Economies of Scale in Nuclear Power Generation

TLDR

Nuclear power expansion has stalled since 1978, with critics citing high costs, and while economies of scale are seen as key to reducing costs, empirical evidence on their impact remains scarce compared to more sophisticated fossil‑fuel cost analyses. The study applies a translog cost function, modeled after Christensen and Greene’s 1955–1970 utility data, to estimate nuclear power production costs, addressing the scarcity of empirical evidence on scale economies. The analysis suggests that larger reactors.

Abstract

Current prospects for the expansion of nuclear electric generating capacity appear dim; there has not been a domestic order placed for a nuclear power plant since 1978, and over 80 plants have been cancelled since the early 1970s. While a host of economic, political and environmental factors are responsible for the current state of the nuclear power industry, concern has increasingly focused on the cost effectiveness of nuclear power, with critics arguing that nuclear power is not an economically feasible alternative.' Economies of scale are a crucial consideration in addressing nuclear power costs. At the plant level, scale economies could be associated with the size of generating units or with multiunit siting. If the former is important, the strong trend toward larger reactors would imply that, all else equal, electricity produced by new plants should cost less than previous experience would indicate. Siting several reactors at a plant, which is common practice in France, for example, would lead to lower costs if the latter factor is important. Despite the importance of these issues, virtually no empirical evidence on economies of scale in nuclear power operations is available.2 Existing studies of nuclear power production costs [20; 7; 26; 23; 22] typically specify some plant size and type, often the proverbial 1,000 MWe plant, and sum up the costs of the inputs required to run it, including a capital cost. By contrast, cost analyses for fossil-fueled electricity generation are more sophisticated.3 Perhaps the first application of econometric modeling in this area was by Nerlove [19]. However, a more up-to-date example is the study of Christensen and Greene [4], who estimated a translog cost function using cross sections of privately owned utilities in 1955 and 1970. Straightforward application of Christensen and Greene's techniques to nuclear power is prob-