TY - JOUR

T1 - Investing into third generation nuclear power plants - Review of recent trends and analysis of future investments using Monte Carlo Simulation

AU - Wealer, B.

AU - Bauer, Stefan

AU - Hirschhausen, Christian von

AU - Kemfert, Claudia

AU - Göke, Leonard

N1 - An earlier version of this paper was presented at the 41st Annual IAEE International Conference in Groningen in June 2018, at the 36th USAEE North American Conference in Washington in September 2018, and at the 42nd Annual IAEE International Conference in Ljubljana in August 2019. We thank the conference participants for their valuable comments and fruitful discussions. An extended abstract was published in the IAEE Energy Forum Special Issue Groningen [80]. An earlier version of the paper was published as DIW Discussion Paper 1833 [81]. We thank Clemens Gerbaulet for initiating the data work and Yussra Tolba for research support; the usual disclaimer applies.

PY - 2021/6/1

Y1 - 2021/6/1

N2 - This paper provides a review of trends in third generation nuclear power plants, and analyzes current and future nuclear power plant investments using Monte Carlo simulations of economic indicators. We first review global trends of nuclear power plant investments, including technical as well as economic trends. The review suggests that cost escalations in the sector observed in previous research continue until today, including the most recent investment projects in the U.S. and in Europe. In order to extend this analysis, we carry out our own investment analysis of a representative third generation nuclear power plant, focusing on the net present value and the levelized cost of electricity. We base our analysis on a stochastic Monte Carlo simulation to nuclear power plant investments. We define and estimate the main drivers of our model: Overnight construction costs, wholesale electricity prices, and weighted average cost of capital, and discuss reasonable ranges and distributions of those parameters. Model runs suggest that investing in nuclear power plants is not profitable, i.e. expected net present values are highly negative, mainly driven by high construction costs, including capital costs, and uncertain and low revenues. Even extending reactor lifetimes does not improve the results significantly. We conclude that our numerical exercise confirms the literature review, i.e. the economics of nuclear power plants are not favorable to future investments, even though additional costs (decommissioning, long-term storage) and the social costs of accidents are not even considered.

AB - This paper provides a review of trends in third generation nuclear power plants, and analyzes current and future nuclear power plant investments using Monte Carlo simulations of economic indicators. We first review global trends of nuclear power plant investments, including technical as well as economic trends. The review suggests that cost escalations in the sector observed in previous research continue until today, including the most recent investment projects in the U.S. and in Europe. In order to extend this analysis, we carry out our own investment analysis of a representative third generation nuclear power plant, focusing on the net present value and the levelized cost of electricity. We base our analysis on a stochastic Monte Carlo simulation to nuclear power plant investments. We define and estimate the main drivers of our model: Overnight construction costs, wholesale electricity prices, and weighted average cost of capital, and discuss reasonable ranges and distributions of those parameters. Model runs suggest that investing in nuclear power plants is not profitable, i.e. expected net present values are highly negative, mainly driven by high construction costs, including capital costs, and uncertain and low revenues. Even extending reactor lifetimes does not improve the results significantly. We conclude that our numerical exercise confirms the literature review, i.e. the economics of nuclear power plants are not favorable to future investments, even though additional costs (decommissioning, long-term storage) and the social costs of accidents are not even considered.

KW - Investment

KW - Levelized cost of electricity

KW - Monte Carlo simulation

KW - Nuclear financing

KW - Nuclear power

KW - Uncertainty

KW - Economics

KW - Sustainability Governance

UR - http://www.scopus.com/inward/record.url?scp=85102654034&partnerID=8YFLogxK

UR - https://www.mendeley.com/catalogue/f480f789-6e78-3573-836e-dc890773b803/

U2 - 10.1016/j.rser.2021.110836

DO - 10.1016/j.rser.2021.110836

M3 - Scientific review articles

AN - SCOPUS:85102654034

VL - 143

JO - Renewable & Sustainble Energy Reviews

JF - Renewable & Sustainble Energy Reviews

SN - 1364-0321

M1 - 110836

ER -