has neither additional water nor transmission costs.

I’ll crudely estimate that local labour is 33% for the US$4140/kW. So using Pater Lang’s estimate of multipllying by 1.7 for the situation in Oz, I obtain US$6906/kW for an LCOE of US$0.122/kWh (which is approximately the expected USA average busbar costs for electricity in 2020 CE). I opine this is affordable.

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Martin Burkle — In the USA NPP operators are well trained and amply compensated; for those reasons I doubt more operators would be required in Oz. Incidently, it takes hiring 7 people to have one always on duty 24/7/52.

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David Benson and Martin Burkle:

Re: “To think that the labor component would be 1.71 times more than in the US is really hard for me to believe.”

Agreed. Thus far, I have not seen clarification of this figure in sufficient detail to eliminate the possibility that EPRI selected a high-cost nation (USA) for its base prices and then overloaded the labour rates. I’m always a little suspicious of rats in the ranks… did, perhaps, the Australian Government, when establishing the ground rules, put a thumb on the scale, perhaps two thumbs, in order to ensure that the nuclear power prices were pessimistic? Maybe, EPRI did not set this factor alone, it may well have done so in concert with a client whose published long term anti-nuclear stance led it to this outcome.

Alternatively, how much of that 1.71 is a loading for FOAK construction?

Of course, I do not know the answer to these questions. That doesn’t stop me from wanting to know, because the cost of NPP’s appears to be extortionate when compared to international examples.

This aside, well done, Peter Lang. This study is the result of considerable effort and talent.

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JB,

Thank you. With your experience in project management of NSW coal and gas power stations you be the ideal person to investigate the basis of estimates and write an article to show which components are the main drivers making the projected cost of nuclear iin Australia so much higher than in Korea and UAE .

I’d suggest the first step might be to check and summarise for readers, what is stated in the EPRI reports (2010 and 2006) and also the ACIL-Tasman (2009) report. There is also an update for AEMO by WorleyParsons of the EPRI data; it investigates the sensitivity to certain parameters as you imply should be done; for example, see sensitivity to “Productivity Rate Variations”, Section 3.3.2. Unfortunately, the Worley Parsons report has excluded nuclear in its analyses, no doubt as a result of a direction from the client Also, AEMO has on its web site the spreadsheets with the inputs needed for estimating LCOE that they provided to their consultants for modelling the electricity generation cost. Here are some references (but not all):

http://www.ret.gov.au/energy/Documents/AEGTC%202010.pd

Click to access EPRI_report.pdf

Click to access 419-0035.pdf

http://adl.brs.gov.au/data/warehouse/pe_abarebrs99014434/energy_proj.pdf (Figures f and g are taken directly from the EPRI report figures 10-13 and 10-14)

Click to access 0419-0017.pdf

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Martin Burkle, @ 4 November 2011 at 11:34 AM,

@Peter
Thanks for more detail on labor costs. I have been looking at this site http://www.bls.gov/fls/ which compares manufacturing labor productivity (and other stuff). This report also shows huge differences between countries. There is much difference between countries in the EU. There is much difference between countries in Asia.

Thank you for that link and comment. It is very helpful. If we can all explore and contribute like this we may, as a group, be able to isolate what are the main contributors causing the high cost of nuclear in the Australia.

@ 4 November 2011 at 11:46 AM,

As long as we are thinking about labor, has anyone thought about operations labor?

I have a little. However, O&M is responsible for only 15% of the LCOE of nuclear (see Table A2-2), so I haven’t focused on this. The priority, I believe, is to focus on the capital cost which is responsible for 79% of LCOE.

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Peter Lang, thank you for the response.
I should have noted I was considering coal outside the available options in my statement that baseload nuclear, with only CCGT would be cheaper than options that included intermittent s which, in my opinion, can only displace baseload. I’ll try to get to reading the EPRI report.
This comment is related to the breakdown of costs for CANDU’s, and I’ll have to admit to offering hyperlinks that I have not read – they were sent to me in reply to my inquiries. They may be helpful to you.
Here’s some quick background on Atomic Energy of Canada Ltd. (recently sold for next to nothing and now part of SNC-Lavalin). Most of the builds in the past 25 years were foreign and came in on time and on budget. Domestically the last reactor entered operation in 1994, which was the fourth Darlington unit. That project was stopped and started multiple times during the high interest 1980’s. Predictably the cost overruns were huge.
So my quick glance at the one document is what can go wrong domestically in politicized environments: http://www.magma.ca/~jalrober/CANcostf.htm
The second document is the, on time and budget, Qinshan post-project analysis:

Click to access 20031701.pdf

You might find some useful information for containing costs in there – although at a glance I can’t see a neat breakdown of the cost components.

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Scott, thanks for the link to the IAEA lessons learned from two Candu reactors built in China. http://canteach.candu.org/library/20031701.pdf
I especially liked the chart showing man hours by month resulting in 34.000,000 man hours for two reactors. Also, the break down of hours by type of activity. At peak there were 7,000 workers on site!

The amount of concrete, 500,000 m3, is very large as compared to two AP1000s at 200,000 m3.

These projects are really large. Aren’t they?

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Martin Burkle @ 4 November 2011 at 11:46 AM

I have always assumed that 4 sets of people can staff a plant 24/7 but maybe 5 sets would be needed in Australia?

Any place with civilized / restrictive labour laws is going to need five shifts, which is what my employer runs for a 24/7 chemical plant.
40hr/week X 46 wk/yr X 5 = 9,200 hrs year, vs 8,760 hrs needed
That’s with 6 weeks holiday each. The extra 88 hrs each covers sickness, training and a bit to spare for busy times, preparing plants for maintenance etc. Four shifts plus a lot of overtime works out more expensive.

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Peter Lang,

All I could find was this report which includes the assumed work days for various NPP’s on page 57(according to the pdf reader)

Click to access mpr2627DoeConstructionScheduleEvaluationRev2Final.pdf

The AP1000 construction schedule is optimized for a 5 day a week 10 hour a day work schedule.

Under US work rules the AP1000 would yield 47 1/2 of paid work per week.(1/2 lunch break is unpaid and generally staggered between 11 am and 1 PM)

By US work rules it would be 40 hours base time + 7.5 hours at an overtime rate of 1.5 base pay. = 51.25 hours of pay for 47.5 hours of paid work.

An ABWR is optimized for a 5 days a week 8 hour days plus every other Saturday. In the US a standard work day is 8.5 hours minus 1/2 hour for lunch.

The ESBWR is optimized for construction with 3 crews working 4 ten hour shifts with 2 days off.

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Martin Burkle, @ 3 November 2011 at 9:59 AM:

Let’s revisit the nuclear cost question again. I checked the EPRI report and found no mention of the Korean APR1400. Since the UAE deal for four reactors was signed in 2009, I wonder why the APR1400 was not included. The UAE deal was for four 1,400 MWe reactors at $20 billion (mostly fixed cost!). That gives 5.6 GWe divided by 20 billion US dollars for a cost per kW of $3570 or 25% less than used by EPRI.

Can someone verify that I am comparing apples to apples?

I said in my response @ 3 November 2011 at 1:18 PM the answer to your questions is “Yes, you are comparing apples with apples”. I’ve changed my mind on that. The $20.4 billion is the contract payment to the Korean consortium. Therefore, it probably does not include owner’s cost and may not include AFUDC. Therefore the Total Capital Required is probably higher than $20.4 billion.

By the way, I understand (perhaps misunderstand) the APR1400 being built in UAE is 1,350 MW (sent out) each unit, or 5,400 MW for the four units, not 5,600 MW. So the Total Plant Cost would be $3,778/kW (2010 US $).

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Scott Luft @ 4 November 2011 at 12:56 AM

Your comment demonstrates why the analysis presented in the lead article is valid and useful.

I suspect the cheapest option for an entire system (that lacks hydro) is nuclear set at the level of minimum demand, and CCGT set to match the remainder of winter peak.

This would be true if nuclear was cheaper than coal. It is not true if nuclear is more expensive than coal.

In Australia’s case our electricity is generated by:

Coal = 76%
Gas (predominantly OCGT) = 15%
Oil = 1%
Renewables = 8% (of which 5% is hydro)

If we want to replace the coal component first, and do it as you suggest, 76% of our electricity generation needs to be replaced by nuclear and CCGT.

