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PostPosted: Nov 08, 2013 6:08 pm 
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I'll take these "expensive" 6500/kWe nuclear reactors anytime over coal. In New Zealand, you've got the luxury of renewables that work (hydro and geothermal). We have none of those renewables that work. We only get the crappy ones that don't work, wind and solar.

Installing 6500/kWe nuclear reactors with 93% capacity factor for 60 years is a much better strategic investment than installing 1000/kWe solar panels at 8% capacity factor (which is what we get here in real systems) that won't last for even 40 years. Try calculating the cost of 60 years of natural gas... even a $10000/kWe nuclear reactor is a bargain compared to that.

The "free market" prefers to spend 50 billion in natural gas over 60 years than to spend 10 billion in a nuclear reactor all at once.

So it is a little hard for me to accept that notion that free markets will make the best decision. It's useful to optimize the day to day decisions, but that is not where the most egregious market failure is, even in fully regulated systems.

And yes, in case anyone complains, this is all horribly off topic...


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PostPosted: Nov 08, 2013 8:21 pm 
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Just to add some more fuel to off topic fire.

One of the problems is, we talk about free market this and that, but due to constant government intervention which is an unavoidable requirement, electricity markets are not truly 'free' anywhere, what varies is the level of subsidy, intervention and adequacy of market structures and rules for participants.

In a truly free electricity market you would not get renewables unless they could demonstrate their ability to meet the requirements of the ISO and produce electricity at a cost-effective and competitive price.

My little economic model predicts that for USD 6,500/kW, and base load a nuclear plant needs a contract price of USD 121.61/MWh (looking at a 35 year time span) to provide a 9% return in investment. For the plant that only costs USD 2,500/kW, the corresponding contract price is USD 51.70/MWh Depending on local prices and competing forms of generation, one price is competitive and the other not. Real-world example is the recent underwriting of Hinkley C by the UK government with a CFD contract price of GBP 92.50 or USD 148.00/MWh. We have to do better than that, much better.

There are many factors that work against the deployment of nuclear power, the cost of the product in western jurisdictions is definitely one of them, most that is driven by arcane regulation and oversight which in turn is driven by the politics of fear. Clever engineering is not very effective against the politics of fear (we are now officially a gazillion km off topic), but almost everyone appreciates the value of lower prices.

Closing thought for the day, free market or government sponsored we need cheap and clean power not just clean at any price.

(BTW NZ due environmental concerns will see very little new hydro, we can tap some more geothermal, but that too is limited and effectively non-renewable IMO (look up The Geysers in California). We are blessed with a large number of government built hydro schemes and have excellent wind resources in many places)


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PostPosted: Nov 08, 2013 8:40 pm 
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A state owned utility, existing for the sole purpose of producing low cost electricity, does not need 9% return on investment though, considering that even the rate of interest on non index-linked gilts with 30 year lives is only 3.62%.
Index linked 37 year gilts show RPI+0.05%.

So if the price of electricity is linked to inflation you can manage it with basically no interest payments whatsoever. (You will simply be paying back the capital in real terms).

Even if you shorten your plant depreciation period to 30 years to account for this debt you still end up with lower repayments than a 9% return on investment on 60 years of life.


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PostPosted: Nov 08, 2013 10:02 pm 
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Agreed and perhaps there is a place for a government owned and funded corporation to provide competition in the market to cap the price gouging that may otherwise occur. The counterpoint is that governments in general, frequently make very poor investment decisions, or take a well run business and ruin it which one good reason to keep the government out of business in general.

In NZ we used to have a government owned and operated power system, but we also had electricity shortages, we built an oil fired power station just in time for the price of oil to become so severe that the entire station was never commissioned and all of it eventually sold off to an Indian company for the price of scrap some 30 years later. During that time we also as a nation accumulated so much foreign debt that the country almost collapsed completely to be taken over by the IMF.

I look at some utility investments in the UK and many look capital inefficient to me, Bankside was a gloriously gorgeous power station in the style of a massive brick cathedral of power, absolutely beautiful, stunning in many ways, but housing a very small and inefficient thermal power station pumping out significant quantities of sulphur and other contaminants into the heart of a major population centre. It operated for less that 30 years, at face value it looks like a short lived project which probably cost significantly more than it needed to. All the hallmarks of a government built power station. We could also discuss the effectiveness of the UK government's involvement with British Leyland, that example did not end well for anyone.

