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Atomic Insights

Atomic energy technology, politics, and perceptions from a nuclear energy insider who served as a US nuclear submarine engineer officer

Nuclear Cost Data

Economy of Scale?: Is Bigger Better?

August 14, 2020 By Rod Adams 21 Comments

It is possible for engineers to make incredibly complex calculations without a single math error that still come up with a wrong answer if they use a model based on incorrect assumptions.

Pick up almost any book about nuclear energy and you will find that the prevailing wisdom is that nuclear plants must be very large in order to be competitive. This notion is widely accepted, but, if its roots are understood, it can be effectively challenged.

When Westinghouse, General Electric and their international competitors first learned that uranium was a incredible source of heat energy, they were huge, well established firms in the business of generating electrical power. Each had made a significant investment in the infrastructure necessary for producing central station electrical power on a massive scale.

Experience had taught them that larger power stations could produce cheaper electricity and that electricity from central power stations could be effectively distributed to a large number of customers whose varying needs allowed the capital investment in the power station to be most effectively shared between all customers.

Their experience was even codified by textbook authors with a rule of thumb that said that the cost of a piece of production machinery would vary by the throughput raised to the 0.6 power. (According to this thumb rule, a pump that could pump 10 times as much fluid as another pump of similar design and function should cost only four times as much as the smaller pump.) They, and their utility customers, understood that it was much cheaper to deliver bulk fuel by pipeline, ships, barges, or rail than to distribute smaller quantities of fuel in trucks to a network of small plants.

Just as individuals make judgements based on their experience of what has worked in the past, so do corporations. It was the collective judgement of the nuclear pioneers that the same rules of thumb that worked for fossil plants would apply to nuclear plants.

Failed Paradigm

There have now been 110 nuclear power plants completed in the United States over a period of almost forty years. Though accurate cost data is difficult to obtain, it is safe to say that there has been no predictable relationship between the size of a nuclear power plant and its cost. Despite the graphs drawn in early nuclear engineering texts-which were based on scanty data from less than ten completed plants-there is not a steadily decreasing cost per kilowatt for larger plants.

It is possible for engineers to make incredibly complex calculations without a single math error that still come up with a wrong answer if they use a model based on incorrect assumptions. That appears to be the case with the bigger is better model used by nuclear plant planners.

For example, one assumption explicitly stated in the economy of scale model is that the cost of auxiliary systems does not increase as rapidly as plant capacity. In at least one key area, that assumption is not true for nuclear plants.

Since the reactor core continues to produce heat after the plant is shutdown, and since a larger, more powerful core releases less of its heat to its immediate surroundings because of a smaller surface to volume ratio, it is more difficult to provide decay heat removal for higher capacity cores. It is also manifestly more difficult, time consuming and expensive to prove that the requirements for heat removal will be met under all postulated conditions without damaging the core. For emergency core cooling systems, overall costs, including regulatory burdens, seem to have increased more rapidly than plant capacity.

Curve of Growth

Though the “economy of scale” did not work for the first nuclear age, there is some evidence that a different economic rule did apply. That rule is what is often referred to as the experience curve. According to several detailed studies, it appears that when similar plants were built by the same organization, the follow-on plants cost less to build. According to a RAND Corporation study, “a doubling in the number of reactors [built by an architect-engineer] results in a 5 percent reduction in both construction time and capital cost.”

This idea is extremely significant. It tells us that nuclear power is no different conceptually than hundreds of other new technologies.

The principle that Ford discovered is now known as the experience curve. . . It ordains that in any business, in any era, in any capitalist competition, unit costs tend to decline in predictable proportion to accumulated experience: the total number of units sold. Whatever the product (cars or computers, pounds of limestone, thousands of transistors, millions of pounds of nylon, or billions of phone calls) and whatever the performance of companies jumping on and off the curve, unit costs in the industry as a whole, adjusted for inflation, will tend to drop between 20 and 30 percent with every doubling in accumulated output.

