Nuclear power plants are cheaper to operate

Nuclear power plants have the lowest variable costs among the three fuel types, at $11.8 per MWh (for plants coming online in 2019).

Mike Sonnenberg - Author

Jan. 19 2015, Updated 8:05 a.m. ET

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Levalized cost of electricity (or LCOE)

The LCOE is a measure to determine the competitiveness of different generating technologies. Every year, the EIA (Energy Information Administration) publishes its estimates for fixed and variable costs for different generating technologies. Unlike overnight capital costs, the LCOE is a measure for plants coming online into the future. The current report, published in April 2014, estimates the measures for plants coming online in 2019. This is because some types of power plants (like nuclear) take longer to come online.

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The LCOE is a useful measure for utility companies deciding which type of technology to go with. So the LCOE also impacts related companies like General Electric (GE), Fluor (FLR), and Siemens (SIEGY). GE is part of various ETFs, including the SPDR S&P 500 ETF (SPY) and the Industrial Select Sector SPDR ETF (XLI).

Fixed costs

The EIA classifies operation and maintenance (or O&M) costs as fixed O&M costs and variable O&M costs. Variable O&M costs also include fuel costs. According to the EIA, the fixed O&M expenses for plants coming online in 2019 would be in the range of $4.20–$9.80 per megawatt hour (or MWh) for coal-fired plants, $1.7–$4.2 per MWh for natural gas–based plants, and $11.8 for nuclear power plants. The fixed O&M expenses are higher for nuclear power plants, as nuclear power plants spend more on cooling systems and waste management.

Variable costs

However, the picture is entirely the opposite when it comes to variable costs. Nuclear power plants have the lowest variable costs among the three fuel types, at $11.8 per MWh (for plants coming online in 2019). This is because uranium is a much more concentrated source of energy. According to the Nuclear Energy Institute, fuel costs for generating 1 unit of electricity came in at just $7.9 per MWh for nuclear power plants compared to $35.1 per MWh for natural gas and $25.3 per MWh for coal-fired plants.

Which technology has the best prospects? Let’s find out in the next part of this series.


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