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Nuclear Energy Economics and Policy Analysis 1

Interdisciplinary study group

Steve Ansolabehere (Political Science) John Deutch (Chemistry) (co-chair) Mike Driscoll (Nuclear Engineering) Paul Gray (Electrical Engineering) John Holdren (Energy Systems)

Paul Joskow ( Economics)

Richard Lester ( Nuclear Engineering) Ernie M oniz (Physics) (co-chair)

Neil Todreas (Nuclear Engineering)

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Nuclear Energy Economics and Policy Analysis 2

The Context

• If atmospheric C O 2 concentration is not to exceed twice its pre-industrial value, 21st century C O 2 emissions will need to be held to half the c umulative t otal under ‘ business as usual ’ trajectory

=>Annual emission rate i n 2050 will need to have fallen back (roughly) to its level in 2000.

• This will be extrem ely difficult!

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The Context

There are four basic options for reducing greenhouse gas emissions from electricity production:

– Increased e fficiency in electricity s upply and use

– Increased use of renewables

– Continued use o f f ossil f uels, c oupled with c arbon capture and sequestration

– More nuclear power

It would be a mistake to exclude any of the four options from an overall carbon emissions reduction strategy.

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The Question

What must be done to m a ke nuclear pow er a significant option for meeting increasing global electricity demand while reducing greenhouse gas emissions?

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The Obstacles

• Economic competitiveness

• Concerns over nuclear safety

• Nuclear waste disposal

• Nuclear proliferation risks

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The Global G rowth S cenario

• 1000 G W e of nuclear capacity by 2050

– Nearly 3x current nuclear c apacity

– Would a void 25% of the increment i n g lobal carbon emissions expected i n t he business-as-usual case

• 1.8 G T/yr of carbon emissions a voided if the nuclear capacity displaced coal

• c f . 6 GT/yr of carbon emissions today

– Would roughly maintain nuclear ’ s c urrent share of the global electricity market (17%--->19%)

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Illustrative nuclear deployment in the global growth scenario

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Findings: Economics

• In deregulated markets, nuclear power i s not now cost competitive with coal or gas.

• Plausible (but so far unproven) reductions in nuclear plant capital costs, O&M costs, and construction lead-tim e could reduce the gap, but not elim inate it.

• These reductions, i f c ombined with policies internalizing the s ocial cost of carbon emissions (e.g., carbon tax, ‘ cap-and-trade ’ system) could make nuclear power cost competitive.

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Results o f m erchant p lant cost model

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BASE-CASE COSTING ASSUMPTIONS

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BASE-CASE COSTING ASSUMPTIONS

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BASE-CASE COSTING ASSUMPTIONS

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Base

40 year life

85% CF

$2000/kW

overnight

1.5 ¢ /kWh

(includes fuel)

Nuclear Base

Reduce c ost of Capital to gas/coal

Reduce

O+M to 1.3 ¢

Reduce Construction Cost 25%

Reduce Construction Times from 5

to 4 y ears

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C a r b o n T a x , $ / tonne C

P g . 15 of 26

9

8

7

6

5

4

3

2

1

5 0 100 150 200

Equity/Debt

Equity

Nuclear

5 0 / 5 0 %

1 5 %

G a s

4 0 / 6 0 %

1 2 %

(nominal net of name tax)

Debt (Nominal) 8% 8%

Inflation 3 % 3 %

Income Tax 3 8 % 3 8 % Rate (after e xpenses, interest + tax depreciation)

Base

40 year life

85% CF

$2000/kW

overnight

1.5 ¢ /kWh

(includes fuel)

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C a r b o n T a x , $ / tonne C

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Findings: Safety

• Feasibility o f global growth scenario will depend on maintaining a safety standard of < 1 accident resulting in a s erious release o f radioactivity over the next 50 years from all fuel cycle activity.

• Implies a t en-fold reduction in expected f requency of serious reactor core accidents.

• Achievable with advanced LWR t echnology + other designs.

• ‘ Best practices ’ in construction and operation are essential.

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SAFETY ( C ontd . )

• Historical frequency of core-damage accidents in US commercial reactor operations = 1 in 3,000 reactor-years.

• Estimated frequency of core-damage accidents in current US commercial reactor fleet = 1 in 10,000 reactor-years.

• Core-damage accidents expected worldwide 2003-2050 in the study scenario if the latter estimate applies = 4.

• Claimed core-dam age-accident frequency for advanced light-water-reactor designs = 1 in 100,000 reactor-years.

• Core-damage accidents expected worldwide 2003-2050 in the study scenario if this lower estimate applies = 0.4.

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Findings: W aste management

• Geologic disposal is technically feasible but execution is yet to be dem onstrated or certain.

• A c onvincing case has not been made that the long- term waste managem ent benefits of advanced, closed fuel cycles involving spent fuel reprocessing and partitioning and transmutation of the m inor actinides a re outweighed by the short-term risks and economic costs.

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Findings: W aste management

• Geologic disposal is technically feasible but execution i s y et to be demonstrated or certain.

• A c onvincing case has not been m ade t hat the l ong-term waste management benefits o f advanced, closed fuel cycles involving spent fuel r eprocessing and p artitioning a nd transmutation of the minor actinides a re outweighed b y the short-term risks and economic costs.