The National Energy Market Demand (eastern states) is about:

Minimum = 17 GW
Maximum = 33 GW

So, applying your suggestion, we’d need to replace 17 GW of coal with nuclear and much of 16 GW (33 -17) with CCGT.

While nuclear is more expensive than coal, we will not implement nuclear. We will start by building the CCGT.

The analysis in the lead article helps to expose the problem we face: nuclear is too expensive to be seriously considered as an option for Australia. That is the reality.

Unless, of course, we expose a major flaw in the EPRI figures (and all the other consultants’ reports which reach effectively the same conclusion that nuclear is too expensive for Australia).

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Scott Luft @ 4 November 2011 at 10:32 PM

Domestically the last reactor entered operation in 1994, which was the fourth Darlington unit. That project was stopped and started multiple times during the high interest 1980′s. Predictably the cost overruns were huge.
So my quick glance at the one document is what can go wrong domestically in politicized environments: http://www.magma.ca/~jalrober/CANcostf.htm
The second document is the, on time and budget, Qinshan post-project analysis:

Click to access 20031701.pdf

You might find some useful information for containing costs in there – although at a glance I can’t see a neat breakdown of the cost components.

Thank you for that information. I should let you know that I have kept somewhat up to date on AECL and CANDU but do not have all the recent figures. I worked on the Wolsung Unit 1 (CANDU) during construction and the site investigations for the Preliminary Safety Analysis Report (PSAR) for Units 2, 3 and 4 back in 1980. I also worked for AECL at Whiteshell on the Canadian Nuclear Fuel Waste Management Program and was on site from the start of construction of the Underground Research Laboratory. I also worked with and visited most of the other waste management programs throughout the world including Yucca Mountain, Sweden, Switzerland, Germany and UK between 1983 and 1989. So a bit out of date and out of touch now, but just thought I’d give that background.

Realistically, we do not have any up to date costings for CANDU 6 other than China. So we need to scale those figures to Australia, probably via USA, along the lines of what EPRI has done.

I’d say to others following this thread, and especially those criticising the EPRI report, I believe EPRI’s conversion methods and factors are as good as we have. Just saying that we don’t like the result is not a convincing argument. If we want to tell the government departments who are using the data in their modelling (and AEMO and Energy Supply Association of Australia and many modelling and consulting organisations) that the EPRI work is wrong, we need to do better than say in effect “we don’t like the numbers EPRI has come up with”.

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Again by following World Nuclear News one learns that there is a local contractor other than the South Koreans on the UAE project. The local contractor appears to be doing site preparation work, at least right now. Therefore the contracted price to the Korean consortium is not the full cost of the UAE project.

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In concluding that CCGT is the preferred form of baseload now I think we should factor in steep price rises for gas. I note that a gigajoule thermal is 0.28 Mwh thermal. If the latest CCGT plant is 50% efficient then that becomes 0.14 Mwh electrical. Therefore if new contract gas is $7 per GJ in Victoria (expected for the Mortlake plant) then the fuel cost per Mwhe will be some 7X that, say $50.

What if the fuel cost went from $50 to $100 in a decade? Here are some reasons I think it could happen
1) regional supply imbalance
The south eastern States SA, Vic and Tas will be begging for gas by about 2025. It is conceivable that the Federal govt may have to force gas rich parts of Australia to share gas with the SE. That probably means paying export price, noting the Japanese recently paid $10 a GJ for LNG
2) transport demand
Natural gas vehicles are popular in Iran, Pakistan and Argentina. Currently heavy vehicle operators here can pay as little as $1 a litre if they are eligible for a rebate. I think when truckers have to pay $2/L there will be a wholesale shift to gas fuel, LNG for big rigs and CNG for urban vehicles. In thermal terms that means their price point is over $50 per GJ and they will out-compete stationary users like power stations. Again the Feds may have to intervene.
3) fracking foibles
It will only take one upset farmer to win a court case for damage to his bore water supply to force a rethink on CSG. Then claims of 250 tcf or ~5 bn tonnes of CSG will have to be reviewed.

Therefore claims new gas fired power stations will be built in places like Roxby Downs SA and Yallourn Vic are suspect. It would require the Feds intervening to ensure a long term cheap supply.

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harrywr2, @ 5 November 2011 at 3:02 AM

Very interesting information. Thank you for that. I am not sure how we can use it, but good to have it for future reference.

I am not intending to try to check the EPRI report. I am going to accept their figures as OK and use them. I feel if they were wrong someone would have picked it up by now and the government would not be using their figures as an inout for their modelling. The fact that AEMO contracted WorleyParsons to run sensitivity analyses on the EPRI key inputs, such as labour productivity factor, shows that others have asked similar questions and AEMO responded by contracting Worley Parsons to do an independent check. I believe the issue has been dealt with.

I feel we need to start with something. So unless someone else can show clearly there is a serious flaw in the EPRI figures, then I urge we accept the EPRI figures and get on with working out what we need to do to remove the impediments to low cost nuclear in Australia.

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I hope the Moderator will allow me to repost these two comments from the “Alternative to Carbon Pricing” thread. The thread is frustratingly slow to respond and I understand why readers will not read comments on that thread because of the slow response. These comments are directly relevant to this discussion.

Alternative to Carbon Pricing


28 December 2010 at 10:00 AM

I would like the government to instruct the Productivity Commission to investigate:

1. What are the impediments to low-cost, low-emissions electricity supply in Australia?

2. What could be done to remove these impediments?

3. What could be done to give Australia a secure supply of the least-cost, low-emissions, environmentally benign electricity for the next four decades.

To help educate the public and to encourage the government to conduct a thorough, independent, impartial investigation along these lines, I’d urge BNC contributors to conduct a sustained debate to address these questions

Alternative to Carbon Pricing


28 December 2010 at 11:29 AM

Terms of Reference for Productivity Commission Investigation

1. What are the impediments to low-cost, low-emissions electricity supply in Australia?

2. What could be done to remove these impediments?

3. What could be done to give Australia a secure supply of the least-cost, low-emissions, environmentally benign electricity for the next four decades.

An alternative version of the Terms of Reference:

1. Could electricity from nuclear be cheaper than from new coal in Australia?

2. If so, how much cheaper?

3. What would we need to do to achieve this?

4. What are the options?

5. What are the benefits and costs, advantages and disadvantages of each option?

While waiting for the Productivity Commission to complete their analysis and report, what could BNC do to pursue this line of analysis?

What skills sets and inputs would be required?

• Legal – what are the impediments; how could they be removed?

• Financial – what do we need to do to establish an investment environment that would give us least cost nuclear?

• Nuclear industry – provide insight from them as to what would allow them to provide electricity at least cost, for the long term, what would be needed from government to facilitate phase in of nuclear and phase out of coal and, later, gas

• Electricity industry – how could nuclear be integrated into the existing electricity system for least cost in the short term and the long term?

• Economic modelling – what are the consequences of the proposed options for macro economy and the micro-economic effects on the relevant sectors and industries?

• IAEA – what are the minimum requirements and how have they been implemented at least cost in other countries with small economies?

• State government bureaucracies – what are the impediments and how could they be overcome?

Please suggest improvements, and/or how we could progress this, and/or let’s get started: put forward your contributions.

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“• IAEA – what are the minimum requirements and how have they been implemented at least cost in other countries with small economies?”

How does IAEA work? By this I mean who joins? Does the government of Australia join? If the government, is this thru a treaty or does some federal department pay dues?

or would the a group interested in nuclear join?

On the IAEAs web site I found a meeting of many middle east countries that do not have nuclear power plants conducted by the IAEA. So could some professor or doctoral student from Australia attend IAEA meetings and accumulate best practices?

Why build bridges to IAEA when nuclear is clearly off the table for many years? I suspect that when the politics changes the change will be very rapid. So being prepared is one reason but more importantly would be to develop experts that can inform another EPRI committee about the best nuclear choice for Australia. It seems that the experts on this blog know a lot but not enough to actually lay out a plan once the politics is in pace.

How do you set up a regulation body? Which countries methods would best to emulate?

