Carbon pricing, nuclear power and electricity markets
- OECD Nuclear Energy Agency, 12, boulevard des Iles, 92130 Issy-les-Moulineaux (France)
In 2010, the NEA in conjunction with the International Energy Agency produced an analysis of the Projected Costs of Electricity for almost 200 power plants, covering nuclear, fossil fuel and renewable electricity generation. That analysis used lifetime costs to consider the merits of each technology. However, the lifetime cost analysis is less applicable in liberalised markets and does not look specifically at the viewpoint of the private investor. A follow-up NEA assessment of the competitiveness of nuclear energy against coal- and gas-fired generation under carbon pricing has considered just this question. The economic competition in electricity markets is today between nuclear energy and gas-fired power generation, with coal-fired power generation not being competitive as soon as even modest carbon pricing is introduced. Whether nuclear energy or natural gas comes out ahead in their competition depends on a number of assumptions, which, while all entirely reasonable, yield very different outcomes. The analysis in this study has been developed on the basis of daily data from European power markets over the last five-year period. Three different methodologies, a Profit Analysis looking at historic returns over the past five years, an Investment Analysis projecting the conditions of the past five years over the lifetime of plants and a Carbon Tax Analysis (differentiating the Investment Analysis for different carbon prices) look at the issue of competitiveness from different angles. They show that the competitiveness of nuclear energy depends on a number of variables which in different configurations determine whether electricity produced from nuclear power or from CCGTs generates higher profits for its investors. These are overnight costs, financing costs, gas prices, carbon prices, profit margins (or mark-ups), the amount of coal with carbon capture and electricity prices. This paper will present the outcomes of the analysis in the context of a liberalised electricity market, looking at the impact of the seven key variables and provide conclusions on the portfolio that a utility would be advised to maintain, given the need to limit risks but also to move to low carbon power generation. Such portfolio diversification would not only limit financial investor risk, but also a number of non-financial risks (climate change, security of supply, accidents). (authors)
- Research Organization:
- American Nuclear Society, 555 North Kensington Avenue, La Grange Park, IL 60526 (United States)
- OSTI ID:
- 22107910
- Resource Relation:
- Conference: ICAPP '12: 2012 International Congress on Advances in Nuclear Power Plants, Chicago, IL (United States), 24-28 Jun 2012; Other Information: Country of input: France; 2 refs.; Related Information: In: Proceedings of the 2012 International Congress on Advances in Nuclear Power Plants - ICAPP '12| 2799 p.
- Country of Publication:
- United States
- Language:
- English
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