According to the 1994 Annual Report of Ontario Hydro (now known as Ontario Power Generation Inc.), nuclear power in Ontario currently had a 35% cost advantage over fossil power (average energy costs of CDN$0.05/kWh for nuclear vs. CDN$0.07/kWh for fossil). This cost advantage had increased quite sharply from a 9% advantage in 1990.
In 2002 this cost advantage is still evident: a statement by Ontario Power Generation in January 2002 claimed that electricity from the refurbished Pickering A plant (see related FAQ) would cost CDN$0.03/kWh, compared with CDN$0.045/kWh for a new gas-fired cogeneration plant (i.e. one that generates industrial process steam as well as electricity), and CND$0.05/kWh for a new combined-cycle gas turbine. Price volatility is another concern: these gas prices are based on an average long-term cost of US$3/million BTU, but the spot price reached three times this average at one point in 2001. [Source: Speech by OPG CEO and President Ron Osborne to Ajax-Pickering Board of Trade, Pickering, Ont., 2002 January 23]
The relative cost advantage of nuclear power is dependent upon the amount of time that a given plant is operated, measured by its “capacity factor” (percentage of time that a plant operates at design rating). Since nuclear plants are much cheaper to fuel than fossil plants, they are usually operated in “baseload” mode; that is, they contribute to the bulk electricity supply that does not vary as the load changes (e.g. throughout a typical day). More expensive fossil plants, such as natural gas turbines, would be operated at much lower capacity factors and used to meet peaking demands only. (In Ontario, as of December 1999, baseload demand was about 15,000 MW and the highest peaking demand was 25,000 MW. Installed capacity was 31,000 MW – the extra capacity being a “reserve margin” required for system reliability.)
A useful measure of energy cost is the LUEC, or “Levalized Unit Energy Cost”. The LUEC represents the entire life-cycle cost of a given technology, divided by the energy generated by the technology over its lifetime. The result, expressed in “cents/kWh”, can be used to compare vastly differing technologies, with differing pay-back schedules, on a common scale. This is a useful comparison because the LUEC’s life-cycle cost includes everything from initial design and construction, to operation, maintenance, fuelling, administrative overhead, and final plant decommissioning and fuel disposal. The LUEC also accounts for the cost of inflation over the time it takes to build and operate a given plant, expressing the result in constant dollars for a given year.
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Notice the variation with capacity factor: CANDU nuclear plants incur a relatively high capital cost, and therefore their LUEC is the lowest of the options when operated at capacity factors greater than about 60% (i.e., taking advantage of nuclear power’s relatively low fuelling costs). Combustion-turbine gas plants, on the other hand, incur relatively low capital costs but high fuelling costs, and thus become cost-effective only at capacity factors less than about 25%.
To illustrate this difference further, compare the cost of a day’s worth of baseload operation for each of the three “new supply” options in the above figure, using the technology-dependent LUECs given for 80% capacity factor (gas 6.6 cents/kWh, coal 4.1 cents/kWh, CANDU 3.2 cents/kWh). The cost of operating a new 1000 MWe generating plant over a 24-hour period in Ontario would therefore be $1,584,000 if natural gas were used, or $984,000 using coal, or $768,000 using uranium (1989 dollars).