If we could somehow combine the efficiency of private companies with the low cost of government capital, perhaps that is ideal combination, especially with nuclear which is a very capital heavy investment. I've thought about this quite a bit, and my best guess is that government financing may indeed provide the most efficient form of support without getting dragged into the day to day decision-making or eye-watering subsidies, signing up for a massive contract price for 35 years where the wealth transfer from government coffers to private corporations seems like one of the least efficient IMO. But all of this is very difficult, perhaps Hinkley C will provide some welcome experience that will permit more cost-effective nuclear to follow. We can only hope.


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PostPosted: Nov 08, 2013 11:12 pm 
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With regards to oil fired power stations, I don't think it is fair to blame the supposed 'inherent inefficiency' of the state for that.
The oil crisis was rather hard to predict, indeed many private corporations were caught out by it just as state bodies were.

And with regards to the pollution released by Bankside, when the plant was built in the 50s there was still massive contamination every winter, the so called 'pea souper' smogs, from coal being burned on open fires for heating purposes.
The contamination from an oil fired power station is probably negligible compared to that.
Additionally the idea of the 'National Grid' as an operational entity (rather than only an emergency system) had only been developed during the late 30s and proved during the war years, so the idea of building power stations away from the load centres as would be done today had not yet settled in.
Additionally there were operational benefits in that London still had a functional district heating system at this time which allowed CHP projects like the one at Battersea to be implemented.

The CEGB may have not delivered electricity at the cheapest possible price, but it built the most reliable electricity distribution system in the entire world, as it was run by engineers who saw their primary responsibility as 'keeping the lights on'. The privatised 'National Grid plc' has been living off that infrastructural overhang since privatisation and is now screaming for increases in grid maintenance charges because they have been skimming off the investment budget as profit for most of that time.

On another note, one could point to the French state's nuclear programme as a situation where the state achieved a low cost electricity scenario. As to escaping the idea of wealth transfer to the private sector, I have yet to come up with a satistifactory mechanism that matches the simplicity and transparency of the state funding model.

In summary, I don't think it is really a case of 'private sector efficient'/'public sector inefficient', especially in these days of 'Freedom of Information' and such things that allow an unprecedented degree of democratic oversight of key state operations.


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PostPosted: Nov 08, 2013 11:54 pm 
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For what it is worth, I do have a lot of sympathy for organisations run by engineers with a longer term investment horizon than 5 years looking through a lens of public good. Your points regarding the lack of a national grid and other factors around Bankside are well taken. It was a time driven by a public service/public good point of view that seems to be frequently overlooked these days.

Quote:
I have yet to come up with a satisfactory mechanism that matches the simplicity and transparency of the state funding model.
Perhaps we can hybridise that to create a model that includes state funding of capital costs at government borrowing rates coupled with private sector operation with profit sharing that rewards the operator and the state together for the most efficient operation of that investment within clearly defined boundaries of 'good'.


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PostPosted: Nov 09, 2013 12:12 am 
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http://www.akmeengineering.com/svbr100.html
Among the applications considered for SVBR series is as part of floating power plants. Had one been available, it could have been hired by the Japanese to provide cooling power after the quake and tsunami damage to diesels and stayed on for partial replacement for lost power.
Other development required is a U-Pu Nitride fuel for this reactor. There is such a lot of spent fuel and even reprocessed RG Plutonium that it has to be utilized.
UK and France have been providing reprocessing services to the world. Time has come for a lower cost pyroprocessing now.


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PostPosted: Nov 10, 2013 12:13 am 
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Cyril R wrote:
The "free market" prefers to spend 50 billion in natural gas over 60 years than to spend 10 billion in a nuclear reactor all at once.

So it is a little hard for me to accept that notion that free markets will make the best decision.
Since there is no free market around, I don't see how you can make that judgement. However, what you say is true bout the mal-regulated markets of today.

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PostPosted: Nov 10, 2013 1:59 am 
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Regulation has nothing to do with it.

Its all about the fact that private sector operators want things like 9% returns on investment.

Nuclear power is always going to loose out to natural gas in such an environment.
Nuclear can knock out $20/MWh power, but only if capital costs are defrayed away.