The Chinese Candu took 17,000,000 hours to assemble. I have read that the AP1000 takes 5,000,000 hours to assemble. I bet the IAEA is the best place to learn which number would be closer to the Australian number.

Does the UAE contract include ground work? owner cost? I bet the IAEA is the best place to get such information.

So how or who needs to become active in IAEA?

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@Peter,

While nuclear is more expensive than coal

The EPRI estimates for IGCC coal are based on a ‘theoretical plant’.

The US ‘demonstration plant’ for IGCC technology at Edwardsport, Indiana is 50% over budget. Now estimated to be US$2.88 billion for a 618MW plant.
http://www.reuters.com/article/2011/10/20/utilities-duke-edwardsport-idUSN1E79J20S20111020

The second proposed coal IGCC 600MW IGCC demonstrator is budgeted at US$2.4 billion with a US$2.88 billion cap set by the regulator.It’s got some legal problems and may not get built.

http://msbusiness.com/tag/kemper-county-coal-plant/

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Gene Preston — Making the trees grow requires drip irrigation, Israeli style. The full article (which is free for you to download) estimates the desal and pumping costs (although should be somewhat higher).

Maybe the DesertTec porject, which is going forth, could actually be put to some good use this way…

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Peter,
You have written a perfect description of a doctoral thesis!

“Would you like to take on a research project to quantify how much savings on LCOE, if any, Australia could achieve by tieing into a nuclear regulatory program run by USA, Canada, UK, EU, Finland, Sweden, Russia, Japan, China or India.”

Where would you find such a student?

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Harrywr2,

The lead article for this thread does not include IGCC for the very reason you mention. Nor does it include geothermal or most of the other 43 technologies EPRI provided figures for. I selected the six most viable and/or most advocated technologies. These make the point clearly: nuclear is not cost competitive in Australia nor is it the least cost way to reduce emissions at this stage. Therefore, nuclear will not be given serious consideration by governments while this situation remains.

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Harrywr2,

I should have said ‘thank you” for providing those up to date figures on the demonstration IGCC plants. I am sceptical that IGCC, CCS, geothermal, solar thermal or PV, wind, biomass, or any ot the other renewable energy technologies will ever be realistic options for supplying a significant proportion of our electricity. I doubt any of them will be economically viable. I do believe nuclear will be, eventually. The question is when. When will we do what we have to do to unwind the mass of impediments we’ve imposed on it over the past 50 years as a response to anti-nuclear activism.

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Harrywr2,

just to clarify, what I mean by the sentence of mine you quoted:

While nuclear is more expensive than coal

is that LCOE of nuclear is 4.5 times the LCOE of existing coal generation and twice the LCOE of new black coal generation.

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Martin Burkle — I previously answered some of your questions regarding UAE; all I did was repost what I learned from following World Nuclear News.

I’ve also earlier (and probably on another thread) offered the opinion that Australia might well wish to follow the British regulatory model for, not the least, its reponsivieness and the demonstrated competence of regulators and NPP operators.

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Martin Burkle,

Thank you for your comment.

Australia is active on the IAEA. In fact, the IEA’s investivgation of Iraq’s ‘weapons of mass destruction’ (nuclear weapons) was led by an Australian (until he became Governor of Tasmania!).

Our research and medical isotope nuclear facility at Luca Heights and ARPANSA are active in the IAEA.

The IAEA is an excelelnt source of information.

What I am hopong is that others who know a lot about the subject and have speciif relevant skills will do some research and post the results on line. What I believe we want to identify is how much the LCOE could be reduced. We need to break it down into component parts and focus, initially, on the components where there is most opportunity to reduce the LCOE. Clearly, since Capital is 79% of LCOE, that is the place to focus attention initially. Capital can be broken down into components. On another axis are the influencing factors, such as labour rates and productivity factors, investor risk premium, etc.

I hope we can encourage the many experts who contribute to BNC (and the many more who are reading and watching) to get involved in this exercise.

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DBB,

Yes, the UK regulator regime might be preferable to the US. But others may be better still. What is needed is a quantification on the effect on the LCOE, not just fot one plant but for 50 years or more of nuclear build and operation. Would you like to take on a research project to quantify how much savings on LCOE, if any, Australia could achieve by tieing into a nuclear regulatory program run by USA, Canada, UK, EU, Finland, Sweden, Russia, Japan, China or India.

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Peter Lang — You left off France!

:-)

Japan’s scheme will surely be unpopular in Australia and China has decided than a mere 300 regulators is too few [given the number of simultaneous builds, I agree]. The UK scheme has the NPP owner paying for 98% of costs of regulation; surely popular with tax payers if not rate payers.

Fleet average LCOE goes down as realized capacity factor goes up; the cost of regulatory services is negligible in comparison.

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DBB,

The cost of the regulatory services may be negligible. But the cost of the excessive regulatory intrusion in nuclear energy is enormous. According to Cohen, regulatory ratcheting has raised the cost of nuclear generation by a factor of four. I’d assert that is for no real benefit. In fact it is a massive disbenefit. It is costing the world tens of thousands of lives and many more illnesses and disabilites per year. I’ve seen figures (I don’t remember where) that polution from coal fired power stations in USA causes 24,000 early fatalities per year (anyone have the source for that figure? Is it considered authoritative?).

I suspect if we have to fall under the US NRC, the cost of nuclear will be much higher for ever than if we could fall under am much leaner regulatory environment. For example, I’ve seen how the US EPA continually changes the rules for emissions regulations [1]. They’ve been changing the regulations every few years for 30 odd years. The cost to industry must be enormous. I suspect it would be even worse with the NRC, wspecially during the FOAK period for new reactor types.

[1] http://www.epa.gov/airmarkets/business/ecmps/docs/ECMPSEMRI2009Q2.pdf

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Martin Burkle, @ 6 November 2011 at 12:45 AM,

Where would you find such a student?

I reckon you’d be ideal! Are you offering? :)

Actually, being serious, this is what I think on the issue of “nuclear is too expensive to be a realistic option for Australia”:

There are many people contributing to BNC who are highly knowledge about the relevant subject material, have excellent research skills, have background to enable them to know where to look and to zoom in quickly on the relevant material.

So I am hoping these people might volunteer to take on bits of the task.

The first hurdle we need to get over is for the contributors who are finding the message confronting (I’m not referring to you, by the way, you are one of the few left contributing on this thread) – that nuclear is too expensive to be viable in Australia – to recognise this is a fact.

Once we get over this denialism (a BNC term), we can move forward.

If in the meantime, if some people want to drill down into the EPRI figures and find a gross error – or find an error in my analysis – then that is all valuable too. We do not want to set off on a path based on a wrong starting position.

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Peter Lang — The NRC has agreed to give up so-called regulatory racheting by issueing type licenses. For example, the type license for the Nuscale 45 MWe SMR will require 7 years if all goes well. The UK regulatory is much nimbler, so much so the Hyperion appears likely to build its SMR in England as the type approval won’t require anything like the ~21 years the NRC would likely spend on that [my guess], given that its not an LWR but instead a (just barely) Gen 4 lead cooled unit.

All LWRs encourporate much the same safety features which were add-on during the period of ratcheting; only the Areva EPR has substantial additional features [and doesn’t seem to have a type license in the USA yet].

Your remarks about the US EPA demonstrate your failure to understand the applicable laws under which the EPA makes and enforces rules; these decrease LLE and so are generally thought to be a good thing [I certainly do]. However, as recent events in Japan have amply demonstrated, the LLE from NPP mishaps is so low as to be almost unmeasurable. I recommend reading Professor Cohen’s “Understanding Risk”
http://www.phyast.pitt.edu/~blc/book/chapter8.html
(Deleted inflammatory comment.)

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DBB,
(The comment to which you refer has been deleted.)

The NRC has agreed to give up so-called regulatory racheting by issueing type licenses.

You’ve completely missed the point, I think. Nuclear is too expensive. It is not competitive. Largely that is because it has been regulated to be overly expensive as a result of 50 years of anti nuke activism. To make Gen IV and new SMRs least cost we need to completely revamp the nuclear regulatory system.

(Snide remark deleted.)

But, obvioulsy I’ve jumped too far ahead on this thread.

