Should-cost Nuclear and Human Ignorance 2.0

I have received a chorus of complaints about the recent CO2 versus grid cost piece. For once, the uppity choir is on solid grounds. The key point that should-cost nuclear can protect us from our ignorance of the social cost of CO2 got lost in the lousy graphics and impenetrable wording. So I decided to try again. Apologies for redundantly cluttering your inbox.

Figure 1. German Power Costs vs CO2 emissions for a range of nuke CAPEX

Figure 1 shows the new version of the grid cost versus CO2 emissions trade-off curves. These curves are based on multiple runs of the GKG Grid Model. In these runs, the basic rule is the program has to supply the actual hourly German demand for electricity for every hour from the beginning of 1993 to the end of 2000. The peak hourly demand in that 8 years was 101 GW. The average over that period was 62 GW. In each run, the model comes up with the combination of onshore wind, offshore wind, PV solar, batteries, hydrogen, open cycle gas turbine, closed cycle gas turbine, coal or nuclear that minimizes the sum of the grid cost and the CO2 emissions cost, the total cost to society of providing the power.

Thanks to its astonishing energy density, nuclear's overnight CAPEX should be less than $2000/kW in current money. This was the case in the late 1960's, when nuclear was just starting down a steep learning curve. But the body politic opted to replace competitive market pressures with a regulatory system whose overriding goal is preventing a release of radioactive material. Under this system, nuclear's overnight CAPEX in the West escalated to the point where it is now over $16,000/kW. In the German study, we looked at a range of nuke Capexes running from a should-cost of $2000/kW up to $32,000/kW.

Each solid line was created by fixing the nuclear overnight Capex at one of the six $/kW numbers shown in the top of the legend and varying the dollar cost to society of an additional ton of CO2 emissions from $1600/ton CO2 at the left upper end of the curve to zero dollars per ton at the right lower end of the curve.

The official name for this dollar cost is the Social Cost of Carbon (SCC). If the Social Cost of Carbon is very high, the societal optimum for any given nuclear CAPEX is near the left end of the curve. If the SCC is near zero, the societal optimum is near the right end of the curve. For each nuclear Capex, we ran the eight CO2 costs shown in the bottom of the legend, creating the 48 points marked on the curves.

Nobody knows what the Social Cost of Carbon is; but that has not stopped people from making guesses at it. The US EPA has been using $51/ton CO2; but recently the EPA proposed increasing the legal SCC by nearly a factor of four to $190/ton.\cite{epa-2023} Other estimates range from negative to over $1000/ton. It is not difficult to concoct hypothetical scenarios that support either end of that range and anything in between. I repeat: we do not know what the social cost of CO2 is. Anybody who claims to know what the SCC is is either a liar or a fool. Therefore, we must consider a wide range of CO2 costs.

The dashed lines are constant Social Cost of CO2 contours. For example, the nearly horizontal reddish dashed line at the bottom of the figure is the zero Social Cost of CO2 contour. Along this line, the model uses either an "All" nuclear grid or an "All" coal grid, where "All" in quotes means "almost all", since these grids include some gas peaking. If the nuke overnight CAPEX is $2000/kW, the model uses an "All" nuke grid. If the nuke overnight CAPEX is $4000/kW, the model uses an "All" coal grid. Somewhere in between the model will flip from one to the other. If the Social Cost of CO2 is zero, the model uses the "All" coal grid for all nuclear Capex's above $4000/kW. So all the solid lines other than $2000/kW converge to the "All" coal grid at the right end.

As the social cost of CO2 increases, the SCC contours become more humped. At the left end, the SCC contours are tied to should-cost nuclear, and its relatively low grid cost, even at a very high cost of CO2. But as the nuclear CAPEX rises, the program uses less nuclear and the grid cost rises rapidly. Eventually the model gets to the point where maximizing societal welfare requires using no nuclear. That point can be as low as a grid cost of $68/MWh for an SCC = $50/ton CO2 to as high as $185/MWh for an SCC = $1600/ton At nuclear CAPEXes above that point, the best the model can do is accept a much higher CO2 intensity in return for a decrease in grid cost. At that point, the SCC contours turn right and downward.

Once we are above $8000/kW nuclear, Germany's choices (and our choices) are pretty stark. At one end, she can have $60/MWh and 717 gCO2/kWh electricity from a coal grid with gas peaking. At the other end, she can have $167/MWh and 37 gCO2/kWh power from a wind, solar, hydrogen, and gas grid. To pick out the optimum from that wide span, ranging from planet frying to tragically unnecessary impoverishment, she needs to guess the Social Cost of CO2, and she (and us) had better get it right. Good luck with that.

The only way to protect humanity from our ignorance of the social cost of CO2 is should-cost nuclear. Figure 2 is a semi-log version of Figure 1.

Figure 2. German Power Costs vs CO2 emissions for a range of nuke CAPEX.

On the solid blue should-cost curve, even if the social cost of carbon is zero, the program comes up with a low 59 gCO2/kWh grid. Even if the social cost of CO2 is a very high $1600/ton, the model comes up with an affordable 56 $/MWh grid. Should-cost nuclear is resilient to human ignorance and stupidity. Even if the Social Cost of CO2 is very high and we don't account for that cost in building our grid, we will be in pretty good shape. Even if the Social Cost of CO2 turns out to be nearly zero and we act as if it's very high, we will not have impoverished humanity unnecessarily, at least as far as the grid goes.¹

We live in a bipolar world. Some people focus on the possibility that greenhouse gases could make the planet unlivable for humans. Others focus on the manifest need to lift some three billion humans out of energy poverty and avoid civilization shattering impoverishment for the rest of us. Here's the real problem. Both sides are right. Should-cost nuclear is the only way out of this dilemma,

1. We can't push this too far. The should-cost curve does turn vertical before it gets to zero CO2.