Economics (Sustainability Assessment)

INPRO Economic Basic Principle (BP) - Energy and related products and services from nuclear energy systems shall be affordable and available.

UR1 (Cost of energy)

The definition of UR1 is: The cost of energy supplied by nuclear energy systems, taking all relevant costs and credits into account, C_N, must be competitive with that of alternative energy sources, C_A, that are available for a given application in the same time frame and geographic region/jurisdiction.
This UR relates to the cost competitiveness of different energy sources available in a country, region, or globally. In comparing the costs of electricity (or other energy products) from a NES, C_N, and competing alternatives, C_A, discounted costs (LUEC) are used. In this comparison all relevant costs are to be included.
Depending on the jurisdiction in a country, one energy source may be burdened with costs, e.g. for waste management, while another may not. In a number of Member States, the external costs of nuclear power that are not accounted for are small, since producers are required by law to make provisions for the costs of waste management, including disposal, and decommissioning, whereas the external costs of competing (non-nuclear) energy sources that are not accounted for may be significant, e.g. CO₂ emission from fossil power plants. Ideally, all external costs should be considered and, where possible, internalized, when comparing a NES with competing energy systems, but only costs that are internalized (in the price to the consumer) should be taken into account, and other external costs should be ignored.

CR1.1: Cost competitiveness

Indicator IN1.1: Cost of energy 

The value of indicator IN1.1, i.e. costs of energy (C_N and C_A) of competing energy supply options to be deployed, is determined using a discounted cost (LUEC) model[8], taking into account all relevant cost determinants for both the NES and the competing energy technology.
C_N is, in principle, the LUEC for a complete NES, excluding FOAK cost but including external costs and credits if they are fully included in the price setting mechanism, and using contingency allowances and a discount rate that reflects the economic decision making investment environment. In practice, a technology user would compare the cost of electricity from the NPP, which would include an allowance for the back end costs for waste management and decommissioning for the NPP, with that of the alternative energy source. Costs of other components of the NES, including costs for decommissioning and managing wastes from these components, would be reflected in the cost of fuel.

C_A is the LUEC for the (strongest) competitor A (for power generation investment), excluding FOAK cost but including external costs and credits if they are fully included in the price setting mechanism, and using contingency allowances and the same discount rate as applied for calculating C_N . Further, the competing alternative energy source is to be available for the same application in the same time frame and geographic region/jurisdiction. This is an important limitation since an NPP is usually operated at high load factors, primarily for meeting base load demand. So, usually, the competing alternative will be a fossil fuelled plant, e.g., coal, oil or a combined cycle gas turbine plant or, in some jurisdictions, a hydro plant. Further, the cost comparison should be based on costs for the relevant region/market and the time frame for the deployment of the NES.

Acceptance limit AL1.1 

AL1.1 is defined as: C_N < k*C_A. $C_{N}\geqslant k\cdot C_{A}$

This means that the discounted energy cost (LUEC) of a NES to be deployed or developed should be comparable, within a factor of k, to the LUEC of an available system with a competing energy source. As mentioned above, the LUEC of a NES and of a given competing energy source can be calculated using the NEST tool). Again, the case of deployment and development are distinguished. First, the case of deployment will be considered.

UR2 (Ability to Finance)

The definition of UR2 is: The total investment required to design, construct and commission nuclear energy systems, including interest during construction, should be such that the necessary investment funds can be raised.
There are two aspects to investment, somewhat related to each another, namely, the attractiveness of the investment in terms of the financial return to be expected and the size of the investment that is required. Even if the financial indicators used to analyse return are attractive, a given utility may not have the wherewithal to raise the funds needed — neither from its own resources nor from other investors.
The total investment required to deploy a given NES, or component thereof, comprises the costs to adapt a given design to a given site, and then to construct and commission the plant, including the interest during construction. The latter depends on construction time and the time to commission. A universally applicable criterion for what constitutes an acceptable ‘size’ of investment cannot be defined a priori since this will vary with time and region and will depend on many factors, such as alternatives available, etc. But a judgment must be made that the funds required to implement a project can be raised within a given expected investment climate. Factors influencing this ability may include the overall state of the economy of a given region/country, the size of the investment relative to a utility’s annual cash flow (and hence the size of the unit relative to the size of the grid), and the size of the investment compared with that needed for alternative sources of supply.
The attractiveness of an investment may be expected to have some influence on the acceptability of the size of the investment but in the INPRO methodology the two are treated as independent. Since, however, there is some influence of attractiveness on acceptability of size, we treat attractiveness first.
The attractiveness of an investment is usually quantified by determining economic parameters called financial figures of merit. Examples of such figures are IRR, the ROI, NPV of cash flows, and payback period. IRR and NPV are more or less two sides of the same coin, as are ROI and payback time.

CR2.1: Attractiveness of investment

ᅠIndicator IN2.1: Financial figures of merit ᅠ

Acceptance limit AL2.1: Figures of merit for investing in a NES are comparable with or better than those for competing energy technologies. Investors can look at a variety of financial indicators when evaluating investments. The financial indicators used in a given region will reflect the investment climate and requirements of a given country or region, including the source(s) of investment funds. In some countries or regions implementation of a NES will require private sector investment, e.g. in deregulated electricity markets, while in other countries or regions installment of a NES may require government investment or guarantees, e.g. in countries embarking on a nuclear power programme.

	[ + ] Assessment Methodology
Areas of INPRO Sustainability Assessment Overview • Economics • Safety (Nuclear Reactors) • Safety (NFCF) • Waste management • Environmental Impact on Stressors • Environmental Impact from Depletion of Resources • Infrastructure Requirements Basic Principle • User requirements • Criteria