The Economics of the Russian Nuclear Power Industry - Bellona

46Cost ofcapitalTable 15. Price of electricity generated by Russian nuclear power plantsas calculated to cover all industry expenses.Required net cash flow (in millionUS dollars)Required revenue(in million USdollars)Cost of unit ofproduction (in UScents per kilowatthour)10 percent 727 1061.6 8.18 percent 555.5 890.1 6.75 percent 318.2 652.8 4.80 percent 125 459.6 3.2At a 5 percent discount rate, nuclear‐produced electricity costs, as shown above, US 4.8 centsper kilowatt‐hour; at an 8 percent discount rate, the cost of power generation is US 6.7 cents; and withthe cost of capital equalling zero, that value is US 3.2 cents, without VAT.Fuel management costs account for a large part of operating costs and therefore have thebiggest impact on the final result. But even if fuel cycle costs were assumed to be zero, we would seethat the tariff needed to ensure that a nuclear power plant does not operate at a loss should beUS 3.67 cents for the discount rate at 5 percent, US 5.6 cents for the discount rate at 8 percent, andUS 2 cents for the zero rate.To compare with other assessments, this is what the overall cost structure of nuclear powerproduction looks like, roughly, in estimates done by the Bank of Moscow:Cost itemTable 16. Bank of Moscow’s estimates of costs of nuclear power production.Cost of production,in US cents perkilowatt‐hourShare in total NPPprime costFuel 0.80 24 percentOperation and engineering maintenance 1.93 58 percentCapital costs, present value 0.60 18 percentTOTAL 3.33 100 percentSNF management costs are apparently, here, part of the operation and maintenance costs. Andthe discounted capital expenditure can only be in such low values here if much more optimistic,industry‐favourable assumptions are made with regard to the construction cost and construction timeframe and/or cost of capital than estimated in this report.According to Vladimir Milov, 133 “in order to recoup the investor’s expenses on building a nuclearpower plant at capital costs ranging between $3,000 and $4,000 per kilowatt of new capacity, the tariffmust equal RUR 1.5 to RUR 2 134 [per kilowatt‐hour] of [electricity produced].” We assume constructioncosts to be at much lower values, of around $2,400 per kilowatt‐hour, but in reality, costs can, of course,133 Vladimir Milov. Why is development of nuclear energy harmful for Russia? Moscow, 2009. (Milov V. Pochemurazvitiye atomnoi energetiki vredno dlya Rossii? M., 2009, http://www.rusolidarnost.ru/pochemu‐razvitieatomnoi‐energetiki‐vredno‐dlya‐rossii,in Russian).134 Between US 5.3 cents and US 7.1 cents as per current exchange rate. – Translator.