"Our children will enjoy in their homes electrical energy too cheap to meter,". This is what Lewis Strauss, Chairman of the US Atomic Energy Commission, said in 1954 in reference to the cost of nuclear generated power. At the time, the US was eager to put its knowledge of nuclear energy gained in World War II to civilian use in order to power the American economy. In the subsequent decades, nuclear power plants would be built not only in the US, but in Europe and also here in Canada (Quebec, Ontario, and New Brunswick).
However, that original promise of nuclear energy too cheap to power never quite materialised. Now that those original post-war nuclear plants are reaching the end of their design lives, governments are grappling with the cost of replacing them. Unfortunately for them, the cost of nuclear power has not reduced over time as most people predicted. If anything, nuclear power has become even more expensive.
The claim that nuclear power is too cheap to power has been made many times over the years, but where does it come from? It stems from the fact that the marginal cost of nuclear power (the cost to produce one additional unit of electricity) is effectively zero. However, this approach ignores the significant upfront capital cost of building a nuclear plant. It also ignores a number of hidden costs associated with nuclear power such as insuring the risk of a disaster, and upgrading the transmission system to cope with such large plants.
The upfront capital costs alone can be astronomical. Ontario has decided to refurbish its old plants instead of building new ones from scratch. Although they have not released an official estimate, most industry observers believe the refurbishment cost per nuclear plant will be up to $10 billion. In the UK, where they are building brand new nuclear plants, the cost for the first one is pegged at a staggering $22 billion. Furthermore, both of these figures assume there will be no cost overruns, a dubious assumption given that nuclear power plants have rarely being built on budget.
But how do these huge billion dollar figures translate into consumers' power bills. The short answer is: we don't know. However, the procurement process the UK government is currently going through gives us a few clues. Instead of paying a large sum upfront for a new nuclear power plant, the UK has decided to pay a fixed flat charge for every unit of electricity produced by the nuclear plant. This is the exact same mechanism that BC Hydro uses to procure power from independent power producers, (IPPs) here in BC.
Although the final price has not been set yet, press reports indicate the UK will be paying about $150 for each unit of nuclear electricity produced. This is about 20% more than the latest BC Hydro contracts awarded to wind and small hydro IPPs. And it is about 50% more expensive than BC Hydro's estimate for the cost of site C.
Nuclear energy is a valuable technology with lots of benefits. Unfortunately, its original promise of being so inexpensive as to be "too cheap to meter" has proven to be completely false.