To all, let’s get back to the lead article. Are there any errors? We need specifics if I am to change anything. Simply saying “we don’t like the result” or “we don’t agree with the labour productivity figures” is little help. The figures proposed instead need to be justified. Otherwise, it is just a case of “I don’t like what you are saying”.

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Peter Lang,
I could purchase 1.5 kW for $7500 US dollars if I were given the opportunity. That would supply about 12,000 kWh for a year for the next 60 years. How can that be too expensive? Its the cheapest energy source out there, Nuclear’s problems are only institutional.

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Peter Lang — The world population has agreed to go with (essentially) NRC’s PRA safety criteria, no matter how much anyone thinks making NPPs as safe as eating peanut butter is overdoing it. Therefore NPPs are expen$ive but in most of the world not appreciably more and often less than other forms of low carbon electricity generaation.

In an attempt to lower the costs of NPPs, Nuscale devised their 45 MWe SMR, whose simplicity and even elegance is prehaps best appreciated by engineers. Following on much the same thought B&W’s 300(?) MWe mPower SMR might be a larger version of much the same design ideas which keep or improve on the ‘eating peanut butter’ safety while lowering costs rather dramatically [by NPP standards, that is]. I have offered an approximate LCOE for the Nuscale unit if built in the USA and even made a stab at the cost in Australia using your labour multiplier. I suspect that the B&W mPower, still to receive NRC type approval, will be about the same price; whatever that price is, it will be less than for the Westinghouse AP1000 and the Areva EPR.

There is essentially nothing which can be done to change the required safety or anything else which might be a cost driver. I personally suspect that Australian EPRI(?) study is biased or otherwise contains a mistake; the e3 study commissioned by the State of California also priced NPPs way too high, that in a state which had already forbidden any new NPPs. I suggest that influenced the e3 study and I repectfully suggest the same mght be true of the Australia EPRI(?) study. However, I have no competence enabling me to critically read either cost study; I just note that both are completely out of line with what is occurring elsewhere in the world. Maybe Australia, just like California, is extra special.

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DBB,

I guess, since you and many others do not waht to entertain the possibility that NRC regulation has cause nuclear to be massively over priced we should stick with coal until another generation wakes up to what we’ve done.

There is not point me trying to explain what I am trying to say to you. I’ve tried too many times, and it is going nowhere. So please understand why I do not bother responding to your comments. I find them mostly unhelpful.

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Thanks to Peter and to all contributers for an interesting thread.

Peter, I noted with interest in your paper the sentence
” Nor do the emissions intensities include the higher emissions intensities produced when load-following; e.g. when cycling power up and down to back-up for intermittent renewable energy generators”

I have seen figures suggesting that the thermal efficiency of the best OCGT’s is around 40%, and other figures suggesting that the thermal efficiency of the best CCGT’s is around 60%. Even if the latter figure is overstated and should be around 50% as mentioned in passing in some places in the above thread, the use of OCGT’s certainly represents a sub-optimal use of the finite CSG resource.

Now I observe that GT’s backing up wind and solar cannot use closed cycle, as the steam turbine section cannot vary its output sufficiently quickly to follow the potential generation variations, and the ST also requires the GT to be working at near full output to operate anyway. So: we have OCGT backing up “unreliables” [https://bravenewclimate.com/2011/10/29/gws-sg-es/]. Running as backup, these OCGT’s will not be achieving their full thermal efficiency. So we have WT’s etc plus OCGT’s at, what, 30%?

Now one alternative to that is to scrap the (WT’s etc) bit and install CCGT’s at 50% instead. I am left wondering whether the CO2e/kWh figure of the latter will actually work out near equivalent to the former. The latter will certainly be a more productive use of the CSG, and would require far less investment in resources and infrastructure.

Has anyone figures to verify or disprove this conjecture?

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Phil Spencer,

Thank you for your comment and question. Most regulars on BNC would agree with the point you make. There are many articles on this on BNC. I’ll point you to three for a start, and suggest that many of the comments will be of interest too:

CO2 avoidance cost with wind energy in Australia and carbon price implications

CO2 avoidance cost with wind energy in Australia and carbon price implications

Replacing Hazelwood coal-fired power station – Critique of Environment Victoria report

Replacing Hazelwood coal-fired power station – Critique of Environment Victoria report

‘Zero Carbon Australia – Stationary Energy Plan’ – Critique

‘Zero Carbon Australia – Stationary Energy Plan’ – Critique

You may also want to download the spreadsheet linked at the top of this thread. Unhide columns L, M and N and change the inputs to suit your assumptions. Use the NREL calculator to calculate LCOE if you need to change capacity factors or any other input that affects LCOE.

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Gene Preston, on 7 November 2011 at 12:06 AM said:

I could purchase 1.5 kW for $7500 US dollars if I were given the opportunity. That would supply about 12,000 kWh for a year for the next 60 years. How can that be too expensive?

Mine mouth coal prices in Australia are similar to mine mouth coal prices in Wyoming. In the neighborhood of $1/GJ. In addition Australian coal has a very low sulfur content so SO2 scrubbers aren’t required(according to the EPRI report Peter referenced)

In the US the overwhelming majority of the population lives a very long way from Wyoming. Once one calculates in the transmission costs or the rail transport costs from Wyoming coal doesn’t look all that competitive.

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Gene Preston,

You claim is un-substantiated. Can you explain how you derived the figures and provide all the sources for your assumptions and inputs. Need to use accepted accounting methods and LCOE analysis methods (please use the NREL calculator so we can all follow it.

Do you have any problem with the analysis of the EPRI data presented in the lead article?

If you dispute anything in the EPRI report can you explain the error and provide a replacement value.

For all contributors, I’d suggest, at this stage it would be unhelpful to have any more comments which amount to no more than “I don’t like the figures in the EPRI report”. If there are errors let’s substantiate them and quantify them.

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The $7500 per 1.5 kW is $5000 per kW. The price of the South Texas Nuclear project units 3 and 4 at $5000 per kW for 2700 MW is a total price of $13.5 billion dollars, which is higher than the estimated project cost. Under my energy annuity concept severa million customers buy into the project by making cash flow investments over a period of 5 years. The customers investing do not charge interest but expect to get in return low cost energy for a very long time into the future. So with this model there is no interest during construction. There is little uncertainty by the builder that the money will be available because the individual customers want to buy into the project and have signed an agreement to make the payments over 5 years to pay for their share which they will own when the plant comes on line. Then the O&M cost is expected to be about 1.6 cents per kWh after the plant is running, which is the current STP O&M cost. So the investory pay the up front capital cost which is low, and then pay a very low energy cost when the plant is running. The contract with the utility allows the energy received from the plant to be taken into account and lowers the kWh supplied by the utility for production. The utility supplying the customer charges for T&D costs and charges for any energy above the energy taken from the nuclear plant, so the utility does make money, but not on resale of the nuclear energy, which is wholesale to the customer investing. The only problem with this idea is that the utilities oppose it and its not allowed in Austin Texas where I live. When the lights go out, I will demand that indivudual customers be given an opportunity to invest in their own power sources. The lights may go out this summer because the ERCOT grid is becoming extremely short on capacity with its energy only markey. The LCOE has nothing to do with my analysis. Do you do a levlelized cost analysis when you buy a new car. Heck no.

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All right, Gene, let’s avoid using the more appropriate LCOE calculation and take a look at your figures. We will, amongst other things, ignore the time value of money and the cost of R&M. We will presume, quite unreasonably, that every single unmaintained, geriatric panel remains in service for 60 years.

Let’s do a quick comparison based on 20 years panel life, which is closer to the claims of most panel manufacturers. Perhaps you could provide a quote indicating that panel cost, inverter and controller, support frames and installation are commercially available at your stated price of $7500 and that no inspections, maintenance or repairs will be needed during the 60 year guarantee period – presumably, this is included in the price and at the supplier’s risk. Good luck with that. However I will use your figure.

Now it’s time for my own unsupported assumptions:
1. 5% degradation of panel performance annually.
2. Zero maintenance cost. Yes. I know, impossible, but favourable to your case.
3. Capacity factor of 25% (again, generous).

Results:
First, the annual output is not 12,000kWh as claimed. It is 3247.5kWh. You overestimated by a factor of 3.7, right at the outset.