Trying to defray away $3-4/W is not going to be easy when you have to pay 30 cents a watt every year in interest alone.


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PostPosted: Nov 10, 2013 3:55 am 
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Low interest cost requires low capital cost. Low capital cost reactors are made only in Russia and China. SVBR series are compact and could be purchased whole afloat in running order or could be available on hire/hire-purchase. The Chinese or Indians could make them on licence.
The Russians should also provide refueling services and replacement guarantees of defective pieces.


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PostPosted: Nov 10, 2013 12:18 pm 
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E Ireland wrote:
Regulation has nothing to do with it.

Its all about the fact that private sector operators want things like 9% returns on investment.

Nuclear power is always going to loose out to natural gas in such an environment.
Nuclear can knock out $20/MWh power, but only if capital costs are defrayed away.

Trying to defray away $3-4/W is not going to be easy when you have to pay 30 cents a watt every year in interest alone.

Actually regulation uncertainty has everything to do with it. Things like Shoreham make investing in nuclear risky so the financiers require higher interest rates. Things like Diablo Canyon make the time to start paying back long which significantly runs up the expense. Change the build time from 15 years to 7 years and you cut the costs in half (at 9%). Also, a shorter build time means less chance of regulatory change which would further increase build time and costs. HENCE the ability to factory build and cut the build time dramatically is key to getting decent cost nuclear. This is also understood by opponents who will file every motion they can no matter how stupid just to force a delay while a hearing is scheduled, reviewed, comment periods, etc.


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PostPosted: Nov 11, 2013 11:30 pm 
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E Ireland wrote:
Regulation has nothing to do with it.
Mal-regulation has EVERYTHING to do with it. When power generating companies MUST bid in an hourly auction rather than provide reliable power under long term contract, nuclear companies are just going to lose out. That kind of business requirement is what I mean by MAL-regulation.

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PostPosted: Nov 12, 2013 12:34 am 
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Long term energy contracts will make little difference, since the nuclear operator should be able to bid rather lower than say a gas turbine plant can because the marginal costs of running the plant compared to not are tiny.

The problem is that the private sector demands large rates of return on its capital, because they can obtain those rates of return elsewhere and if they can't get them they won't bother to invest in power generation infrastructure at all.
The capital repayments each year on a nuclear plant would pay for a brand new open cycle gas turbine plant.

Nuclear can't hope to compete at 9%+ capital discounts.


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PostPosted: Nov 12, 2013 5:28 am 
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E Ireland wrote:
Long term energy contracts will make little difference, since the nuclear operator should be able to bid rather lower than say a gas turbine plant can because the marginal costs of running the plant compared to not are tiny.

The problem is that the private sector demands large rates of return on its capital, because they can obtain those rates of return elsewhere and if they can't get them they won't bother to invest in power generation infrastructure at all.
The capital repayments each year on a nuclear plant would pay for a brand new open cycle gas turbine plant.

Nuclear can't hope to compete at 9%+ capital discounts.
Seems that the few places in the country where the hourly auction is not king put the kybosh to your contention. Nuclear plants ARE being built where the utility is allowed to use them properly.

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PostPosted: Nov 15, 2013 8:43 am 
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E Ireland wrote:
Long term energy contracts will make little difference, since the nuclear operator should be able to bid rather lower than say a gas turbine plant can because the marginal costs of running the plant compared to not are tiny.

The problem is that the private sector demands large rates of return on its capital, because they can obtain those rates of return elsewhere and if they can't get them they won't bother to invest in power generation infrastructure at all.
The capital repayments each year on a nuclear plant would pay for a brand new open cycle gas turbine plant.

Nuclear can't hope to compete at 9%+ capital discounts.
Term power purchase agreements are essential to underwrite capital intensive generation projects, unless you are sitting on top of a very large pot of money before you start. Nuclear can underbid almost anyone in a real-time electricity market, but they have to recover both variable and fixed costs to have a workable business model, so they can't afford to just take any price, the average price paid for their output is extremely important.

I disagree with the idea that nuclear in incompatible with a 9% return on equity. Nuclear at less than $3,000/kW is competitive, even cheap, but at $6,500/kW it is just too expensive. Cheaper cost of capital or lower returns may help, but the fundamental problem is that the infrastructure is simply too expensive at that upper price point.


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