World Energy Outlook 2006

associated with nuclear power. Experience in managing complex large industrial
projects, as well as stakeholders who are accustomed to working together appear
to be key elements for success. Some 1 100 subcontractors are currently involved
in the construction of the Finnish EPR plant.
Governments may choose to play a role in facilitating such capital-intensive
investments as nuclear power plants. Box 13.3 describes the impact on nuclear
power generating costs of the incentives the US government provides for
nuclear power.
Box 13.3: Impact of Incentives in the US 2005 Energy Policy Act
on Nuclear Power Generating Costs
The Energy Policy Act 2005 provides a set of incentives for new nuclear
power plants. The act provides a production tax credit of 1.8 cents per kWh
for the first eight years of operation. This incentive reduces the lifetime
generating cost of nuclear power by about 0.8 cents per kWh.
The act also provides for loan guarantees of up to 80% of the project cost.
Loan guarantees enable lenders to offer lower interest rates and require less
equity investment. The latter allows project leverage to increase up to 80%
compared to 50% without guarantees. Assuming a nominal debt interest
rate of 5% (instead of 8% in the analysis presented in the section discussing
the economics of nuclear power) and 80% debt, the impact on the
generating cost of nuclear power is 1.2 cents/kWh over the lifetime of the
plant. It is equivalent to $125 million per year assuming a 20-year debt
recovery period.
The standby guarantee, the third major incentive, provides guarantees in
case of regulatory delays (up to $500 million per plant for the first two
plants and up to $250 million for the next four). This translates into
a payment of between about 0.1 cents per kWh for a six-month delay to
0.5 cents per kWh for a 24-month delay period.
Nuclear Fuel Outlook
Demand for Uranium
Annual reactor requirements for uranium are determined principally by the
amount of electricity generated in operating nuclear plants. Based on the
projections of nuclear power generation presented earlier in the chapter, annual
demand for uranium is projected to increase from 68 thousand tonnes in 2005
to between 80 thousand and 100 thousand tonnes by 2030. This demand is
expected to be satisfied mainly by newly-mined primary uranium, which over the
past several years has met some 50% to 60% of world requirements. The
remainder has been derived from secondary sources, including stockpiles of
376 World Energy Outlook 2006 - FOCUS ON KEY TOPICS