Rising steel and material prices and higher interest rates are increasing the cost of a major modular nuclear project, as it is with the construction of other generating technologies, including wind and solar power. NuScale designed a small modular nuclear reactor that is believed to be safer, cheaper, and more flexible than a conventional nuclear reactor. By relying on natural convection to cool the reactors and eliminating many pumps and pipes, NuScale’s modular reactor is expected to be safer than a conventional nuclear reactor. Its price for electricity is now estimated, however, to have almost doubled from $55 per megawatt hour to around $100 per megawatt hour.
The Utah project consists of a half dozen 77-megawatt reactors for a total of 462 megawatts. Construction is scheduled to begin in 2026 and the first output is expected in 2029 –three years later. The reactors would be built in a factory and shipped to the plant site. NuScale was spun out of Oregon State University in 2007 and has benefited from Department of Energy (DOE) support. In 2020, DOE approved a multi-year cost share award of about $1.4 billion to help demonstrate NuScale reactors at the Idaho National Laboratory. That funding must go through an annual appropriations process in Congress.
The new cost projections take into account approximately 30 percent in savings through the Inflation Reduction Act, which includes billions in tax credits to support “clean” energy projects. Otherwise, the project cost could reach $120 per megawatt hour.
Of the 462 megawatts the NuScale reactors are expected to generate, 116 megawatts have been subscribed to by members of the Utah Associated Municipal Power Systems (UAMPS). Of UAMPS’s 48 members, 27 have signed on to purchase electricity from the advanced nuclear Carbon Free Power Project (CFPP). The higher costs, however, are making subscribers rethink the project feasibility. The last chance for participants to abandon the project may be in 2024, depending on the Nuclear Regulatory Commission’s (NRC) review of the project.
The NuScale design passed a milestone in the NRC review process, receiving its safety evaluation report. Next, NuScale must secure the design certification and complete a pre-licensing application review by the NRC. In its recent review, NRC staff issued findings of “several challenging and/or significant issues” in the NuScale draft application while noting that it is still a work in progress. In the NRC readiness assessment letter to NuScale, NRC staff identified a number of unaddressed safety concerns and gaps that could introduce delays to the NRC certification process, according to critics. NuScale will address the NRC’s comments in the final application which “remains on schedule for submittal this year.” UAMPS is also working on an application to construct and operate the plant, which is to be submitted in 2023. Before construction can start, however, UAMPS has to line up customers to buy the full output of the plant.
A benefit of the reactor is that operators can ramp the plant’s output up and down by turning on and off the individual reactors, which makes it attractive as a back-up to wind and solar power that depend on the wind to blow and the sun to shine for power generation to occur. As such, nuclear power can serve as a carbon-free energy source on demand, backing up renewables. However, if the NuScale plant does not run constantly at full output, it will be less efficient and even more expensive to operate, in terms of cost per megawatt hour of energy. When nuclear or coal back-up wind and solar power, they are dispatched after the renewable technologies and not allowed to generate power to their full capacity. These plants are their most efficient and economic when running full-time, but that changes when they are relegated to standing by waiting for intermittent sources to stop producing. This is the reason (i.e. operating at less than full capacity) why existing coal and nuclear plants, most of which have had their capital costs already paid, have had to shutter.
Wind and Solar Costs
Renewable energy costs are increasing along with those of all electricity sources. The Seattle company, LevelTen Energy, which runs an online marketplace for buyers and sellers of renewable energy, found that the prices of solar contract offers in North America have risen 30 percent in the third quarter of 2022 compared to the third quarter of the prior year. Wind contract prices were up 37 percent in the same timeframe.
In the third quarter, North American solar and wind power purchase agreement (PPA) prices increased 9.6 percent to $45.93 per megawatt hour, according to a new report from LevelTen Energy. These long-term energy contract prices are 34 percent higher than in the same period last year, continuing the steady rise that began in 2020, when supply chain challenges worsened by the pandemic upended years of low PPA prices. The industry has since faced a series of compounding economic, regulatory and permitting challenges that have created an imbalance between PPA supply and demand, and led to an increase in development costs, keeping prices high.
Prices for one key solar panel input, polysilicon, are at a ten-year high due to high demand and low supply, driven in part by the U.S.’s ban on polysilicon from Xinjiang Province, where production has been tied to forced labor. In late June, the Biden Administration began enforcing the Uyghur Forced Labor Prevention Act, leading to more than 3 gigawatts of solar panels being withheld by Customs and Border Protection as of mid-August. According to the Solar Energy Industries Association, shipping and supply chain constraints have caused utility-scale solar photovoltaic installation costs to increase 12.7 percent over last year.
Wind prices increases are fueled by inflation, permitting issues, and transmission constraints in certain regions. Because many of the best wind sites have already been used, developers have moved to sites that require new transmission. In July, for instance, the Midcontinent Independent System Operator (MISO) approved 18 new high-voltage transmission lines that will permit the addition of 53 gigawatts of renewable energy capacity to the grid. However, it is expected to take between six to eight years before these powerlines become operational, limiting additional renewable capacity coming online.
Some believe that the Inflation Reduction Act will reduce or stabilize solar and wind prices. However, there are a number of issues that may not result in reduced prices. First, there are immediate, major roadblocks including interconnection queue congestion and supply chain challenges that are stalling buildout. Second, development costs keep increasing as the price of labor, capital, commodities, and other project inputs continue increasing along with inflation. Lastly, demand continues to grow from corporations and utilities, increasing competition for already limited capacity.
Conclusion
Project costs for generating technologies are increasing as inflation and material costs increase, interest rates rise and supply chain problems persist. A new modular nuclear project is expecting project costs to almost double, though construction is not expected to start until 2026 and these costs may come down, depending on inflation and supply chain issues. Wind and solar project costs have increased over 30 percent due to inflation, permitting issues, transmission constraints, supply chain constraints and issues with China’s use of forced labor. Americans have already seen increased electricity prices and they can expect them to go higher thanks, in part, to President Biden’s energy policies, causing fuel prices to increase and inflation to grow since taking office on January 20, 2021.
