The Head of Nuclear Development Division at OECD Nuclear Energy Agency, Ron CAMERON, explained the impacts of nuclear energy and renewables on the network costs, using the “Energy triangle”: Security of supply, Low carbon, Affordability.

1. The impacts of nuclear energy and
renewables on network costs
Ron Cameron
OECD Nuclear Energy Agency
© 2013 Organisation for Economic Co-operation and Development

2. Energy Mix
• A country’s energy mix depends on both resources and
policies
• The need for energy depends on past actions to provide
capacity and expectations of growth for the future
• The supply of energy depends on availability of
resources, both internally and externally and distribution
networks
• Hence national situations will lead to different outcomes
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3. National Energy Production Mixes
Total
62.6
TWh
781gCO2/KWh
188gCO2/KWh
Total
541
TWh
Total
582
TWh
79gCO2/KWh
461gCO2/KWh
CO2 figures from IEA 2010
© 2013 Organisation for Economic Co-operation and Development
3

4. of
s
w
on
rb
Energy triangle
ca
Se
cu
rit
y
Lo
up
ply
WHAT DRIVES ENERGY POLICIES?
Affordability
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5. Dimensions of Energy Supply Security and
Potential Contributions of Nuclear Energy
Security of supply
External Dimension
Internal Dimension
Geopolitics,
Access to Primary Fuels
Adequacy of Generation
Capacity
Safety and Adequacy of
Internatl. Infrastructures
Adequacy of Domestic
Transport Infrastructure
Unanticipated
Resource Exhaustion
Adequacy of Market
Design and Regulation
Resilience to Changes in
Climate Policy
Price Stability
Operational Reliability
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6. Energy
triangle
on
rb
ca
Se
cu
rity
w
Lo
of
su
pp
ly
LOW CARBON ELECTRICITY?
Affordability
Current ‘liberalised’ markets
send only short term signals
which threatens longer term
security of supply
We need to think in terms of the
system effects and costs in a
longer term perspective
Nuclear power is the only low
carbon dispatchable technology,
with high availability other than
hydro (which is in short supply)
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7. Nuclear remains important – and countries will
need to start seriously investing by 2020
40%
1100GWe
35%
1 000
30%
GW
800
25%
600
20%
15%
400
10%
200
0
2009
5%
2020
2030
2040
Other OECD
share of global electricity generation
1 200
0%
2050
2DS scenario shows an increasing role for nuclear energy
© 2013 Organisation for Economic Co-operation and Development
European Union
United States
Other non-OECD
India
China
2DS
2DS-hiNuc

8. Competitiveness and affordability
Energy
triangle
Affordability
OECD Europe,
137.7
Industry
140
on
rb
ca
Se
cu
rit
w
Lo
yo
fs
up
ply
150
130
Japan, 116.2
120
110
USA, 95.9
100
90
80
2005
© 2013 Organisation for Economic Co-operation and Development
2006
2007
2008
2009
2010
2011 Q3 2012
8

9. Is Nuclear Competitive? (1)
Levelised Cost of Electricity Generation by Region (5% Discount Rate) gives
part of the picture
Nuclear is already a very cost competitive technology
Source: Projected Costs of Generating Electricity, IEA/NEA 2010
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10. Levelised Cost of Electricity Generation by Region (10% Discount Rate)
But nuclear costs depend strongly on the discount rate
Source: Projected Costs of Generating Electricity, IEA/NEA 2010
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11. OECD NEA System Effects
Study:
Key Issues
“System costs are the total costs above plant-level costs to supply electricity at a given
load and given level of security of supply.”
