Announcements of nuclear power plant retirements throughout the world have increased amid sustained low gas prices, market pressure from renewables, slow demand growth, and uncertainty about future policies. Although market and policy changes can have significant impacts, nuclear power plant owners and operators may decide to undertake modernization efforts to lower costs of plant operations and thereby improve their economic competitiveness in a changing landscape.
This white paper describes a framework for assessing the economic value of modernizing the existing nuclear fleet in the United States and demonstrates how this value depends on future market, policy, and plant-specific conditions. Modernizing, in this context, means applied process improvements (for example, risk-informed decision making) and technologies (for example, digital monitoring and automation) to reduce plant operating costs. The goal of this analysis is not to provide precise estimates but to propose a structure for assessing the value of nuclear modernization and to offer order-of-magnitude approximations. Asset owners and operators can further refine these estimates using proprietary data or additional plant-specific assumptions. Although this paper focuses on U.S. markets, the methods used are applicable in any energy market in the world.
Given the data and assumptions used in this paper, initial estimates suggest that many nuclear plants can justify investments of more than $100 million to modernize and reduce fixed operations and maintenance (FOM) capital costs by 25%. The break-even value of modernization varies significantly by plant, though it is typically higher for larger multi-unit plants. Cost reductions from modernization and market conditions also impact break-even value estimates, and these values tend to be higher under more favorable market conditions for nuclear, such as carbon pricing and higher natural gas prices. Premature retirements are a significant investment risk and driver of break-even values, but modernization may delay some retirements, which increases the value of modernization efforts.
Authors John Bistline and Robert Austin