While OC are important for vendors for preparing their cost calculations and bids, it is the sum of OC and IDC that utilities must arrange financing for. The investment decision, however, is usually guided by a comparison of the total estimated generating costs, i. e. OC plus IDC plus estimated future fuel, operating and maintenance costs, of nuclear power to the same sum for alternative electricity generating options.

Four factors determine the IDC of a construction project: (a) OC, (b) the construction period, (c) the distribution of the OC over the construction period, and (d) the return on equity to shareholders and the interest rate, or rates, to be paid for loans (different rates may apply to different plant components or construction stages). IDC adds an extra layer of uncertainty to the final investment costs of a nuclear power plant. While interest rates can usually be fixed before construction begins or, if they are variable, hedged through various financial instruments, the largest uncertainty in IDC arises from possible construction delays. When cost overruns occur, the largest portion is generally due to construction delays. To the extent that regulatory intervention during plant construction causes delays, it will also increase IDC.

Table 15.1 shows that an increase in the construction period from four years to six or 10 years can increase IDC’s share of total investment costs

from 28% to 41% or 75%, assuming OC of $2000/kW(e), a uniform distri­bution of OC over the construction period and a 10% real interest rate. If the interest rate were only 5%, IDC would be 13%, 19% and 32%, respec­tively, of total investment costs.