…environmental economics and the implications of environmental policy

Running their spreadsheets again and again and again….cause it makes no sense even with the law of large numbers

with 14 comments

Of course lots of folks are lining up to capitalize on the great carbon economy shift that is coming. None more so than the nuclear industry. While this Globe article infers that nuclear may be cost-effective at higher carbon prices, it also highlights the cost obfuscation coming from the industry:

The (UK) White Paper glosses over this problem with a number of glib assumptions. In its economic analysis, which reckons that the all-in cost of nuclear power will be some £39 a megawatt-hour, compared with £38 for gas and £30 for coal, the government admits that nuclear is only marginally competitive. However, it has also used an important assumption, that the carbon price is €36 a tonne.

According to this, the cost of nuclear is just 2 dollars Canadian more per MWh relative to natural gas assuming an carbon price of about $72 CDN per tonne. This is crazy stuff. If the price gap was this small (CDN $76 for gas and CDN$78 for Nuclear), we would have widespread proliferation of nucs for electricity and all kinds of industrial applications. Indeed, with the price swings in natural gas, and the steady price appreciation since 1999 (140 percent or so in the delivered price), would we not have more nucs if costs were that competitive? (setting aside those little deployment barriers of 20-year build horizons and regulatory hurdles for a moment).

A more realistic figure is perhaps twice the purported cost, say $125 to 150 MWh, which means that at emission prices of about $200 dollars is required before nuclear is competitive with combined cycle gas. And there are lots of other reductions and deployment opportunities that should occur at carbon prices below $200.

So, cost-effectiveness is a good criterion for guiding carbon policy and is the reason why the nuclear folks are running all those Monte Carlo models seeking, desperately, to find a sweet spot. Unfortunately, it is the rate payer who will ultimately get skewed.

Written by Dave Sawyer

January 18th, 2008 at 4:32 pm

14 Responses to 'Running their spreadsheets again and again and again….cause it makes no sense even with the law of large numbers'

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