The Future of Nuclear Power

The generation of electricity from fossil fuels, notably natural gas and coal, is
a major and growing contributor to the emission of carbon dioxide – a greenhouse gas that contributes significantly to global warming. We share the scientific consensus that these emissions must be reduced and believe that the
U.S. will eventually join with other nations in the effort to do so.
At least for the next few decades, there are only a few realistic options for
reducing carbon dioxide emissions from electricity generation:
‡ increase efficiency in electricity generation and use;
‡ expand use of renewable energy sources such as wind, solar, biomass, and
geothermal;
‡ capture carbon dioxide emissions at fossil-fueled (especially coal) electric
generating plants and permanently sequester the carbon; and
‡ increase use of nuclear power.
The goal of this interdisciplinary MIT study is not to predict which of these
options will prevail or to argue for their comparative advantages. In our view,
it is likely that we shall need all of these options and accordingly it would be a
mistake at this time to exclude any of these four options from an overall carbon
emissions management strategy. Rather we seek to explore and evaluate actions
that could be taken to maintain nuclear power as one of the significant
options for meeting future world energy needs at low cost and in an environmentally acceptable manner.
In 2002, nuclear power supplied 20% of United
States and 17% of world electricity consumption. Experts project worldwide electricity consumption will increase substantially in the coming decades, especially in the developing world,
accompanying economic growth and social
progress. However, official forecasts call for a
mere 5% increase in nuclear electricity generating capacity worldwide by
2020 (and even this is questionable), while electricity use could grow by as

much as 75%. These projections entail little new nuclear plant construction
and reflect both economic considerations and growing anti-nuclear sentiment
in key countries. The limited prospects for nuclear power today are attributable, ultimately, to four unresolved problems:
‡ Costs: nuclear power has higher overall lifetime costs compared to natural gas
with combined cycle turbine technology (CCGT) and coal, at least in the
absence of a carbon tax or an equivalent “cap and trade” mechanism for
reducing carbon emissions;
‡ Safety: nuclear power has perceived adverse safety, environmental, and health
effects, heightened by the 1979 Three Mile Island and 1986 Chernobyl reactor accidents, but also by accidents at fuel cycle facilities in the United
States, Russia, and Japan. There is also growing concern about the safe and
secure transportation of nuclear materials and the security of nuclear facilities from terrorist attack;
‡ Proliferation: nuclear power entails potential security risks, notably the possible misuse of commercial or associated nuclear facilities and operations to
acquire technology or materials as a precursor to the acquisition of a
nuclear weapons capability. Fuel cycles that involve the chemical reprocessing of spent fuel to separate weapons-usable plutonium and uranium
enrichment technologies are of special concern, especially as nuclear power
spreads around the world;
‡ Waste: nuclear power has unresolved challenges in long-term management of
radioactive wastes. The United States and other countries have yet to implement final disposition of spent fuel or high level radioactive waste streams
created at various stages of the nuclear fuel cycle. Since these radioactive
wastes present some danger to present and future generations, the public
and its elected representatives, as well as prospective investors in nuclear
power plants, properly expect continuing and substantial progress towards
solution to the waste disposal problem. Successful operation of the planned
disposal facility at Yucca Mountain would ease, but not solve, the waste
issue for the U.S. and other countries if nuclear power expands substantially

Today, nuclear power is not an economically competitive choice. Moreover,
unlike other energy technologies, nuclear power requires significant government involvement because of safety, proliferation, and waste concerns. If in
the future carbon dioxide emissions carry a significant “price,” however,
nuclear energy could be an important — indeed vital — option for generating electricity. We do not know whether this will occur. But we believe the
nuclear option should be retained, precisely because it is an important carbonfree source of power that can potentially make a significant contribution to
future electricity supply.
To preserve the nuclear option for the future requires overcoming the four
challenges described above—costs, safety, proliferation, and wastes. These
challenges will escalate if a significant number of new nuclear generating
plants are built in a growing number of countries. The effort to overcome
these challenges, however, is justified only if nuclear power can potentially
contribute significantly to reducing global warming, which entails major
expansion of nuclear power. In effect, preserving the nuclear option for the
future means planning for growth, as well as for a future in which nuclear
energy is a competitive, safer, and more secure source of power.
To explore these issues, our study postulates a global growth scenario that by
mid-century would see 1000 to 1500 reactors of 1000 megawatt-electric
(MWe) capacity each deployed worldwide, compared to a capacity equivalent
to 366 such reactors now in service. Nuclear power expansion on this scale
requires U.S. leadership, continued commitment by Japan,
Korea, and Taiwan, a renewal of European activity, and
wider deployment of nuclear power around the world. An
illustrative deployment of 1000 reactors, each 1000 MWe in
size, under this scenario is given in following table.
This scenario would displace a significant amount of carbon-emitting fossil fuel generation. In 2002, carbon equivalent emission from human activity was about 6,500 million
tonnes per year; these emissions will probably more than
double by 2050. The 1000 GWe of nuclear power postulated
here would avoid annually about 800 million tonnes of carbon equivalent if the electricity generation displaced was
gas-fired and 1,800 million tonnes if the generation was
coal-fired, assuming no capture and sequestration of carbon
dioxide from combustion sources.