1. Quantitative estimation of system effects of different
generating technologies in particular VaREN:
o Costs on the electricity system above plant-level costs (Grid level
costs: connection, extension and reinforcement, short-term
balancing costs, long-term costs for adequate back-up capacity)
o Total system-costs in the long-run (including production)
o Pecuniary impacts on nuclear and other dispatchable sources
2. Analysis of institutional frameworks, regulation
and policy conclusions to enhance the flexibility
and security of supply of power generation and
enable coexistence of renewables and nuclear
power in decarbonising electricity systems
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12. The System Effects of Nuclear
Power
While system effects of intermittent sources are by far the largest, all technologies have
some system effects, including nuclear power:
•Specific and stringent requirements for siting NPPs
o
Vicinity to adequate cooling source, Location in remote, less populated areas
•Large size impacts minimum grid size and system operations
o
No plant’s output >10% of lowest demand; high spinning reserves according to N-1 criterion;
•Importance of grid stability and power quality for the safety of nuclear installations
o
Stringent requirements in term of grid availability, frequency and voltage stability
100
•In some countries (France, Germany, Belgium)
significant flexibility is required of NPPs:
90
80
70
60
o
o
o
Frequency control, daily and weekly load-following;
Good load-following characteristics;
No proven impacts on fuel failures and major components;
50
40
30
20
10
0
11/07/2008
Start-up Time
30 /08/2008
19/10/2008
08/12/2008
27 /01/2009
18/03/2009
07/05/2009
26 /06/2009
15/08/2009
Maximum ramp rate
Maximal change in 30 sec
(%/min)
Open cycle gas turbine (OGT)
10-20 min
20-30 %
20 %/min
Combined cycle gas turbine (CCGT)
30-60 min
10-20 %
5-10 %/min
Coal plant
1-10 hours
5-10 %
1-5 %/min
2 hours - 2 days
up to 5%
1-5 %/min
Nuclear power plant
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13. The Short-run and the Long-run
• Crucial importance of the time horizon, when analyzing adequacy/back-up costs and
impacts on dispatchable generators (no issue for grid costs or balancing costs):
• Adequacy/back-up costs :
o In the short-run (ex post), in a system where existing capacity reliably covers peak
demand, there are no back-up costs for new variable renewable capacity.
o In the long-run (ex ante), variable renewable capacity due to its low « capacity credit »
demands dedicated back-up, which is not commercially sustainable on its own.
• Impacts on dispatchable generators
o In the short-run, the pecuniary externalities of subsidized, variable renewables
(reduced electricity prices and load factors) will over-proportionally affect
technologies with high variable costs such as CCGTs.
o In the long-run, the structural re-composition of residual dispatchable capacity will
over-proportionally affect technologies with high fixed costs such as nuclear.
Issue for investors and researchers: when does the short-run become the long-run?
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14. Short-Run Impacts
100
In the short-run, renewables with zero
marginal costs replace technologies with
higher marginal costs, including nuclear as
well as gas and coal plants. This means:
Gas (CCGT): Lost load
80
Coal: Lost load
Nuclear: Lost load
70
Power (GW)
Yearly Load
•Reductions in electricity produced by
dispatchable power plants (lower load factors,
compression effect).
•Reduction in the average electricity price on
wholesale power markets, merit order effect
(by 13-14% and 23-33%).
60
Residual load
50
40
30
20
10
0
0
Load losses
Gas Turbine (OCGT)
-54%
-40%
-87%
-51%
Gas Turbine (CCGT)
-34%
-26%
-71%
•
-27%
-28%
-62%
-44%
Nuclear
-4%
-5%
-20%
-23%
Gas Turbine (OCGT)
-54%
-40%
-87%
-51%
Gas Turbine (CCGT)
-42%
-31%
-79%
-46%
Coal
-35%
-30%
-69%
-46%
-24%
-23%
-55%
-39%
-14%
-13%
-33%
•
-43%
Coal
1000
2000
3000
4000
5000
6000
7000
8000
Utilisation time (hours/year)
30% Penetration level
Wind
Solar
Profitability
losses
10% Penetration level
Wind
Solar
Gas (OCGT): Lost load
90
Declining profitability for baseload
(gas, coal and then nuclear).
Insufficient incentives for new
investment;
Security of supply risks as gas plants
close (HIS CERA estimate 110 GW no
longer cover AC and 23 GW will close
until end 2014).
-23%
Nuclear
Electricity price variation
•
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15. Long-Run Impacts
Gas (OCGT)
Coal
Renewables
Gas (CCGT)
Nuclear
Capacity Credit
100
90
90
Yearly load
80
80
Residual load: wind at 30% penetration
70
70
60
60
50
50
40
40
30
30
20
20
10
Capacity (GW)
100
10
0
0
Dispatchable
Without VaRen
Dispatchable
Renewables
0
1000
2000
3000
4000
5000
Utilisation time (hours/year)
6000
7000
8000
With VaRen
• Renewable production will change generation structure - also for back-up.
