Nuclear Power: Understanding the Economic Risks and Uncertainties, Energy Policy

Abstract

a b s t r a c t This paper identifies the fundamental elements and critical research tasks of a comprehensive analysis of the costs and benefits of nuclear power relative to investments in alternative baseload technologies. The proposed framework seeks to: (i) identify the set of expected parameter values under which nuclear power becomes cost competitive relative to alternative generating technologies; (ii) identify the main risk drivers and quantify their impacts on the costs of nuclear power; (iii) estimate the nuclear power option value; (iv) assess the nexus between electricity market structure and the commercial attractiveness of nuclear power; (v) evaluate the economics of smaller sized nuclear reactors; (vi) identify options for strengthening the institutional underpinnings of the international safeguards regime; and (vii) evaluate the proliferation resistance of new generation reactors and fuel cycles. & 2010 Elsevier Ltd. All rights reserved. Motivation and context Volatile fuel prices, concerns about the security of energy supplies, and global climate change are coinciding to strengthen the case for building new nuclear power generation capacity. By 2030, global electricity demand is projected to more than double to over 30,000 TWh annually. More than 70% of the increased energy demand will come from developing countries, led by China and India. Providing sufficient energy to meet the needs of a growing world population with rising living standards will be a challenge. Doing it without substantially exacerbating the already disquieting risks of climate change will be an especially daunting task. There is an emerging consensus that there is no obvious ''silver bullet'' for addressing the global energy challenge-the solution will be comprised of a variety of technologies on both the supply and demand side of the energy system Proponents argue that in relation to the objectives of electricity supply security, resource efficiency, and mitigating the threat of climate change, nuclear power performs very well. Nuclear power: (a) represents a well-established technology for generating electricity that produces no carbon or other climaterelevant emissions; (b) is amenable to significant scaling-up and thus can provide large amounts of power; and (c) uses a natural resource (uranium), which is found at an abundance (2-3 parts per million) in the earth's crust-with advanced technologies, it could provide enough fuel to meet the world's electricity needs for several centuries. And, advances in nuclear reactor technology have substantially improved the underlying economics and safety profile of nuclear power. Skeptics claim that nuclear power is costly and technically complex. It involves the use of highly toxic materials that must be kept secure from attack or theft. Moreover, a viable technology for the permanent disposal or reprocessing of spent nuclear fuel has not yet been fully demonstrated. Finally, even in a carbon-constrained world, nuclear power may be less ARTICLE IN PRES