Panel efficiency after 60 years is only 4.8% of its original, ie 72 watts.

Lifetime kWh (60 years) = 62 MWh.
Lifetime kWh (20 years) = 40.4 MWh.

Average cost (60 years) = 12.105 cents/kWh
Average cost (20 years) = 18.6 cents/kWh

If, as per the second post, an O&M cost of 1.6 cents per kWh is included, the energy costs become:
13.7 cents/kwh over 60 years
20.2 cents per kWh over 20 years.

Compare this with 5 to 8 cents per kWh LCOE for new nuclear power in USA. Ref: http://www.oecd.org/dataoecd/59/50/45528378.pdf

So, even using Gene’s own very questionable figures and after correction for the capacity factor, the solar power proposal is nowhere near the money.

Of course, this would change if the sun shines 24/7/365 in Austin, Tx and no cloud ever obstructs the sun’s rays. That’s where the cf comes in. Even an optimised, two axis tracking system was installed to keep the panels perpendicular to the sun’s rays, the hypothetical capacity factor will still be 50% minus dirt, degradation, cells out pending maintenance or replacement, etc – say 40% in lieu of the assumed 25%.

I submit this to demonstrate the differences between a used car salesman’s view of solar costs and LCOE. This is why Peter Lang’s request for LCOE calculations is relevant. Unless costs are levellised and based on verifyable real world prices, comparisons will always lie along a continuum, somewhere between error-prone and fraudulent.
Ev

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John, there is no panel. There is no inverter. I am talking about investing in a partnership in a 2700 MW nuclear plant, namely STP 3 and 4. Nothing changes at my house. The only thing that is different from a utility building the plant and a million customers investing is the ownership and where the money to build the plant comes from. Also the accounting of kWh at the customers end and at the nuclear plant end must be accounted for and matched up for each customer. I am only talking about a nuclear plant, I am not talking about a solar plant at all.

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John Bennetts — Gene Preston is aattempting to explain another way to finance an NPP; his post has nothing whatsoever to do with solar PV.

The LCOE calculations remain the same; the capital costs have to be recovered somehow but an alternate to the current financing methods in the USA is to be welcomed.

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Gene Preston,

Before we get into your analysis, can you please cite sources for the figures for:

Total Plant Cost
Owners Costs
AFUDC
Total Capital Required
Fixed Operation and Maintenance
Variable Operation and Maintenance
Fuel costs
Book Life
Discount Rate (before tax)
Capacity Factor

Under my energy annuity concept severa million customers buy into the project by making cash flow investments over a period of 5 years. The customers investing do not charge interest but expect to get in return low cost energy for a very long time into the future.

We’ve been through your idea before on another thread. I wasn’t persuaded then and there is nothing new to persuade me now. I explained my issues with your proposal on the other thread (as did others). One of thee issues is that small investors demand a shorter payback period (higher return on investment) than large institutional investors. The small investors are more risk averse. So the LCOE will be higher, not lower.

Another reason was the problem of ownership of the shares and liquidity (when someone wants to sell). Would shares be traded on the stock market? Can anyone buy them? If not how will there be liquidity? If they will be traded, how is this different to any publically traded company? If it is not different, wouldn’t it be cheaper and safer for small investors to buy shares in the electricity utility?

So with this model there is no interest during construction.

I don’t buy that.

I believe this is a pie-in-the-sky idea. My reaction is that it is too far out in left field to help this thread. I’d urge any further discussion of this be taken up on your original thread on this subject.

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Before we get into your analysis, can you please cite sources for the figures for:

I will give the perspective of how I see the financing as an investor.

Total Plant Cost NRG says 10 billion direct capital and 13 billion with IDC for 2700 MW http://www.nuclearenergyfortexans.org/nuclear_energy_news.php?id=38

Owners Costs Owners are the small customers investing, which is 10 billion.

AFUDC none, the owners pay as invoices for construction are issued

Total Capital Required 10 billion since there is no interest during construction

Fixed Operation and Maintenance These three items are currently 1.6 cents per kwh as NRG is billing Austin Energy, I got this figure from NRG.
Variable Operation and Maintenance
Fuel costs

Book Life at least 30 years

Discount Rate (before tax) none because thats not the way it is financed

Capacity Factor at least 95%, STP 1 and 2 set records for performance at 98% CF http://www.winregioniv.com/stpnoc04-10.pdf

Peter we are not financing this plant the way you are thinking so your LCOE analysis does not apply in this instance. Simply compare the up front out of pocket cash to get a power source going and the cents per kWh operating cost. Thats all we are looking at here. Now compare the out of pocket case for another source and the cents per kWh energy cost. Gas would be cheaper out of pocket but the cents per kWh O&M cost would be higher. Solar out of pocket cost is out of sight. Wind would not be bad, but your source of power would be on one minute and off the next.

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My apologies to Gene. When I read his solid block of text it appeared to swing between solar and nuclear – once my mistake had been made, I failed to realise that the contribution was about NPP’s, not solar as compared with NPP’s.

It’s amazing what a bit of inattentive reading can do, and how resistant the brain can be once the initial (quite wrong) conclusions have formed. So, apologies to Gene.

That leaves unaddressed the 8660 productive hours for solar PV in Texas, or have I misinterpreted this as well?

Frankly, even after several readings of the first two contributions, I remained confused as to what, precisely, Gene was talking about, apart from the well-known fact that ERCOT is presently light on for capacity. Is this not some kind of indication that LCOE analysis brings things together, in fair comparison, for objective analysis?

Was Gene discussing NPP or solar in his first comment? He did not say which. If NPP, who ever heard of a 1500 watt NPP?

I was still lost, till at the third try, Gene explained – we are discussing a part share in specific NPP proposals. But why say that LCOE is not relevant?

So, Gene, my apologies for being unable to understand your contributions. The rest is history.

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LCOE is the way a utility would look at the different types of plants as EPRI has done. One problem with LCOE is that if you think a project is not going to fly, then the interest rate is high. If you think the project is reliable and no problem, then you finance it with a low interest rate. In this sense, the fear of nuclear by utilities and the government is what makes it unattractive financially. That fear jacks up the interest rate. In the case of ERCOT, the DOE said the interest rate would have to be 11%. Yikes. The project is not economic at 11% interest for financing. What went wrong? The proglem is that the ERCOT market design doesn’t allow the utility owners of the plant to charge in their rates the capital cost. How is the nuclear plant going to be paid for? The DOE knew this problem with the ERCOT market design so they jacked up the interest rate to 11%. They had no choice. Now if the market design here allowed utilities to finance the plant in a different manner, then the interest rate might have been as low as 5%. So you see, when someone posts LCOE with certain assumed interest rates, they basically don’t know what they are talking about unless they are very familiar with the particular market the nuclear plant is attempting to be constructed in. The problem here in the US is that deregulation has ruined the ability to finance large nuclear plants. If you want to see more about the evils of deregulation here in the US see this interview: http://www.hd.net/blogs/the-un-banked-dr-jeffrey-sachs/

So what I was trying to illustrate is that there might be a whole new way to finance these large projects. If utilities and the government are not able to finance them, then let the customers themselves finance the nuclear projects as a coop effort. Once individuals begin financing plants, all the LCOE stuff goes out the window. Individual customers can look at their money any way they want to. I think they would only be interested in 1) our of pocket cash, 2) what energy do they get and for how many years, and 3) what is the cents per kWh they will have to pay for the energy on top of what they have already paid. If you look at the individual’s investments, they will find their investment in nuclear for nearly the rest of their lives will have been a wise investment and not all that hard to finance. So lets get the show on the road and let individuals form coops to build their own plants for their own energy needs. Get the governments and utilites out of the way!

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Gene Preston’s comment does raise an interesting point about ownership. I understand the Finnish utilities have combined to own the EPR being constructed. I seem to recall there is a very innovative (typically of the Scandinavians :) ownership arrangement. Perhaps one of the Finnish contributors could explain it and what are the perceived benefits of that arrangement.

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Gene Preston,

Thank you for your two articles. We have been over all this before on the thread you wrote on this very subject: http://wp.me/piCIJ-UK .

