In the heydays of nuclear energy in the 1960s when nuclear was seen as the long-term solution for providing energy to humankind, then oil was considered just a transition fuel. It was said that nuclear energy would be "too cheap to meter." Meaning, that you would no longer have a meter installed to find out how much electricity you consume, because this electricity would be so cheap that it would not need to be metered, it would not be necessary nor convenient to meter it. Today, we are concerned that nuclear energy is in fact an expensive source of energy, and the building of nuclear power plants has become more and more expensive. This is due to the increase in safety features and various difficulties that are encountered sometimes in the building of new nuclear power plants. So is nuclear energy expensive source? A cheap source? It is very difficult to give an answer that will always be valid, we need to consider individual cases. So rather than discussing whether it is expensive or cheap, what I will do I will introduce the main determinants. What is it that may turn nuclear energy to be expensive and what is it that may still allow it to be cheap depending on how we go about building a nuclear power plant. In this slide, you see that there is a base case. This base case, a reference case, this reference case envisages that the long-range marginal cost, LRMC, long-range marginal costs of nuclear energy would be $66 per megawatt hour. So this is the base case. Then, the chart represents variations relative to this base case if we change some of the assumptions. So by far, the most important assumption, the one that has the greatest impact if it is changed, is the assumption concerning overnight cost. Overnight cost is the cost of a nuclear power plant in the assumption that it takes no time to build it. It's built overnight from one day to the next and so you don't have to pay interests over the period of construction. It is in other words, just like a dishwasher or a washing machine or a refrigerator, you go to the shop, you buy it, you take it home, and it's operational. Of course this is not the case, but we have to distinguish the cost of the plant perceived from the cost which is derived because of the fact that it may take years to build this plant. So speaking now of the cost of the plant itself, the overnight cost in this case is estimated in the base case at $3,500 per kilowatt. But overnight costs are very much different in different regions because conditions are different and preferences for the quality model and design of the nuclear power plants are different. So in North America, the typical overnight costs would be probably above $3,500 per kilowatt. As you can see in this slide, it would oscillate in between something more than 2,000 and something more than 6,000. So that's very much more than the $3,500 per kilowatt. In Europe, the cost would equally oscillate from a minimum of somewhat less than $2,000 per kilowatt to close to 6,000 per kilowatt. Already you can tell that there is a big difference between the maximum and the minimum, meaning that even in Europe you might be able to build a nuclear power plant for substantially less than the base case that we saw before. In the case of Asia, it's highly likely that you will build a plant for less. In fact, 3,500 is just about the maximum overnight cost for plants in Asia, which means that mostly they will cost less. That has obviously a major impact because if we have a decrease of $1,000 per kilowatt, the long-range marginal cost of electricity would decrease by 25 percent. A quarter less, which is very significant. So overnight cost is the most important aspect, but there are other important aspects. One of these is the cost of capital. Here it is assumed in the central case a capital cost of seven percent, and then we look at variations of plus or minus two percent. Now, if the plant is being built or sponsored by a private company, it is quite likely that seven percent might not be sufficient because a private company has to borrow money, has to pay interest on that money, has to pay dividend to the shareholders, and it's likely that they will consider that seven percent is not enough remuneration for the investment that they are undertaking and the risk that they are taking. However, if you are a state entity, state-owned or guaranteed by the state like the case in China for example, then it is clear that your cost of capital can be substantially even less than seven percent. There is no reason why it should be as high as seven percent. It is viewed as a strategic decision to have a certain number of nuclear power plants, and the state is ready to give it a financial guarantee or even directly invest. So probably the cost of capital would be less than seven percent. As you can see, that means if it is only five percent, it means that the long-range marginal cost is reduced by close to 20 percent, and if it were less than five percent, they would be reduced even more. Then we have the capacity factor. That is a function of the extent to which you utilize your nuclear power plant. The nuclear power plant is a machine that can almost work 24 hours a day, 365 days of the year. There is normally a short stoppage once a year, but it is a plant that is meant to work on a continuous basis and provide the base load for the grid. So if you can achieve better than 85 percent capacity factor and for example utilize your plant at 95 percent of capacity, then the long-range marginal cost is further reduced by close to 10 percent. So that would go to further reducing the cost of nuclear energy. The construction time is important, you have to reduce the construction time as much as possible. The longer the construction time, the higher the cost and the long range-marginal cost of electricity, and so on. So the last characteristic which is important is the economic lifetime. We assume that the plant is in operation for 40 years. But if we can extend this lifetime, in this case five years but it could be extended even more, several of the plants that we have today have been allowed to work for 60 years, so then the cost of the long-range marginal cost of electricity would be reduced even more. So is nuclear energy expensive? It depends. It depends on the kind of plant that you are building and therefore its overnight cost, it depends on the cost of capital, it depends on the capacity factor, it depends on the main variables that you see in this slide. If everything is managed properly, can nuclear energy be a cheap source of electricity? The answer is certainly positive.
