Nuclear energy’s system cost conundrum

System costs, meaning “the total costs accrued beyond the perimeter of a power plant to supply electricity at a given load and at a given level of security of supply”, according to the OECD’s Nuclear Energy Agency (NEA), are an important factor to be considered for national policy-makers. After all, these costs determine which energy source should be prioritized in a given national context.

The default assumption is that renewables are preferable option independent of the conditions. However, while it is true that their fixed costs are incredibly low – which does impart a series of important advantages – the true cost of renewables is represented in their system costs. If this is taken into account, more traditional energy sources, like coal, gas and – notably, nuclear – come a lot cheaper.

The reason for this discrepancy is threefold. First, renewables increase the need for reserve requirements as a result of intermittency. In a review of renewables system costs, the UK Energy Research Centre (UKERC) found that this could add up to £5/MWh at 30 percent penetration of wind and solar. This number could rise to £15 and £45/MWh when penetration reaches 50 percent.

Other cost-increasing factors are the need to maintain enough electricity production to meet peak demand at all times, as well as expanding the national power grid, since the power produced by wind or solar is rarely needed where it is being produced. All of this shows that system costs increase disproportionately as the amount of renewables increases in the electricity mix.

Still, the bone of contention regarding nuclear is its high fixed costs. Given nuclear’s main advantages – producing low-carbon energy, providing base-load during intermittency periods of renewable sources and ensuing energy security – it would be prudent to adapt the market in order to allow nuclear to play its role as a complement to renewables. However, little is happening in reality to bring about such a change.

“We need to reform the market to be able to keep running reactors that are obviously lowering system costs, that are obviously good for emissions, and obviously good for the system,” contends Staffan Qvist, an energy consultant from Sweden. “I think what we need to do better because no one is going to come down from heaven and install the market that makes this work. We have to come up with that suggestion but until then, NPPs are prematurely shutting down.”

In terms of costs, nuclear is not the only option of course. Theoretically, coal and natural gas are alternatives too. But they are not viable form an environmental point of view. ”The cost of electricity is the best way for a society to compare the cost of different electricity sources, and nuclear comes out as one of the best”, explains Agneta Rising who is the Director-General of the World Nuclear Association. She goes on to elucidate that “We have seen that from Chinese bank sources, nuclear electricity is the second cheapest – the only cheaper one is coal because they can get coal at a low price, but they are going to pay with their health and the environmental effects.”

If the current global challenges are to be tackled effectively, a new compromise is needed that resolves the renewables – nuclear dichotomy. The consequence would be an energy market relying on nuclear energy as an immediately dispatchable power source when required, with renewables covering the rest. The benefit would be lower system costs overall.