Home > Economics > Should-Cost Versus Did-Cost

Should-Cost Versus Did-Cost

US Capex 1960 - 2000

In the 1960’s and early 1970’s, most USA nuclear plants were built at an overnight cost of less than one thousand 2014 dollars per kW and the total construction time was 4 to 5 years. Komanoff, no friend of nuclear, estimates that as of 1971 the capital costs of a coal plant and a light water nuclear plant were essentially the same despite rudimentary coal pollution control including no SO2 scrubbers. (According to UC Berkeley, a 1970 light water reactor required a bit more steel than ThorCon, and twice as much concrete, almost all of it slow, expensive rebar.) But in the 1970’s real cost started rising, and in the early-mid 80’s after Three Mile Island they exploded. At the same time, construction periods stretched out to 8 or 10 or more years. Orders stopped after Three Mile Island but the last plants to be completed in the late 1980’s had capital costs in excess of ten thousand 2014 dollars per kW. Vogtle 3 and 4 currently under construction will probably exceed this number. Obviously, nuclear is now expensive.

Most people will automatically scoff at the claim that a nuclear power plant should cost less to build than a coal plant. It is received wisdom that nuclear plants are outrageously expensive. And most recent nuclear projects confirm that belief. But why? ThorCon clearly consumes less resources than a coal plant of the same capacity, and is easier to build. Even a standard nuclear plant requires about the same amount of steel and concrete as a coal plant. Why is nuclear so expensive?

Economists tell us that in a reasonably competitive market with: multiple providers, nil price power, no big secrets, no major barriers to entry, and no big externalities, market cost measures the value of the planet’s precious resources consumed by an activity. This is the should-cost. In situations, where there are little or no competitive pressures, the difference between should-cost and the dollars actually expended, the did-cost, can be quite remarkable. The Tale of Two Ships offers an example. Naval ships can be built with exactly the same technology as commercial ships. Yet they can easily cost 20 to 30 times their commercial counterparts.

Where does all this money go? The Navy ship has extensive design calculations of every detail, interminable design reviews, careful certification of yards, vendors, materials, welders, janitors. Ubiquitous documentation of everything with strictly followed sign off procedures, all sorts of prescriptive standards and procedures which must be precisely adhered to. Meticulous review of the tiniest of changes. Nothing is too good for our sailors.

The commercial ship has little of this. There are heavy penalties if the ship is not delivered on time or does not perform per spec in actual trials; but the cost of owner, classification society, and flag state review and inspection is less than 5% of the shipyard price. As a result, a commercial ship will be unavailable on average about 15 days per year, an availability of 96%. Most ships do better, but a few do worse. A ship that is unavailable more than 30 days per year is a lemon and will probably cost the builder a customer.

Astonishingly, the availability of Navy ships is much worse. The Tale of Two Ships offers an egregious but not uncommon example. Availability is often 60% or less, construction schedules are expected to slip, and the ships frequently do not perform per spec. All that process, all that paperwork, all those rules, often — if not usually — results in a badly flawed product.

ThorCon requires less resources than a coal plant. One third less in construction; four time less in fuel. ThorCon is simpler and can be built almost entirely on an assembly line at shipyard productivity and quality. ThorCon power should-cost about half as much as coal where coal is cheap. But the did-cost depends on how we regulate nuclear power. The bottom line is simple: will we build nuclear power plants the way the U.S. Navy builds ships or the way the Koreans build ships? If it’s the former, then nuclear will never beat coal regardless of the technology. If it’s the latter, then ThorCon is easily cheaper than coal.