• Without countervailing measures (carbon taxes), nuclear power will be displaced by a
more carbon-intensive mix of renewables and gas.
• Cost for residual dispatchable load will rise as more expensive technologies are used.
• No change in wholesale electricity prices for penetration levels < 25%.
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16. System Effects of Different Technologies:
Estimating Grid-level Costs
System Costs at the Grid Level (average of 6 countries - USD/MWh)
Technology
Penetration level
Nuclear
Coal
Gas
On-shore wind
Off-shore wind
Solar
10%
30%
10%
30%
10%
30%
10%
30%
10%
30%
10%
30%
Back -up Costs (Adequacy)
0.00
0.00
0.04
0.05
0.01
0.00
5.09
7.30
6.39
6.87
17.03
16.30
Balancing Costs
0.61
0.36
0.02
0.00
0.00
0.00
3.86
7.84
4.69
7.84
4.69
7.84
Grid Connection
1.73
1.71
1.03
0.94
0.59
0.51
5.24
6.24
17.23
18.68
14.58
13.71
0.00
2.34
0.00
2.06
0.00
1.09
0.00
0.99
0.00
0.60
0.00
0.51
1.86
16.06
6.28
27.65
1.68
29.99
3.82
37.21
4.19
40.49
13.55
51.40
Grid Reinforcement and Extension
Total Grid-Level System Costs
• Six countries, Finland, France, Germany, Korea, United Kingdom and USA analyzed
• Grid-level costs for variable renewables at least one level of magnitude higher than for
dispatchable technologies
o
o
o
o
Grid-level costs depend strongly on country,
context and penetration level
Grid-level costs are in the range of 15-80
USD/MWh for renewables (wind-on shore
lowest, solar highest)
Average grid-level costs in Europe about
50% of plant-level costs of base-load
technology (33% in USA)
Nuclear grid-level costs 1-3 USD/MWh
Coal and gas 0.5-1.5 USD/MWh.
Grid-level system costs
400
Plant-level costs
300
Total cost [USD/MWh]
o
200
100
0
10%
30%
Nuclear
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10%
30%
Coal
10%
30%
Gas
10%
30%
On-shore wind
10%
30%
Off-shore wind
10%
30%
Solar
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17. Total Costs of Electricity Supply
for Different Renewables Scenarios
Total cost of electricity supply [USD/MWh]
Comparing total annual supply costs
of a reference scenario with only
dispatchable technologies with six
renewable scenarios (wind on, wind
off, solar at 10% and 30%)
UK
Germany
Ref.
o Takes into account also fixed
and variable cost savings of
displaced conventional PPs
30%
Total cost of electricity supply
Increase in plant-level cost
Grid-level system costs
Cost increase
Total cost of electricity supply
Increase in plant-level cost
Grid-level system costs
Cost increase
Total cost of electricity supply
Increase in plant-level cost
Grid-level system costs
Cost increase
•
10% penetration level
30% penetration level
Conv.
Mix
USA
•
Wind on- Wind offSolar
shore
shore
Wind on- Wind offSolar
shore
shore
80.7
98.3
72.4
-
86.6
3.9
1.9
5.8
101.7
1.5
1.9
3.4
76.1
2.1
1.6
3.7
91.3
7.8
2.8
10.6
105.6
3.9
3.4
7.3
78.0
4.2
1.4
5.6
101.2
16.9
3.6
20.4
130.6
26.5
5.8
32.3
88.2
14.3
1.5
15.7
105.5
11.6
13.2
24.8
111.9
4.5
9.1
13.6
84.6
6.2
6.0
12.2
116.9
23.3
12.9
36.2
123.6
11.7
13.6
25.3
91.5
12.5
6.5
19.1
156.2
50.6
24.9
75.4
199.4
79.6
21.5
101.1
123.7
42.8
8.5
51.2
Total costs of renewables scenarios are
large, especially at 30% penetration levels:
o Plant-level cost of renewables still
significantly higher than that of
dispatchable technologies.
o Grid-level system costs alone are
large, representing about ⅓ of the
increase in unit electricity costs.
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18. Impacts on CO2 emissions
and electricity price
In the short-run, renewables replace technologies with higher marginal cost, i.e.
fossil-fuelled plants emitting CO2.
