Varying definitions and boundaries

The most important factor influencing the lifetime cost of a nuclear reactor is capital or construction cost. Investment in electricity generation is a multi-year affair and can take a decade or more from an early planning stage, conducting environmental impact assessments, obtaining construc­tion permits, actual construction and plant commissioning before the plant produces the first kWh. Necessarily the actual financial outlays are spread over this period.

Despite its crucial role in determining the economics of nuclear power, investment costs of nuclear power plants remain a mysterious affair. The fact that the investment in a nuclear power project encompasses numerous, often site — or project-specific components ranging from site acquisition and preparation to bid evaluation, construction, licensing and grid integration, mandates unambiguously defined project boundaries, i. e., what is included in an investment cost quotation and what is not. It also requires clarity about the cost of finance during construction, currency exchange rates used, inflation over the construction periods, taxes or subsidies. Otherwise cost comparisons are meaningless.

At the most aggregate level, total investment costs equal ‘overnight costs’ (OC) plus interest during construction (IDC). The term OC is often used to express what the investment of a project would cost if it were built ‘over­night’, i. e., as if money had no time value.

IDC are the financing costs for plant construction until the plant is con­nected to the grid and generates revenues. Because it can take as much as 10 years or more to bring a nuclear power plant from planning to comple­tion, IDC alone can tilt the balance between an economically viable or unviable project. Their long construction periods and high up-front invest­ment requirements make nuclear power projects very sensitive to IDC, and thus to construction delays.