The Economics of Nuclear Power

Nuclear power generates electricity from the heat released when atoms of uranium are split inside a reactor. It produces almost no carbon emissions while running and can operate steadily around the clock. Economically, though, nuclear power is a puzzle: once built, a plant is one of the cheapest and most reliable sources of electricity, yet building new plants has often proved so costly and slow that many projects have struggled.

Expensive to build, cheap to run

Nuclear is the classic example of capital intensity, where most of a project’s lifetime cost is paid before it produces anything. A reactor needs massive concrete and steel structures, extremely precise engineering, strict safety systems and years of regulatory review. Once running, however, its fuel is a small part of its costs, because a tiny amount of uranium releases an enormous amount of energy. Nuclear plants also run most of the time; in the United States, they have typically operated at over 90 percent of their full capacity across a year, higher than any other major source.

The problem of overruns

The biggest economic challenge is the cost overrun, when a project ends up costing far more than planned. Large reactors are huge, one-of-a-kind construction projects, and delays in any part can push back everything else. While a plant is being built, the money borrowed to build it keeps gathering interest, so each year of delay adds to the final bill. Two recent Western examples are the Vogtle expansion in the American state of Georgia and the Flamanville reactor in France; both finished many years late and cost well over twice their original estimates. By contrast, some countries that build reactors repeatedly with standard designs, such as South Korea, have tended to build more quickly and cheaply, which suggests experience matters a great deal.

Costs at the end of life

Nuclear plants also face costs after they stop producing. Decommissioning is the process of safely shutting down a plant, removing radioactive materials and cleaning up the site, and it can take decades. Spent fuel stays radioactive for a very long time and must be stored securely. Most countries require plant owners to set money aside for these costs while the plant is running, which adds to the cost of electricity but ensures the bill is not simply left for future generations.

Why countries still choose nuclear

Despite these challenges, many countries see value in nuclear power. It provides steady, low-carbon electricity regardless of weather, supports energy security by reducing fuel imports, and uses very little land. India operates reactors at several sites, including Kudankulam in Tamil Nadu, and plans to expand its nuclear capacity. There is also growing interest in the small modular reactor, a smaller design intended to be built largely in factories and assembled on site. Supporters hope repeated factory production will bring the kind of learning that cut solar costs, though these designs are still being proven commercially.