George Guilder Recapturing the Spirit of Enterprise Updated for the 1990s, ICS Press, San Francisco, CA. p. 195

In applying this idea, however, one must realize that the curve is reset to a new value when a new product is introduced and that there must be competition in order to keep firms focused on lowering unit costs and unit prices. In the nuclear industry, new products in the form of bigger and bigger plants continuously were introduced, and, after the dramatic rise in the cost of fossil fuel during the 1970s, there was little competitive benefit in striving for cost reduction during plant construction.

When picking the proper size of a particular product, the experience curve should lead one to understand that high volume products will eventually cost less per unit output than low volume products and that large products inherently will have a lower volume than significantly smaller products.

In the case of the power industry, it is very difficult to double unit volume if the size of a single unit is so large that it takes a minimum of 5 years to build and if the total market demand is measured in tens or hundreds of units.

Engines vs Power Plants

The Adams Engine philosophy of small unit sizes is based on aggressively climbing onto the experience curve. If a market demand exists for 300 MW of electricity, distributed over a wide geographic area, traditional nuclear plant designers would say that the market is not yet ready for nuclear power, thus they would decide to learn nothing while waiting for the market to expand.

In contrast, atomic engine makers may see an opportunity to manufacture and sell 15 units, each with 20 MW of capacity.

Depending on the distribution of the power customers, there might an opportunity to produce 150 machines, each with 2 MW of capacity. Though 2 MW sounds small to power plant people, 2,000 kilowatts is enough electricity for several hundred average American homes.

Though it sounds incredibly far fetched to people intimately involved with present day constraints regarding fissionable material, that same market might even be supplied with 1500 machines producing 200 kilowatts each. That is enough power to supply a reasonably sized machine shop, farm or apartment building with electricity. It might even be supplied by 15,000 machines producing 20 kilowatts each, or enough for a small group of cooperative neighbors to share. Current gas turbine technology begins at the 20 kilowatt level.

With the completion of each engine, the accumulated experience of design, production and engine operation will increase and provide opportunities for cost reductions.

There is plenty of competition and incentive for this cost reduction since there are dozens of fossil fuel engine makers who currently serve the need for power in smaller markets.

If the producers of Adams Engines are successful at providing the existing market need, the traditional nuclear suppliers may never see a demand build up for 1000 MW, and they may never even start on their own learning curve.

Note: This article originally appeared in the May 1996 issue of Atomic Energy Insights, when it was still a paper newsletter. It addresses numerous questions about small and micro reactors that are still being frequently asked today. For those questions, it is worth republishing. For historical reasons, I’ve decided not to change anything.

Filed Under: Atomic Insights May 1996, Nuclear Cost Data, Small Nuclear Power Plants

One step to save nukes – stop their immediate destruction

November 4, 2016 By Rod Adams 70 Comments

Kewaunee
Kewaunee

Nuclear plants that are economically uncompetitive under current market conditions should be retained for future operations, not immediately destroyed.

Some might wonder at my wording. They might accurately point out that virtually all of the 30+ commercial reactors that have been permanently shut down in the US are still standing and have not been physically removed from their sites.

It’s true that the most common decommissioning method is SAFSTOR, a condition in which the nuclear island of a reactor is left alone for several decades after operation in order to allow isotopes like Co-60 to decay, making it less costly to take apart the systems that were radioactively contaminated during operations.

Vermont Yankee
Vermont Yankee

However, an operational nuclear plant in the US is effectively “destroyed” and prohibited from ever being operated again if the owner certifies to the NRC that it intends to permanently cease operating and thus obtains a license amendment that converts the operating license to “possession only.”

That certification letter can be called the “death certificate” for a US nuclear power plant. The containment hulk may still dominate the local landscape for many years and the systems inside the building may look exactly as they did when the plant was operational, but no one will ever load fuel or obtain a valuable output from the enormous investment.

Existing, operational nuclear plants produce reliable, controllable, stable electricity and massive quantities of low temperature heat without producing CO2. Even in markets where their ongoing costs exceed the revenues that they can obtain from selling electricity, they’re potentially valuable assets.

Replacing them would cost billions and take 10-20 years worth of planning, licensing, construction and testing.

