A bargain at three times the cost?


LATE last week the Chamber of Commerce of the Philippine Islands (CCPI) came out strongly in favor of rehabilitating and starting the country’s 30-year-old monument to bad decisions, the Bataan Nuclear Power Plant (BNPP).

In conclusion to a list of assertions about economics and safety concerns that they presented in support of their position, the CCPI said: “…the chamber supports the operation of the nuclear power plant in Bataan to accelerate the economic progress of the country through industrialization,”

As of now, no one seems to be certain what the government’s position on the BNPP is; President Duterte initially dismissed the idea, largely due to nuclear power’s perceived safety risks. But transportation expert Alfonso Cusi, in his capacity as Energy secretary, has done his best to convince everyone who would listen that he was able to prevail upon Duterte to give the green light to putting the BNPP into operation. In the meantime, the government may or may not have approved a new feasibility study for the Marcos-era white elephant. (To get a good sense of the chaos surrounding the issue, read Katrina Stuart Santiago’s Dec. 2 column, “Cusi, confusion, BNPP.”)

Safety is probably the biggest public concern, thanks to high-profile disasters such as the Three Mile Island, Chernobyl, and Fukushima. While the reality is that nuclear power is statistically very safe, the outcomes of a serious accident are much worse than for other forms of power; the worst accident that could strike a coal or gas power plant would still only render the plant inoperative for a relatively short time, and would not prevent its repair, whereas even a moderate failure in a nuclear plant (such as Three Mile Island) renders the entire plant forever useless.

The CCPI, however, unnecessarily resorted to inaccuracies to downplay the safety risk. They said that over 32 years of commercial nuclear operations, there have only been three major accidents (the aforementioned Three Mile Island, Chernobyl, and Fukushima), and that except for Chernobyl, no one was killed as a result.

According to the International Atomic Energy Agency (IAEA), however, in that 32-year timeframe, there have actually been 10 serious accidents, with “serious” defined as an incident resulting in multiple fatalities or $100 million or more in property damage. Since 1957, there have been 28; one occurring every 21 months, on average. Not all of these have been accidents at nuclear generating facilities (although most have been), but have also occurred in facilities related to nuclear power – research reactors, or fuel manufacturing or disposal facilities, the sort of ancillary facilities that would also find a home here in the Philippines if the country pursues a nuclear power program. In terms of deaths, excluding Chernobyl (with a direct death toll of about 30), there have been at least 18 people killed in or as a direct result of nuclear accidents, whether by radiation or other causes.

From the economic perspective, the CCPI simply repeated the same tired, and utterly inaccurate claim that nuclear power is a cheap form of energy. Its cost is competitive, but it is not the cheapest way to create electricity. According to the US Energy Information Agency (EIA), the average cost per kilowatt for nuclear-generated electricity was $.0257 as of last year; less than the $.0332 and $.0373 for gas and coal, respectively, but almost twice that of hydropower’s $.0134 per kilowatt.

Those costs, it should be noted, are for plants that were built and operated normally, at a typical construction cost; electricity from BNPP, given its odd history, would cost considerably more.

If the $1 billion estimate for the rehabilitation and start-up of the BNPP is accurate, by the time the plant creates a single spark of electricity that can be sold, it will cost at least $3.33 billion – the total including the original construction cost, interest on loans, and 30-plus years of preservation. That is about three times the cost of a similar-sized (620 MW capacity) coal generating plant, and works out to a cost of $5,370 per kilowatt.

According to EIA figures (as of 2013), the average cost for a dual-unit nuclear plant – BNPP only has one reactor – is $5,530, meaning that BNPP, a nearly 40-year-old design, costs nearly twice what a brand-new nuclear plant would cost.

The advantage of nuclear power is that in terms of energy produced from the fuel used, it is extremely efficient, and that keeps the cost of the generated electricity low. But because the costs to be recovered from the BNPP are so much greater than they ordinarily would be, the savings, if the plant ever produces power, would be minimal. The cost per kilowatt for electricity generated by BNPP would be about P3.37, less than the P4.60 to P5.06/kW cost for coal-generated electricity (based on estimates from FirstGen).

But that assumes a normal level of capital costs that would have to be recovered; in the case of the BNPP, those are already two to three times higher than normal, which would push the cost of generated power to about P3.95/kW. That is still cheaper than gas- or coal-generated power, a savings of about 5 percent and 14 percent, respectively, but a far cry from the 78 percent and 23 percent savings claimed by CCPI.

And that also assumes the costs for rehabilitating and starting the plant do not increase, which they typically do, and typically by a huge amount. Vietnam recently canceled its two nuclear plant projects – CCPI highlighted those in its statement, evidently unaware that they were no longer going ahead – largely due to alarmingly high cost overruns.

Cost increases are, in fact, almost certain for nuclear power projects; in an April study done, ironically, by a group of nuclear advocates and published in Energy Policy, costs for nuclear power, unlike other forms of energy, did not consistently decrease over time, and over a long period, actually increased. According to noted energy analyst Jon Koomey of Stanford University (whose expertise bridges energy, computing, and the environment), “With the exception of South Korea, whose nuclear cost data are not independently audited and are therefore of unknown quality, all available cost data paint a consistent picture: the investment risk of nuclear power is significant, costs almost always increased over time in the modern era, and cost overruns and lengthened construction times need to be considered carefully by investors and policy makers alike.”

The economic payoff of operating a power plant that already costs two to three times what it’s actually worth, will almost certainly generate additional costs, and has a heightened risk of catastrophic failure, is not in any way justifiable, particularly in a country which has precisely zero experience in the technology it is attempting to use.



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