Nuclear Energy Econom ics and

Polic y A nalysis

February 3, 2004

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1

World Primary Energy Production

U.S. En ergy Information Administration: http://www.eia.doe.gov/emeu/iea/table29.html

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World Primary En ergy P roduction (commercial)

1992

(Quads =10 15 BTU)

2001

(Quads =10 15 BTU)

Petroleum

136.5

(39%)

155.3 (38%)

Coal

89.3

(25%)

96.0 (24%)

Natural gas

76.9

(22%)

93.5 (23%)

Hydro

22.9

(6.5%)

26.7 (6.6%)

Nuclear

21.2

(6.0%)

26.4 (6.5%)

Wind, geothermal, solar, wood, and waste

2.01

(<1%)

3.1 (<1%)

TOTAL

351.1

(100%)

403.4 (100%)

2

World net electricity generation by fuel type, 2000

Billions of kilowatt hours

(2000)

U.S. En ergy Information Administration: http://www.eia.doe.gov/emeu/iea/table63.htm

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About 440 nuclear plants provide nearly 17% of world’s electricity.

Thermal

9318.4

(63.8%)

Hydro

2625.8

(18.0%)

Nuclear

2434.2

(16.7%)

Geothermal

238.7

(1.6%)

TOTAL

14617.0

(100%)

Country

Number of

Nuclear percentage of

nuclear plants

electricity generation

France

59

76.4

Lithuania

2

73.7

Belgium

7

56.8

Countries with

Slovakia

Ukraine

6

13

53.4

47.3

highest dependence

on nuclear power

Bulgaria South Korea

Hungary

6

16

4

45.0

40.7

40.6

(2000)

Sweden

Switzerland

11

5

39.0

38.2

Slovenia

1

37.4

Japan

53

33.8

Finland

4

32.1

Source: International Atomic

Germany

19

30.6

Energy Agency

Spain

9

27.6

United Kingdom

35

21.9

Czech Republic

5

20.1

United States

104

19.8

Russian Federation

23

14.9

Canada

14

11.8

WORLD TOTAL

438

16.0

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3

Source: International Atomic Energy Agency

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• Relatively few new

nuclear plants are under construction

Construction began

on 6 new plants in 2002 (5 in India, one in DPRK)

4 plants were shut down in 2002

Source: International Atomie Energy Agency

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EIA Projection of World Nuclear Power Growth through 2025

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How did we get to this point?

• Some hypotheses:

– . . . .

– . . . . .

– . . . .

– . . . .

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22.812 /ESD.163J Nuclear Energy Economics and Policy Analysis (S'04): Preliminary Schedule

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Ke y obsta cles to future nuclear

pow er developm ent

• H igh costs and financial risks of nuclear

power plants

• Public concerns over nuclear power plant safety and siting

• Nuclear waste disposal

• Nuclear proliferation and nuclear terrorism

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Class

Date

Topic

1

Wed Feb 3

Introduction.

2

Mon Feb 9

Balance sheets and income statements. The time value of money. Discrete and continuous compounding.

3

Wed Feb 11

Time value of money mechanics (contd.)

Mon Feb 16

VACATION

4

Tue Feb 17

No Class

Wed Feb 18

The effects of inflation. Calculation of capital costs

5

Mon Feb 23

Depreciation, capital recovery, and taxes

6

Wed Feb. 25

Depreciation, capital recovery, and taxes (II)

7

Mon Mar 1

Levelized cost of product. Carrying charges

8

Wed Mar 3

Methods for project evaluation

9

Fri Mar 5

(Makeup Class) Methods for project evaluation (II): Nuclear power economics

10

Mon Mar 8

Review session

11

Wed Mar 10

Quiz#1

12

Mon Mar 15

Scale economies. Investing under uncertainty.

13

Wed Mar 17

Nuclear fuel cycles (I)

Mon Mar 22

VACATION

Wed Mar 24

VACATION

14

Mon Mar 29

Nuclear fuel cycles (II): Material balances and simple cost models

15

Wed Mar 31

Nuclear fuel cycles (III): Enrichment case study

16

Mon Apr 5

Nuclear fuel cycles (IV): MOX case study

17

Wed Apr 7

Quiz #2

18

Mon Apr 12

Nuclear theft & nuclear sabotage

19

Wed Apr 15

Nuclear safeguards, export controls, and the Non-Proliferation Treaty

Mon Apr 19

VACATION

20

Wed Apr 21

Managing nuclear safety risks

21

Mon Apr 26

Spent fuel/high level waste management (I)

22

Wed Apr 28

Spent fuel/high level waste management (II): Once-through vs. closed cycles

23

Mon May 3

Risk perceptions, risk communication & public attitudes

24

Wed May 5

Global nuclear growth scenarios

25

Mon May10

Term Project Presentations

26

Wed May 12

Term Project Presentations

6

Som e im portant distinctions

• M acroeconom ics

– How national economies work; how the international economy works

• Microeconomics

– Behavior of firms and markets

☛ • Engineering econom ics (m anagerial economics)

– Analyzing the performance of real investments

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Investm ent analysis

• What is an investment?

– “The act of incurring an immediate cost in the expectation of future rewards.”

– Examples:

• Purchasing equipment

• Building a plant

• Laying in a stock of goods for later sale

• Paying tuition

• A superbowl ad

• R&D

– Two essential features of any investment

• Time

• Risk

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A nother im porta nt distin ction

• Engineering economics

– Predicting the consequences of alternative future courses of action

• Accounting

– Establishing a precise historical record of past economic activity

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K ey concepts for ne xt class

• Balance sheet

– Assets, liabilities, net worth

• Income statement (profit-and-loss statement)

– Revenues, cost of goods sold, operating expenses, operating income, net income, etc.

• Cash flow statement

• Financial ratios

– Return on assets

– Return on investment

– Liquidity ratios

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8