– Technological advances may change this assessment

– But f or the basic conclusion to change, long term risks from geologic repositories would have t o b e much higher than the performance a ssessments c urrently suggest, a n d incremental costs and short-term risks of partitioning and transmutation would have t o be much lower than current analyses indicate.

• Advances in the open, once-through fuel cycle potentially offer waste management b enefits a t l east as large a s those claimed for t he more expensive c losed fuel cycles.

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Findings: P roliferation

• Nuclear power can e xpand as envisioned in a global growth scenario with a cceptable incremental proliferation risk, if built primarily on the once- through thermal reactor fuel c ycle and if combined with strong safeguards and security m easures.

• The c urrent international safeguards regime is not adequate t o meet the s ecurity c hallenges implied by a global growth scenario and requires serious reexamination by the international community.

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A key conclusion

“ Over at least the nex t 50 years, the bes t choice to meet these challenges [economic, safety, waste, proliferation] is the open, once-through fuel cycle. . . .

. . . We judge that there are adequate uranium resources available at reasonable cost to support this choice under a global growth scenario. ”

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25,000

20,000

Uranium Resource

Uranium Consumption (2.1 % Growth, 1000 GW e b y 2050)

Potentially Additionally Available:

• EAR II ~ 6000 Million pounds

• Speculative Resources ~25,700 Million pounds

15,000

10,000

Known Resources (RAR and E AR-I) (<$50/lbU3O8)

5,000

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0

2000 2010 2020 2030 2040 2050 2060

P g . 26 of 26

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A further finding

Public acceptance is critical to the expansion of nuclear pow er. In the U nited States, the public does not currently see nuclear power as a way to address global warming.

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PUBLIC PERCEPTIO NS: THE MIT SURVEY

• Performed by Knowledge Networks, which drew a random sample of 1800 people from its “ panel ” , o f whom 1358 completed the s urvey.

• All respondents were 18 years or over, with a median age around 45.

• Of the respondents, 31% h ad completed only h igh school, 28% h ad some college, and 24% had a bachelor ’ s degree or higher.

• Three fourths were white, 62% were married, 52% were female.

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Surprising survey result

• The public ’ s view about global warming doesn ’ t predict attitudes tow a rds nuclear power

– There is no significant difference in the degree of support for nuclear power between those w ho are concerned about global warming and those who aren ’ t

– I.e., the carbon-free character of nuclear power doesn ’ t appear to m o tivate the U.S. public to favor expansion of the nuclear option

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Selected policy recommendations: economic competitiven ess

• The U .S. government should p rovide production tax credits for a set of ‘ first mover ’ nuclear power plants

– 1.7 c ents/kwh u p to $200/ k we for u p t o 1 0 p lants

– ~ 1 .5 years of full power operation

– Equivalent to $70 per avoided tonne o f c arbon emissions f rom c oal p lants ( $160 per tonne for gas) -

- but only for first 1.5 yrs.

– Production tax credit mechanism o ffers g reatest incentive f or projects to be completed

• If the plant isn ’ t completed and operated, there is no subsidy

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Selected policy recommendations: waste management

• Long-term storage of spent fuel for several decades should become a n integral part of the waste management system architecture

– a network of centralized storage facilities should be established in the U .S. and internationally.

• The scope of w a ste managem ent R&D should be significantly broadened

– Should include an extensive program on deep borehole disposal

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ON EXTENDED INTERIM STORAGE O F WASTE

Several decades of engineered interim storage would …

-- provide greater flexibility in the event of delays in repository development; allow a deliberate approach to disposal and create opportunities to benefit from future advances in relevant science and technology;

-- provide greater logistical flexibility, with centralized buffer storage capacity facilitating the balancing of short and long-term storage requirements, and enabling the optim ization of logistics, pre- processing, and packaging operations;

-- allow countries that want to keep open the option to reprocess their spent fuel to do so without actually having to reprocess;

-- create additional flexibility in repository design, since the spent fuel would be older and cooler at the time of emplacement in the repository; and potentially reduce the total number of repositories required.

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Selected policy recommendations: proliferation

• The i nternational safeguards r egime s hould be strengthened

– Implement the A dditional Protocol

– Supplement a ccounting/inspection regime with continuous materials protection, control and accounting using surveillance and containment systems

– Allocate safeguards resources i n a risk-based framework keyed t o f uel cycle a ctivity

– IAEA should focus o verwhelmingly on safeguards and safety

• Reconsideration of NPT/Atoms for P eace/IAEA safeguards framework a s i t p ertains t o n uclear fuel cycle development

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Selected policy recommendations: Analysis, research, developm ent & demonstration

• The U.S. DOE s hould e stablish a Nuclear S ystems Modeling P roject to carry out the analysis, r esearch, simulation and collection of engineering data needed to evaluate all fuel cycles from the viewpoint of cost, safety, waste management, and proliferation resistance

– Models should be based on real engineering data

– Development of advanced nuclear technologies -- either fast reactors or advanced fuel cycles employing reprocessing -- should await the results of the project

– Modest laboratory-scale research and analysis on new separation methods and fuel forms

– Only encompass technology pathways that do not produce weapons- usable m a terial during norm al operation

– Overall ARD&D program will require ~ $400M/yr for 10 years

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