Energy costs - direct and indirect

Depending on how you do the sums, in most assessments, in direct Levelised Cost of Energy terms, nuclear comes out as far more expensive than any other energy option. For example, the US National Renewable Energy Research Labs have put the cost of nuclear at about $163/MWh and wind and solar at around £40/MWh, these figures being mid range of the 2020 data from Lazard. And as their costs continue to fall, wind and solar win against all the others. But these are just the direct costs. A study by Sovacool et al adds in estimates for the additional so called ‘external’ social and environmental costs. On that basis, wind still wins overall, and does better than solar PV, but nuclear is over-taken by coal as the worst option. The rest fall somewhere in between. 

Some other assessments differ in terms of safety and impact rankings, and certainly estimating social and environmental costs is not easy, especially for future costs. And even past costs! We are still battling it out over the human costs of Chernobyl and Fukushima.  For example, while, in Japan, many thousands of people from the contaminated region are still unable to return home, a new report from the United Nations Scientific Committee on the Effects of Atomic Radiation (UNSCEAR) says that increased incidences of radiation-related health effects from the 2011 accident at the Fukushima Daiichi nuclear power plant are ‘unlikely to be discernible’. But, despite massive very expensive clean up efforts, there is still local contamination, and continuing debates on cancer risks and radioactive water issues at the reactor site. As well as latent heath impacts.  

Even leaving the health and cleanup cost aide, it is clear that nuclear power’s direct economic costs are high and that has been ruling it out of contention, as, headline spin aside, the Scientific American now accepts.  By contrast, for most renewables, direct costs are much lower, but there can be some local environmental costs and materials scarcity and extraction issue. There are also waste costs, an issue that has of late begun to attract more critical attention. So has the impact of global warming: it is cutting plant efficiency, and therefore increasing the cost of running, of many power plants, most obviously in terms of providing cooling water for nuclear and fossil plants, but also others e.g. CSP focused solar. Hydro also suffers from water shortages. 

There is also the cost of balancing supply and demand on the grid so it can cope with variable renewables. Estimates vary, but the most recent meta study from Imperial College London suggested that proving backup via storage, supergrid links and smart grid demand management would add perhaps €14MWh to the overall system cost (including the so called the ‘profile costs’) with a variable renewable share of 35%, rising to €30/MWh at 85% penetration. That is quite high- although not compared with the £92.5/MWh strike price that the Hinkley nuclear plant has been awarded. It is also worth noting nuclear plants will need some back-up too, the cost of that presumably being included in the consumer levy charged as part of the capacity market system. The latest four-year-ahead round of auctions for that cleared at £18/MWh. 

Clearly the cost of grid balancing does have to be faced, but not everyone thinks it is fair to include the earnings lost by conventional plants when their output is displaced by cheaper renewables i.e. the profile costs. Moreover, as new more flexible technology develops, the balancing costs could fall. Indeed, some flexible balancing measures may reduce system cost by better matching variable supply and variable demand. Certainly it makes no sense to offer a capacity market subsidy to support the use inflexible nuclear for balancing as is done at present. Fortunately that seems to be dropping off, as cheaper, more flexible balancing options have emerged. 

Energy saving 

The bottom line on costs seems clear. Some renewables may be better than others, but neither coal or nuclear look good in either direct or indirect cost terms. You can reduce costs and impacts even more if you focus more on energy saving. Indeed, ever provocative, Amory Lovins says that globally ‘reduced energy intensity has 28 times the impact of renewable growth’. That is quite a claim. Most of his examples come from the building sector, and it is true that, if you build and insulate well, you hardly need much energy for heating. And it is also true that cheap savings are available in many areas.  So we should grab these savings. 

It is certainly interesting that, as Socacool et al note in their meta study review, while electricity systems can generate $11.644 trillion in annual social and environmental externalities, energy saving has a net annual positive value of $312 bn. There can be problems with improved energy efficiency- the money saved can be re-spent on energy intensive good and services, so maybe undermining some carbon savings.   A recent review of this so called rebound effect suggested that perhaps one half of the savings may be lost in practice in this way. Even so, avoiding energy waste is worth doing, not least to reduce the impact of generating energy, and if the cash savings can be invested in zero carbon renewable supplies, then more of the carbon savings can also be captured.  

It does seem that a mixture of renewables and energy efficiency is our best bet.  In many cases it will be cheaper to avoid generation by reducing demand, but not always, and there will be limits to how much energy can be saved- we will always need some generation.  So we need to develop both the supply and saving options together - and fast. Fortunately, they are usually compatible and mutually supportive- cutting demand makes it easier to supply with renewables. It is not a competition- we need both. 

Conclusions     

Not everyone shares the view that renewables and energy efficiency are the best way ahead in  cost and impact terms. Some also still look to nuclear. So far that has been excluded from support in the European Union’s post-Covid economic stimulus plan.  And last year the European Commission published rules for managing sustainable finance which excluded nuclear from the EU’s Sustainable Finance Taxonomy ‘at this stage’.  It said that ‘it was not possible to conclude the nuclear energy value chain does not cause significant harm to other environmental objectives on the time-scales in question’. 

However, not everyone was happy with this and a new review was put in hand, carried out by the EC’s Joint Research Centre. The JRC has now concluded that nuclear could meet the ECs ‘do no significant harm’ criteria ‘provided that all specific industrial activities in the whole nuclear fuel cycle (e.g. uranium mining, nuclear fuel fabrication, etc.) comply with the nuclear & environmental regulatory frameworks and related Technical Screening Criteria’. That might seem a little tautological or even complacent. Certainly there is no shortage of conflicting views, some stressing the opportunity cost issue- nuclear sucks funds and vital political attention away from imperative renewable investments. The debate continues.