You do make some interesting points. In particular you’ve pointed out that the discount rate used in comparing technologies such as EPRI has done is for comparison purposes only. The discount rate that applies for different projects depends on the financial risk of each project. You said that you view 11% as a high rate. However, many mining projects have a much higher discount rate. I suspect the discount rate that would be applied to a NPP in Australia would be much higher than that.

EPRI (2006) points out the difference between an LCOE analysis and an analysis for an investment decision. They are quite different. I think you are crossing between the two. Australia is nowhere near the stage where we would start talking about a market analysis for a particular plant on a particular site to meet expected demand profile for electricity.

Gene, what market analysis has been done to test your idea?

• Who are the investors?

• How many of them are there?

• How much are they prepared to invest each?

• When will they make their contributions, and how much each

• What terms and conditions do they require to attract them to a coop as opposed to having the flexibility they have now?

• Have you considered why co-ops generally fail?

Some renewable energy idealists in Victoria want their own wind farms. After years they’ve managed to convince a small band of idealists to put in enough money to get two wind turbines. That’s a long way short of getting the money to buy an NPP.

You may not be interested in the financial analysis for your decisions. But most people are. Most people have an innate ability to be able to sense value without doing the analyses. Analyses of purchase and investment decisions show consumers require pay back periods of about 1 to 5 years.

I suspect if you did the market research you’d find only about 1% to 2% of the people you would need would commit to a co-op for their electricity along the lines you envisage.

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Peter, you asked these points:

Gene, what market analysis has been done to test your idea? none, the idea is a new idea that has not been tested, its also not allowed under the current rules.

• Who are the investors? Individual electric customers including large load customers investing in off site generation which is not allowed.

• How many of them are there? Every customer in the state, probably a few million.

• How much are they prepared to invest each? large customers might put forth quite a lot of money. Small customers are unknown since the concept has never been presented to them.

• When will they make their contributions, and how much each. THey would make payments as work in progress payments come due, just like they were building a project of their own.

• What terms and conditions do they require to attract them to a coop as opposed to having the flexibility they have now? The customers have no flexibility now because the only choise they have is company x or company y, but those companies do not offer this investment option because the notion of ownership by customers has not caught on yet. In Austin which is not deregulated we have no options. There is a green rate, but it has no nuclear option. In fact the utility is anti nuclear because it is believed that the public is anti nuclear. However the utility and the city government will not put this issue before the public because if they did at least half the population her would be pro nuclear and the anti nuclear folks want to keep that hidden. They are in charge now, but their tenure is close to an end because they have not been good system planners and not the system is at risk of failure.

• Have you considered why co-ops generally fail? I know of no coops in Texas that have failed. I know of a few small attempts at solar and wind here in Austin that have (quietly) failed. Coops are not easily formed here. There was one new company recently formed called Sharyland on the border between Texas and Mexico. Its actually a rather ordinary utility so its not a coop. It was funded by the Hunt Brothers. That utility was carved out of American Electric Power. Sharyland has a DC tie to Mexico. I think they have something in mind sso that they operate on both sides of the border in some sort of bbusiness activity that is not clear as to what it is at this time.

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Gene Preston — The investors still have to find an energy equity a good deal. There is a lost opoortunity cost associated with (instead) buying a share of an NPP. Supposing that is a net 2.5% for 30 years and supposing all up capital costs are only US$5100/kW [costs always seem to go up], I determine an LCOE of US$0.058/kWh for CF a long term realisitic value of 92%.

Assuming current wholesale price in Texas is US$0.010 and will increase at 4% pa, the LCOE for that portion of one’s utility bill becomes US$0.134/kWh. So at first pass buying an energy annuity appears to be quite a good investment. To find a better investment appears to require assuming one can net 16.7% for 30 years, which seems quite, quite unlikely.

Maybe I’ve done the analysis incorrectly, not being ‘up’ on this sort of thing…

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David the nuclear energy cost of $0.058/kWh is a good deal but by paying for the capital cost up front the energy cost to those investors is much less, only about 2 cents per kwh.

David you said the current wholesale price in Texas is US$0.010. Wow we wish. Its more like five times that amount. But the generation companies say they cannot build any new plants unless the market price is ten times what you gave.

You noticed that the energy annuity seems like a good investment. It is when you consider that everyone seems to be losing money in every other kind of investment around here, House prices are depressed, stock market is failing, return on CDs is near 0% interest. There is nothing you can put your money in here that is safe except possibly gold. Being able to buy your electric power and energy for the next 30 years with a small outlay is a super investment. A great deal. Unfortunately the monopolies do not want the citizens to have that power.

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As the designated Finn of this chain maybe I should comment briefly on the EPR constructed here. I do not really understand the pros and cons of the ownership structure of TVO (Teollisuuden voima) that owns OL NPPs. (http://www.tvo.fi/www/page/3067) TVO produces power to its owners at cost price. TVO is owned by utilities and industrial companies (mostly under Pohjolan voima PVO) and by buying shares you become entitled to a slice of the power produced by TVO.

Incidentally, the deal that TVO has with Areva for EPR is a fixed-price turnkey agreement. So the cost overruns are not directly relevant for TVO. When they sue for damages, the damage to them (as far as I remember) is estimated by taking the difference between the electricity TVO:s shareholders must now, because of the delay, buy from the market and the cost of electricity from OL3 NPP.

I am having trouble in understanding what discount rate one should use in computing LCOE. The answers can be pretty much whatever depending what choice you make. The bonds issued to finance OL3
(http://www.tvo.fi/www/page/3373/) seem to have an interest rate less than 6%.

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Thanks very much Jani for providing the information re Finnish loans.

It seems that private finance tends to be available only over 10 or 11 percent (US experience, including as contributed above), while governments access funds at half of that.

The difference, the price of risk, spells death for privately funded NPP’s which are also FOAK in Australia.

We will not know the cost of nuclear power in Australia till we build one. Wasn’t this also true for renewables, of all types? I see value in proceeding to tender-box capital and operating costs asap, probably via a build-own-operate (BOO) contract. Reimbursing short listed tenderers part of the cost of bidding appears reasonable, given the need to get well researched prices, not just ambit claims. Perhaps these could be via progressive steps, with culls along the way depending on the content and quality of proposals/offers.

Until we see those prices, discussion about Australia’s comparative costs of construction and operation will remain primarily academic. Certainly, EPRI and WorleyParsons, etc estimates can only get us part of the way.

So, is the best first question not what the price is, but how to find out what the price is?

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Jani Martikainen, on 7 November 2011 at 5:18 PM

Thank you for the explanation and the link. It is an innovative way to fund NPPs.

I’ll summarise my understanding of the arrangement (please correct me if I have misunderstood anything):

There are six shareholders in TVO. Each is an electricity distribution utility (or industrial company that wants a reliable supply of power).

Their shares range from 0.1% to 60.2% ownership of OL3.

Each shareholder takes their share of the electricity generated and distributes that share.

Each shareholder bears their share of the variable and fixed annual cost of OL3.

How is the capital cost of the plant paid for? Does each shareholder pay its share of each payment to the contractor as the payment falls due? Presumably interest owing is paid as the project progresses. Therefore, the total interest during construction is still a portion of the cost of the project that must be capitalised. It cannot be avoided which is what I understood Gene Preston was saying. Gene, have I misunderstood you?

Consortium formed by AREVA NP S.A.S, AREVA NP GmbH and Siemens is delivering the unit on a fixed-price turnkey agreement, under which the Supplier is e.g. responsible for:

• design and engineering
• scheduling and project management
• quality
• licensability
• manufacturing, procurement and transport
• construction
• erection and installation
• testing and commissioning
• performance values.

TVO, as the client, is responsible for applying for the necessary licences (on the basis of the Supplier’s licensing documentation), which are granted by the Finnish Radiation and Nuclear Safety Authority (STUK). TVO is also responsible for the infrastructure and excavation work of the power plant site, connections to the national grid, and construction of certain auxiliary buildings.

I wonder if the total capital cost that is often quoted includes the owner’s costs. Do you know?

The contract is “fixed-price turnkey agreement”. The project has run over budget by a factor of two. Does Areva carry all that cost increase or is some billed to the TVO shareholders?

