Sunday, 17 May 2020

Fund Managers with £424 million to invest, should you: Invest now in Solar Parks OR invest in Advanced Nuclear Power Plants in 5 years time????

£424 million of capital investment will be going into Cleve Hill Solar Park if the decision to go ahead is given; it is expected within weeks. 

This is Cleve Hill Solar Park

One of the first Advanced Nuclear Power Plants (NPPs), the BWRX-300 Small Modular Reactor (SMR) will commence operation in 2027 and should become available in the UK by 2030 requiring a capital investment of £587 million (2020).

And this is the BWRX-300 Advanced NPP

The most significant factor investors should consider about advanced SMRs is their build programmes are now down to 2 years - no different to Solar PV or Wind Farm projects. So the cost-of-capital burden that has drained investment from conventional npps is utterly negated. Comparing investments, it need not be considered a part of 'Significant Costs'.
For the Cleve Hill investment, assuming the full 14 million MWh are generated between 2023 and 2063, the first significant cost is capital investment content:, which works out at £30.29/MWh.

The second significant cost is O&M. The National Renewable Energy Laboratory (NREL) in the USA predicts a 2020 cost of $10.5/kW/yr. At the 'Long Term' exchange rate of £1.00 = US$1.15 that equates to £9.13/kW/yr. For 350 MW of installed capacity, that's a total cost over 40 years of £127.82 million. The O & M cost content works out at £9.13/MWh.
NREL Operation and Maintenance (O & M) Costs

The third significant cost is fuel and since it is stated frequently that this is 'free energy' the fuel cost content is £0.00/MWh.

The fourth and final significant cost is decommissioning. An Oct 2017 RFF Report gives a cost for decommissioning a 300 MW US Solar PV Project at $45,976/MW. That's $16.09 million for 350 MW Cleve HIll. Using 2017 exchange rate and adding in UK inflation brings it to £13.0 million This Decommissioning cost content is £0.93/MWh.

RFF Report. P.36; Table 9.

The significant cost total is £40.35/MWh. Which, when applied to the 14 million MWh generated is £564.9 million.

For the Advanced NPP, the BWRX-300, the first significant cost of capital investment is works out at £4.13/MWh.

It is then possible to ascertain all of the remaining costs: Fuel fabrication; O&M; waste fund; decommissioning fund - from an analysis of Hinkley Point C npp. All of these costs add up to €23.00/MWh in 2018. Factor in the 2018 € to £ exchange rate and UK inflation to 2020 and this significant cost is £25.10/MWh

Pie Chart: Hinkley Point C nuclear power plant

The significant cost total is £29.23/MWh - but that is for a capital investment of £587 million. So a capital investment of £424 million would fund 102.5 million MWh (72%) of the total 142.0 million MWh. When applied to 102.5 million MWh the cost is £3.00 billion.
So what does that mean for the pension pots that have gone into the £424 million utility scale solar pv projects, commencing generation in 2023 and earning for every MWh sold at the going Wholesale Price?

Thinking in terms of a Wholesale Electricity Price of £50.00/MWh, by 2063, after a 40 years lifespan of economical operation, Cleve Hill will have generated an income of £700.0 million, with significant costs of £564.9  million. That's a potential for dividend payments from earnings of £135.1 million. 

Working out at £0.29 for every £1.00 of capital invested.

Meanwhile, it is reasonable to assume the Pension Fund Manager holding onto his £424 million until 2030 would probably have partaken of 'opportunity earnings'. Then by 2030, the £424 million invested in advanced npps starts earning on the Wholesale Market.

Again,thinking in terms of a Wholesale Electricity Price of £50.00/MWh, by 2063, after 33 years of operation, the 72% portion of the BWRX-300 generation will have raised an income of £2.82 billion, with significant costs of £1.65 billion. That's a potential for dividend payments from earnings of £1.17 billion.

But it will carry on for another 27 years of economical operation to reach £2.13 billion

Working out at £5.02 for every £1.00 of capital invested (17.3X more).




Power to the People said...

Thank you for this succinct but at the same time thorough economic presentation. It pains me to think that this analysis may not be read by the very people who most need to read (and understand) it.

It is clear that you constrained this to an economic comparison.

I think it is important to point out that while you held to the lifetime comparison of the two energy sources, the equivalency ends at those annualized totals.

The nuclear plant will have operated as a baseload generator (no, that's not a dirty word) delivering power for hospitals and other functions critical to civilization throughout every day and night of its operation. The solar farm reliably would NOT produce power at night. That is the most reliable part of its operation.

So, the cost comparison is valid, but I want to emphasize the fact that the solar investment leaves a gaping hole, one that must be filled with a parallel investment in a supplemental power source to feed the grid the power solar cannot provide more than 50% of the time.

So, to your point, the solar investment is not only poor from the investor's point of view, but it is much worse from a social benefit point of view.

Adam Antatheist said...

Many thanks for your comment.

Simplistically, I'm of the opinion that it is of no importance to confirm the aspects you raise to the general public, politicians or investors. My 'programme' is to point out to investors the 'error of their ways' by totally ignoring burgeoning developments in advanced nuclear power plants.

I'm basing my efforts on the hope that investors will plough into advanced nuclear and withdraw from renewables (certainly in developed nations). Then the politics will follow the money; the 99.9% (or even 99.99%) of the indifferent general public will be told "you're getting nuclear" and they won't care two hoots as long as it's there at the flick of a switch and at the pumps 24/7/365.

My previous blogpost compared the £9 billion of capital investment going into Dogger Bank Windfarm and the final figure was 12X the potential earnings from the BWRX-300.

I'm going to do it next for onshore wind, usinf Whitelee Windfarm and then one for solar pv in Australia or California, to prove that even with cfs of 30%, it's still a ridiculous investment.

Do you have any blogposts yet to have a look at? I searched and couldn't find anything.

Power to the People said...

I think you are wise to narrow your focus selectively like this. It allows you to present your case to an audience interested in one aspect of power generation.

I am not actively blogging, but keenly interested in power, civilization and the environment. I would love to find a way to bring your message to a wider audience.