"Business Risks and Costs of New Nuclear Power"

In case some of you missed it, the Climate Progress blog has picked up a study by Craig Severance, Business Risks and Costs of New Nuclear Power [PDF]. The report has quite a number of holes in it, in my opinion, and the biggest hole has to do with a flawed assumption in how the study calculates the cost of electricity from a new nuclear plant. We've been discussing and debating the study over at Climate Progress and the author has been great in responding to most everyone's critiques.

So what's the flaw?

The study claims that a new nuclear plant's capital costs, when all is said and done, will be about $10,500/kW. Many studies that I'm aware of estimate that a new nuclear plant will cost between $5,000-$8,000/kW for the all-in construction costs. Mr. Severance's capital cost assumptions are quite a bit higher than the highest estimate but whatever. That's not the flaw of the study's cost numbers. The flaw is how the cost of electricity from a new nuclear plant is calculated.

Apparently, the cost of electricity from a new nuclear plant comes out to 25-30 cents/kWh, "triple current U.S. electricity rates." The studies I've seen come out to less than half of that number. So what gives? It appears to be the study's assumption for how fast a utility pays off a nuclear plant.

The study assumes a payback period of 40 years. That's way too long. A new nuclear plant will probably be setup to pay back its loans for construction in 15-20 years and maybe faster depending on the financing agreements. Investors don't wait 40 years to receive their money back and in fact 15-20 years is a long time for any investment. Changing this one assumption in the study basically cuts the cost of electricity from a nuclear plant in half and becomes more in line with the conclusions from the other studies I've seen. I've explained this in more detail here.

This is just one of the problems with the study that I, and many others, have found. We're having quite a spirited discussion and debate over at Climate Progress so if you have the time, please do check it out.

Update: The Heritage Foundation blog has their own thoughts on the study.