UPDATE: I’ve been getting feedback asking about how the methodology I employ in this article would be applied to renewable energy sources, for comparison. I added a section to the end comparing nuclear and offshore wind energy.

Discussions about the application of nuclear energy as part of the solution to the climate/energy challenge often falter on the perceived high costs of nuclear energy.

Dutch talk show host Jeroen Pauw casually said that it is “terribly expensive” in his broadcast on 31 October and Pieter Boot, energy expert at the Netherlands Environmental Assessment Agency, sanctioned the exclusion of nuclear energy from the klimaatakkoord (The Dutch national climate policy law) with the words: “Nuclear energy has become too expensive” .

Like many nuclear opponents, Boot points to the Hinkley Point C project in the United Kingdom, where two nuclear power plants are being built whose costs are higher than initially estimated.

In this article we will take a closer look at Hinkley Point C and the question of whether this project is really as expensive as is claimed. First, we discuss the nature and origin of this type of nuclear power plant, then the economy of the project and finally the future of nuclear energy in Europe.

What the Brits are building

Two nuclear reactors of the type “EPR” (European Pressurized Reactor) are currently being built at Hinkley Point. The design was developed by a consortium of the French company Framatome and the German Siemens. These two reactors are the first part of a national plan, initiated in 2008, to build 16,000 MW of new nuclear power plants in England to support the UK energy transition to a clean, reliable and affordable energy system, with drastically lower CO2 emissions.

EPR’s under construction (2 x 1600 MW), United Kingdom, Hinkley Point

Compared to earlier designs, the EPR includes new features to meet the stringent safety requirements of the German government in particular. For example, there is a double concrete building shell to protect against potential aircraft impact, and there are no fewer than four different types of independent cooling systems provided. These cooling systems are there to prevent accidental damage to the reactor core (and therefore the risk of radioactive material escaping into the environment) in case of a natural disaster, equipment failure or human error.

Despite this technological complexity, EPR was intended to be more economical than its predecessors for the following reasons:

a higher electricity output and reliability, with fewer unplanned interruptions;

a large and fast control range of the power supplied, to provide extended load following capability and power quality services;

lower operating and maintenance costs, and a longer economic life, allowing the plant to continue to operate after the end of the design life, up to at least 80 years;

and extensive possibilities to use different types of nuclear fuels, including combinations of enriched and unenriched uranium, thorium, plutonium and “MOX”, anticipating the closing of the fuel cycle in the course of the 21st century. After all, it is intended that “nuclear waste” will be re-used as fuel in both existing thermal reactors, such as the EPR, and in future fast reactors, resulting in more energy being extracted from the mined uranium (up to a hundred times more) while leaving less “nuclear waste” that also decays faster. In fact, current French reactors already partially run on recycled MOX fuel.

Two EPRs in operation (2 × 1600 MW), China Taishan

EPR’s are currently being built in Finland, France and England. Two further reactors have recently begun operating in China. India is negotiating with EDF for the construction of six EPRs and the French government has also recently decided to investigate the construction of six more EPRs.

The costs of Hinkley Point C

After seven years of negotiations and revisions, the British government decided in 2016 to execute the Hinkley Point C project (hereinafter: HPC). The costs were estimated at around € 20 billion. For that price, French and British companies would take care of the construction, including the development of the necessary industrial chains and trained staff in the UK after thirty years of nuclear industrial stagnation in the country.

The cost estimate has since been adjusted up to 25 billion euros. This is considerably more than the original estimates made during the design of the EPR at the turn of the century. The construction of two EPR’s was estimated at the time to be at most 7 billion euros (see slide 51).

Let us look briefly at the causes of the cost increase at HPC. These include:

the departure of Siemens from the EPR consortium, as a result of which important components and knowhow had to be re-sourced;

the series of new safety investigations and requirements following the accident at the Fukushima-Daiichi nuclear power plant in 2011 following the Great Tohoku Earthquake and tsunami;

the decision of various European governments (including the Dutch one) despite the desired transition to a zero carbon energy supply, not to build new nuclear power plants after all, but rather to construct new coal, gas and bio-energy power plants;

the uncertainty arising from the systematic exclusion of nuclear energy from various international treaties from bodies such as the United Nations (see for example the Clean Development Mechanism of the Kyoto Protocol) and from support mechanisms in the context of climate policy and sustainable development. For example, the World Bank provides loans to developing countries for fossil fuels, but not for nuclear energy, and while European countries have strong subsidies and mandates for green energy, nuclear energy is taxed extra;

the demise of the European nuclear industry due to empty order books, rising debts and bankruptcies, and the outflow of specialized personnel towards pensions, other sectors or nuclear projects outside of Europe.