View of Crystal River from water
Crystal River

Market conditions change. Only the most sophisticated and connected investors have any ability to predict future market prices and overall demand for commodities. Even they often make gross errors in judgement or timing.

It is therefore common practice in almost every enterprise to layup rather than to destroy facilities whose product is temporarily “oversupplied” and a victim of uneconomic pricing. (There are exceptions to this practice in situations where dominant suppliers of a given product purposely destroy “obsolete” or troublesome facilities in order to elevate market prices for the rest of their production facilities.)

Zion Station
Zion

In the US nuclear enterprise, there has not yet been a push from licensees to create a license condition that is somewhere between a full operating license — with all of its associated security, inspection and operating crew overhead — and a “possession only” condition where there is no need to maintain chemistry, protect paperwork integrity, or retain physical integrity.

San Onofre Nuclear Power Plant.  STOCK PHOTO BY RIAN CASTILLO VIA FLICKR CREATIVE COMMONS
San Onofre Nuclear Power Plant.
STOCK PHOTO BY RIAN CASTILLO VIA FLICKR CREATIVE COMMONS

Many of the reactors that were shutdown were the result of regulatory changes that would have required something close to a rebuilding effort and were deemed to be completely uneconomic. Others were owned by a dominant supplier that determined that the plant was worth more dead than alive because restoration would have driven their market into an uneconomic “oversupply” situation with very low selling prices.

The situation today is different. There are a number of well-maintained and fully compliant nuclear plants that are losing money because there is currently an oversupply of natural gas. Even though that condition has been in place for nearly a decade, there are signs that the end of the oversupply isn’t too far in the future.

Here is a quote from the November 3, 2016 Natural Gas Weekly Update from the Energy Information Agency (EIA).

2016 injection season sees record natural gas demand

Total natural gas demand in the Lower 48 states reached record levels during the 2016 injection season (April through October). According to data from PointLogic, natural gas consumption and net exports averaged 71.4 billion cubic feet per day (Bcf/d)—2.2 Bcf/d above the 2015 injection season, which held the previous record. However, the total supply of natural gas decreased by an average of 1.1 Bcf/d compared to the 2015 injection season, according to PointLogic. Several factors contributed to the narrowing of supply and demand over this period:

Though the report went on to describe how gas prices had fallen for the week, careful readers would note that now is not the time to assume that prices will remain low. It is not the time to destroy facilities that can produce electricity and heat without burning natural gas or producing CO2.

FT Calhoun Station
FT Calhoun Station

Mothballed nuclear plants would provide their owners, and the nation, with a valuable hedge against natural gas price spikes and also prevent the permanent removal of large sources of emission-free electricity.

If plants are mothballed due to economic conditions that may be temporary, that action should be sufficient proof that the plant is deserving of the same kind of boost given to other non-emitting power sources. It should be treated as a new nuclear plant under the Clean Power Plan if [when] it is returned to commercial service.

The industry — possibly including INPO — and the NRC should establish the conditions necessary to economically and safely preserve nuclear plants in a condition that minimizes carrying costs while also providing an efficient method of restoring the plant to full operational condition.

The DOE might even lend a hand; they have some experience in laying up nuclear assets for later recovery. From all of the public communications I’ve heard from the DOE leadership, they should welcome a proposal that preserves proven nuclear production facilities at a moderate and affordable cost.

Filed Under: Aging nuclear, decommissioning, Nuclear Cost Data

Another nuclear plant will close for good on Monday

October 21, 2016 By Rod Adams 56 Comments

The Ft. Calhoun Station (FCS) is scheduled to shut down for good on Monday, October 24. The number of operating nuclear power reactors in the US will have been in the three digits again for a just one week. That event will be a tragic shame for the surrounding community, for a gradually growing portion […]

Filed Under: Business of atomic energy, Aging nuclear, decommissioning, Economics, Fossil fuel competition, Nuclear Cost Data

Addressing remaining concerns about nuclear energy

December 23, 2015 By Rod Adams 58 Comments

In recent years, critical thinkers who have habitually objected to using nuclear energy have conceded that it has a good safety record and that its CO2 and other air pollution emissions are a tiny fraction of produced by the most efficient natural gas power plants. They also recognize that nuclear power plants, unlike power sources […]

