The Economic Reasons Behind Nuclear Power

By Eric Fontinelle | April 08, 2011 AAA
The Economic Reasons Behind Nuclear Power

Overall, the economic challenge of nuclear power generation is to ensure that the large upfront capital costs can be recovered by the highly profitable operations after the plant comes online. This is similar to the economic model associated with oil, natural gas and coal. (As investors become more environmentally conscious, the exchange-traded fund market is following. Check out Going Green With Exchange-Traded Funds.)

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Disputed Environmental Impact
Nuclear power stations are essentially just sophisticated steam engines. Heat is created in the reactor core by carefully controlled nuclear fission reaction. A large amount of water surrounds the reactor core, cooling the reactor. Water close to the reactor boils, creating steam which drives a turbine. The motion of the steam turbine is used to generate electricity.

Nuclear power is attractive as an energy source because, when operated safely, it is able to generate significant amounts of energy with little to no toxic emissions. A variety of studies conclude that the total carbon footprint of nuclear power is comparable to wind, solar and hydro power.

However, some environmental groups, such as Greenpeace International, dispute nuclear power's claim as a more environmentally friendly energy source. These groups point to concerns about nuclear safety as well as to the cost of decommissioning old plants and providing for the long term storage of spent radioactive fuel.

Dangers and Alternatives
Nuclear power entails the worst potential for catastrophic disaster compared with alternative methods of power generation. Radioactive materials used in nuclear power generation must be isolated from human or environmental contact for thousands of years. This necessitates costly safeguards to mitigate the risk of a radiation release due to accidents, natural disasters, theft or terrorism.

The primary alternatives such as coal, oil and natural gas power plants also pose dangers to nearby residents who breathe in fine pollutants released by the combustion of these fuels. In fact, many nuclear energy based corporations argue that the danger of atmospheric pollution from coal is actually greater than the dangers of nuclear power. On the other hand, coal and natural gas plants do not hold the same potential for a single catastrophic failure event.

Other energy sources, such as hydro power solar, and wind power are extremely safe. Except for the amount of pollutants emitted during the plant construction and maintenance, the normal operation of these power facilities emits essentially no pollutants into the atmosphere. There is also little risk of a catastrophic event due to accidents or terrorism. Unfortunately, these energy sources are also among the most expensive in terms of the cost of electricity generated. (For more, check out Green Energy: Why We're Still Not Using It.)

High Upfront Costs
The large capital investment required to build a nuclear plant can be difficult to obtain. Precise construction costs differ based on the size of the plant, the costs of raw materials, the type of plant and many other factors. However, in all cases it costs several billion dollars to build a new nuclear plant. Construction also takes several years, leading to a substantial period of uncertainty before the power plant is able to begin generating revenue.

Once the plant is online however, nuclear plants are very cheap to operate. The uranium fuels used in the plants are relatively cheap and the amount required is small. While the cost of fuel is minimal, other required costs, including security personnel and plant operation personnel, are also very cheap considering the large amount of electricity generated by even smaller nuclear power stations.

The other main operating cost of nuclear power is properly disposing of nuclear waste and spent fuel rods. The cost of disposing of nuclear waste is relatively low. A variety of techniques exist to reprocess spent fuel and compact remaining waste so that the need for more costly long term storage is minimized. (The average family spends $1600/year on utility bills - find out how to put some of that back in your wallet. See Ten Ways To Save Energy And Money.)

Nuclear as Energy Independence
According to the World Nuclear Association, The United States leads the world in terms of the Megawatt capacity of its nuclear generating stations. The U.S. is followed by France, Japan, Russia and Germany.

As a percentage of the amount of electricity generated, France leads the way, utilizing nuclear power for over 75.2% of its electricity needs. This is by far the most in the world.

This may be due to conscious choices by the French made in the early 1970s - around the time of the first oil shocks in the Middle East. Despite a lack of natural resources such as oil, natural gas or coal, France today is energy independent with respect to electricity generation. The large initial investment that France made in nuclear power is now paying off.

The Bottom Line
Nuclear power presents an economic challenge due to the large initial investment required. However, if citizens are willing to accept the risks, investments in nuclear energy can pay off in the form of energy independence.

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