Nuclear power stations are expensive to build. However they also produce vast amounts of power: a reactor produces thousands of times more power than a wind turbine, millions of times more than a solar panel. We can factor in these relative scales and calculate costs per unit of electricity produced, but there is another issue we need to consider. Hydro, nuclear, and geothermal produce reliable, always-on energy, whilst wind, wave, solar, and tidal energy are intermittent, and there is no agreed formula for comparing reliable with intermittent energy sources.
Nevertheless activists, media, and politicians often do compare the market prices of intermittent energy sources such as wind and solar with those of reliable sources like nuclear and fossil fuels, inevitably finding that the intermittent sources are cheaper and usually deducing either that fossil fuels will be driven out by "cheaper" renewables or that we don't need nuclear energy. Yet despite seemingly exponential growth of installed wind and solar capacity world-wide there is also a continuingly increasing consumption of fossil fuels. Why do hard-nosed businesspeople pay good money to use fossil fuels if they could get all their energy more cheaply from wind and solar?
What activists, media, and politicians (who are mostly not scientists or engineers) fail to understand is the consequence of the intermittency of "variable" renewable energy (VRE) sources; since their production fluctates between roughly full power and zero, there must always be some other source of power which can be turned up and down to compensate for VRE's fluctuations. Onshore wind produces on average around 30% of its maximum ("nameplate") capacity, offshore 40% or so, and solar in UK and German latitudes around 10-20%, so in a system where the main sources of power are fossil fuels (which can be turned up and down), nuclear (which runs at a constant rate), and wind and solar, what happens in practice is that for every unit of energy supplied by wind, between 6 and 7 are supplied by fossil fuels, and for each unit from solar, fossil supplies 8 or 9. This relationship is governed by the laws of physics.
The reality is that in practice, world-wide, most wind and solar is in a symbiotic relationship with fossil fuels, and the system as a whole is very far from low carbon: it is somewhere between 10 and 40% lower carbon than its "backup" fossil fuel. That is a useful reduction at a time when we desperately need to be reducing the total amount of CO2 we emit, but it will not get us close to net zero. Hence if we are interested in tackling climate change we should not compare the market prices of VRE with nuclear as if they were interchangeable, any more than we would compare them with the price of coal or gas.
Proponents of 100% renewables solutions propose various ways of getting around the limitations of wind and solar's fluctuations. Generally these involve one or more of:
To make a proper like-for-like comparison between the costs of nuclear and intermittent renewables we need to include the cost of whatever realistic combination of the above schemes would give us equivalent reliable matching of supply to needs. This is likely to at least double the cost of VRE sources compared to their "raw" prices.
One way of comparing the cost of nuclear with renewables is to look at electricity prices in similar countries with different energy systems.
Why is electrcity so expensive in Germany? Why is it so much cheaper in its neighbour Poland? Is it because German electricity is lower carbon than Poland's - as can be seen from LowCarbonPower.org?
But Germany has a proportion, and mix, of low carbon energy very similar to that of the UK, whose electricity prices are about average for the EU
What about Denmark, with the second highest prices in Europe? Its electricity has a carbon intensity very similar to that of Finland, whose electricity prices are only 60% of Denmark's, but whilst Finland gets most of its clean energy from hydro and nuclear, Denmark relies mostly on wind.
The top three European countries for low carbon electricity are Sweden, Norway, and France. They also have below average electricity prices.
The relationship between Denmark and its neighbours is also work considering. Denmark gets over half of its electricity from wind, and when wind output drops it has to source power from elsewhere. It has interconnectors with Norway, Sweden, and Germany. Norway and Sweden have large amounts of hydro. and Germany itself has a lot of wind, and expensive electricity. Thus when Denmark has surplus wind-generated electricity to sell it will get low prices from its neighbours, but when wind is low it has to buy electricity at high prices.
From this small sample set it would appear that countries which use hydro and/or nuclear acheive both low carbon emsissions and lower than average electricity prices. However the comparison between the UK and Germany suggests that electricity prices are influenced by far more than generation technology alone, a point made by Oxford economics professor Dieter Helm in his review of the cost of energy commissioned by the UK government, who finds that the cost of electricity in the UK is too high because of the complex mixture of policies, regulations, subsidies, price guarantees etc affecting the electricity market. It seems probable that Germany's high prices are also a result of its market, especially the efforts the German government has taken to encourage intermittent renewables.
Despite the complicating factors of artificial interventions in countries' electricity markets, the examples of Sweden, France, Finland and Denmark suggest that countries using nuclear energy enjoy if anything lower prices, for similar or better carbon footprints, than those relying on non-hydro renewables.
As noted, nuclear power plants are very expensive to build. In part this is because building them requires a lot of expensive components, including vast amounts of steel and concrete, and lots of labour, much of it highly skilled. (This is known as a plant's "overnight" cost; how much it would cost if it were possible to build the plant overnight.)
Since a nuclear plant (like any other construction project) takes time to build, the money needed to build it has to be invested at the start of the project (and/or at stages during it) but cannot even start being be repaid until the project is built, up and running and earning revenue. Borrowing money costs money; interest which must be paid on the investment. This cost should be related to the risks taken by investors in the project. These risks fall into two categories:
Once a plant is up and running the situation changes. The risks are now those of the government changing pricing structures (e.g. carbon pricing, and subsidies for competing technologies) and the regulator changing rules (e.g. following safety incidents and accidents anywhere in the world, as happened after the Fukushima accident).
In the case of Hinkley Point C the financing model effectively lumped all these factors together, giving the consortium investing in building the plant a guaranteed relatively high price for the electricity it produces of £92.50/MWh, (in 2012 prices, index linked), for 35 years, through a low carbon Contract for Difference (CfD). Although in 2016 when the contract was agreed CfDs were also agreed for wind and solar at similar prices (onshore wind was lower, offshore wind, and solar, were higher), prices of renewables have dropped significantly since.
This financing arrangement resulted in approximately two-thirds of the total cost of the project being interest charges. The National Audit Office report on Hinkley Point C shows how the strike price was related to apportion of risk between the state (and consumers) versus risk taken by private investors:
As of late 2020 there has been no announcement by the UK government of a financing model which would be used for Sizewell C, Bradwell B, and other proposed new nuclear power stations, if they are approved.