Filed Under: Atomic politics, Business of atomic energy, Economics, Fossil fuel competition, Nuclear Cost Data

Rosatom achieves a marketing win in Finland to supply Fennovoima

December 21, 2013 By Rod Adams

Finns are pragmatic people who love their country, but also recognize its geographic limitations. “Finland is a very cold and dark country. Electricity is very important to us. We are a kind of island in Europe, we have take care of ourselves. No one will help us if we run out of power.” Way back […]

Filed Under: International nuclear, New Nuclear, Nuclear Cost Data, Pressurized Water

Nuclear less risky than natural gas – for customers

August 2, 2013 By Rod Adams

Chart showing natural gas prices for power producers

Mark Halper recently published a piece on SmartPlanet.com titled Nuclear power cheaper than gas. He cited an article from InvestorIntel.com written by Canon Bryan titled Nuclear versus Natural Gas. That article was based on a report from a private consultancy named Energy Path Corporation. The Energy Path report is titled “Will Low Natural Gas Prices […]

Filed Under: Fossil fuel competition, Natural Gas, Nuclear Cost Data

Tina Gerhardt thinks Obama Administration likes nuclear energy – Huffington Post

July 13, 2013 By Rod Adams

Tina Gerhardt has published an almost sadly amusing article on the Huffington Post titled Obama’s Climate Action Plan: Nuclear Energy? in which she tries to make the case that President Obama’s climate action plan is an undeserved endorsement of nuclear energy. Although less in the headlines than the plan’s position on coal-fired power plants, hydraulic […]

Filed Under: Energy density, Nuclear Cost Data, Solar energy, Wind energy

Nuclear costs are higher than they should be – many people like it that way

June 22, 2013 By Rod Adams

Nuclear energy in the United States and Europe is far more expensive that it should be. There is plenty of blame to spread; nuclear professionals have to accept some of the responsibility. If you want to do something about the high cost of nuclear energy, it might be best to start with taking the actions […]

Filed Under: Atomic Advocacy, Economics, Fossil fuel competition, Nuclear Cost Data

Is Levy County nuclear plant too expensive to compete with natural gas?

May 13, 2013 By Rod Adams

On Saturday, May 11, 2013, the Tampa Bay Times published a lengthy piece by Ivan Penn titled Levy nuclear plant more costly than a natural gas facility that uses a detailed analysis with substantial “error bars” around cost estimates to show that under nearly all scenarios considered, the two reactor installation that has been proposed […]

Filed Under: Fossil fuel competition, AP1000 saga, New Nuclear, Nuclear Cost Data

Kewaunee needs a “deus ex machina”; rising natural gas prices not quite enough

April 21, 2013 By Rod Adams

Graph displaying natural gas prices from 1997-2013

On May 7, 2013, the Kewaunee Nuclear Power Station is scheduled to stop generating emission free electricity for the last time. The plant is one of the better run and maintained facilities in the US, it has an operating license that is effective until December 2033, and it generates electricity for an average cost of […]

Filed Under: Fossil fuel competition, Natural Gas, Nuclear Cost Data, Wind energy

Should customers allow natural gas to push nuclear out of market?

February 2, 2013 By Rod Adams

Rebecca Smith asked an interesting question in a recent Wall Street Journal article titled Can Gas Undo Nuclear Power? She describes how financial analysts are wondering whether or not certain nuclear plants are at risk of being shuttered as being uneconomical in an era of cheap natural gas. It is a legitimate question for people […]

Filed Under: Fossil fuel competition, New Nuclear, Nuclear Cost Data

Atomic Show #192 – Zero Carbon Options for South Australia

December 17, 2012 By Rod Adams

Zero Carbon Options

Ben Heard is one of the growing number of environmental professionals who have seriously evaluated all options for reducing mankind’s annual production rate of carbon dioxide and discovered that the best tool available is nuclear fission energy. As a part of his continuing journey of discovery, he worked with Brown and Pang to produce a […]

Filed Under: Climate change, Economics, Nuclear Cost Data, Podcast, Unreliables

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