•
•
Electricity market prices are significantly reduced (by 13-14% and 23-33%)
Carbon emissions are reduced (by 30% to 50% per MWh) if mix stays the same.
In the long-run, low-marginal cost renewables replace base-load technology.
•
•
Similar electricity market prices at penetration levels < 25%.
The long-term effect on CO2 emissions depends on the base-load technology displaced
(nuclear or coal):
o
o
If there was no nuclear on the generating mix, renewables will reduce CO2 emissions.
If nuclear was part of the generating mix, CO2 emissions increase.
Short- and long-term CO2 emissions
Reference
[Mio tonnes
of CO2]
Short-term
Long-Term
59.3
10% Penetration level
Wind
Solar
[%]
[%]
-31%
2%
-29%
4%
30% Penetration level
Wind
Solar
[%]
[%]
-66%
26%
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-44%
125%
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19. New Markets for New Challenges
The integration of large amounts of variable generation and the dislocation it creates in
electricity markets requires institutional and regulatory responses in at least three areas:
A. Markets for short-term flexibility provision
For greater flexibility to guarantee continuous
matching of demand and supply exist in principle
four options that should compete on cost:
1.
2.
3.
4.
Dispatchable back-up capacity and load-following
Electricity storage
Interconnections and market integration
Demand side management
So far dispatchable back-up remains cheapest.
B. Mechanisms for the long-term provision of capacity
There will always be moments when the wind does not blow or the sun does not shine.
Capacity mechanisms (payments to dispatchable producers or markets with supply
obligations for all providers) can assure profitability even with reduced load factors and
lower prices.
C. A Review of Support Mechanisms for Renewable Energies
Subsidising output through feed-in tariffs (FITs) in Europe or production tax credits (PTCs) in
the United States incentivises production when electricity is not needed (including
negative prices). Feed-in premiums, capacity support or best a substantial carbon tax
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would be preferable.
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20. Lessons Learnt and Policy
Conclusions
Lessons Learnt
The integration of large shares of intermittent renewable electricity is a major challenge for the
electricity systems of OECD countries and for dispatchable generators such as nuclear.
o Grid-level system costs for variable renewables are large (15-80 USD/MWh) but depend on country,
context and technology (Wind ON < Wind OFF < Solar PV). Nuclear is 1-3 USD/MWh.
o Grid-level and total system cost increase over-proportionally with the share of variable renewables.
With current technologies, 35-40% seems to be the limit of affordability and technical feasibility
o Lower load factors and lower prices affect the economics of dispatchable generators: difficulties in
financing capacity to provide short-term flexibility and long-term adequacy need to be addressed.
Policy Conclusions
1. Account for system costs and ensure transparency of power generation costs.
2. New regulatory frameworks are needed to internalize system effects.
(1) Capacity payments or markets with capacity obligations, (2) Oblige operators to feed stable hourly
bands of capacity into the grid, (3) Allocate costs of grid connection and extension to generators, (4)
Offer long-term capacity payments to dispatchable base-load capacity.
3. Explicitly recognize the value nuclear brings to long term stability and security of supply as
the major dispatchable low carbon fuel.
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21. Conclusions
1. The energy mix is determined by national circumstances and by policy decisions. Policy decisions
need to take account of sometimes competing interests.
2. Nuclear power has advantages in an energy mix. For developed countries, it contributes to
security of supply, reduction of GHG and provides stability of electricity prices over long periods.
For many developing countries, it also meets the increasing demand for energy.
3. However, financing of nuclear power in a liberalised market is challenging because the market
sends only short term signals and does not favour actions that require long term commitment.
4. This is compounded by grid operations that permit electricity to be produced when not required
and leads to weak wholesale power prices but increasing total costs.
5. In terms of costs, LCOE calculations confirm the overall lifetime competitiveness of nuclear but
the industry needs to reduce costs and construction times for new designs. However LCOE is
more applicable for social and not private optimality and thus a government role in favouring
diverse low carbon sources seems necessary.
6. In particular for nuclear, if system costs were internalised, this would create a more level playing
field and nuclear power would be increasingly competitive in comparison to intermittent
renewables. Such a process requires more transparency on costs, a move away from
subsidisation and greater recognition of the stabilising role of baseload technologies for grid
operation.
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