Nuclear power cost projections should incorporate fuel cost uncertainties.
Edward Kee is a vice president at CRA International, Inc. His work is focused on nuclear power, electricity industry restructuring and electricity markets. He can be reached at firstname.lastname@example.org.
Price volatility is not something that most people would associate with nuclear fuel, after more than twenty years of low, stable and even decreasing nuclear fuel costs. Nuclear Energy Institute (NEI) data shows nuclear fuel costs declined through the end of 2006 to about 1/2 cent per kWh (see Figure 1).
However, spot prices for uranium, the largest component of nuclear fuel costs, increased from less than $20 a pound in mid-2004 to an all-time high (even when adjusted for inflation) of $138 per pound in mid-2007 (see Figure 2).
This inconsistency between reported nuclear fuel costs and uranium prices is the result of nuclear fuel purchasing and accounting practices that create a several-year lag between when nuclear fuel costs are incurred and when these costs are amortized.
This lag between component prices and reported costs is not a problem in itself, but may lead to nuclear fuel cost forecasts that are too low in today’s market.