Econonomics of Energy and Environmental Policy

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Revisiting the Cost Escalation Curse of Nuclear Power: New Lessons from the French Experience

In several OECD countries such as the United Kingdom, the United States and France, nuclear power is envisioned as having a role to play alongside renewables to reduce greenhouse gas emissions. Leaving aside post-Fukushima-Daiichi safety concerns, the major issue for nuclear power is whether new builds could be achieved at reasonable costs. In fact, ever since the completion of the first wave of nuclear reactors in 1970, and continuing with the ongoing construction of new reactors in Europe, nuclear power seems to be doomed with the curse of cost escalation. This phenomenon has been studied for the U.S., and it has been argued that a heterogeneous nuclear fleet, which has made it difficult to learn from experience, can partially explain the escalation. The French nuclear power programme has followed a standardization strategy; however, previous cost assessments have also pointed to an increase in capital costs. This observation implies that even in the best economic conditions, cost escalation is inherent to nuclear power. In this paper we re-examine the drivers of cost escalation in France, based on construction costs taken from a recent report by the French Court of Auditors (i.e. Cour des Comptes). Using this information, we found that the cost escalation observed in previous studies was lower than argued. Our results indicate that the scale-up resulted in more costly reactors, but we also found evidence of learning effects from these same reactors. This finding shows that the standardization strategy adopted in the French nuclear programme has led to significant cost reductions.
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JEL Codes:L51: Economics of Regulation, L94: Electric Utilities, H23: Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies

Keywords: Nuclear power, Construction costs, Learning effects, Technological change

DOI: 10.5547/2160-5890.4.2.lran

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Published in Volume 4, Number 2 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.


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