To build HPC despite the aforementioned obstacles, it was agreed that the UK government would guarantee a CfD power price of 11.3 €cents/ kWh (in current prices) for 35 years adjusted for inflation. The project would be funded entirely by EDF and its investors — there would be no money provided up-front by the UK government.

This guaranteed price, or strike price, as it is known, is much higher than the original estimate of the French electricity company EDF, namely 5.5 cents / kWh (at current prices). Moreover, it is higher than the current price of electricity on the wholesale market, which is only 5 cents / kWh. In that regard, we might conclude that HPC indeed appears to be “terribly expensive.”

And what are the benefits?

To find out whether HPC at 25 billion euros really is expensive, we have to compare the costs with the benefits. HPC consists of two EPRs with a combined net capacity of 3200 Megawatts. On an annual basis they will together supply 26 billion kWh to the British electricity grid. That is enough power for almost 9 million households. (In the Netherlands, HPC could therefore provide all households with CO2-free electricity.) HPC has a design life of 60 years, with the possibility of extending it to at least 80 years. HPC will supply more than 1500 billion kWh of electricity for 60 years. This yields a construction cost per kWh of 1.6 cents.

The operating costs after commissioning of the plant are estimated at between 1.5 and 2.5 cents / kWh. This includes all running costs during operation, including personnel costs, fuel costs, permits, insurance, maintenance, taxes and premiums to the decommissioning fund and the processing and, importantly, the ultimate disposal of nuclear waste.

The construction costs and the operating costs together are therefore at most 4.1 cents / kWh. That is by no means the CfD strike price of 11.3 cent that the owner of HPC will get. What happens to the 7.2 cent / kWh difference? Well, this will be paid as a premium (interest, dividend or other forms of profit distribution) to the investors and lenders of HPC, namely the (pension) funds and (state) participations of France and China who are the owners of the project. (The UK government had prohibited itself from participating in nuclear energy investment for antinuclear political reasons, though that policy appears to have softened in recent years, as noted in the NAO report on HPC, which we'll get to below.)

If the price of 11.3 cents continues to be realized even after the expiry of the 35-year CfD, the owners will earn another 100 billion euros (7.2 cents x 1500 billion kWh) over the 60-year lifetime of HPC, in addition to the recovery of the original investment of € 25 billion and the 60 year running costs. That 100 billion is the compensation for the risk that investors take to finance and operate HPC for 60 years.

Expensive, and cheap?

So is HPC “terribly expensive”? That depends on the perspective one takes. From the investor standpoint, one could say that HPC is indeed expensive when compared with other recent nuclear projects. After all, HPC costs almost 8 billion euros per GigaWatt, while in China, Russia and South Korea a comparable project costs less than 3 billion per GW.

Yet, despite the relatively high construction cost, the total costs per kWh for investors are still low. That 4.1 cents / kWh is comparable to the costs of a fossil power plant and much lower than the costs of the cheapest equivalent (stable, independent) combination of solar panels and wind turbines plus storage with batteries and hydrogen, the costs of which can run up to 50 cent / kWh . When compared to other options — particularly other stable zero-carbon options — HPC is “terribly cheap”.

Even by assuming “radical transformation” of the energy system to 100% renewables under very favorable assumptions (such as continuous cost reductions of wind turbines, solar panels and storage systems, the construction of an international electricity network on a continental scale, and the availability of cheap land surface for all equipment), opponents of nuclear energy anticipate a stable supply cost not below 5 cents / kWh in 2050.

As well as the investor’s perspective, what about that of consumers and of society as a whole? For electricity consumers — all those households, institutions and companies that receive an energy bill every month — the price of HPC is relatively high: comparable to the cost of solar rooftop electricity (which costs at least 11 cents / kWh, but which appears cheap to owners because it exempts them from paying high retail energy taxes and surcharges worth up to 14 cents / kWh). But the societal cost of HPC is low because the costs that society experiences are exclusively the costs for building and operating the plant, not the interest and dividends, because those are returned to society.