I understand the regulator is being blamed for part of the delays and cost overruns. Do the TVO shareholders have to pay that share?

I don’t quite understand this bit of your comment:

Incidentally, the deal that TVO has with Areva for EPR is a fixed-price turnkey agreement. So the cost overruns are not directly relevant for TVO. When they sue for damages, the damage to them (as far as I remember) is estimated by taking the difference between the electricity TVO:s shareholders must now, because of the delay, buy from the market and the cost of electricity from OL3 NPP.

I’ll rewrite it in my words and please tell me if I have understood correctly

Incidentally, the deal that TVO has with Areva for EPR is a fixed-price turnkey agreement. So the cost overruns are not billed to TVO. The Consortium has to carry those costs, except where they are the fault of TVO (or the regulator? In which, case the Consortium sues TVO or the regulator). When TVO sues for damages, the damage to them (as far as I remember) is estimated by taking the difference between the electricity TVO:s shareholders must now, because of the delay, buy from the market and the [projected] cost of electricity from OL3 NPP.

What does the italic bit mean? I this the LCOE of the electricity based on the original price of the fixed price contract?

I am wondering if the mechanism for purchasing OL3 provides a lower cost and reduces risks. I wonder if it reduces the investor risk premium. I wonder how it might work in NSW. Could our electricity distributors form a similar sort of consortium to get a fleet of NPPs in NSW?

Any comments (from anyone)?

I’ll respond to your comment/question about discount rates in a separate comment.

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Jani Martikainen, @ 7 November 2011 at 5:18 PM,

I am having trouble in understanding what discount rate one should use in computing LCOE. The answers can be pretty much whatever depending what choice you make.

I was intending to copy the relevant sections from the ACIL-Tasman (2009) report http://www.aemo.com.au/planning/419-0035.pdf .

However, it would be best to read all of Section 2, and especially “2.2.2 Discount rate” and “2.4.2 WACC for new entrants”.

This bit (from section 2.2.1) is relevant:

The new entrant model utilised by ACIL Tasman is a simplified discounted cash flow (DCF) model for a greenfield generation project. It is significantly simpler than a DCF model which would be utilised to evaluate an actual investment decision for a specific project due to the fact that it is by definition generic and designed to be suitable for a range of projects and proponents.

Sections 2.1, 2.2 and 2.4 explain the discount rate. It is not just anyone’s pluck. It is interesting to note that ACIL-Tasman used 6.91% post-tax real WACC. EPRI provided both the pre-tax and post-tax WACC for both Current and Constant dollars. EPRI’s figure for post-tax real WACC was 7.1%, which is similar to the ACIL Tasman figure (given the analyses were done a year apart). However, EPRI used the real before tax method for calculating LCOE; using real before tax WACC of 8.4%.

The messages I take from this are:

1. Selection of the value for Discount rate (WACC) is not a matter of pick any value you want to use. It is tightly defined by the input parameters defined in Table 4 and the expression chosen for the calculation (Section 2.2.2).

2. WACC is specific for each economy and very different for different economies.

3. For LCOE to be comparable across technologies it must have been calculated using WACC that are consistent in all ways: same method, same year dollars, and post tax or pre tax, real (Constant) or current dollars.

4. It is meaningless to compare LCOE of projects that have been calculated using discount rates generated by different methods. Therefore, it is generally meaningless to compare the LCOE of technologies if the LCOE is presented in different reports.

5. These methods of calculating LCOE are not intended to be used “to evaluate an actual investment decision for a specific project” like OL3. They are for comparing a range of technologies in the planning and evaluation phase.

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JB,

So, is the best first question not what the price is, but how to find out what the price is?

Good question. What do you suggest? Who do you suggest would pay for the work?

By the way, South Africa was going through the process a year or so ago. I wonder where they have got to.

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Gene Preston,

The purpose of my question was to demonstrate that no market testing has been done. I’d expect a very small percentage of people (mostly idealists) would invest in the coop – similar to what has happened with the coop to buy a develop a farm (now just two turbines and struggling to get the people to actually pay for that). I am not persuaded.

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@Peter: I cannot claim that I know all the details regarding the OL3 NPP so I am basically telling what my understanding of the issue is based on the media reports here. TVO:s line is that they have nothing to do with the delays and that they have a fixed price agreement with Areva for EPR. They wish to sit on the sidelines and wait until they are given the NPP they were promised and at a price agreed earlier. Areva naturally wishes to minimize their losses by attempting to dump as much responsibility for the delays on someone else so that they can avoid paying for damages.

“I understand the regulator is being blamed for part of the delays and cost overruns. Do the TVO shareholders have to pay that share?”Yes, this is what Areva claims, but to me it looks like nonsense. The regulatory regime here is not actively obstructionist and in fact on occasion the regulators have warned Areva in advance about possible delays unless they get their act together. The project has not been delayed by regulators not doing their jobs or doing it slowly, but rather because the EPR design wasn’t finished when Areva sold it. The work on control systems (which are safety critical of course) are apparently still not finished. The same concern, I think, has also been raised by the French as well as the UK regulators.

I suspect Areva was desparate to win the contract for OL3 and therefore sold the first EPR very cheaply. Their plan was probably to use it as a succesful demonstration with which they could sell more NPPs later. In the end it is hard to see what kind of agreement Areva and TVO eventually strike. Who knows… maybe Areva is desparate to win the contract for OL4 and therefore sell also that one cheaply. TVO in turn might be reluctant to buy EPR again unless Areva pays the damages.

(TVO:s funding does eventually originate from the shareholders. Just few weeks ago utility in Helsinki agreed to participate for their part in the planning of OL4 NPP. This implied costs of about 40 million euros for them. If the OL4 is eventually build, Helsinki utility would have to pay perhaps about 500 million euros for their share.)

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This has been an illuminating discussion. In 2008, I looked at the question of how the nuclear industry Industries costs could be lowered. I have since 2008 continued to think about how nuclear costs can be lowered, and this discussion will undoubtedly lead me to revisit my original posts. I will not repeat my original 2008 discussions here, but most of my conclusions seem to have held up well.

One of my assumptions on Nuclear Green has been that the cost and scaleability of carbon replacement technologies is the most important issue in carbon mitigation. These issue is not being seriously addressed by most nuclear advocates, and not being addressed by renewables advocates. In addition to carbon mitigation, even if there were no CO2 problem, the ability of the global fossil fuel reserve to meet the energy demands of 7 billion people living in high energy societies is doubtful. The inability of fossil fuels to supply energy is certain. Thus lowering post carbon energy cost is of great importance to the future of human civilization.

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An important feature of the TVO’s ownership model is that the electricity generated and sold to the shareholders at cost is not taxed under current Finnish legal practice, as long as the shareholders cover the operating costs. This makes the model pretty attractive to the shareholders: TVO’s dividents are in a sense paid in tax-free electricity.

This so-called “Mankala principle” (after a precedent case) applies to other energy generation as well. However, it’s now under review by the EU as a possible violation of competition law, after a complaint from two (surprise surprise) Green MEPs. I don’t know how, exactly, a possible repeal of the principle would affect the funding or the position of TVO or NPPs in Finland, other than it wouldn’t help.

Many here fear that while AREVA & co seems to be legally responsible for the cost overruns, the firm will use their connections to the French government and the EU to simply twist the rules somehow and leave the Finnish shareholders holding the sticky end of the stick. As the Russians would say, “bumaga eta bumaga, praktika eta praktika.”

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One thing that I forgot to ask, was this concept of “book life”. It is clearly different than the life time of the plant. Does it not matter at all to LCOE claculation that NPP lasts for perhaps 60 years while wind turbine lasts perhaps 20 years? Or is the idea somehow to insist that the plant must pay for itself in 30 years so that one has two different LCOE:s for the same plant. One for the years 1….30 and the other from 31-60 which is only derived from fuel and O&M costs (so that it is almost free for NPP)?

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A poster, quokka, has post a link to a PwC report that includes many financing suggestions for increasing renewables, all of which, it appears to me, would be ways to make nuclear appear cheaper

Depressing climate-related trends – but who gets it?