ECONOMICS
Nuclear power will succeed in the long run only if it has a lower cost than
competing technologies. This is especially true as electricity markets become
progressively less subject to economic regulation in many parts of the world.
We constructed a model to evaluate the real cost of electricity from nuclear
power versus pulverized coal plants and natural gas combined cycle plants (at
various projected levels of real lifetime prices for natural gas), over their economic lives. These technologies are most widely used today and, absent a carbon tax or its equivalent, are less expensive than many
renewable technologies. Our “merchant” cost model uses
assumptions that commercial investors would be expected
to use today, with parameters based on actual experience
rather than engineering estimates of what might be achieved
under ideal conditions; it compares the constant or “levelized” price of electricity over the life of a power plant that
would be necessary to cover all operating expenses and taxes
and provide an acceptable return to investors. The comparative figures given below assume 85% capacity factor and a
40-year economic life for the nuclear plant, reflect economic
conditions in the U.S, and consider a range of projected
improvements in nuclear cost factors. (See Table.)
We judge the indicated cost improvements for nuclear power to be plausible,
but not proven. The model results make clear why electricity produced from
new nuclear power plants today is not competitive with electricity produced
from coal or natural gas-fueled CCGT plants with low or moderate gas prices,
unless all cost improvements for nuclear power are realized. The cost comparison becomes worse for nuclear if the capacity factor falls. It is also important
to emphasize that the nuclear cost structure is driven by high up-front capital
costs, while the natural gas cost driver is the fuel cost; coal lies in between
nuclear and natural gas with respect to both fuel and capital costs.
Nuclear does become more competitive by comparison if
the social cost of carbon emissions is internalized, for example through a carbon tax or an equivalent “cap and trade”
system. Under the assumption that the costs of carbon
emissions are imposed, the accompanying table illustrates
the impact on the competitive costs for different power
sources, for emission costs in the range of $50 to $200/tonne
carbon. (See Table.) The ultimate cost will depend on both
societal choices (such as how much carbon dioxide emission to permit) and technology developments, such as the cost and feasibility of
large-scale carbon capture and long-term sequestration. Clearly, costs in the
range of $100 to $200/tonne C would significantly affect the relative cost
competitiveness of coal, natural gas, and nuclear electricity generation.
The carbon-free nature of nuclear power argues for government action to
encourage maintenance of the nuclear option, particularly in light of the regulatory uncertainties facing the use of nuclear power and the unwillingness of
investors to bear the risk of introducing a new generation of nuclear facilities
with their high capital costs.
We recommend three actions to improve the economic viability of nuclear
power:
The government should cost share for site banking for a number of plants,
certification of new plant designs by the Nuclear Regulatory Commission,
and combined construction and operating licenses for plants built immediately or in the future; we support U.S. Department of Energy initiatives on
these subjects.
The government should recognize nuclear as carbon-free and include new
nuclear plants as an eligible option in any federal or state mandatory
renewable energy portfolio (i.e., a “carbon-free” portfolio) standard.
The government should provide a modest subsidy for a small set of “first
mover” commercial nuclear plants to demonstrate cost and regulatory feasibility in the form of a production tax credit.
We propose a production tax credit of up to $200 per kWe of the construction cost of up to 10 “first mover” plants. This benefit might be paid out at
about 1.7 cents per kWe-hr, over a year and a half of full-power plant operation. We prefer the production tax credit mechanism because it offers the
greatest incentive for projects to be completed and because it can be extended
to other carbon free electricity technologies, for example renewables, (wind
currently enjoys a 1.7 cents per kWe-hr tax credit for ten years) and coal with
carbon capture and sequestration. The credit of 1.7 cents per kWe- hr is
equivalent to a credit of $70 per avoided metric ton of carbon if the electricity were to have come from coal plants (or $160 from natural gas plants). Of
course, the carbon emission reduction would then continue without public
assistance for the plant life (perhaps 60 years for nuclear). If no new nuclear
plant is built, the government will not pay a subsidy. These actions will be effective in stimulating additional investment in nuclear generating
capacity if, and only if, the industry can live up to its own expectations of being able to
reduce considerably capital costs for new plants.
Advanced fuel cycles add considerably to the cost of nuclear electricity. We considered
reprocessing and one-pass fuel recycle with current technology, and found the fuel cost,
including waste storage and disposal charges, to be about 4.5 times the fuel cost of the
once-through cycle. Thus use of advanced fuel cycles imposes a significant economic
penalty on nuclear power.