Vadim Malkin, Managing Partner, Transitional Markets Consultancy LLP. (TMC LLP is a business strategy and communications consulting firm based in London, UK).

Closer to India, recently built Kudankulam NPP, based on the Russian VVER design is generating electricity at a price of ₹42.9/MWh.

The main argument the opponents of nuclear tend now to employ is that nuclear is no longer a commercially viable and competitive source of energy. Overnight construction costs for nuclear new build are apparently on the rise while the costs of renewables, solar in particular, are falling even faster than expected. Thus, they go on claiming that the best strategy is to scrap or at least postpone new nuclear projects to give way “truly” clean, nuclear-free renewable energy.

The argument, although may seem appealing, is flawed.

Math modelling of the future based on extrapolation of the past is almost always misleading unless fundamental drivers behind the trends are properly analyzed and factored in. It is especially the case when past observations are about “apples and oranges”.

First of all, what is compared to what? As an example of how low solar can get they would cite Dubai’s DEWA project (UAE) which won a tender offering to deliver electricity for just US below $30 per MWh. As an example of how high nuclear can climb they would take Hinkley Point C nuclear power plant in Britain where the government promised to pay the difference between market electricity price and a strike price of about US $120 per MWh.

The difference is striking, but misleading. Comparing more like-for-like, same country figures gives quite a different picture.

Lightsource, a leading solar developer, has secured for its solar park in Britain recently connected to the grid a strike price of about $108 per MWh. Barakah nuclear power plant in UAE is estimated to produce electricity at a roughly the same price as solar.

Granted, the French technology proposed for Hinkley called EPR is among the most expensive in the world but the main reason for this is that it’s a first-of-a-kind (FOAK) project. Serial construction and the economies of scale make installations about 30% cheaper compared to FOAK.

A recent rise in the cost of nuclear was due to additional safety features making major accidents impossible and a transition to a new generation of designs (many reactors under construction or recently completed are FOAK). In fact, reactors are likely to get cheaper in the coming decades and it is actually what is already happening in Russia or China.

Closer to India, recently built Kudankulam NPP, based on the Russian VVER design is generating electricity at a price of ₹42.9/MWh. Lightsource will receive benchmark tariff support of ₹44.3/MWh and viability gap funding (VGF) of ₹1.96 million/MWe for its solar installation.

Is Solar Really Likely To Get Much Cheaper?

It’s not “natural gravity” that has been driving down the cost of solar and wind over the last five years. Contrary to the common misconception it wasn’t major technology breakthroughs either, though, admittedly, there have been some improvements. In solar the most common polysilicon technology is close to its practical efficiency limit. New technologies are yet to be commercialised.

The main drivers are the economies of scale and, most importantly the aggressive pricing policies by Chinese and Malaysian manufacturers leading to global price wars. When their solar panels began flooding the global market the US and EU even had to introduce anti-dumping measures. It didn’t help much. With a great deal of excess capacity and state support Chinese, Taiwan and Malaysian producers dominate the global market with about 2/3 share while western vendors are struggling to survive.

There are very little economic grounds to suggest that solar prices are likely to tumble even more – thin or negative margins are simply not sustainable. They are expected to stabilise at about 25-35 cents a watt, down merely 20-25% from their current levels.

So, in terms of final price of kWh nuclear solar and on-shore wind are likely to remain in the same range. What makes nuclear indispensable is that solar and wind remain intermittent. They don’t produce energy when there is no wind of sunshine. Even if there is a major breakthrough in energy storage technologies it is highly unlikely that energy storage would add less than US $50-70 now and $25-30 per MWh in the future.

The reports of the death of so-called baseload (demand for uninterrupted available capacity in the grid) have been greatly exaggerated. Demand management and smart meters could increase energy efficiency and level down variability of demand in residential sector but energy intensive industrial users without are doomed without stable and predictable energy supply.

That is why nuclear is actually competing not with intermittent renewables but with coal, which is the most polluting but cheap and reliable, as a source of baseload generation.

It speaks volumes that Germany which is phasing off its nuclear fleet has witnessed its electricity prices up 24% from 2010 to 2014 and CO2 emissions – up 11%. In Japan electricity prices were up 12% (same period), CO2 emissions up 27% which prompted a U-turn with relaunch or reactors in the country last year.

Vadim Malkin, Managing Partner, Transitional Markets Consultancy LLP. (TMC LLP is a business strategy and communications consulting firm based in London, UK).