Optimal policy for investments in nuclear power

Researchers of Centrum Wiskunde & Informatica (CWI), Delft University of Technology (TU Delft) and NRG have developed a tool that determines the optimal policy for nuclear power plant investments. The tool uses advanced techniques from financial mathematics to determine the economics of a new generation of highly sustainable and safer nuclear reactors. Researcher Shashi Jain defended his thesis on this topic on Monday 10 February 2014 at Delft University of Technology.

Nuclear power currently accounts for 15% of the world’s electricity production. Although the prospects for nuclear power after the Fukushima accident are weaker in some regions, the world’s nuclear power capacity is projected to rise from 393 GW in 2009 to 630 GW in 2035. A new generation of nuclear reactors, Generation IV, may provide a substantial reduction in fuel and nuclear waste by re-entering spent fuel in the energy production cycle.  An additional benefit of certain types of Generation IV reactors is that they can be built in small and medium size. This allows for balancing the costs of these reactors with economic flexibility: construction of future modules can be delayed if economic conditions do not evolve favourably.

The important question is how the economy of scale of large reactors compares to the flexibility of a number of smaller reactors. Jain has developed numerical methods that can give a value to the flexibility of nuclear power plants with smaller modules. These take into account uncertainties in economic conditions, lifetime of operation, electricity prices and construction costs. The resulting decision tool provides, within the model’s assumptions, a minimal-risk portfolio of nuclear reactors. It also gives the optimal economic conditions to either start or abandon the construction of the Generation IV reactors.

The results of this research cannot only be applied to future decisions on investments in nuclear power plants, but also on other investments under uncertainties, such as wind turbines and stock trade. The project is funded by TU Delft and by the R&D program of NRG, and was carried out at CWI in Amsterdam under supervision of prof. dr. ir. Kees Oosterlee.


Image: Experimental nuclear fission reactor at Cadarache, France