Section 3.3 of the PwC report is titled “innovative finance” and it includes credit and risk guarantees to increase the ‘bankability” of Power Purchase Agreements”;
financing through pension funds (public?), and/or sovereign wealth funds;
regulatory incentives,
Feed-in tariffs,
capacity payments,
a carbon price,
a ‘green’ investment bank.

“In the context of offshore wind for example, Renewables Obligation Certificates (ROCs) and the CPF only go so far in providing the appropriate investment opportunities in the industry. Policy must now address specific issues such as pre-construction financing risk that deter institutional investors from investing in offshore wind. Appropriate measures to reduce risk include underwriting technology
and construction risks via a consumer levy, regulating offshore assets, and measures to increase returns.”

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Thank you for these very interesting comments. These are addressing the fundamental issue – how to get nuclear cheaper. Please keep these constructive comments coming. I’ll be back later. For now, I have three questions:

1. Is TVO one of many electricity companies that are competing. If not are there competitive pressures to keep electricity industry efficient and low cost, or is price controlled by a regulator?

2. Secondly, can any Australians add any comments about how such a financing arrangement could be applied in Australia; e.g. in NSW and Victoria?

3. This is interesting:

An important feature of the TVO’s ownership model is that the electricity generated and sold to the shareholders at cost is not taxed under current Finnish legal practice, as long as the shareholders cover the operating costs. This makes the model pretty attractive to the shareholders: TVO’s dividends are in a sense paid in tax-free electricity.

I believe energy, as a fundamental input to society and to human well being, should be as low cost as possible. The Finns seem to have found a way to do this. The CO2 tax concept is the exact opposite of what we should be doing, IMO.

Thank you Jani Martikainen, J. M. Korhonen, Charles Barton, Scott Luft, and quokka for the PwC link (I didn’t see it when quokka posted it ).

I’ll be back later to respond to some comments and questions; e.g on ‘book life.

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Few seem to question why renewables get recurrent subsidies like REC and FIT but nuclear doesn’t. Perhaps it’s because renewables are low carbon and delightful but nuclear is low carbon and nasty. As Garnaut the architect of carbon tax pointed out it’s only the low carbon part that should matter.

I think we should make low CO2 the sole objective, provided that objective isn’t defrauded with worthless credits. If recurrent subsidies are dropped that still leaves capital subsidies, loan guarantees and insurance indemnities. Nuclear critics fail to to note the one big US loan default was Solyndra, a solar manufacturer. The biggest liability waiver in Australia is Chevron storing CO2 under Barrow Island WA. That’s a fossil fuel operation.

In my opinion we should drop the RET and the REC subsidy and focus on tough carbon constraints, be it tax or cap. The Federal govt can give capital and liability assistance as it sees appropriate to any new low carbon project. That project gets no additional assistance like a 20% quota for that technology. I’m not sure that all that much help will be required since the customers are out there waiting for energy. If that energy is high carbon they’ll have to pay more.

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@ Peter Lang, on 7 November 2011 at 8:36:

Who and how to obtain competitive prices which indicate the real market price for a new NPP?

Off the top of my head, I can think of two processes which might relate to the Australian situation. First, the process selected must itself be subjected to careful analysis, or it will be a costly failure. Certainly, I don’t suggest that my thoughts are anything beyond half-baked.

All projects, to be successful, must have a leader who sets the vision and the goals. Who might this be? The answers to this question determine the shape of my tentative response.

1. Climate change is perceived to be real, threatening, a real future cost to society and thus worth committing expenditure now to drive zero CO2 electric power generation capacity. This could justify social response via a government backer, probably the Federal Government. So, the federal Government reviews ways in which to reduce future CO2 emissions, and achievable abatement costs.

The Australian Government has adopted an ad-hoc approach to this task, essentially oiling the squeaky wheels and lacking rigour in determining which projects will receive funding, from a basket of renewables, including:
Demonstration plants – Solar PV, Solar thermal, hot dry rocks, wind, wave and variants, including both applied research. Funds committed during the past 5 years or so have cost the public purse several thousand million dollars. The process has been noteworthy for its lack of openness and rigour, having (IMHO) all of the hallmarks of election gimmickry.

So, Proposal #1, Step #1 is for the Federal Government to drag the past into the sunlight, possibly via a status review of all expenditure to date, including State expenditure and State income foregone and, especially, tallying up the costs which have been fed through to consumers via retail tariffs. These include FiT’s, but also costs attributable to mandatory and voluntary renewable energy targets, costs incurred by retailers managing these programs – EnergyAustralia alone, submitted a request to the Regulator seeking to pass $75M over 4 years to all retail customers, these being the internal costs of administering the rooftop solar scheme in their part of NSW. This suggests that, nationally the hidden costs from this alone would be $100M or more.

Proposal #1, Step #2 would rely on the analysis of the data assembled above and an estimate of NPP costs and benefits – obviously, not market tested. I strongly suspect that the analysis of CO2 reductions over time versus cost will justify diversion of some of the existing social expenditure to fund a test of the NPP market, with expectation that the champion of the project would be a Federal minister, supported by developing public demand. Yes, I’m an optimist.

Proposal #2 relies on AEMO and the annual statement of generation opportunities. It is lamentable that nuclear options are specifically excluded… this is where the environmentalist George Monbiots and economic rationalists of the world have common ground.
Step 2.1: Unfortunately, is political – nuclear options must be considered on the basis of a fair comparison, warts and all. Until this is done, progress is stalled.
2.2: AEMO to oversee the process, with obvious need for involvement from ANSTO and a raft of other regulatory bureaucracies. In a perfect world, they may not be so complex, but the real world is where we and they exist, so we must deal with them.
2.3: Who pays? AEMO would proceed via an EOI. RFP documents issued to qualified respondents to the EOI. The goals would be identified via the Generation Opportunities study. Respondents to fund their own initial response – they are well capable of handling this expenditure. After culling to (say) one or two competing proposers, for a limited number of sites, the cost to bidders start to rise significantly.

I suggest that site investigations and an agreed portion of the site-specific design development and detailing could reasonably be reimbursed via AEMO in a commercial arrangement akin to an alliance agreement. This form of contract is now common in Australia, both within the power industry and throughout construction generally. Contract lawyers are comfortable with the notion of stepping away from strict contractual obligations and working cooperatively within alliances, which in my experience work particularly well on technologically advanced projects.

The output from the alliance’s work would be one or more detailed, costed proposals. Progressive review would probably further cull the proposals, ideally, down to one technology on one site.

So, Proposal 2 is driven essentially not by CO2 issues within the existing budgetary scenarios, but to extend beyond the desk studies of LCOE to produce a costed, SMART proposal by which to meet society’s future energy needs. SMART meaning Specific, Measurable, Achievable, Realistic and Time-based.

Sorry if this has become another long Bennetts post, but my intention has been to demonstrate that there are two current processes via which real bids for Australia’s first NPP could be obtained. The hold point which is common to both is the need to convert the Federal Minister into the project’s Champion, because without this, the legislative barriers will remain. My personal preference is for Option 2, on the grounds that a much wider cross-section of the community is likely to support economic rationalism or environmental rationalism (Monbiot et. al.) than the first option, which involves taking money away from virtually every renewables program in Australia, which will bring forth the renewables suppliers and their apologists, who are skilled at using PR to stifle the future of nuclear power.

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@ Gene:
Re energy co-ops, one outfit in Australia is travelling this path. Google Hepburn Wind. They started with small shareholders in a specific part of Victoria, Australia. Over time, they finalised plans, have obtained approvals and, only this week, have commissioned their first 4 wind turbines – perhaps 8MW total nameplate.

Interestingly, they are now talking of spreading to many sites, still with small shareholders.

Perhaps there is something of their experience which will interest you.

A nuclear co-op is conceptually a much bigger entity, but perhaps this is not necessarily so. Packaged 45MW to 60MW units have been mentioned here. They may be an entry point, owned by and constructed for a single community.

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I was thinking of something on a much larger scale. I was thinking of something like wall street, a clearing house, but non profit, and it woule be for the benefit of people who want to invest in real projects, not just the gambling operation we have now at wall street. So this wall street clearing house would match projects with interested end use customers where the customers receive the final product instead of cash. Financing a large nuclear plant with a million small customers should not be a problem if the right type of clearing house is set up.

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