Is Solar Really Cheaper Than Nuclear?

Based on an anti-nuclear group’s report, the New York Times and its global edition, the International Herald Tribune, published a piece last week claiming that solar is now cheaper than nuclear. Rod Adams right off the bat saw through the bunkum and took the NYT as well as the anti-nuclear group’s report to town. After taking a closer look, we have more to add.

The report the NYT references comes from the group North Carolina Waste Awareness & Reduction Network (WARN). Below is the thesis of their 18 page report (pdf):

Here in North Carolina, solar electricity, once the most expensive of the “renewables,” has become cheaper than electricity from new nuclear plants.

When digging into the foundation of this statement, there’s one key factor in the solar cost assumptions that makes all the difference. As Rod pointed out, it’s that they are based on large incentives. On page 17 of the report, this sentence explains the large solar incentives included in the calculations:

A 30% Federal tax credit and a 35% North Carolina tax credit were applied to the capital cost [of solar] to reach a net cost per kWh.

How big of a difference do these make?

Before accounting for the incentives, the report derived a cost of 35 cents/kWh for solar (p. 18). After adding in the incentives, the cost of solar dropped by more than half: to 15.9 cents/kWh. If NC WARN wants to be accurate, then they should revise their thesis to read:

Thanks to state and federal incentives, solar electricity, once the most expensive of the “renewables,” has become cheaper than electricity from new nuclear plants.

But is solar now cheaper than nuclear even at the incentivized 15.9 cents/kWh? Credible sources still say no. Back to Rod:

The [NC WARN] paper ignores all other cost projections for nuclear. Some of the previous work on this topic that the professor and his graduate student ignored includes the following:

• A 2003 study conducted by a multidisciplinary team at MIT titled The Future of Nuclear Power which was updated with new data in 2009.
• A 2005 report by the World Nuclear Association titled The New Economics of Nuclear Power
• A 2010 OECD study titled Projected Costs of Generating Electricity: 2010 Edition

Further, the Energy Information Administration finds that without incentives, solar’s levelized costs range from 25.7 cents/kWh to 39.6 cents/kWh compared to nuclear at 11.9 cents/kWh. As well, EIA looks at a total levelized cost for all technologies that accounts for all costs over a plant’s life. NC WARN’s report only looks at capital costs. Because of the capital-intensiveness of nuclear and solar, the conclusions for only looking at capital between the two don’t change too much though.

The nuclear cost assumptions for the NC WARN’s dubious statement are based on a bent source: a report from Mark Cooper, senior fellow from the Vermont Law School. Last year, we highlighted testimony from FPL (now NextEra) that identified multiple flaws in Cooper’s claims. Did NC WARN further distort Cooper’s flawed report?

Below is the chart NC WARN created to claim that solar in 2010 is now cheaper than nuclear.

Based on Cooper’s report, the dots for nuclear up to 2008 in the graph above are not actual costs but the estimated costs of new nuclear plants by various academics and groups. Cooper’s chart for comparison is below.

As shown in Cooper’s chart, the purple dots to the right all vary based on who’s reporting the costs. Yet apparently it somehow makes sense for NC WARN to lump all these varying cost estimates together to create a meaningful trend. It doesn’t.

As Cooper’s chart above shows, the nuclear cost estimates depend on the estimator. A trend-line may be appropriate to use if utilities had made projections earlier in the decade so we could compare to their latest projections. But comparing early academic studies to utility studies and even to “Wall Street and Independent Analyst” studies doesn’t constitute a meaningful trend.

In NC WARN’s report, the data that continues the trend-line for nuclear past 2009 is based on an historical GDP investment index from 2000 to 2009 that has little to do with nuclear. On page 17, their report says to check the following page on why this index was applied to nuclear. No reason was provided.

On the opposite end, if we go to EIA, we find that their AEO 2010 “reference case already projects a 35 percent reduction in capital costs [for nuclear] between 2010 and 2035” due to learning curves by building new plants. We’ll leave it to the readers to decide which source of assumptions for the future is reasonable: an anti-nuclear group’s or a credible agency’s.

None of NC WARN’s and Cooper’s figures for nuclear are based on actual costs; the data are only estimates. Without any real costs on completed new nuclear plants in the US, it’s way too premature for NC WARN to claim solar is cheaper than nuclear in 2010. Solar’s costs may be declining, but based on government data, they still have a long way to go before they’re competitive with nuclear.

Update 8/3/10, 9:10: The NYT just posted an Editor's note on the article:

An article published July 27 in an Energy Special Report analyzed the costs of nuclear energy production. It quoted a study that found that electricity from solar photovoltaic systems could now be produced less expensively than electricity from new nuclear power plants.

In raising several questions about this issue and the economics of nuclear power, the article failed to point out, as it should have, that the study was prepared for an environmental advocacy group, which, according to its Web site, is committed to ‘‘tackling the accelerating crisis posed by climate change — along with the various risks of nuclear power.’’ The article also failed to take account of other studies that have come to contrasting conclusions, or to include in the mix of authorities quoted any who elaborated on differing analyses of the economics of energy production.

Although the article did quote extensively from the Web site of the Nuclear Energy Institute, an industry group, representatives of the institute were not given an opportunity to respond to the claims of the study. This further contributed to an imbalance in the presentation of this issue.