Economic cost of nuclear power

About 1 year before the Fukushima disaster President Obama announced $8 bn dollars in loan guarantees to the Southern Company, for the construction of two new nuclear reactor piles at the Vogtle site, each having a capacity of 1117 MW. The expected construction cost of the plants is $8.87 billion.

The Southern Company provide the following information about costs.

Economic Impacts
* Up to $14 billion of investment in the state of Georgia
* Approximately 5,000 on-site jobs during the peak of construction
* 800 high-paying jobs for the life of the plant
* Tax dollars to the local communities and the state over the expected 60-year life

The Westinghouse AP1000 is design is based on the AP600, the design is boasted to use existing technology and simplified design to cut down on the number of safety valves, pumps and piping, control cable and ‘seismic building volume’. Two plants of similar design are currently under construction in China, and planned at 6 other sites in the USA.

http://en.wikipedia.org/wiki/Vogtle_Electric_Generating_Plant
http://en.wikipedia.org/wiki/AP1000

Of course a full cost would also have to include any price premium or guaranteed market for electricity generated from the plant.

Vogtle site:
Vogtle site under construction

Benefits to financing during construction:

* The cost of the plant will be phased-in over 7 years, versus included in rates over only two years. (Approx. 1.3 percent/yr over 7 years for total of 9 percent, versus approximately 12 percent total over two years.)
* Customers will avoid paying $300 million in interest charges, thereby saving money over the life of the plant.
* The in-service cost of the plant will be reduced by nearly $2 billion (30 percent).
* Total rate increases required to cover the cost of the plant when it goes into service will be nearly 3 percent lower.
* Preserving utility credit ratings reduces costs for other projects and helps keep customer rates low.

Is this an interesting use of compound interest? if we increase by 1.3% every year we can claim the total increase is 9%. The real increase is (1.013)^7 = 1.0946 = 9.46%. 1.3 x 7 = 9.1 so pretty close between these two numbers. Why would we have to increase tax to 12% over 2 years then. We can only make such large numbers by borrowing all the money to build the plant before we start building which seems a strange way to do business.

It’s also strange that electricity bills have to increase to pay for the nuclear plant to be built when they also use nuclear power, I guess coal power is pretty cheap in comparison.

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