Aside from a few minor editorial alterations I have no changes to make to this post.
Reactors are built with borrowed money. Any way you look at it, the cost of money is a major factor in the cost of building reactors. The reactor owner must borrow money to finance the reactor's construction. The borrowing starts even before the first spade of earth is turned, and continues until the current starts flowing to electrical consumers. Since it takes at least 3 years for reactor construction to be completed, and complex reactor projects often take far longer, this means that interest may be accumulating for several years before repayment begins. Thus the cost of interest on borrowed money during the construction phase adds significantly to reactor capital costs.
Let us consider two approaches to reactor manufacture/construction. The first is the traditional approach. The second is the cost lowering approach I advocate.
In the first approach a power company orders a 1 GW Generation 3+ reactor from the manufacturer. Once NRC approval for the project is approved, the manufacturer starts ordering parts and contractors begins site preparations. Money has to be borrowed to pay for these activities and interest charges begins accumulate. Once parts are built they are shipped to the manufacturer for module assembly, and as modules are assembled, they are shipped on to the building site for final assembly. Meanwhile construction activity continues at the site. This goes on for several years. At the end of the construction phase the fuel; is ordered, then loaded into the reactor. Tests are run, and only then does the reactor start generating power. The sale of electricity to the consumers from the reactor produces a stream of money with which to begin repaying interest and principal. We have been borrowing money for 3 years before the first repayment can come in.
The second approach is as follows. The power company orders 10 100 MWe Generation 4 reactors. Their construction is to be spaced over a 3 year period. The factory manufacture approach will allow for rapid assembly of large reactor modules - say a reactor module, a power generating module, and a module for chemical processing units. While the reactor moves down the assembly line site preparation is underway. Once the modules arrive on the prepared site, they are given final assembly. The completed reactor is given its first fuel charge, and after initial testing, electrical production begins. Three months worth of interest has accumulated before the reactor can begin to repay the borrowed money. Then construction of the second unit begins. The small reactor approach, has saved the small reactor owner up too 88% of the accumulated construction phase interest, that would be added to the capital cost of a large reactor project. In addition, during the three year construction project. the owner will see a steadily increasing stream of revenue, which pays not only interest and principle but also contributes to the bottom line of the electrical business.
In addition the decreased risk entailed by the small reactor multiple unit model diminishes investor's risk. Not only is far less money at stake, over a far shorter period of time, but project cancellation due to expense over run or over estimate of consumer demand is fat less likely.
Small, relatively inexpensive, reactors are much more likely to be completed in a timely fashion than big reactors are. Owners are not forced to order more generating capacity than they need as they might with huge one size fits all reactors.
A further observation on reactor construction financing
The current reactor financing system assumes a different set of social goals, than the situation we face demands. The current financial system assumes that the construction of power producing facilities is a speculative investment, whose risk should be born by investors, until the project is complete. Once the production of power begins, the investors are entitled to receive compensation for the risk they task.
This approach leads to the problem we noted earlier, that the accumulation of interest during the project construction phase increases project capitol costs.
Our current social goal is quite different than that assumed by the old regulatory model. Priority needs to be given to the replacement of fossil fuel burning, CO2 producing energy sources, by post-carbon energy sources. This would mean that the sources of the about 75% of American electricity that is currently produced by fossil fuel burning electrical generators must be replaced by post carbon electrical generating sources. No matter what technology is used, the potential cost of greenhouse gas induced global warming far outweighs the cost of changing energy sources, hence the over riding social goal is the change in energy sources, not the question of who should bare the risk. The risk clearly comes from a failure to implement a viable system of financing changes in energy production technology.
Our social goal should be to changing the energy system, to motivate that change by penalizing producers and consumers who do not change, and to see to it that the change can be financed at a reasonable price. Subsidies tend to favor the adoption of energy new technologies, but they may have limited CO2 reduction effect, witness of the peak load inefficiency of California wind generators.
My suggestion would be to link the system of penalties for CO2 generation with a system of rewards for post-carbon energy construction. Hence power companies would have to pay carbon penalties for electricity produced by burning fossil fuels. Rather than going into general revenue accounts however, those penalties would flow into escrow accounts that can be used for for post carbon energy construction. The penalties would be past on to consumers who would be motivated by higher electrical costs use more efficient electrical technology.
Thus the risk of generating new post-carbon electrical generating facilities would be passed on from the investors to the rate payers. It might be complained that this system favors investors over rate payers, but in facto this system lowers rather than raises the costs which rate payers eventually carry. First by insuring that financing for new post-carbon power generating facilities is available, and by lowering the cost of that financing. Thus rate payers are assured that they will have electrical energy when they need it, and that they will not have to carry the cost of construction phase interest once power from the new electrical generating facilities comes on line.
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